IMANET

CMA

Exam Name:
IMANET Certified Management Accountant (CMA) Exam

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Question: 1

A distinction between forecasting and planning

A. Is not valid because that are synonyms

B. Arises because forecasting covers the short term and planning does not
C. Is that forecasts are used in planning
D. Is that forecasting is a management activity, whereas planning is a technical activity

Answer: C

Explanation:
Planning is the determination of what is to be done, and of how, when, where. and by whom it is to
be done. Plans save to direct the activated that all organizational members must undertake to move
the organization from where it is to where it wants to be. Forecasting is the basis of planning because
it projects the future. A variety of quantitative methods are used in forecasting

Question: 2

Strategy is a broad term that usually means the selection of overall objectives. Strategic analysis
ordinarily excludes the

A. Trends that will affect the entity’s markets

B. Target product mix and production schedule to be maintained
C. Forms of organizational structure that would best serve the entity
D. Best ways to invest in research, design, production, distribution, marketing, and administrative
activities

Answer: B

Explanation:
Strategic analysis is the process of long-range planning. It includes identifying organizational
objectives, evaluating the strengths and weaknesses of the organization, such as market trends,
changes the technology, international competition, and social change. The final step is to derive the
best strategy for reaching the objectives. Setting the target product mix and production schedule for
the current year is not a concern of strategic analysis because it is short-term activity.

Question: 3

Strategic planning, as practiced by most modem organizations, includes all of the following expect

A. Top-level management predication

B. A long-term focus
C. Strategies that will help in achieving long-range goals
D. Analysis of the current month’s actual variances from budget

Answer: D

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Explanation:
Strategic planning is the process of setting overall organizational objectives and goals. It is a long-
term process aimed at charting the future course of the organization. Strategic planning is based on
assessing risk levels, evaluating the strengths and weaknesses of the organization, and forecasting
the future direction an influences of factors relevant to the organization such as market trends,
changes in technology, international competition, and social change. Analysis of the current month’s
budget variances is not an aspect of strategic planning.

Question: 4

Which one of the following reasons is not a significant reason for planning in an organization?

A. Promoting coordination among operating units

B. Forcing managers to consider expected future trends and conditions
C. Developing basis for controlling operations
D. Monitoring profitable operations

Answer: D

Explanation:
Monitoring profitable operations is not a significant reason for planning. Monitoring is a control
function, whereas planning has a control purpose that precedes control in the planning-control cycle.
Planning establishes standards against which is the control function compares preliminary or final
results.

Question: 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. Formalization requires the establishment and observance of deadlines for decision making and
planning
D. Formalization provides a logical basis for rational flexibility in planning

Answer: B

Explanation:
A formal plan is a prescription for organizational behavior and a set of goals. Management decision
making is therefore necessarily constrained by the limitations established I the plan.

Question: 6

All of the following are characteristics of the strategic planning process except the

A. Emphasis on the long run

B. Analysis of external economic factors
C. Review of the attributes and behavior of the organization’s competition
D. Analysis and review of department budgets

Answer: D

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Explanation:
Strategic planning is the process of setting the overall organizational objectives and goals, and
involves the drafting of strategic plans. Long-range (strategic) planning is based on identifying and
specifying organizational goals and objectives, evaluating the strengths and weaknesses of the
organization, assessing risk levels, forecasting the future direction and influences of factors relevant
to the organization (such as market trend, changes in technology, international competition, and
social change), and deriving the best strategy for reaching the objectives given the organization’s
strengths and weaknesses and the relevant future trends. Analyzing and reviewing department
budgets is an aspect of operational management and not a part of strategic planning.

Question: 7

The first 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 specific to sales planning, including the sales planning process
and planning responsibilities
C. Prepare a sales forecast consistent with specified forecasting guidelines, including assumptions
D. Secure management commitment to attain the goals specified in the comprehensive sales plan

Answer: B

Explanation:
Sales planning is a starting 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 operating unit should include
as much specific information 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 operational managers can prepare their plans. Corporate support include economic forecasts,
overall market sales forecasts, and capital budgets.

Question: 8

Which of the following is a market-oriented definition of a business versus a productoriented

definition of a business?

A. We make air conditioners and furnaces

B. We supply energy
C. We produce movies
D. We sell men’s shirts and pants

Answer: B

Explanation:
Business should be defined in market terms, that is, in terms of needs and customer groups.
Moreover, a distinction should be made between a target market definition and as strategic market
definitions. For example, a target market for a railroad might be freight hauling, but a strategic
market might be transportation of any goods and people . Accordingly, stating that a business
supplies energy is a market-oriented definition as opposed to the product-oriented definition.
Moreover, it is also a strategic market definition.

Question: 9

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The capital budget is a(n)

A. Plan to ensure that sufficient funds are available for the operating needs of the company
B. Exercise that sets the long-range goals of the company including the consideration of external
influences
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

Explanation:
Capital budgeting is the process of planning expenditures for long-lived assets. It involves choosing
among investment proposals using a ranking procedure. Evaluations are based on various measures
involving rate of return on investment.

Question: 10

Capital budgeting techniques are least likely to be used in evaluating the

A. Acquisition of new aircraft by a cargo company

B. Design and implementation of a major advertising program
C. Adoption of a new method of allocating nontraceable costs to produce lines
D. Sale by a conglomerate of a n unprofitable division

Answer: C

Explanation:
Capital budgeting is the process of planning expenditures for investments hat are expected to
generate returns over a period of more than one year. Thus, capital budgeting concerns the
acquisition or disposal of long-term assets and the financing ramifications of such decisions. The
adoption of a new method of allocating nontracble costs to product lines has no effect on a
company’s cash flows, does not relate to the acquisition of longterm assets , and is not concerned
with financing. Hence, capital budgeting is irrelevant to such a decision.

Question: 11

The capital budgeting model that is ordinarily considered the best model for long-range decision
making is the

A. Payback model
B. Accounting rate of return model
C. Unadjusted rate of return model
D. Discounted cash flow model

Answer: D

Explanation:
The capital budgeting 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 flow
methods

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Question: 12

Effective cost capacity management

A. Minimizes the value delivered to customers

B. Maximizes required future investments
C. Matches the firm’s resources with current and future market opportunities
D. Is limited to eliminating short-term worth

Answer: C

Explanation:
According to SMA 4Y, Measuring the Cost of Capacity, maximizing the value created within an
organization starts with understanding the nature and capabilities of all of the company’s resources.
Capacity is defined from several different perspectives. Managing capacity cost starts when a product
is first envisioned. It continues through the subsequent disposal of resources downstream. Effective
capacity cost management requires supporting effective matching of a firm’s resource with current
and future market opportunities.

Question: 13

What is the key strategic issues when a firm is considering capacity expansion?

A. Forecasting long-term demand

B. Analyzing the behavior of competitors
C. Identifying options
D. Avoiding industry overcapacity

Answer: D

Explanation:
Whether to expand capacity is a major strategic decision because of the capital required, the
difficulty of forming accurate expectations, and the long time frame of the lead times and the
commitment. The key forecasting problems are long-term demand and behavior of competitors. The
key strategic issue is avoidance of industry overcapacity. Undercapacity in a portable industry trends
to be a short-term issue. Profits ordinarily lure additional investors. Overcapacity trends to be a long-
term problem because firms are more likely to compete intensely rather than reverse their
expansion

Question: 14

When demand uncertainty is low, firms tend to adopt a strategy of preemptive expansion. The
conditions for successful preemption expansion include which of the following?

A. The firm should avoid market signals that alert competitors to the firm’s plans
B. The expansion should be small relative to the market to minimize risk
C. Economic of scale should be large relative to demand
D. The business should be strategically vital to competitors

Answer: C

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Explanation:
Economics of scale should be large in relation to demand, or the learning-curve effect should give an
initial large investor a permanent cost advantage. For example, the preemptive firm may be able to
secure too much of the market to allow a subsequent firm to invest at the efficient scale. That is, the
residual demand available to be met by the later firm is less than the efficient scale of production.
The later firm therefore must choose between intense competition at the efficient scale or a cost
disadvantage.

Question: 15

Capacity expansion is also referred to as

A. Market penetration B.
Market development C.
Product development D.
Diversification

Answer: A

Explanation:
Market penetration is growth of existing products or development of existing markets. It occurs in
mature firms within an industry

Question: 16

What type of synergy exists when products or services have positive complementary effects?

A. Market synergy
B. Cost Synergy
C. Technological synergy
D. Management synergy

Answer: A

Explanation:
Market synergy arises when products or services have positive complementary effects Shopping
mails reflect this type of synergy.

Question: 17

Which of the following is not an example of synergy?

A. A shopping mail with several businesses providing different products and performing different
services
B. A store provides warranties 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 utility vehicles for sale to civilians

Answer: B

Explanation:

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Synergy occurs when the combination of formerly separate elements has a greater effect than the
sum of their individual effects. It is unclear here whether the store is a car dealership or a parts shop.
Therefore, this is seen more as an operational service strategy that seeks to gain a competitive
advantage and maximize customer value by providing services such as warranties, rather than
market synergy. Market synergy arises when products or services have positive complementary
effects. (i.e., a parts shop and a service warranty on parts)

Question: 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. Production of multiple products at one facility
D. Use of complementary management skills to achieve entry into a new market

Answer: B

Explanation:
Market synergy arises when products or services have positive complementary effects. Shopping
malls reflect this type of synergy. Also, bundling of products, distribution through the same
distribution channels , and usage of the same sales force are other examples of market synergies.

Question: 19

Which of the following factors is not typical of an industry that faces intense competitive rivalry?

A. Price-cutting
B. Large adverting budgets
C. Frequent introduction of new products
D. Inelastic demand

Answer: D

Explanation:
Rivalry among existing firms will be intense when an industry has many strong competitors. Inelastic
demand exists when quality purchased is not greatly affected by price changes. Thus, price cutting
does not increase sales for the industry and is therefore atypical of an intensely competitive industry.

Question: 20

Intense rivalry among firms in an industry increases when there is

l- A low degree of product differentiation
ll- Low consumer switching costs

A. l only
B. ll only
C. Both l and ll
D. Neither l nor ll

Answer: C

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

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