Cisco
CompTIA
ISC
EC-Council
EXIN
Fortinet
ITIL
Juniper
Microsoft
VMware
Avaya
SAP
Google
NVIDIA
Salesforce
Amazon
Palo Alto Networks
ISC2
Splunk
ServiceNow
All Vendors
  2. Home
  3. Exams
  4. Financial
  5. CMA

Financial CMA Exam
Certified Management Accountant (Page 36 )

Updated On: 1-Feb-2026
Page 36 of 270
PDF with 1336 Questions
View Related Case Study

In an insourcing vs. outsourcing decision1 the decision process favors the use of total costs rather than unit costs. The reason is that

  1. Unit cost may be calculated based on different volumes.
  2. Irrelevant costs may be included in the unit amounts.
  3. Allocated costs may be included in the unit amounts.
  4. All of the answers are correct.

Answer(s): D

Explanation:

Unit costs should be used with extreme care. In each situation, they may be calculated based on a different volume level from that anticipated, so comparability may be lost. Irrelevant costs included in the unit cost should be disregarded; only relevant costs should be included in the analysis. Allocated costs should also be ignored, and only the relevant costs that will change with the option chosen should be considered.



View Related Case Study

Whitehall Corporation produces chemicals used in the cleaning industry During the previous month, Whitehall incurred $300,000 of joint costs in producing 60,000 units of AM-12 and 40000 units of BM-36. Whitehall uses the units-of-production method to allocate joint costs. Currently, AM-i 2 is sold at split-off for $3.50 per unit. Flank Corporation has approached Whitehall to purchase all of the production of AM-12 after further processing. The further processing will cost Whitehall $90000.Assume that Whitehall Corporation agreed to sell AM-12 to Flank Corporation for $5.50 per unit after further processing. During the first month of production, Whitehall sold 50,000 units with 10,000 units remaining in inventory at the end of the month. With respect to AM-12, which one of the following statements is true?

  1. The operating profit last month was $50,000, and the inventory value is $15,000.
  2. The operating profit last month was $50,000, and the inventory value is $45,000.
  3. The operating profit last month was $125,000, and the inventory value is $30,000.
  4. The operating profit last month was $200,000, and the inventory value is $30,000.

Answer(s): B

Explanation:

Joint costs are allocated based on units of production. Accordingly, the unit joint cost allocated to AM-12 is $3.00 [$300,000 + (60,000 units of AM-12 + 40,000 units of BM-
36)]. The unit cost of AM-12 is therefore $4.50 [$3.00 joint cost + ($90,000 additional cost + 60,000 units)]. Total inventory value is $45,000 (10,000 units x $4.50), and total operating profit is $50,000 [50,000 units sold x ($5.50 unit price -- $4.50 unit cost)]



View Related Case Study

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. A decision by Korbin to close the Suburban Store would result in a monthly increase (decrease) in Korbin's operating income of

  1. $(10,800)
  2. $(6,000)
  3. $(1,200)
  4. $4,000

Answer(s): A

Explanation:

If the Suburban Store is closed, one-forth of its direct fixed costs will continue. Thus, the segment margin that should be used to calculate the effect of its closing on Korbin's operating income is $6,000 {$36,000 contribution margin- [$40,000 direct fixed costs x(1.0-.25)]}. In addition, the sales ( and contribution margin) of the Urban Store will decline by 10% if the Suburban store closes. A 10% reduction in Urban's $48,000 contribution margin will reduce income by $4,800. Accordingly, the effect of closing the Suburban Store is to decrease operating income by $10,800 ($6,000 + $4,800).



View Related Case Study

What is the opportunity cost of making a component part in a factory given no alternative use of the capacity?

  1. The variable manufacturing cost of the component.
  2. The total manufacturing cost of the component.
  3. The total variable cost of the component.
  4. Zero.

Answer(s): D

Explanation:

Opportunity cost is the benefit forgone by not selecting the best alternative use of scarce resources. The opportunity cost is zero when no alternative use is available.



View Related Case Study

Costs relevant to an insourcing vs. outsourcing decision include variable manufacturing costs as well as

  1. Avoidable fixed costs.
  2. Factory depreciation.
  3. Property taxes.
  4. Factory management costs.

Answer(s): A

Explanation:

Relevant costs are anticipated costs that will vary among the choices available. If two courses of action share some costs, those costs are not relevant because they will be incurred regardless of the decision made. Relevant costs include fixed costs that could be avoided if the items were purchased from an outsider.



Viewing page 36 of 270
Viewing questions 176 - 180 out of 1336 questions



Post your Comments and Discuss Financial CMA exam prep with other Community members:

Join the CMA Discussion