Free CMA-Strategic-Financial-Management: CMA Part 2: Strategic Financial Management Exam Questions and Answers

Which one of the following is the correct formula for calculating a company's breakeven point in sales dollars for a single product?

• AA. Total fixed costs divided by the variable cost ratio
• BB. Total costs divided by the contribution margin ratio
• CC. Total fixed costs divided by the contribution margin ratio
• DD. Total fixed costs divided by the contribution margin per unit

Delmar Supply uses the economic order quantity (EOQ) model for a part it buys. Annual demand is 14,400 units, the cost to place an order is $50, and the annual carrying cost is $4 per unit. Demand is constant throughout the year. What is Delmar's total annual ordering and carrying cost when it orders the EOQ?

• AA. $1,200
• BB. $2,400
• CC. $3,600
• DD. $4,800

A company sells a product at $40 per unit and sells 1,000 units per month. Variable cost is $22 per unit. Management reduces the price to $36, and monthly sales rise to 1,150 units. Fixed costs do not change. Which one of the following best describes the result of the price reduction?

• AA. Demand is elastic, and both total revenue and total contribution margin decrease
• BB. Demand is inelastic, total revenue decreases, and total contribution margin decreases
• CC. Demand is elastic, and both total revenue and total contribution margin increase
• DD. Demand is elastic, total revenue increases, and total contribution margin decreases

Match each action taken by a manufacturer to the risk response strategy it represents. Each strategy is used once. Actions: Action 1: The company buys an insurance policy that covers losses from a fire at its main warehouse. Action 2: The company decides not to open a plant in a country where the government has a history of seizing foreign assets. Action 3: The company installs sprinklers and keeps off-site backups of its inventory records. Action 4: The company decides to absorb the cost of occasional minor damage to office equipment and takes no further action. Strategies: Accept; Avoid; Reduce; Share

Drag or tap each item onto its target, then reveal.

A company reported net income of $420,000 for the year. Its income tax rate is 30%, and interest expense was $90,000. What is the company's times interest earned ratio?

• AA. 4.67
• BB. 5.67
• CC. 6.67
• DD. 7.67

A U.S. company must pay a European supplier €500,000 in 90 days. The spot rate is $1.0800 per euro, and the 90-day forward rate is $1.0650 per euro. The company enters a 90-day forward contract to buy euros. What is the U.S. dollar cost of the payable under the forward contract?

• AA. $462,963
• BB. $469,484
• CC. $532,500
• DD. $540,000

Norwell Corp. makes 20,000 units of a component each year. Unit costs are direct materials $12, direct labor $9, variable overhead $6, and allocated fixed overhead $10, of which $4 per unit is avoidable if the component is no longer made. A supplier offers to sell the component for $29 per unit. If Norwell buys, the freed capacity can be rented to another firm for $50,000 per year. By how much would Norwell's annual operating income increase if it buys the component?

• AA. $40,000
• BB. $90,000
• CC. $110,000
• DD. $160,000

Delmar Products sells two products, A and B. Selling price and variable cost per unit are shown below. Product A: selling price $20, variable cost $12 Product B: selling price $30, variable cost $18 Total fixed costs are $144,000 per period. The budget assumed a sales mix of three units of A for every one unit of B. Actual sales are now expected to be one unit of A for every one unit of B. Based on the actual sales mix, what is the total number of units (A and B combined) the company must sell to break even?

• AA. 12,000
• BB. 14,400
• CC. 16,000
• DD. 18,000

A retailer lowers the price of a small appliance from $50 to $45. Weekly unit sales rise from 1,000 units to 1,150 units. Based on these results, which one of the following is correct?

• AA. Demand is elastic, and total revenue increased
• BB. Demand is elastic, and total revenue decreased
• CC. Demand is inelastic, and total revenue increased
• DD. Demand is inelastic, and total revenue decreased

Selected data for Torrance Industries for the year are shown below. Net sales: $1,500,000 Net income: $90,000 Total assets, beginning of year: $700,000 Total assets, end of year: $800,000 Total shareholders' equity, end of year: $500,000 Using average total assets, what is the company's return on assets?

• AA. 6.00%
• BB. 11.25%
• CC. 12.00%
• DD. 18.00%