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CMA- GLEIM MCQ - Part 1 (2nd Batch)
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Preguntas del test (100)
1[101] Gleim #: 1.3.101 -- Source: CMA 0408 1-147
Martin Fabricating uses a cumulative average-time learning curve model to monitor labor costs.
Data regarding two recently completed batches of a part that is used in tractor-trailer rigs is as
follows:
Batch Number Cumulative Average
Number of Units Hours Per Unit
1 50 20
2 50 16
If the same rate of learning continues for the next several batches produced, which of the
following best describes (1) the type (i.e., degree) of learning curve that the firm is
experiencing and (2) the average hours per unit for units included in the 201-400 range of units
produced (i.e., the last 200 units)?
Type (Degree) of Average Hours Per
Learning Curve Unit for Units 201-400
A. 20% 10.24
B. 80% 10.24
C. 80% 7.68
D. 20% 3.84- A20% | 10.24
- B80% 10.24
- C80% 7.68
- D20% 3.84
2[102] Gleim #: 1.3.102 -- Source: CMA 0408 1-150
A manufacturing company required 800 direct labor hours to produce the first lot of four units
of a new motor. Management believes that a 90% learning curve will be experienced over four
lots of production. How many direct labor hours will be required to manufacture the next 12
units?- A1,792
- B1,944
- C2,016
- D2,160
3[103] Gleim #: 1.4.103 -- Source: CMA 1294 3-12
Which one of the following is a sales forecasting technique that can be utilized in preparing the
annual profit plan?- ALinear programming.
- BExponential smoothing
- CQueuing theory
- DProgram Evaluation and Review Technique (PERT).
4[104] Gleim #: 1.4.104 -- Source: CMA 1293 4-25
The four components of time series data are secular trend, cyclical variation, seasonality, and
random variation. The seasonality in the data can be removed by- AMultiplying the data by a seasonality factor.
- BIgnoring it.
- CTaking the weighted average over four time periods
- DSubtracting a seasonality factor from the data
5105] Gleim #: 1.4.105 -- Source: CMA 0205
A forecasting technique that is a combination of the last forecast and the last observed value is
called- ADelphi
- BLeast squares.
- CRegression
- DExponential smoothing
6[106] Gleim #: 1.4.106 -- Source: CIA 594 II-38
As part of a risk analysis, an auditor wishes to forecast the percentage growth in next month’s
sales for a particular plant using the past 30 months’ sales results. Significant changes in the
organization affecting sales volumes were made within the last 9 months. The most effective
analysis technique to use would be- AUnweighted moving average
- BExponential smoothing.
- CQueuing theory.
- DLinear regression analysis
7[107] Gleim #: 1.4.107 -- Source: CIA 1189 III-50
What are the four components of a time series?- ATrend, cyclical, seasonal, and irregular
- BAlpha, cyclical, seasonal, and irregular
- CAlpha, cyclical, seasonal, and repetitive
- DTrend, cyclical, seasonal, and repetitive
8[108] Gleim #: 1.4.108 -- Source: CIA 589 III-50
The moving-average method of forecasting- AIs a cross-sectional forecasting method
- BRegresses the variable of interest on a related variable to develop a forecast
- CDerives final forecasts by adjusting the initial forecast based on the smoothing constant
- DIncludes each new observation in the average as it becomes available and discards the
oldest observation.
9[109] Gleim #: 1.4.109 -- Source: Publisher
Violation of which assumption underlying regression analysis is prevalent in time series
analysis?- AVariance of error term is constant.
- BError terms are independent.
- CDistribution of error terms is usually normal
- DExpected value of error term equals zero
10[110] Gleim #: 1.4.110 -- Source: CMA 0408 1-152
Sales of big-screen televisions have grown steadily during the past five years. A dealer
predicted that the demand for February would be 148 televisions. Actual demand in February
was 158 televisions. If the smoothing constant is α = 0.3, the demand forecast for March, using
the exponential smoothing model, will be- A148 televisions
- B151 televisions
- C155 televisions
- D158 televisions
11[111] Gleim #: 1.5.111 -- Source: CMA 697 4-22
Philip Enterprises, distributor of video discs, is developing its budgeted cost of goods sold for
next year. Philip has developed the following range of sales estimates and associated
probabilities for the year:
Sales Estimate Probability
$ 60,000 25%
85,000 40
100,000 35
Philip’s cost of goods sold averages 80% of sales. What is the expected value of Philip’s
budgeted cost of goods sold?- A$85,000
- B$84,000
- C$68,000
- D$67,200
12[112] Gleim #: 1.5.112 -- Source: CMA 1293 4-26
The expected value of perfect information is the- ASame as the expected profit under certainty
- BSum of the conditional profit (loss) for the best event of each act times the probability of
each event occurring - CDifference between the expected profit under certainty and the expected opportunity loss.
- DDifference between the expected profit under certainty and the expected monetary value of
the best act under uncertainty
13[Fact Pattern #9]
The probabilities shown in the table below represent the estimate of sales for a new product.
Sales (Units) Probability
0-200 15%
201-400 45%
401-600 25%
601-800 15%
[113] Gleim #: 1.5.113 -- Source: Publisher
(Refers to Fact Pattern #9)
What is the probability of selling between 201 and 600 units of the product?- A0%
- B11.25%
- C70%
- D25%
14[114] Gleim #: 1.5.114 -- Source: Publisher
(Refers to Fact Pattern #9)
What is the best estimate of the expected sales of the new product?- A480
- B380
- C400
- D800
15[115] Gleim #: 1.5.115 -- Source: CMA 690 5-25
In decision making under conditions of uncertainty, expected value refers to the- ALikely outcome of a proposed action
- BPresent value of alternative actions
- CProbability of a given outcome from a proposed action
- DWeighted average of probable outcomes of an action
16[Fact Pattern #10]
A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks
and the weather is hot, it will make $2,500; if the weather is cold, the profit will be $1,000. If the
stand sells coffee and the weather is hot, it will make $1,900; if the weather is cold, the profit will be
$2,000. The probability of cold weather on a given day at this time is 60%.
[116] Gleim #: 1.5.116 -- Source: CMA 1292 4-21
(Refers to Fact Pattern #10)
The expected payoff for selling coffee is- A$1,360
- B$2,200
- C$3,900
- D$1,960
17[117] Gleim #: 1.5.117 -- Source: CMA 1292 4-22
(Refers to Fact Pattern #10)
The expected payoff if the vendor has perfect information is- A$3,900
- B$2,200
- C$1,360
- D$1,960
18[118] Gleim #: 1.5.118 -- Source: CMA 1292 4-23
(Refers to Fact Pattern #10)
If the probability of hot weather, given a hot weather forecast, is 50%, how much would the
vendor be willing to pay for the forecast?- A$600
- B$300
- C$1,000
- D$500
19[Fact Pattern #11]
Butler and Burnside are projecting market conditions for the upcoming month. They have prepared
the following payoff table:
Demand in Units
0 2 4 6
Probability of Demand
Supply
in Units 0.1 0.3 0.4 0.2
0 $ 0 $ 0 $ 0 $ 0
2 (80) 40 40 40
4 (160) (40) 80 80
6 (240) (120) 0 120
[119] Gleim #: 1.5.119 -- Source: CMA 689 5-28
(Refers to Fact Pattern #11)
Butler and Burnside’s expected profit when supply equals 4 units is- A$(40)
- B$80
- C$20
- D$120
20[120] Gleim #: 1.5.120 -- Source: CMA 689 5-29
(Refers to Fact Pattern #11)
Butler and Burnside’s expected profit with perfect information is- A$28
- B$20
- C$(36)
- D$68
21[121] Gleim #: 1.5.121 -- Source: CMA 689 5-30
(Refers to Fact Pattern #11)
The price Butler and Burnside are willing to pay for perfect information is- A$68
- B$40
- C$48
- D$104
22[122] Gleim #: 1.5.122 -- Source: Publisher
Pongo Company’s managers are attempting to value a piece of land they own. One potential
occurrence is that the old road bordering the land gets paved. Another possibility is that the
road does not get paved. A third outcome is that the road might be destroyed and completely
replaced by a new road. Based on the following future states of nature, their probabilities, and
subsequent values of the land, what is the expected value of the land?
Future States of Nature (SN) Probability
SN 1: Current road gets paved .5
SN 2: Road does not get paved .4
SN 3: Current road destroyed and
replaced with new road .1
Estimates of land value under each possible future state of nature:
Value if SN 1: $200,000
Value if SN 2: $100,000
Value if SN 3: $550,000- A$133,333
- B$195,000
- C$225,000
- D$283,333
23[123] Gleim #: 1.5.123 -- Source: Publisher
Under favorable weather conditions, the management of Flesher Farms expects its raspberry
crop to have a $120,000 market value. An unprotected crop subject to frost has an expected
market value of $80,000. If Flesher protects the raspberries against frost, the market value of
the crop is still expected to be $120,000 under frost-free conditions and $180,000 if a frost
occurs. What must be the probability of a frost for Flesher to be indifferent to spending $20,000
for tents to provide frost protection?- A.167
- B.200
- C.250
- D.333
24[124] Gleim #: 1.5.124 -- Source: Publisher
During the past few years, Wilder Company has experienced the following average number of
power outages:
Number per Month Number of Months
0 3
1 2
2 4
3 3
12
Each power outage results in out-of-pocket costs of $800. For $1,000 per month, Wilder can
lease a generator to provide power during outages. If Wilder leases a generator in the coming
year, the estimated savings (or additional expense) for the year will be- A$(15,200)
- B$(1,267)
- C$3,200
- D$7,200
25[Fact Pattern #12]
The College Honor Society sells hot
pretzels at the home football games. The
pretzels are sold for $1.00 each, and the
cost per pretzel is $.30. Any unsold
pretzels are discarded because they will
be stale before the next home game.
The frequency distribution of the demand for
pretzels per game is presented as follows.
Unit Sales Volume Probability
2,000 pretzels .10
3,000 pretzels .15
4,000 pretzels .20
5,000 pretzels .35
6,000 pretzels .20
[125] Gleim #: 1.5.125 -- Source: CMA 1289 5-20
(Refers to Fact Pattern #12)
The estimated demand for pretzels at the next home football game using an expected value
approach is- A4,000 pretzels
- B4,400 pretzels
- C5,000 pretzels
- DSome amount other than those given.
26[126] Gleim #: 1.5.126 -- Source: CMA 1289 5-21
(Refers to Fact Pattern #12)
The estimated demand for pretzels at the next home football game using a deterministic
approach based on the most likely outcome is- A4,000 pretzels
- B4,400 pretzels
- C5,000 pretzels
- D6,000 pretzels
27[127] Gleim #: 1.5.127 -- Source: CMA 1289 5-22
(Refers to Fact Pattern #12)
The conditional profit per game of having 4,000 pretzels available but only selling 3,000
pretzels is- A$1,800
- B$2,100
- C$2,800
- DSome amount other than those given.
28[128] Gleim #: 1.5.128 -- Source: CMA 1289 5-23
(Refers to Fact Pattern #12)
The conditional profit per game of having 4,000 pretzels available and selling all 4,000 pretzels
is- A$1,200
- B$2,100
- C$2,800
- D$800
29[129] Gleim #: 1.5.129 -- Source: CMA 690 5-19
Alsen Company is in the process of preparing its budget. As part of the process, the company
has prepared sales estimates and estimated the probability associated with each sales estimate.
Which one of the following techniques should be used by Alsen to determine sales for
budgeting purposes?- ALinear programming
- BMinimax regret criteria
- CExpected value analysis
- DMonte Carlo simulation
30[130] Gleim #: 1.5.130 -- Source: CMA 692 4-4
The expected monetary value of an event- AIs equal to the conditional value or profit of the event.
- BIs equal to the payoff of the event times the probability the event will occur
- CIs the profit forgone by not choosing the best alternative
- DIs the absolute profit from a particular event
31[131] Gleim #: 1.5.131 -- Source: CMA 1286 5-3
Expected value in decision analysis is- AA standard deviation using the probabilities as weights.
- BAn arithmetic mean using the probabilities as weights.
- CThe square root of the squared deviations.
- DA measure of the difference between the best possible outcome and the outcome of the
original decision.
32[132] Gleim #: 1.5.132 -- Source: CMA 688 5-20
The following table contains the profit outcomes for each state of nature and decision
combination for a firm
States of Nature
S1 S2 S3
Decision 1 $ 24 $14 $ (6)
Decision 2 $ 20 $10 $ 5
Decision 3 $(20) $ 8 $15
Probabilities 0.10 0.50 0.40
The expected value of perfect information for this firm in this case is- A$6.40
- B$8.40
- C$9.00
- D$8.60
33[133] Gleim #: 1.5.133 -- Source: CMA 691 4-1
The expected monetary value of an act is the- ASum of the conditional profit (loss) for each event.
- BSum of the conditional profit (loss) for each event times the probability of each event’s
occurrence. - CConditional profit (loss) for the best event times the probability of each event’s occurrence
- DRevenue minus the costs for the act.
34[134] Gleim #: 1.5.134 -- Source: CMA 691 4-3
The expected value of perfect information is the- ASame as the expected profit under certainty.
- BSum of the conditional profit (loss) for the best event of each act times the probability of
each event’s occurring. - CDifference between the expected profit under uncertainty and conditional profit for the best
act under certainty - DDifference between the expected profit under certainty and the expected monetary value of
the best act under uncertainty
35[135] Gleim #: 1.5.135 -- Source: CIA 1188 III-44
In decision theory, those uncontrollable future events that can affect the outcome of a decision
are- APayoffs.
- BStates of nature
- CProbabilities.
- DNodes
36[Fact Pattern #13]
The Booster Club at Blair College sells hot dogs at home basketball games. The group has a
frequency distribution of the demand for hot dogs per game and plans to apply the expected value
decision rule to determine the number of hot dogs to stock.
[136] Gleim #: 1.5.136 -- Source: CMA 691 4-2
(Refers to Fact Pattern #13)
The Booster Club should select the demand level that- AIs closest to the expected demand.
- BHas the greatest probability of occurring.
- CHas the greatest expected opportunity cost
- DHas the greatest expected monetary value
37[Fact Pattern #14]
A company is considering three alternative machines to produce a new product. The cost structures
(unit variable costs plus avoidable fixed costs) for the three machines are shown as follows. The
selling price is unaffected by the machine used.
Single purpose machine $.60x + $20,000
Semiautomatic machine $.40x + $50,000
Automatic machine $.20x + $120,000
The demand for units of the new product is described by the following probability distribution.
Demand Probability
200,000 0.4
300,000 0.3
400,000 0.2
500,000 0.1
[137] Gleim #: 1.5.137 -- Source: CMA 689 5-26
(Refers to Fact Pattern #14)
Ignoring the time value of money, the expected cost of using the semiautomatic machine is- A$170,000
- B$130,000
- C$210,000
- D$250,000
38[138] Gleim #: 1.5.138 -- Source: CMA 689 5-27
(Refers to Fact Pattern #14)
Using the expected value criterion,- AThe single purpose machine should be used because of the low expected demand
- BThe automatic machine should be used because of the high expected demand
- CThe semiautomatic machine should be used because it has the lowest expected cost.
- DThe automatic machine has the lowest expected cost.
39[Fact Pattern #15]
Stan Berry is considering selling peanuts at the Keefer High School football games. The peanuts
would cost $.50 per bag and could be sold for $1.50 per bag. No other costs would be incurred to sell
the peanuts. All unsold bags can be returned to the supplier for $.30 each. Berry estimated the
demand for peanuts at each football game and constructed the payoff table that follows.
Action (Bags to Stock)
Demand Probability
(Bags) of Demand 20 30 40 50
20 .2 $20 $18 $16 $14
30 .4 $20 $30 $28 $26
40 .3 $20 $30 $40 $38
50 .1 $20 $30 $40 $50
[139] Gleim #: 1.5.139 -- Source: CMA 690 5-17
(Refers to Fact Pattern #15)
The optimum number of bags of peanuts for Stan Berry to stock is- A20
- B30
- C40
- D50
40[140] Gleim #: 1.5.140 -- Source: CMA 690 5-18
(Refers to Fact Pattern #15)
The maximum that Stan Berry should pay for perfect information so that he could always stock
the correct number of bags of peanuts is- A$.80
- B$2.60
- C$10.40
- D$30.00
41[141] Gleim #: 1.5.141 -- Source: CMA 0205
Carson Products sell sweatshirts and is preparing for a World Cup Soccer match. The cost per
sweatshirt varies with the quantity purchased as follows.
Quantity Unit cost
4,000 $14.00
5,000 13.50
6,000 13.00
7,000 12.50
Carson must purchase the sweatshirts one month before the game and has analyzed the market
and estimated sales levels as follows.
Unit sales 4,000 5,000 6,000 7,000
Probability 15% 20% 35% 30%
The estimated selling price is $25 for sales made before and during game day. Any sweatshirts
remaining after game day can be sold at wholesale to a local discount store for $10.
The expected profit if Carson purchased 6,000 shirts is- A$64,500
- B$66,000
- C$69,000
- D$72,000
42[Fact Pattern #16]
A computer store sells four computer models designated as P104, X104, A104, and S104. The store
manager has made random number assignments to represent customer choices based on past sales
data. The assignments are shown below.
Model Random Numbers
P104 0-1
X104 2-6
A104 7-8
S104 9
[142] Gleim #: 1.5.142 -- Source: CMA 688 5-25
(Refers to Fact Pattern #16)
The probability that a customer will select model P104 is- A10%
- B20%
- C50%
- DSome percentage other than those given
43[143] Gleim #: 1.5.143 -- Source: CMA 688 5-26
(Refers to Fact Pattern #16)
In running a simulation of the computer demand, the following numbers are drawn in
sequence: 2, 8, and 6. The simulation indicates that the third customer will purchase.- AModel P104
- BModel X104.
- CModel A104.
- DModel S104
44[144] Gleim #: 1.5.144 -- Source: CMA 683 5-8
A company is simulating the actions of a government agency in which 50% of the time a recall
of a product is required, 40% of the time only notification of the buyer about a potential defect
is required, and 10% of the time no action on its part is required. Random numbers of 1 to 100
are being used. An appropriate assignment of random numbers for the recall category would be- A1-40
- B40-90
- C61-100
- D11-60
45[145] Gleim #: 1.5.145 -- Source: CMA 0408 1-176
Johnson Software has developed a new software package. Johnson’s sales manager has
prepared the following probability distribution describing the relative likelihood of monthly
sales levels and relative income (loss) for the company’s new software package.
Monthly Sales
In Units Probability Income(Loss)
10,000 .2 $(4,000)
20,000 .3 10,000
30,000 .3 30,000
40,000 .2 60,000
If Johnson decides to market its new software package, the expected value of additional
monthly income will be- A$23,200
- B$24,000
- C$24,800
- D$25,000
46[146] Gleim #: 1.5.146 -- Source: CMA 0408 1-177
According to recent focus sessions, Norton Corporation has a “can’t miss” consumer product
on its hands. Sales forecasts indicate either excellent or good results, with Norton’s sales
manager assigning a probability of .6 to a good results outcome. The company is now studying
various sales compensation plans for the product and has determined the following contribution
margin data:
Contribution
Margin
If sales are excellent and
Plan 1 is adopted $300,000
Plan 2 is adopted 370,000
If sales are good and
Plan 1 is adopted 240,000
Plan 2 is adopted 180,000
On the basis of this information, which of the following statements is correct?- APlan 2 should be adopted because it is $10,000 more attractive than Plan 1
- BPlan 1 should be adopted because it is $8,000 more attractive than Plan 2
- CPlan 1 should be adopted because of the sales manager’s higher confidence in good results.
- DEither Plan should be adopted, the decision being dependent on the probability of excellent
sales results.
47[147] Gleim #: 1.5.147 -- Source: CMA 0408 1-178
Denton, Inc. manufactures industrial machinery and requires 100,000 switches per year in its
assembly process. When switches are received from a vendor they are installed in the specific
machine and tested. If the switches fail, they are scrapped and the associated labor cost of $25
is considered lost productivity. Denton purchases “off the shelf” switches as opposed to
custom-made switches and experiences quality problems with some vendors’ products. A
decision must be made as to which vendor to buy from during the next year based on the
following information.
Percentage expected
Vendor Price per switch to pass the test
P $35 90%
Q 37 94%
R 39 97%
S 40 99%
Which vendor should Denton’s controller recommend to management?- AVendor P.
- BVendor Q.
- CVendor R.
- DVendor S.
48[148] Gleim #: 1.5.148 -- Source: CMA 0408 1-179
Scarf Corporation’s controller has decided to use a decision model to cope with uncertainty.
With a particular proposal, currently under consideration, Scarf has two possible actions, invest
or not invest in a joint venture with an international firm. The controller has determined the
following.
Action: Invest in the Joint Venture
Events and Probabilities:
Probability of success = 60%
Cost of investment = $9.5 million
Cash flow if investment is successful = $15.0 million
Cash flow if investment is unsuccessful = $2.0 million
Additional costs to be paid = $0
Costs incurred up to this point = $650,000
Action: Do Not Invest in the Joint Venture
Events:
Costs incurred up to this point = $650,000
Additional costs to be paid = $100,000
Which one of the following alternatives correctly reflects the respective expected values of
investing versus not investing?- A$300,000 and $(750,000)
- B$(350,000) and $(100,000).
- C$300,000 and $(100,000).
- D$(350,000) and $(750,000).
49[149] Gleim #: 1.5.149 -- Source: CMA 0408 1-180
Allbee Company has three possible investment opportunities. The controller calculated the
payoffs and probabilities as follows:
Probabilities
Payoffs Investment A Investment B Investment C
$(20,000) .3 .2 .3
(10,000) .1 .2 .1
30,000 .3 .2 .2
70,000 .2 .2 .3
100,000 .1 .2 .1
The cost of investments A, B, and C are the same. Using the expected-value criterion, which
one of the following rankings of these investments, from highest payoff to lowest payoff, is
correct?- AA, B, C
- BB, A, C
- CC, A, B.
- DB, C, A.
50[150] Gleim #: 1.5.150 -- Source: CMA 0408 1-181
The sales manager of Serito Doll Company has suggested that an expanded advertising
campaign costing $40,000 would increase the sales and profits of the company. He has
developed the following probability distribution for the effect of the advertising campaign on
company sales:
Sales increase
(units) Probability
15,000 .10
30,000 .35
45,000 .10
60,000 .25
75,000 .20
The company sells the dolls at $5.20 each. The cost of each doll is $3.20. Serito’s expected
incremental profit, if the advertising campaign is adopted, is- A$6,500
- B$46,500
- C$53,000
- D$93,000
51[151] Gleim #: 1.5.151 -- Source: CMA 0408 1-182
Stock X has the following probability distribution of expected future returns:
Expected
Probability Return
.1 –20%
.2 5%
.4 15%
.2 20%
.1 30%
The expected rate of return on Stock X is- A10%
- B12%
- C16%
- D19%
52[152] Gleim #: 1.5.152 -- Source: CMA 0408 1-183
Which one of the following four probability distributions provides the highest expected
monetary value?
Alternative #1 Alternative #2
Cash Cash
Prob Inflows Prob Inflows
10% $ 50,000 10% $ 50,000
20% 75,000 20% 75,000
40% 100,000 45% 100,000
30% 150,000 25% 150,000
Alternative #3 Alternative #4
Cash Cash
Prob Inflows Prob Inflows
10% $ 50,000 10% $150,000
20% 75,000 20% 100,000
40% 100,000 40% 75,000
30% 125,000 30% 50,000- AAlternative #1.
- BAlternative #2
- CAlternative #3.
- DAlternative #4.
53[153] Gleim #: 1.6.153 -- Source: CMA 689 5-17
A quantitative technique useful in projecting a firm’s sales and profits is- AProbability distribution theory
- BGantt charting
- CLearning curves
- DQueuing theory
54[154] Gleim #: 1.6.154 -- Source: CMA 1294 4-30
Sweivel Company is preparing its budget and, taking into consideration the recent pace of
economic recovery, has developed several sales forecasts and the estimated probability
associated with each sales forecast. To determine the sales forecast to be used for budgeting
purposes, which one of the following techniques should Sweivel use?- AExpected value analysis
- BContinuous probability simulation
- CExponential distribution analysis
- DSensitivity analysis
55[155] Gleim #: 1.6.155 -- Source: CMA 696 4-20
A widely used approach that managers use to recognize uncertainty about individual items and
to obtain an immediate financial estimate of the consequences of possible prediction errors is- AExpected value analysis
- BLearning curve analysis
- CSensitivity analysis
- DRegression analysis
56[156] Gleim #: 1.6.156 -- Source: CMA 690 5-21
Through the use of decision models, managers thoroughly analyze many alternatives and decide
on the best alternative for the company. Often, the actual results achieved from a particular
decision are not what was expected when the decision was made. In addition, an alternative that
was not selected would have actually been the best decision for the company. The appropriate
technique to analyze the alternatives by using expected inputs and altering them before a
decision is made is- AExpected value analysis
- BLinear programming
- CProgram Evaluation Review Technique
- DSensitivity analysis
57[157] Gleim #: 1.6.157 -- Source: CMA 1283 5-19
The process of evaluating the effect of changes in variables such as sales price or wage rates on
the optimum solution in a linear programming application is called- AIterative analysis
- BRegression analysis
- CSensitivity analysis
- DMatrix analysis
58[158] Gleim #: 1.6.158 -- Source: CMA 0408 1-187
Susan Hines has developed an estimate of the earnings per share for her firm for the next year
using the following parameters.
Sales $20 million
Cost of goods sold 70% of sales
General & administrative expenses $300,000
Selling expense $100,000 plus 10% of sales
Debt outstanding $5 million @ 8% interest rate
Effective tax rate 35%
Common shares outstanding 2 million
She is now interested in the sensitivity of earnings per share to sales forecast changes. A 10%
sales increase would increase earnings per share by- A7.0 cents per share
- B10.4 cents per share
- C13.0 cents per share
- D20.0 cents per share
59[159] Gleim #: 1.6.159 -- Source: CMA 0408 1-141
Which one of the following techniques would most likely be used to analyze reductions in the
time required to perform a task as experience with that task increases?- ARegression analysis
- BLearning curve analysis
- CSensitivity analysis
- DNormal probability analysis
60[160] Gleim #: 1.6.160 -- Source: CMA 0408 1-143
A manufacturing firm plans to bid on a special order of 80 units that will be manufactured in
lots of 10 units each. The production manager estimates that the direct labor hours per unit will
decline by a constant percentage each time the cumulative quantity of units produced doubles.
The quantitative technique used to capture this phenomenon and estimate the direct labor hours
required for the special order is- ACost-profit-volume analysis
- BThe Markov process
- CLinear programming analysis
- DLearning curve analysis
61[161] Gleim #: 2.1.1 -- Source: CMA 0205
In an organization that plans by using comprehensive budgeting, the master budget is- AA compilation of all the separate operational and financial budget schedules of the
organization. - BThe booklet containing budget guidelines, policies, and forms to use in the budgeting
process. - CThe current budget updated for operations for part of the current year.
- DA budget of a not-for-profit organization after it is approved by the appropriate
authoritative body.
- AA compilation of all the separate operational and financial budget schedules of the
62[162] Gleim #: 2.1.2 -- Source: CIA 579 111-13
While an operating budget is a key element in planning and control, it is not likely to- AEstablish a commitment of company resources.
- BSet out long-range, strategic concepts
- CIntegrate organizational activities
- DProvide subsidiary planning information.
63[163] Gleim #: 2.1.3 -- Source: CIA 1192 IV-19
There are many different budget techniques or processes that business organizations can
employ. One of these techniques or processes is zero-based budgeting, which is- ABudgeting from the ground up as though the budget process were being initiated for the
first time. - BBudgeting for cash inflows and outflows to time investments and borrowings in a way to
maintain a bank account with a minimum balance. - CUsing the prior year’s budget as a base year and adjusting it based on the experiences of the
prior year and the expectations for the coming year. - DDeveloping budgeted costs from clear-cut measured relationships between inputs and
outputs.
- ABudgeting from the ground up as though the budget process were being initiated for the
64[164] Gleim #: 2.1.4 -- Source: CMA 0205 2-3
In preparing a corporate master budget, which one of the following is most likely to be prepared
last?- ASales budget
- BCash budget
- CProduction budget.
- DCost of goods sold budget
65[165] Gleim #: 2.1.5 -- Source: CMA 0205 2-4
Which one of the following is not an advantage of activity-based budgeting?- ABetter identification of resource needs
- BLinking of costs to outputs
- CIdentification of budgetary slack
- DReduction of planning uncertainty.
66[166] Gleim #: 2.1.6 -- Source: CMA 1296 3-1
An advantage of incremental budgeting when compared with zero-based budgeting is that
incremental budgeting- AEncourages adopting new projects quickly.
- BAccepts the existing base as being satisfactory
- CEliminates functions and duties that have outlived their usefulness
- DEliminates the need to review all functions periodically to obtain optimum use of resources
67[167] Gleim #: 2.1.7 -- Source: CIA 580 111-14
The major appeal of zero-based budgeting is that it- ASolves the problem of measuring program effectiveness
- BRelates performance to resource inputs by an integrated planning and resource-allocation
process. - CReduces significantly the time required to review a budget.
- DDeals with some of the problems of the incremental approach to budgeting
68[168] Gleim #: 2.1.8 -- Source: CMA 1291 3-22
A systemized approach known as zero-based budgeting (ZBB)- APresents the plan for only one level of activity and does not adjust to changes in the level of
activity. - BPresents a statement of expectations for a period of time but does not present a firm
commitment. - CDivides the activities of individual responsibility centers into a series of packages that are
prioritized. - DClassifies budget requests by activity and estimates the benefits arising from each activity.
- APresents the plan for only one level of activity and does not adjust to changes in the level of
69[169] Gleim #: 2.1.9 -- Source: CIA 585 III-20
The major feature of zero-based budgeting (ZBB) is that it- ATakes the previous year’s budgets and adjusts them for inflation.
- BQuestions each activity and determines whether it should be maintained as it is, reduced, or
eliminated. - CAssumes all activities are legitimate and worthy of receiving budget increases to cover any
increased costs - DFocuses on planned capital outlays for property, plant, and equipment
70[170] Gleim #: 2.1.10 -- Source: CMA 1291 3-20
A continuous profit plan- AIs a plan that is revised monthly or quarterly
- BIs an annual plan that is part of a 5-year plan
- CIs a plan devised by a full-time planning staff.
- DWorks best for a company that can reliably forecast events a year or more into the future
71[171] Gleim #: 2.1.11 -- Source: CMA 1294 3-10
A continuous (rolling) budget- APresents planned activities for a period but does not present a firm commitment.
- BPresents the plan for only one level of activity and does not adjust to changes in the level of
activity. - CPresents the plan for a range of activity so that the plan can be adjusted for changes in
activity. - DDrops the current month or quarter and adds a future month or quarter as the current month
or quarter is completed.
72[172] Gleim #: 2.1.12 -- Source: CMA 694 3-13
A continuous (rolling) budget- APresents the plan for only one level of activity and does not adjust to changes in the level of
activity. - BPresents the plan for a range of activity so the plan can be adjusted for changes in activity
- CIs a plan that is revised monthly or quarterly, dropping one period and adding another.
- DIs one of the budgets that is part of a long-range strategic plan, unchanged unless the
strategy of the company changes
- APresents the plan for only one level of activity and does not adjust to changes in the level of
73[173] Gleim #: 2.1.13 -- Source: CMA 0205 2-5
The type of budget that is available on a continuous basis for a specified future period -- by
adding a month, quarter, or year in the future as the month, quarter, or year just ended is
dropped -- is called a(n)- ARolling budget
- BKaizen budget
- CActivity-based budget
- DFlexible budget.
74[174] Gleim #: 2.1.14 -- Source: CMA 679 4-8
A static budget- ADrops the current month or quarter and adds a future month or a future quarter as the
current month or quarter is completed - BPresents a statement of expectations for a period but does not present a firm commitment.
- CPresents the plan for only one level of activity and does not adjust to changes in the level of
activity - DPresents the plan for a range of activity so that the plan can be adjusted for changes in
activity
- ADrops the current month or quarter and adds a future month or a future quarter as the
75[175] Gleim #: 2.1.15 -- Source: CMA 1295 3-10
Which one of the following statements regarding the difference between a flexible budget and a
static budget is true?- AA flexible budget primarily is prepared for planning purposes, while a static budget is
prepared for performance evaluation - BA flexible budget provides cost allowances for different levels of activity, whereas a static
budget provides costs for one level of activity. - CA flexible budget includes only variable costs, whereas a static budget includes only fixed
costs. - DA flexible budget is established by operating management, while a static budget is
determined by top management
- AA flexible budget primarily is prepared for planning purposes, while a static budget is
76[176] Gleim #: 2.1.16 -- Source: Publisher
Zero-based budgeting forces managers to- AEstimate a product’s revenues and expenses over its expected life cycle
- BPrepare a budget based on historical costs
- CFormulate a budget by objective rather than function
- DJustify all expenditures at the beginning of every budget period
77[177] Gleim #: 2.1.17 -- Source: CMA 1290 3-19
The use of the master budget throughout the year as a constant comparison with actual results
signifies that the master budget is also a- AFlexible budget
- BCapital budget
- CZero-base budget
- DStatic budget
78[178] Gleim #: 2.1.18 -- Source: CMA 1291 3-13
A flexible budget is appropriate for- AControl of fixed factory overhead but not direct materials and direct labor.
- BControl of direct materials and direct labor but not selling and administrative expenses
- CAny level of activity
- DControl of direct labor and direct materials but not fixed factory overhead
79[179] Gleim #: 2.1.19 -- Source: CMA 1291 3-26
RedRock Company uses flexible budgeting for cost control. RedRock produced 10,800 units of
product during October, incurring indirect materials costs of $13,000. Its master budget for the
year reflected indirect materials costs of $180,000 at a production volume of 144,000 units. A
flexible budget for October production would reflect indirect materials costs of- A$13,000
- B$13,500
- C$13,975
- D$11,700
80[180] Gleim #: 2.1.20 -- Source: CMA 694 3-15
A method of budgeting in which the cost of each program must be justified, starting with the
one most vital to the company, is- AFlexible budgeting
- BZero-based budgeting
- CContinuous budgeting
- DProbabilistic budgeting
81[181] Gleim #: 2.1.21 -- Source: CMA 697 3-16
After the goals of the company have been established and communicated, the next step in the
planning process is development of the- AProduction budget
- BDirect materials budget
- CSelling and administrative budget
- DSales budget
82[182] Gleim #: 2.1.22 -- Source: CMA 1296 3-14
Flexible budgets- AProvide for external factors affecting company profitability.
- BAre used to evaluate capacity use.
- CAre budgets that project costs based on anticipated future improvements
- DAccommodate changes in activity levels
83[183] Gleim #: 2.1.23 -- Source: CMA 1292 3-12
Barnes Corporation expected to sell 150,000 board games during the month of November, and
the company’s master budget contained the following data related to the sale and production of
these games:
Revenue $2,400,000
Cost of goods sold:
Direct materials 675,000
Direct labor 300,000
Variable overhead 450,000
Contribution margin $ 975,000
Fixed overhead 250,000
Fixed selling and administration 500,000
Operating income $ 225,000
Actual sales during November were 180,000 games. Using a flexible budget, the company
expects the operating income for the month of November to be- A$225,000
- B$270,000
- C$420,000
- D$510,000
84[184] Gleim #: 2.1.24 -- Source: CMA 686 4-23
Simson Company’s master budget shows straight-line depreciation on factory equipment of
$258,000. The master budget was prepared at an annual production volume of 103,200 units of
product. This production volume is expected to occur uniformly throughout the year. During
September, Simson produced 8,170 units of product, and the accounts reflected actual
depreciation on factory machinery of $20,500. Simson controls manufacturing costs with a
flexible budget. The flexible budget amount for depreciation on factory machinery for
September would be- A$19,475
- B$20,425
- C$20,500
- D$21,500
85[185] Gleim #: 2.1.25 -- Source: CIA 586 IV-12
A company prepares a flexible budget each month for manufacturing costs. Formulas have been
developed for all costs within a relevant range of 5,000 to 15,000 units per month. The budget
for electricity (a semivariable cost) is $19,800 at 9,000 units per month, and $21,000 at 10,000
units per month. How much should be budgeted for electricity for the coming month if 12,000
units are to be produced?- A$26,400
- B$25,200
- C$23,400
- D$22,200
86[186] Gleim #: 2.1.26 -- Source: Publisher
A flexible budget is not appropriate for a(n)
Marketing Administrative Production
Budget Budget Budget
A. Yes Yes Yes
B. Yes No No
C. No Yes Yes
D. No No No- AA. Yes Yes Yes
- BB. Yes No No
- CC. No Yes Yes
- DD. No No No
87[187] Gleim #: 2.1.27 -- Source: CMA 1292 3-14
When preparing a performance report for a cost center using flexible budgeting techniques, the
planned cost column should be based on the- ABudgeted amount in the original budget prepared before the beginning of the year.
- BActual amount for the same period in the preceding year.
