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1. IMANET CMA Questions & Answers Certified Management Accountant (Demo Version - Limited Content)

2. Questjons & Answers PDF Page 2 Questjon: 1 A distjnctjon between forecastjng and planning A. Is not valid because that are synonyms B. Arises because forecastjng covers the short term and planning does not C. Is that forecasts are used in planning D. Is that forecastjng is a management actjvity, whereas planning is a technical actjvity Answer: C Explanatjon: Planning is the determinatjon of what is to be done, and of how, when, where. and by whom it is to be done. Plans save to direct the actjvated that all organizatjonal members must undertake to move the organizatjon from where it is to where it wants to be. Forecastjng is the basis of planning because it projects the future. A variety of quantjtatjve methods are used in forecastjng Questjon: 2 Strategy is a broad term that usually means the selectjon of overall objectjves. Strategic analysis ordinarily excludes the A. Trends that will afgect the entjty’s markets B. Target product mix and productjon schedule to be maintained C. Forms of organizatjonal structure that would best serve the entjty D. Best ways to invest in research, design, productjon, distributjon, marketjng, and administratjve actjvitjes Answer: B Explanatjon: Strategic analysis is the process of long-range planning. It includes identjfying organizatjonal objectjves, evaluatjng the strengths and weaknesses of the organizatjon, such as market trends, changes the technology, internatjonal competjtjon, and social change. The fjnal step is to derive the best strategy for reaching the objectjves. Settjng the target product mix and productjon schedule for the current year is not a concern of strategic analysis because it is short-term actjvity. Questjon: 3 Strategic planning, as practjced by most modem organizatjons, includes all of the following expect A. Top-level management predicatjon B. A long-term focus https://www.exams4success.com

3. Questjons & Answers PDF Page 3 C. Strategies that will help in achieving long-range goals D. Analysis of the current month’s actual variances from budget Answer: D Explanatjon: Strategic planning is the process of settjng overall organizatjonal objectjves and goals. It is a long- term process aimed at chartjng the future course of the organizatjon. Strategic planning is based on assessing risk levels, evaluatjng the strengths and weaknesses of the organizatjon, and forecastjng the future directjon an infmuences of factors relevant to the organizatjon such as market trends, changes in technology, internatjonal competjtjon, and social change. Analysis of the current month’s budget variances is not an aspect of strategic planning. Questjon: 4 Which one of the following reasons is not a signifjcant reason for planning in an organizatjon? A. Promotjng coordinatjon among operatjng units B. Forcing managers to consider expected future trends and conditjons C. Developing basis for controlling operatjons D. Monitoring profjtable operatjons Answer: D Explanatjon: Monitoring profjtable operatjons is not a signifjcant reason for planning. Monitoring is a control functjon, whereas planning has a control purpose that precedes control in the planning-control cycle. Planning establishes standards against which is the control functjon compares preliminary or fjnal results. Questjon: 5 Certain phases of the planning process should be formalized for all of the following reasons expect that A. Informal plans and goals lack the necessary precision, understanding, and consistency. B. Formal plans can act as a constraint on the decision-making freedom of managers and supervisors C. Formalizatjon requires the establishment and observance of deadlines for decision making and planning D. Formalizatjon provides a logical basis for ratjonal fmexibility in planning Answer: B Explanatjon: A formal plan is a prescriptjon for organizatjonal behavior and a set of goals. Management decision making is therefore necessarily constrained by the limitatjons established I the plan. https://www.exams4success.com

