IMANET CMA Exam - Topic 2 Question 101 Discussion

Actual exam question for IMANET's CMA exam

Question #: 101
Topic #: 2

Quo Co. rented a building to Hava Fast Food. Each month Quo receives a fixed rental amount plus a variable rental amount based on Hava's sales for that month. As sales increase, so does the variable rental amount but at a reduced rate. Which of the following curves reflects the monthly rentals under the agreement?

BII

CIII

DIV

Show Suggested Answer

Suggested Answer: D

The company will receive net cash inflows of $50 per unit ($500 selling price --- $450 of variable costs), a total of $200.000 per year for 4.000 units. This amount will be subject to taxation, as will the $10,000 gain on sale of the irwestrnent, resetting in taxable income of $210,000. No depreciation will be deducted in the tenth year because the asset was fully depreciated after 5 years. Because the asset was fully depreciated (book value was $0), the $10,000 received as salvage value is fully taxable. At 40%, the tax on $210,000 is $84,000. After subtracting $84000 of tax expense from the $210,000 of inflows the net inflows amount to $126,000.

by Boris at Sep 16, 2024, 04:00 PM

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Ozell

7 months ago

I don't think that's right, it should be curve IV!

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Sophia

8 months ago

I think it's curve II that fits this scenario.

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Elmer

8 months ago

Wait, how can it be at a reduced rate? That seems odd.

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Meghan

8 months ago

Totally makes sense, more sales = more rent!

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Ardella

8 months ago

The rental amount is fixed plus variable based on sales.

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Tammara

9 months ago

If I recall correctly, the curve should reflect a diminishing return on the variable rental as sales go up, so maybe it's curve III?

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Patrick

9 months ago

I'm really uncertain about which curve to choose. I feel like it could be any of them depending on how the variable rental is structured.

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Sheron

9 months ago

I think we practiced a question like this where the variable amount decreased as sales increased. It might be curve II?

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Pamella

9 months ago

I remember something about fixed and variable costs, but I'm not sure how they interact in this scenario.

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Steffanie

9 months ago

I'm a bit confused by the phrasing of the question. What exactly do they mean by "reflects the monthly rentals"? Is it asking about the shape of the curve or the actual rental amounts? I'll need to think this through more carefully.

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Shenika

9 months ago

Okay, let's break this down step-by-step. The key is understanding how the variable rental amount changes as sales increase. I think I can work through this logically and eliminate the incorrect options.

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Helaine

9 months ago

Hmm, I'm not entirely sure about this one. The wording is a bit tricky, and I'm not sure I fully understand the relationship between the fixed and variable rental amounts. I'll need to re-read the question carefully.

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Bok

9 months ago

This seems like a straightforward question about the relationship between sales and rental income. I'll need to think through the details, but I'm confident I can figure this out.

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Tegan

9 months ago

I'm pretty sure the range was from 1 to 65534 for the transform section, I definitely recall seeing that in the materials.

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Donte

1 year ago

I'll take 'Curves that look like a roller coaster' for $500, Alex!

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Celeste

1 year ago

D) IV

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Louann

1 year ago

C) III

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Nobuko

1 year ago

B) II

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Elroy

1 year ago

A) I

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Avery

1 year ago

A) I? Really? That's about as linear as a curve can get. Doesn't sound like the question at all. Maybe the exam writer is just trying to trick us with that one.

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Sheldon

1 year ago

Honestly, I'm stumped on this one. Is the answer hidden in the variable rental amount being reduced? I'll just go with D) IV and hope for the best.

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Silvana

1 year ago

User 3: I'm not sure, but I'll go with A) I since the fixed rental amount is also included in the monthly rentals under the agreement.

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Glory

1 year ago

User 2: I see your point, but I believe the correct answer is B) II because the variable rental amount is based on Hava's sales for that month.

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Aracelis

1 year ago

User 3: I'm not sure, but I'll go with A) I since it seems like a logical choice based on the information given.

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Tamera

1 year ago

User 2: I see your point, but I believe the correct answer is B) II because the fixed rental amount plus the variable amount would create that curve.

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Tammara

1 year ago

User 1: I think the answer might be C) III because the variable rental amount increases at a reduced rate as sales increase.

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Detra

1 year ago

User 1: I think the answer might be C) III because the variable rental amount increases at a reduced rate as sales go up.

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Brande

1 year ago

I'm going with C) III. The description mentions that as sales increase, the variable rental amount also increases, but at a reduced rate. That screams a logarithmic curve to me!

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Nancey

1 year ago

I'm not sure, but I'll go with B) II. It could be a curve that increases at a slower rate as sales increase.

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Lillian

1 year ago

I'm going with C) III as well. The reduced rate increase in variable rental amount seems more like a logarithmic curve to me.

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Refugia

1 year ago

I think it's A) I. The fixed rental amount plus the variable amount increasing at a reduced rate makes me think of a linear curve.

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Pok

1 year ago

I see your point, Flo. I also think the answer is A) I because the variable rental amount increases at a reduced rate as sales increase.

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Flo

1 year ago

I disagree, I believe the answer is A) I because the variable rental amount increases at a reduced rate.

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Vivan

1 year ago

Hmm, I think the answer is B) II. The variable rental amount increases with sales, but at a reduced rate, which sounds like a concave curve to me.

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Santos

1 year ago

I agree, B) II seems to be the correct choice. The reduced rate of increase in variable rental amount with sales fits the description of a concave curve.

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Aimee

1 year ago

I think the answer is B) II. The variable rental amount increases with sales, but at a reduced rate, which sounds like a concave curve to me.

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Gilma

1 year ago

I think the answer is C) III.

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