- CBudget adjusted to the actual level of activity for the period being reported
- DBudget adjusted to the planned level of activity for the period being reported
88[188] Gleim #: 2.1.28 -- Source: CMA 697 3-12
Which one of the following budgeting methodologies would be most appropriate for a firm
facing a significant level of uncertainty in unit sales volumes for next year?- ATop-down budgeting
- BLife-cycle budgeting
- CStatic budgeting
- DFlexible budgeting
89[189] Gleim #: 2.1.29 -- Source: CMA 696 3-14
Comparing actual results with a budget based on achieved volume is possible with the use of a- AMonthly budget
- BMaster budget
- CRolling budget
- DFlexible budget
90[190] Gleim #: 2.1.30 -- Source: CMA 1293 3-18
The use of standard costs in the budgeting process signifies that an organization has most likely
implemented a- AFlexible budget
- BCapital budget
- CZero-based budget
- DStatic budget
91[191] Gleim #: 2.1.31 -- Source: CMA 695 3-19
A plan that is created using budgeted revenue and costs but is based on the actual units of
output is known as a- AContinuous budget.
- BFlexible budget
- CStrategic plan
- DStatic budget
92[192] Gleim #: 2.1.32 -- Source: CIA 587 III-16
A manufacturing firm has certain peak seasons; namely the Christmas season, the summer
season, and the last 2 weeks of February. During these periods of increased output, the firm
leases additional production equipment and hires additional temporary employees. Which of the
following budget techniques would best fit this firm’s needs?- AFlexible budgeting
- BStatic budgeting
- CZero-based budgeting
- DProject budgeting
93[193] Gleim #: 2.1.33 -- Source: CMA 0408 2-002
When compared to static budgets, flexible budgets- AOffer managers a more realistic comparison of budget and actual fixed cost items under
their control. - BProvide a better understanding of the capacity variances during the period being evaluated.
- CEncourage managers to use fewer fixed cost items and more variable cost items that are
under their control. - DOffer managers a more realistic comparison of budget and actual revenue and cost items
under their control.
- AOffer managers a more realistic comparison of budget and actual fixed cost items under
94[194] Gleim #: 2.1.34 -- Source: CMA 0408 2-004
Rainbow, Inc. recently appointed Margaret Joyce as vice president of finance and asked her to
design a new budgeting system. Joyce has changed to a monthly budgeting system by dividing
the company’s annual budget by 12. Joyce then prepared monthly budgets for each department
and asked the managers to submit monthly reports comparing actual to budget. A sample
monthly report for Department A is shown below.
Rainbow, Inc.
Monthly Report for Department A
Actual Budget Variance
Units 1,000 900 100 F
Variable production costs:
Direct material $ 2,800 $ 2,700 $ 100 U
Direct labor 4,800 4,500 300 U
Variable factory
overhead 4,250 4,050 200 U
Fixed costs:
Depreciation 3,000 2,700 300 U
Taxes 1,000 900 100 U
Insurance 1,500 1,350 150 U
Administration 1,100 990 110 U
Marketing 1,000 900 100 U
Total costs $19,450 $18,090 $1.360 U
This monthly budget has been imposed from the top and will create behavior problems. All of
the following are causes of such problems except- AThe use of a flexible budget rather than a fixed budget.
- BTop management authoritarian attitude toward the budget process
- CThe inclusion of noncontrollable costs, such as depreciation.
- DThe lack of consideration for factors, such as seasonality
95[195] Gleim #: 2.1.35 -- Source: CMA 0408 2-026
Country Ovens is a family restaurant chain. Due to an unexpected road construction project,
traffic passing by the Country Ovens restaurant in Newtown has significantly increased. As a
result, restaurant volume has similarly increased well beyond the level expected. Which type of
budget would be most appropriate in helping the restaurant manager plan for restaurant labor
costs?- AZero-based budget.
- BRolling budget
- CActivity-based budget.
- DFlexible budget
96[196] Gleim #: 2.1.36 -- Source: CMA 0408 2-028
A budgeting approach that requires a manager to justify the entire budget for each budget
period is known as- APerformance budgeting
- BProgram budgeting
- CZero-based budgeting
- DIncremental budgeting
97[197] Gleim #: 2.1.37 -- Source: CMA 0408 2-031
Many companies use comprehensive budgeting in planning for the next year’s activities. When
both an operating budget and a financial budget are prepared, which one of the following is
correct concerning the financial budget?
Included in the Financial Budget
Capital Pro-forma Cash
Budget Balance Sheet Budget
A. Yes No Yes
B. No Yes No
C. Yes Yes Yes
D. No No No- AA. Yes No Yes
- BB. No Yes No
- CC. Yes Yes Yes
- DD. No No No
98[198] Gleim #: 2.2.38 -- Source: CMA 1289 4-8
The foundation of a profit plan is the- ACapital budget.
- BSales forecast
- CCost and expense budget
- DProduction plan
99[199] Gleim #: 2.2.39 -- Source: CMA 1289 4-9
A production plan should be based on- AA sales forecast adjusted for projected inventory levels.
- BEconomic order quantities and reorder points
- CExponential smoothing
- DLinear regression.
100[200] Gleim #: 2.2.40 -- Source: CMA 1290 3-17
The operating budget process usually begins with the- AFinancial budget.
- BBalance sheet
- CIncome statement
- DSales budget
Información
- Descripción
- Gleim CMA Test Prep: Part 1: Financial Planning, Performance, and Control (1337 questions)
- Autor
- Mark Anthony Pusing
- Idioma
- English
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