4. Questjons & Answers PDF Page 4 Questjon: 6 All of the following are characteristjcs of the strategic planning process except the A. Emphasis on the long run B. Analysis of external economic factors C. Review of the atuributes and behavior of the organizatjon’s competjtjon D. Analysis and review of department budgets Answer: D Explanatjon: Strategic planning is the process of settjng the overall organizatjonal objectjves and goals, and involves the drafuing of strategic plans. Long-range (strategic) planning is based on identjfying and specifying organizatjonal goals and objectjves, evaluatjng the strengths and weaknesses of the organizatjon, assessing risk levels, forecastjng the future directjon and infmuences of factors relevant to the organizatjon (such as market trend, changes in technology, internatjonal competjtjon, and social change), and deriving the best strategy for reaching the objectjves given the organizatjon’s strengths and weaknesses and the relevant future trends. Analyzing and reviewing department budgets is an aspect of operatjonal management and not a part of strategic planning. Questjon: 7 The fjrst step in the sales planning process is to A. Assemble all the data that are relevant in developing a comprehensive sales plan B. Develop management guidelines specifjc to sales planning, including the sales planning process and planning responsibilitjes C. Prepare a sales forecast consistent with specifjed forecastjng guidelines, including assumptjons D. Secure management commitment to atuain the goals specifjed in the comprehensive sales plan Answer: B Explanatjon: Sales planning is a startjng point for many other plans. The resources required, revenues to be earned, and costs to be incurred depend on sales. The sales plan of an operatjng unit should include as much specifjc informatjon from that unit’s management as possible, but must conform to the strategic plans or corporate management. Thus, top management must provide a context within which operatjonal managers can prepare their plans. Corporate support include economic forecasts, overall market sales forecasts, and capital budgets. Questjon: 8 Which of the following is a market-oriented defjnitjon of a business versus a productoriented defjnitjon of a business? A. We make air conditjoners and furnaces https://www.exams4success.com

5. Questjons & Answers PDF Page 5 B. We supply energy C. We produce movies D. We sell men’s shirts and pants Answer: B Explanatjon: Business should be defjned in market terms, that is, in terms of needs and customer groups. Moreover, a distjnctjon should be made between a target market defjnitjon and as strategic market defjnitjons. For example, a target market for a railroad might be freight hauling, but a strategic market might be transportatjon of any goods and people . Accordingly, statjng that a business supplies energy is a market-oriented defjnitjon as opposed to the product-oriented defjnitjon. Moreover, it is also a strategic market defjnitjon. Questjon: 9 The capital budget is a(n) A. Plan to ensure that suffjcient funds are available for the operatjng needs of the company B. Exercise that sets the long-range goals of the company including the consideratjon of external infmuences C. Plan that coordinates and communicates a company’s plan for the coming year to all departments and divisions D. Plan that assesses the long-term needs of the company for pant and equipment purchases Answer: D Explanatjon: Capital budgetjng is the process of planning expenditures for long-lived assets. It involves choosing among investment proposals using a ranking procedure. Evaluatjons are based on various measures involving rate of return on investment. Questjon: 10 Capital budgetjng techniques are least likely to be used in evaluatjng the A. Acquisitjon of new aircrafu by a cargo company B. Design and implementatjon of a major advertjsing program C. Adoptjon of a new method of allocatjng nontraceable costs to produce lines D. Sale by a conglomerate of a n unprofjtable division Answer: C Explanatjon: Capital budgetjng is the process of planning expenditures for investments hat are expected to generate returns over a period of more than one year. Thus, capital budgetjng concerns the acquisitjon or disposal of long-term assets and the fjnancing ramifjcatjons of such decisions. The https://www.exams4success.com

6. Questjons & Answers PDF Page 6 adoptjon of a new method of allocatjng nontracble costs to product lines has no efgect on a company’s cash fmows, does not relate to the acquisitjon of longterm assets , and is not concerned with fjnancing. Hence, capital budgetjng is irrelevant to such a decision. Questjon: 11 The capital budgetjng model that is ordinarily considered the best model for long-range decision making is the A. Payback model B. Accountjng rate of return model C. Unadjusted rate of return model D. Discounted cash fmow model Answer: D Explanatjon: The capital budgetjng methods that are generally considered the best for long-range decision making are the internal rate of return and net present value methods. These are both discounted cash fmow methods Questjon: 12 Efgectjve cost capacity management A. Minimizes the value delivered to customers B. Maximizes required future investments C. Matches the fjrm’s resources with current and future market opportunitjes D. Is limited to eliminatjng short-term worth Answer: C Explanatjon: According to SMA 4Y, Measuring the Cost of Capacity, maximizing the value created within an organizatjon starts with understanding the nature and capabilitjes of all of the company’s resources. Capacity is defjned from several difgerent perspectjves. Managing capacity cost starts when a product is fjrst envisioned. It contjnues through the subsequent disposal of resources downstream. Efgectjve capacity cost management requires supportjng efgectjve matching of a fjrm’s resource with current and future market opportunitjes. Questjon: 13 What is the key strategic issues when a fjrm is considering capacity expansion? A. Forecastjng long-term demand B. Analyzing the behavior of competjtors C. Identjfying optjons https://www.exams4success.com

