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| Vendor: | IMANET |
|---|---|
| Exam Code: | CMA |
| Exam Name: | Certified Management Accountant |
| Exam Questions: | 1336 |
| Last Updated: | August 22, 2026 |
| Related Certifications: | Certified Management Accountant |
| Exam Tags: | Accounts Management Advanced Account ManagersFinancial Analysts |
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Hermo Company has just completed a hydro-electric plant at a cost of $21,000,000. The plant will provide the company's power needs for the next 20 years. Hermo will use only 60% of the power output annually. At this level of capacity', Hermo's annual operating costs will amount to $1,800,000, of which 80% are fixed. Quigley Company currently purchases its power from MP Electric at an annual cost of $1,200,000. Hermo could supply this power, thus increasing output of the plant to 90% of capacity'. This would reduce the estimated life of the plant to 14 years. The maximum amount Quigley would be willing to pay Hermo annually for the power is
Since Quigley is currently paying $1,200,000, it would not want to pay any more for the same service.
Clay Co. has considerable excess manufacturing capacity. A special job order's cost sheet includes the following applied manufacturing overhead costs:
Fixed costs $21,000 Variable costs 33,000 The fixed costs include a normal $3,700 allocation for in-house design costs, although no in-house design will be done. Instead, the job will require the use of external designers costing $7,750. What is the total amount to be included in the calculation to determine the minimum acceptable price for the job?
Given excess capacity, the company presumably will not incur opportunity costs if it accepts the special order. Assuming also that fixed costs will be unaffected, the incremental cost of the order (the minimum acceptable price) will be $40,750 ($33,000 VC + $7,750 cost of external design).
The term referring to the excess of the price of a good over its cost is
To remain in the market, a product must provide value to the customer and a profit to the seller. The producer's profit (profit margin) is the difference between its costs and the price it charges for the product.
The Moore Corporation is considering the acquisition of a new machine. The machine can be purchased for $90,000; twill cost $6,000 to transport to Moore's plant and $9,000 to install. It is estimated that the machine will last 10 years, and it is expected to have an estimated salvage value of $5,000. Over its 10-year life, the machine is expected to produce 2,000 units per year with a selling price of $500 and combined material and labor costs of $450 per unit. Federal tax regulations permit machines of this type to be depreciated using the straight-line method over 5 years with no estimated salvage value. Moore ha a marginal tax rate of 40%. What is the net cash flow for the tenth year of the project that Moore Corporation should use in a capital budgeting analysis?
The company will receive net cash inflows of $50 per unit ($500 selling price --- $450 of variable costs), or a total of $100,000 per year. This amount will be subject to taxation, as will the $5,000 gain on sale of the investment, bringing taxable income to $105,000. No depreciation will be deducted in the tenth year because the asset was fully depreciated after 5 years. Because the asset was fully depreciated (book value was zero), the $5,000 salvage value received would be fully taxable. After income taxes of $42,000 ($105,000 x 40%), the net cash flow in the tenth year is $63,000 ($105,000 ---$42,000).
Quality control of services should be managed by
Services vary greatly in quality. Accordingly, quality control must be managed effectively by selective hiring, strong training programs, standardizing the firm's services, and researching customer satisfaction
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