Part_4_Newly_released_ questions_businessapps

CMAExamRetiredQuestionsPage1©2008InstituteofCertifiedManagementAccountantsCMAPROGRAMExaminationQuestionsforPracticePart4BusinessApplicationsCMAExamRetiredQuestionsPage2©2008InstituteofCertifiedManagementAccountantsIntroductionTheInstituteofCertifiedManagementAccountants(ICMA)ispublishingthisbookofpracticequestionswithanswerstohelpyoupreparefortheCMAexamination.Thesequestionsareactual“retired”questionsfromthecomputer-basedCMAexamsandareintendedtosupplementotherstudymaterials.ThesepracticequestionswillhelpyoutestyourunderstandingoftheconceptsandrulesincludedinyourCMAstudymaterialsbyrequiringyoutoapplythoseconceptsandrulestouniqueandvaryingsituations.Youwillencounterdifferentscenariosandapplicationsonyouractualexaminationsoitisessentialthatyouunderstandtheunderlyingconcepts.Ingeneral,itwillnotbehelpfultoyoutomemorizeparticularquestions.Part4,BusinessApplications,combinestopicsfromParts1,2,and3andincludestheapplicationofEthicsandOrganizationalandBehavioralissues.Noinferenceshouldbemadefromthelackofpracticequestionsincertaintopicareas.AlltopicareaslistedintheContentSpecificationcanbetestedonPart4oftheCMAexaminationatthedifficultylevelsshown.TheCMAProgramisarigoroustestofyourskillsandcapabilitiesandrequiresdedicationtobesuccessful.Wehopethatthesepracticequestionswillbeavaluableresourceasyoupursueyourgoalofcertification.Goodluck!CMAExamRetiredQuestionsPage3©2008InstituteofCertifiedManagementAccountantsCMAPart4PracticeQuestions(AnswersbeginonPage25)Question1BedrockGravelCompanyisanalyzingitsbusinessplan.Thecompanymarketsgravelfromaquarryitownsanddeliversthegraveltobothresidentialandcommercialcustomers.Asaletoaresidentialcustomeraveragestwotonsofgravelandrequiresonetruck-hour.Salestocommercialcustomersaveragetentonsandrequirethreetruck-hours.Theaverageprofitforaresidentialsaleis$50,whilecommercialsalesaverage$200inprofitperorder.Forthenearterm,Bedrockmanagementdoesnotwanttoexpanditsoperations.Currently,thecompanyhas10,000truck-hoursavailableperyearand25,000tonsofgravel.Themanagementteamwantstodeterminetheoptimalmixofsalestoresidentialandcommercialcustomersinordertomaximizeitsprofit.Oncethatisdetermined,marketingeffortscanbemoreappropriatelyfocused.REQUIRED:A.Bedrockplanstouselinearprogrammingtechniquestoanalyzesales.IfRrepresentsthenumberofresidentialsalesandCrepresentsthenumberofcommercialsales,determinetheobjectivefunctiontobeusedintheanalysis.B.Determinetheformulasfortheconstraintsthatarerequiredfortheanalysis.C.Listedbelowarethreesalesmixscenariostobeanalyzedforthebusinessplan.WhichscenarioisthebestchoiceforBedrockgivenitsobjectivesandconstraints?•ScenarioA:7,000Residentialsales1,000Commercialsales•ScenarioB:6,000Residentialsales1,300Commercialsales•ScenarioC:5,000Residentialsales1,600CommercialsalesD.IdentifyanddescribeatleasttwoeffectsthisinformationcouldhaveonBedrock’smarketingstrategy.CMAExamRetiredQuestionsPage4©2008InstituteofCertifiedManagementAccountantsQuestion2BorealisIndustrieshasthreeoperatingdivisions–SandstoneBooks,CorusGames,andSterlingExtractionServices.Eachdivisionmaintainsitsownaccountingsystemandmethodofrevenuerecognition.SandstoneBooksSandstoneBookssellsnovelstoregionaldistributorswhothenselltoindependentbookstoresandretailchainsintheirterritory.Thedistributorsareallowedtoreturnupto25%oftheirpurchasestoSandstone,andthedistributorshavethesamereturnallowancewiththebookstores.Thereturnsfromdistributorshaveaveraged20%overthepastfiveyears.Duringthefiscalyearjustended,Sandstone’ssalestodistributorstotaled$15,000,000.Atyearend,$6,800,000ofsalesarestillsubjecttoreturnprivilegesoverthenextsixmonths.Thebalanceofthebooksales,$8,200,000,hadactualreturnsof19%.Salesfromthepreviousfiscalyeartotaling$5,500,000werecollectedinthecurrentfiscalyear,with21%ofsalesreturned.Sandstonerecordsrevenueinaccordancewiththemethodreferredtoasrevenuerecognitionwhentherightofreturnexistsasthecompany’soperationsmeetalltheapplicablecriteriaforuseofthismethod.CorusGamesCorusGamessuppliesvideoarcadeswithnewgamesandupdatedversionsofstandardgames.Thecompanyworksthroughanetworkofsalesagentsinvariouscities.Ordersarereceivedfromthesalesagentsalongwithdownpayments;Corusthenshipstheproductdirectlytothecustomer,f.o.b.shippingpoint.Thecustomerisbilledforthebalancedueplustheactualshippingcosts.Duringthefiscalyearjustended,Corusreceivedordersfor$12,000,000fromthesalesagentsalongwith$1,200,000indownpayments.Customerswerebilled$150,000infreightcostsand$9,180,000forgoodsshipped.Afteranorderhasbeenshipped,thesalesagentreceivesa12%commissionontheproductprice.Thegoodsarewarrantedfor90daysaftersales,andwarrantyreturnshavebeenabout3%ofsales.Corusrecognizesrevenueatthepointofsale.SterlingExtractionServicesSterlingspecializesintheextractionofpreciousmetals.Duringthefiscalyearjustended,Sterlingenteredintocontractsworth$36,000,000andshippedmetalsworth$32,400,000.Onequarteroftheshipmentswasmadefrominventoriesonhandatthebeginningoftheyear,andtheremainingshipmentsweremadefrommetalsthatwereminedduringtheyear.Sterlingusesthecompletion-of-productionmethodtor