7. Questjons & Answers PDF Page 7 D. Avoiding industry overcapacity Answer: D Explanatjon: Whether to expand capacity is a major strategic decision because of the capital required, the diffjculty of forming accurate expectatjons, and the long tjme frame of the lead tjmes and the commitment. The key forecastjng problems are long-term demand and behavior of competjtors. The key strategic issue is avoidance of industry overcapacity. Undercapacity in a portable industry trends to be a short-term issue. Profjts ordinarily lure additjonal investors. Overcapacity trends to be a long- term problem because fjrms are more likely to compete intensely rather than reverse their expansion Questjon: 14 When demand uncertainty is low, fjrms tend to adopt a strategy of preemptjve expansion. The conditjons for successful preemptjon expansion include which of the following? A. The fjrm should avoid market signals that alert competjtors to the fjrm’s plans B. The expansion should be small relatjve to the market to minimize risk C. Economic of scale should be large relatjve to demand D. The business should be strategically vital to competjtors Answer: C Explanatjon: Economics of scale should be large in relatjon to demand, or the learning-curve efgect should give an initjal large investor a permanent cost advantage. For example, the preemptjve fjrm may be able to secure too much of the market to allow a subsequent fjrm to invest at the effjcient scale. That is, the residual demand available to be met by the later fjrm is less than the effjcient scale of productjon. The later fjrm therefore must choose between intense competjtjon at the effjcient scale or a cost disadvantage. Questjon: 15 Capacity expansion is also referred to as A. Market penetratjon B. Market development C. Product development D. Diversifjcatjon Answer: A Explanatjon: Market penetratjon is growth of existjng products or development of existjng markets. It occurs in mature fjrms within an industry https://www.exams4success.com

8. Questjons & Answers PDF Page 8 Questjon: 16 What type of synergy exists when products or services have positjve complementary efgects? A. Market synergy B. Cost Synergy C. Technological synergy D. Management synergy Answer: A Explanatjon: Market synergy arises when products or services have positjve complementary efgects Shopping mails refmect this type of synergy. Questjon: 17 Which of the following is not an example of synergy? A. A shopping mail with several businesses providing difgerent products and performing difgerent services B. A store provides warrantjes on automobile parts in order to maximize customer value . C. A manufacturing company hires a new manger with technological experience lacking in the company D. Military Huumvees are converted into sports utjlity vehicles for sale to civilians Answer: B Explanatjon: Synergy occurs when the combinatjon of formerly separate elements has a greater efgect than the sum of their individual efgects. It is unclear here whether the store is a car dealership or a parts shop. Therefore, this is seen more as an operatjonal service strategy that seeks to gain a competjtjve advantage and maximize customer value by providing services such as warrantjes, rather than market synergy. Market synergy arises when products or services have positjve complementary efgects. (i.e., a parts shop and a service warranty on parts) Questjon: 18 Which of the following best describes a market synergy? A. Technology transfer from one product to another B. Bundling of products distributed through the same channels C. Productjon of multjple products at one facility D. Use of complementary management skills to achieve entry into a new market https://www.exams4success.com

9. Questjons & Answers PDF Page 9 Answer: B Explanatjon: Market synergy arises when products or services have positjve complementary efgects. Shopping malls refmect this type of synergy. Also, bundling of products, distributjon through the same distributjon channels , and usage of the same sales force are other examples of market synergies. Questjon: 19 Which of the following factors is not typical of an industry that faces intense competjtjve rivalry? A. Price-cuttjng B. Large advertjng budgets C. Frequent introductjon of new products D. Inelastjc demand Answer: D Explanatjon: Rivalry among existjng fjrms will be intense when an industry has many strong competjtors. Inelastjc demand exists when quality purchased is not greatly afgected by price changes. Thus, price cuttjng does not increase sales for the industry and is therefore atypical of an intensely competjtjve industry. Questjon: 20 Intense rivalry among fjrms in an industry increases when there is l- A low degree of product difgerentjatjon ll- Low consumer switching costs A. l only B. ll only C. Both l and ll D. Neither l nor ll Answer: C Explanatjon: The degree of product difgerentjatjon and the costs of switching from one competjtor’s product to another increase the intensity of rivalry and competjtjon in an industry. Less difgerentjatjon tends to heighten competjtjon based on price, with price cuttjng leading to lower profjts. Low costs of switching products also increase competjtjon https://www.exams4success.com

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