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Free IMANET CMA Exam Questions

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?

Whatney Co. is considering the acquisition of a new, more efficient press. The cost of the press is

$360,000, and the press has an estimated 6-year life with zero salvage value. Whatney uses straightline depreciation for both financial reporting and income tax reporting purposes and has a 40%

corporate income tax rate. In evaluating equipment acquisitions of this type, Whatney uses a goal of

a 4-year payback period. To meet Whatney’s desired payback period, the press must produce a

minimum annual before4ax operating cash savings of

An assembly plant accumulates its variable and fixed manufacturing overhead costs in a single cost

pool, which is then applied to work in process using a single application base. The assembly plant

management wants to estimate the magnitude of the total manufacturing overhead costs for

different volume levels of the application activity base using a flexible budget formul a. If there is an

increase in the application activity base that is within the relevant range of activity for the assembly

plant, which one of the following relationships regarding variable and fixed costs is true?

Free IMANET CMA Exam Questions

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