IMA CMA Part 1: Financial Planning - Performance and Analytics Sample Questions:

1. Which one of the following represents a temporary difference under U.S GAAP?

A) Accrued liabilities
B) Percentage depletion of natural resources
C) interest received in municipal bonds
D) Fines and expenses resulting from violation of the law

2. in preparing Klein Corporation's master budget for the following calendar year, the manager of the Production Department requested the purchase of a new piece of machinery with a purchase price of $150.000 in addition, the cost of installing the machine would total $13.000. The purchase price of the machine would be financed by a 6%. 5-year loan with interest due quarterly. The amount Klein Corporation should include in its Capital Expenditures Budget due to this purchase is

A) $172,000
B) $13,000
C) $22,000
D) $163,000

3. A company incurred the following selected costs In its manufacturing operations during the month.

A) $22,000
B) $20,000
C) $23,000
D) $21,000

4. Discuss how FDL's allocation of shared corporate services costs may overstate the profitability of the Food-To-Go division, and provide your recommendation on shared corporate services costs allocation.
Essay
Food Depot Ltd (FDD is a privately-held company that provides catering services to airlines and operates several restaurant chains including fast food, casual dining, and fine dining restaurants FDL has been profitable m recent years and has a very strong cash position FDL's newest division. Food-To-Go. is an online meal ordering and delivery platform acquired by FDL two years ago.
In 20X7. sales for the entire company were SI billion, with 50% of the business coming from the Airline Catering division. FDL is the country's leading airline catering services provider and controls 60% of the market share. However, the outlook of the airline catering industry is gloomy. The compound annual growth rate of the industry for the past five years was only 0.5% as airline networks have increasingly dropped catering on short domestic flights.
The Food-To-Go division only contributed 5% of FDL's total sales in 20X7 and is far behind in competing for market share of the online meal ordering and deliver, industry. It is estimated that Food-To-Go's sales were only 20% of the industry leader's sales However, the outlook for the online meal ordering and delivery services industry is bright. The compound annual growth rate of the industry since it started three years ago was 50%. It is estimated the rapid growth of the industry will continue in the foreseeable future.
The costs of shared corporate services are allocated based on each division s revenue FDL usually caps its capital expenditure budget to 4% of budgeted sales revenue In a recent capital budget coordination meeting.
Smith Whitney, the head of the Airline Catering division. complained that his division is underfunded on capital projects . The budgeted capital expenditure had been much less than 4 % of the division's budgeted sales in the past three years He argued that his division is the company's best-performing division, and it needs more funds to maintain its market share m the industry Whitney wants to reduce the capital expenditure budget for Food-To-Go and reallocate those funds to his division.
Susan Wiley, the bead of Food-To-Go, does not agree that the Airline Catering division is the best-performing division in the company Wiley argues that her division had the highest ROI in 20X7. and it deserves more capital funding FDL's required rate of return is 12%. The selected financial data for the Airline Catering division and Food-To-Go division in 20X7 are as follows (in $ millions).

5. La Salle Company purchased 2.150 shares of Barry Chocolates Corporation's common stock at $25.16 per share on November 17 of last year. The broker's commission was $85. The shares were sold on January 11 of the current year for $27.50 per share. The broker's commission on the sale was $76 Barry declared and paid dividends of $0 50 per share on March 26. June 25. September 25. and December 23 during the last two years La Salle's current year income statement would reflect a realized gain of

A) $5,031
B) $5,022
C) $4,870
D) $4,946

Solutions: