IMANET-CMA Online Practice Questions and Answers

Correct Answer: C

The degree of product differentiation and the costs of switching from one competitor's product to another increase the intensity of rivalry and competition in an industry. Less differentiation tends to heighten competition based on price, with price cutting leading to lower profits. Low costs of switching products also increase competition

Correct Answer: B

Focus group discussions are guided by a moderator and recorded for later analysis. This approach collects information about participant's attitudes toward a product, company, service, etc. Consumer goods 1,research has popularized the use of focus groups.

Correct Answer: D

Market (customer) segmentation, market selection, and value positioning are all part of the strategic, or long-term, marketing process. Product pricing is an element of the tactical marketing process.

Correct Answer: D

The benefits of diversification become extremely small when more than 20 to 30 different securities are held. Moreover, commissions and other transaction costs increase with greater diversification.

Correct Answer: D

Dividends on preferred stock are not deductible for tax purposes; therefore, there is no adjustment for tax savings. The annual dividend on preferred stock is $100 when the price of the stock is $960.This results in a cost of about 10.4% ($100 + $960).

Correct Answer: C

Financial structure is the composition of the financing sources of the assets of a firm. Traditionally, the financial structure consists of current liabilities, Long-term debt, retained earnings, and stock For most firms, the optimum structure includes a combination of debt and equity. Debt is cheaper than equity, but excessive use of debt increases the firm's risk and drives up the weighted-average cost of capital.

Correct Answer: B

At the breakeven point, total revenue equals the fixed cost plus the variable cost. Beyond the BEP, each unit sale will increase operating income by the unit contribution margin (unit sales price--unit variable cost) because fixed cost will already have been recovered.

Correct Answer: B

The accounting rate of return (the unadjusted rate of return or rate of return on the carrying amount) equals the increase in accounting net income divided by either the initial or the average investment. It ignores the time value of money. The average income over 5 years is $86,000 [($70,000 + $78,000 + $86,000 + $94000 + $102,000) + 5] Dividing the $86,000 average net income by the $250,000 average investment ($500,000 cost + 2) produces an accounting rate of return of 34.4%.

Correct Answer: D

Unit costs should be used with extreme care. In each situation, they may be calculated based on a different volume level from that anticipated, so comparability may be lost. Irrelevant costs included in the unit cost should be disregarded; only relevant costs should be included in the analysis. Allocated costs should also be ignored, and only the relevant costs that will change with the option chosen should be considered.

Correct Answer: A

For tax purposes. straight-line depreciation is an alternative to the MACRS method. Both methods will result in the same total depreciation over the life of the asset: however, MACRS will result in greater depreciation in the early years of the assets life because it is an accelerated method. Given that MACRS results in larger depreciation deductions in the earj years, taxes will be lower in the early years and higher in the later years. Because the incremental benefits will be discounted over a shorter period than the incremental depreciation costs. `MACRS is preferable to the straight-line method,