Financial CMA Exam Questions
Certified Management Accountant (Page 28 )

Condensed monthly operating income data for Korbin, Inc for May follows:


Additional information regarding Korbin's operations follows:
· One-fourth of each store's direct fixed costs would continue if either store is closed. · Korbin allocates common fixed costs to each store on the basis of sales dollars.
· Management estimates that closing the Suburban Store would result in a 10% decrease in the Urban Store's sales, while closing the Urban Store would not affect the Suburban Store's sales.
· The operating results for May are representative of all months. Korbin is considering a promotional campaign at the Suburban Store that would not affect the Urban Store. Increasing annual promotional expense at the Suburban Store by $60,000 in order to increase this store's sales by 10% would result in a monthly increase (decrease) in Korbin's operating income during the year (rounded) of

Condensed monthly operating income data for Korbin, Inc. for May follows:


Additional information regarding Korbin's operations follows:
· One-fourth of each store's direct fixed costs would continue if either store is closed. · Korbin allocates common fixed costs to each store on the basis of sales dollars. · Management estimates that closing the Suburban Store would result in a 10% decrease in the Urban Store's sales, while closing the Urban Store would not affect the Suburban Store's sales.
· The operating results for May are representative of all months.
One-half of the Suburban Store's dollar sales are from items sold at variable cost to attract customers to the store. Korbin is considering the deletion of these items, a move that would reduce the Suburban Store's direct fixed expenses by 15% and result in a 20% loss of Suburban Store's remaining sales volume. This change would not affect the Urban Store. A decision by Korbin to eliminate the items sold at cost would result in a monthly increase (decrease) in Korbin's operating income of

Polar Company sells refrigeration components both in the U.S. and to a subsidiary located in France. One of the components, Part No. 456, has a variable manufacturing cost of $30. The part can be sold domestically or shipped to the French subsidiary for use in the manufacture of a residential subassembly. Relevant data with regard to Part No. 456 are shown below.


* lf deemed preferable, these units could be sold in the U.S. Polar's applicable income tax rates are 40% in the U.S. and 70% in France.Polar will transfer Part No. 456 to the French subsidiary at either variable manufacturing cost or the domestic market price. On the basis of this information, which one of the following strategies should be recommended to Polar's management?

Listed below are a company's monthly unit costs to manufacture and market a particular product.


The company must decide to continue making the product or buy it from an outside supplier. The supplier has offered to make the product at the same level of quality that the company can make it. Fixed marketing costs would be unaffected, but variable marketing costs would be reduced by 30% if the company were to accept the proposal. What is the maximum amount per unit that the company can pay the supplier without decreasing operating income?

In a make-ver
The overhead is 40% fixed. Of the fixed overhead, $25,000 is the salary of the cafeteria supervisor. The remainder of the fixed overhead has been allocated from total company overhead. Assuming the cafeteria supervisor will remain and Laurel will continue to pay his/her salary, the maximum cost Laurel will be willing to pay an outside firm to service the cafeteria is