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CMA- GLEIM MCQ - Part 1 (2nd Batch)

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Gleim CMA Test Prep: Part 1: Financial Planning, Performance, and Control (1337 questions)
Mark Anthony Pusing
Quiz by Mark Anthony Pusing, updated more than 1 year ago
Mark Anthony Pusing
Created by Mark Anthony Pusing over 7 years ago
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Resource summary

Question 1

Question
[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
Answer
  • 20% | 10.24
  • 80% 10.24
  • 80% 7.68
  • 20% 3.84

Question 2

Question
[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?
Answer
  • 1,792
  • 1,944
  • 2,016
  • 2,160

Question 3

Question
[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?
Answer
  • Linear programming.
  • Exponential smoothing
  • Queuing theory
  • Program Evaluation and Review Technique (PERT).

Question 4

Question
[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
Answer
  • Multiplying the data by a seasonality factor.
  • Ignoring it.
  • Taking the weighted average over four time periods
  • Subtracting a seasonality factor from the data

Question 5

Question
105] 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
Answer
  • Delphi
  • Least squares.
  • Regression
  • Exponential smoothing

Question 6

Question
[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
Answer
  • Unweighted moving average
  • Exponential smoothing.
  • Queuing theory.
  • Linear regression analysis

Question 7

Question
[107] Gleim #: 1.4.107 -- Source: CIA 1189 III-50 What are the four components of a time series?
Answer
  • Trend, cyclical, seasonal, and irregular
  • Alpha, cyclical, seasonal, and irregular
  • Alpha, cyclical, seasonal, and repetitive
  • Trend, cyclical, seasonal, and repetitive

Question 8

Question
[108] Gleim #: 1.4.108 -- Source: CIA 589 III-50 The moving-average method of forecasting
Answer
  • Is a cross-sectional forecasting method
  • Regresses the variable of interest on a related variable to develop a forecast
  • Derives final forecasts by adjusting the initial forecast based on the smoothing constant
  • Includes each new observation in the average as it becomes available and discards the oldest observation.

Question 9

Question
[109] Gleim #: 1.4.109 -- Source: Publisher Violation of which assumption underlying regression analysis is prevalent in time series analysis?
Answer
  • Variance of error term is constant.
  • Error terms are independent.
  • Distribution of error terms is usually normal
  • Expected value of error term equals zero

Question 10

Question
[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
Answer
  • 148 televisions
  • 151 televisions
  • 155 televisions
  • 158 televisions

Question 11

Question
[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?
Answer
  • $85,000
  • $84,000
  • $68,000
  • $67,200

Question 12

Question
[112] Gleim #: 1.5.112 -- Source: CMA 1293 4-26 The expected value of perfect information is the
Answer
  • Same as the expected profit under certainty
  • Sum of the conditional profit (loss) for the best event of each act times the probability of each event occurring
  • Difference between the expected profit under certainty and the expected opportunity loss.
  • Difference between the expected profit under certainty and the expected monetary value of the best act under uncertainty

Question 13

Question
[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?
Answer
  • 0%
  • 11.25%
  • 70%
  • 25%

Question 14

Question
[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?
Answer
  • 480
  • 380
  • 400
  • 800

Question 15

Question
[115] Gleim #: 1.5.115 -- Source: CMA 690 5-25 In decision making under conditions of uncertainty, expected value refers to the
Answer
  • Likely outcome of a proposed action
  • Present value of alternative actions
  • Probability of a given outcome from a proposed action
  • Weighted average of probable outcomes of an action

Question 16

Question
[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
Answer
  • $1,360
  • $2,200
  • $3,900
  • $1,960

Question 17

Question
[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
Answer
  • $3,900
  • $2,200
  • $1,360
  • $1,960

Question 18

Question
[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?
Answer
  • $600
  • $300
  • $1,000
  • $500

Question 19

Question
[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
Answer
  • $(40)
  • $80
  • $20
  • $120

Question 20

Question
[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
Answer
  • $28
  • $20
  • $(36)
  • $68

Question 21

Question
[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
Answer
  • $68
  • $40
  • $48
  • $104

Question 22

Question
[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
Answer
  • $133,333
  • $195,000
  • $225,000
  • $283,333

Question 23

Question
[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?
Answer
  • .167
  • .200
  • .250
  • .333

Question 24

Question
[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
Answer
  • $(15,200)
  • $(1,267)
  • $3,200
  • $7,200

Question 25

Question
[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
Answer
  • 4,000 pretzels
  • 4,400 pretzels
  • 5,000 pretzels
  • Some amount other than those given.

Question 26

Question
[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
Answer
  • 4,000 pretzels
  • 4,400 pretzels
  • 5,000 pretzels
  • 6,000 pretzels

Question 27

Question
[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
Answer
  • $1,800
  • $2,100
  • $2,800
  • Some amount other than those given.

Question 28

Question
[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
Answer
  • $1,200
  • $2,100
  • $2,800
  • $800

Question 29

Question
[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?
Answer
  • Linear programming
  • Minimax regret criteria
  • Expected value analysis
  • Monte Carlo simulation

Question 30

Question
[130] Gleim #: 1.5.130 -- Source: CMA 692 4-4 The expected monetary value of an event
Answer
  • Is equal to the conditional value or profit of the event.
  • Is equal to the payoff of the event times the probability the event will occur
  • Is the profit forgone by not choosing the best alternative
  • Is the absolute profit from a particular event

Question 31

Question
[131] Gleim #: 1.5.131 -- Source: CMA 1286 5-3 Expected value in decision analysis is
Answer
  • A standard deviation using the probabilities as weights.
  • An arithmetic mean using the probabilities as weights.
  • The square root of the squared deviations.
  • A measure of the difference between the best possible outcome and the outcome of the original decision.

Question 32

Question
[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
Answer
  • $6.40
  • $8.40
  • $9.00
  • $8.60

Question 33

Question
[133] Gleim #: 1.5.133 -- Source: CMA 691 4-1 The expected monetary value of an act is the
Answer
  • Sum of the conditional profit (loss) for each event.
  • Sum of the conditional profit (loss) for each event times the probability of each event’s occurrence.
  • Conditional profit (loss) for the best event times the probability of each event’s occurrence
  • Revenue minus the costs for the act.

Question 34

Question
[134] Gleim #: 1.5.134 -- Source: CMA 691 4-3 The expected value of perfect information is the
Answer
  • Same as the expected profit under certainty.
  • Sum of the conditional profit (loss) for the best event of each act times the probability of each event’s occurring.
  • Difference between the expected profit under uncertainty and conditional profit for the best act under certainty
  • Difference between the expected profit under certainty and the expected monetary value of the best act under uncertainty

Question 35

Question
[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
Answer
  • Payoffs.
  • States of nature
  • Probabilities.
  • Nodes

Question 36

Question
[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
Answer
  • Is closest to the expected demand.
  • Has the greatest probability of occurring.
  • Has the greatest expected opportunity cost
  • Has the greatest expected monetary value

Question 37

Question
[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
Answer
  • $170,000
  • $130,000
  • $210,000
  • $250,000

Question 38

Question
[138] Gleim #: 1.5.138 -- Source: CMA 689 5-27 (Refers to Fact Pattern #14) Using the expected value criterion,
Answer
  • The single purpose machine should be used because of the low expected demand
  • The automatic machine should be used because of the high expected demand
  • The semiautomatic machine should be used because it has the lowest expected cost.
  • The automatic machine has the lowest expected cost.

Question 39

Question
[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
Answer
  • 20
  • 30
  • 40
  • 50

Question 40

Question
[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
Answer
  • $.80
  • $2.60
  • $10.40
  • $30.00

Question 41

Question
[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
Answer
  • $64,500
  • $66,000
  • $69,000
  • $72,000

Question 42

Question
[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
Answer
  • 10%
  • 20%
  • 50%
  • Some percentage other than those given

Question 43

Question
[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.
Answer
  • Model P104
  • Model X104.
  • Model A104.
  • Model S104

Question 44

Question
[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
Answer
  • 1-40
  • 40-90
  • 61-100
  • 11-60

Question 45

Question
[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
Answer
  • $23,200
  • $24,000
  • $24,800
  • $25,000

Question 46

Question
[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?
Answer
  • Plan 2 should be adopted because it is $10,000 more attractive than Plan 1
  • Plan 1 should be adopted because it is $8,000 more attractive than Plan 2
  • Plan 1 should be adopted because of the sales manager’s higher confidence in good results.
  • Either Plan should be adopted, the decision being dependent on the probability of excellent sales results.

Question 47

Question
[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?
Answer
  • Vendor P.
  • Vendor Q.
  • Vendor R.
  • Vendor S.

Question 48

Question
[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?
Answer
  • $300,000 and $(750,000)
  • $(350,000) and $(100,000).
  • $300,000 and $(100,000).
  • $(350,000) and $(750,000).

Question 49

Question
[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?
Answer
  • A, B, C
  • B, A, C
  • C, A, B.
  • B, C, A.

Question 50

Question
[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
Answer
  • $6,500
  • $46,500
  • $53,000
  • $93,000

Question 51

Question
[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
Answer
  • 10%
  • 12%
  • 16%
  • 19%

Question 52

Question
[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
Answer
  • Alternative #1.
  • Alternative #2
  • Alternative #3.
  • Alternative #4.

Question 53

Question
[153] Gleim #: 1.6.153 -- Source: CMA 689 5-17 A quantitative technique useful in projecting a firm’s sales and profits is
Answer
  • Probability distribution theory
  • Gantt charting
  • Learning curves
  • Queuing theory

Question 54

Question
[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?
Answer
  • Expected value analysis
  • Continuous probability simulation
  • Exponential distribution analysis
  • Sensitivity analysis

Question 55

Question
[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
Answer
  • Expected value analysis
  • Learning curve analysis
  • Sensitivity analysis
  • Regression analysis

Question 56

Question
[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
Answer
  • Expected value analysis
  • Linear programming
  • Program Evaluation Review Technique
  • Sensitivity analysis

Question 57

Question
[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
Answer
  • Iterative analysis
  • Regression analysis
  • Sensitivity analysis
  • Matrix analysis

Question 58

Question
[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
Answer
  • 7.0 cents per share
  • 10.4 cents per share
  • 13.0 cents per share
  • 20.0 cents per share

Question 59

Question
[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?
Answer
  • Regression analysis
  • Learning curve analysis
  • Sensitivity analysis
  • Normal probability analysis

Question 60

Question
[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
Answer
  • Cost-profit-volume analysis
  • The Markov process
  • Linear programming analysis
  • Learning curve analysis

Question 61

Question
[161] Gleim #: 2.1.1 -- Source: CMA 0205 In an organization that plans by using comprehensive budgeting, the master budget is
Answer
  • A compilation of all the separate operational and financial budget schedules of the organization.
  • The booklet containing budget guidelines, policies, and forms to use in the budgeting process.
  • The current budget updated for operations for part of the current year.
  • A budget of a not-for-profit organization after it is approved by the appropriate authoritative body.

Question 62

Question
[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
Answer
  • Establish a commitment of company resources.
  • Set out long-range, strategic concepts
  • Integrate organizational activities
  • Provide subsidiary planning information.

Question 63

Question
[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
Answer
  • Budgeting from the ground up as though the budget process were being initiated for the first time.
  • Budgeting for cash inflows and outflows to time investments and borrowings in a way to maintain a bank account with a minimum balance.
  • Using 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.
  • Developing budgeted costs from clear-cut measured relationships between inputs and outputs.

Question 64

Question
[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?
Answer
  • Sales budget
  • Cash budget
  • Production budget.
  • Cost of goods sold budget

Question 65

Question
[165] Gleim #: 2.1.5 -- Source: CMA 0205 2-4 Which one of the following is not an advantage of activity-based budgeting?
Answer
  • Better identification of resource needs
  • Linking of costs to outputs
  • Identification of budgetary slack
  • Reduction of planning uncertainty.

Question 66

Question
[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
Answer
  • Encourages adopting new projects quickly.
  • Accepts the existing base as being satisfactory
  • Eliminates functions and duties that have outlived their usefulness
  • Eliminates the need to review all functions periodically to obtain optimum use of resources

Question 67

Question
[167] Gleim #: 2.1.7 -- Source: CIA 580 111-14 The major appeal of zero-based budgeting is that it
Answer
  • Solves the problem of measuring program effectiveness
  • Relates performance to resource inputs by an integrated planning and resource-allocation process.
  • Reduces significantly the time required to review a budget.
  • Deals with some of the problems of the incremental approach to budgeting

Question 68

Question
[168] Gleim #: 2.1.8 -- Source: CMA 1291 3-22 A systemized approach known as zero-based budgeting (ZBB)
Answer
  • Presents the plan for only one level of activity and does not adjust to changes in the level of activity.
  • Presents a statement of expectations for a period of time but does not present a firm commitment.
  • Divides the activities of individual responsibility centers into a series of packages that are prioritized.
  • Classifies budget requests by activity and estimates the benefits arising from each activity.

Question 69

Question
[169] Gleim #: 2.1.9 -- Source: CIA 585 III-20 The major feature of zero-based budgeting (ZBB) is that it
Answer
  • Takes the previous year’s budgets and adjusts them for inflation.
  • Questions each activity and determines whether it should be maintained as it is, reduced, or eliminated.
  • Assumes all activities are legitimate and worthy of receiving budget increases to cover any increased costs
  • Focuses on planned capital outlays for property, plant, and equipment

Question 70

Question
[170] Gleim #: 2.1.10 -- Source: CMA 1291 3-20 A continuous profit plan
Answer
  • Is a plan that is revised monthly or quarterly
  • Is an annual plan that is part of a 5-year plan
  • Is a plan devised by a full-time planning staff.
  • Works best for a company that can reliably forecast events a year or more into the future

Question 71

Question
[171] Gleim #: 2.1.11 -- Source: CMA 1294 3-10 A continuous (rolling) budget
Answer
  • Presents planned activities for a period but does not present a firm commitment.
  • Presents the plan for only one level of activity and does not adjust to changes in the level of activity.
  • Presents the plan for a range of activity so that the plan can be adjusted for changes in activity.
  • Drops the current month or quarter and adds a future month or quarter as the current month or quarter is completed.

Question 72

Question
[172] Gleim #: 2.1.12 -- Source: CMA 694 3-13 A continuous (rolling) budget
Answer
  • Presents the plan for only one level of activity and does not adjust to changes in the level of activity.
  • Presents the plan for a range of activity so the plan can be adjusted for changes in activity
  • Is a plan that is revised monthly or quarterly, dropping one period and adding another.
  • Is one of the budgets that is part of a long-range strategic plan, unchanged unless the strategy of the company changes

Question 73

Question
[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)
Answer
  • Rolling budget
  • Kaizen budget
  • Activity-based budget
  • Flexible budget.

Question 74

Question
[174] Gleim #: 2.1.14 -- Source: CMA 679 4-8 A static budget
Answer
  • Drops the current month or quarter and adds a future month or a future quarter as the current month or quarter is completed
  • Presents a statement of expectations for a period but does not present a firm commitment.
  • Presents the plan for only one level of activity and does not adjust to changes in the level of activity
  • Presents the plan for a range of activity so that the plan can be adjusted for changes in activity

Question 75

Question
[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?
Answer
  • A flexible budget primarily is prepared for planning purposes, while a static budget is prepared for performance evaluation
  • A flexible budget provides cost allowances for different levels of activity, whereas a static budget provides costs for one level of activity.
  • A flexible budget includes only variable costs, whereas a static budget includes only fixed costs.
  • A flexible budget is established by operating management, while a static budget is determined by top management

Question 76

Question
[176] Gleim #: 2.1.16 -- Source: Publisher Zero-based budgeting forces managers to
Answer
  • Estimate a product’s revenues and expenses over its expected life cycle
  • Prepare a budget based on historical costs
  • Formulate a budget by objective rather than function
  • Justify all expenditures at the beginning of every budget period

Question 77

Question
[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
Answer
  • Flexible budget
  • Capital budget
  • Zero-base budget
  • Static budget

Question 78

Question
[178] Gleim #: 2.1.18 -- Source: CMA 1291 3-13 A flexible budget is appropriate for
Answer
  • Control of fixed factory overhead but not direct materials and direct labor.
  • Control of direct materials and direct labor but not selling and administrative expenses
  • Any level of activity
  • Control of direct labor and direct materials but not fixed factory overhead

Question 79

Question
[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
Answer
  • $13,000
  • $13,500
  • $13,975
  • $11,700

Question 80

Question
[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
Answer
  • Flexible budgeting
  • Zero-based budgeting
  • Continuous budgeting
  • Probabilistic budgeting

Question 81

Question
[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
Answer
  • Production budget
  • Direct materials budget
  • Selling and administrative budget
  • Sales budget

Question 82

Question
[182] Gleim #: 2.1.22 -- Source: CMA 1296 3-14 Flexible budgets
Answer
  • Provide for external factors affecting company profitability.
  • Are used to evaluate capacity use.
  • Are budgets that project costs based on anticipated future improvements
  • Accommodate changes in activity levels

Question 83

Question
[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
Answer
  • $225,000
  • $270,000
  • $420,000
  • $510,000

Question 84

Question
[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
Answer
  • $19,475
  • $20,425
  • $20,500
  • $21,500

Question 85

Question
[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?
Answer
  • $26,400
  • $25,200
  • $23,400
  • $22,200

Question 86

Question
[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
Answer
  • A. Yes Yes Yes
  • B. Yes No No
  • C. No Yes Yes
  • D. No No No

Question 87

Question
[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
Answer
  • Budgeted amount in the original budget prepared before the beginning of the year.
  • Actual amount for the same period in the preceding year.
  • Budget adjusted to the actual level of activity for the period being reported
  • Budget adjusted to the planned level of activity for the period being reported

Question 88

Question
[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?
Answer
  • Top-down budgeting
  • Life-cycle budgeting
  • Static budgeting
  • Flexible budgeting

Question 89

Question
[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
Answer
  • Monthly budget
  • Master budget
  • Rolling budget
  • Flexible budget

Question 90

Question
[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
Answer
  • Flexible budget
  • Capital budget
  • Zero-based budget
  • Static budget

Question 91

Question
[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
Answer
  • Continuous budget.
  • Flexible budget
  • Strategic plan
  • Static budget

Question 92

Question
[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?
Answer
  • Flexible budgeting
  • Static budgeting
  • Zero-based budgeting
  • Project budgeting

Question 93

Question
[193] Gleim #: 2.1.33 -- Source: CMA 0408 2-002 When compared to static budgets, flexible budgets
Answer
  • Offer managers a more realistic comparison of budget and actual fixed cost items under their control.
  • Provide a better understanding of the capacity variances during the period being evaluated.
  • Encourage managers to use fewer fixed cost items and more variable cost items that are under their control.
  • Offer managers a more realistic comparison of budget and actual revenue and cost items under their control.

Question 94

Question
[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
Answer
  • The use of a flexible budget rather than a fixed budget.
  • Top management authoritarian attitude toward the budget process
  • The inclusion of noncontrollable costs, such as depreciation.
  • The lack of consideration for factors, such as seasonality

Question 95

Question
[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?
Answer
  • Zero-based budget.
  • Rolling budget
  • Activity-based budget.
  • Flexible budget

Question 96

Question
[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
Answer
  • Performance budgeting
  • Program budgeting
  • Zero-based budgeting
  • Incremental budgeting

Question 97

Question
[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
Answer
  • A. Yes No Yes
  • B. No Yes No
  • C. Yes Yes Yes
  • D. No No No

Question 98

Question
[198] Gleim #: 2.2.38 -- Source: CMA 1289 4-8 The foundation of a profit plan is the
Answer
  • Capital budget.
  • Sales forecast
  • Cost and expense budget
  • Production plan

Question 99

Question
[199] Gleim #: 2.2.39 -- Source: CMA 1289 4-9 A production plan should be based on
Answer
  • A sales forecast adjusted for projected inventory levels.
  • Economic order quantities and reorder points
  • Exponential smoothing
  • Linear regression.

Question 100

Question
[200] Gleim #: 2.2.40 -- Source: CMA 1290 3-17 The operating budget process usually begins with the
Answer
  • Financial budget.
  • Balance sheet
  • Income statement
  • Sales budget
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