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Financial CMA Exam
Certified Management Accountant (Page 33 )

Updated On: 1-Feb-2026
Page 33 of 270
PDF with 1336 Questions
View Related Case Study

Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for introduction. However, plant capacity is limited, and only one product can be introduced at present. Therefore, Gleason has conducted a market study, at a cost of $26,000, to determine which product will be more profitable. The results of the study follow.


*Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed asset.
The cost incurred by Gleason for the market study is a(n)

  1. Incremental cost.
  2. Prime cost.
  3. Opportunity cost.
  4. Sunk cost.

Answer(s): D

Explanation:

A sunk cost is a previously incurred cost that is the result of a past irrevocable management decision. Nothing can be done in the future about sunk costs. The market study cost is an example.



View Related Case Study

Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for introduction. However, plant capacity is limited, and only one product can be introduced at present. Therefore, Gleason has conducted a market study, at a cost of $26,000, to determine which product will be more profitable. The results of the study follow.


Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed asset.In order to recover the costs of production tooling and advertising for the breakfast rolls, Gleason's sales of the breakfast rolls would have to be

  1. 37500 units.
  2. 100,000 units.
  3. 60,000 units.
  4. Some amount other than those given.

Answer(s): B

Explanation:

Fixed costs of $45,000 ($25,000 + $20,000) should be divided by the unit contribution margin of $45 ($1 .20 selling price -- $.25 -- $30 -- $.20). The unit breakeven point is therefore 100,000 units ($45,000 ÷ $45).



View Related Case Study

Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for introduction. However, plant capacity is limited, and only one product can be introduced at present. Therefore, Gleason has conducted a market study, at a cost of $26,000, to determine which product will be more profitable. The results of the study follow.


*Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed asset.
The expected value of Gleason's operating profit directly traceable to the sale of frozen desserts is

  1. $198,250
  2. $150,250
  3. $120,250
  4. Some amount other than those given.

Answer(s): C

Explanation:

The expected volume for sales of frozen desserts is 305,000 [(250000 x .30) + (300000 x
40) + (350,000 x .20) + (400 .000 x .10)]. At $1 .80 each1 the total revenue from 305,000 units would be $549,000. Variable costs would total $1.15 each ($40 + $35 + $40), or $350750 for 305.000 units. Fixed costs total $78,000 ($48,000 + $30000). Thus, operating profit would be $120,250 ($549,000 --$350,750-- $78,000).



View Related Case Study

Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for introduction. However, plant capacity is limited, and only one product can be introduced at present. Therefore, Gleason has conducted a market study, at a cost of $26000, to determine which product will be more profitable. The results of the study follow.


*Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed asset.
According to Gleason's market study, the expected value of the sales volume of the breakfast rolls is

  1. 125,000 units.
  2. 260,000 units.
  3. 275,000 units.
  4. Some amount other than those given.

Answer(s): B

Explanation:

The expected value is found by multiplying the probability of each possibility by the potential volumes:



View Related Case Study

Which of the following qualitative factors favors the buy choice in an insourcing vs.
outsourcing decision?

  1. Maintaining a long-run relationship with suppliers is desirable.
  2. Quality control is critical.
  3. Idle capacity is available.
  4. All of the answers are correct.

Answer(s): A

Explanation:

The maintenance of long-run relationships with suppliers may become paramount in a make-or-buy decision. Abandoning long-run supplier relationships may cause difficulty in obtaining needed parts when terminated suppliers find it advantageous not to supply parts in the future.



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