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IMANET Exam CMA Topic 2 Question 101 Discussion

Actual exam question for IMANET's CMA exam
Question #: 101
Topic #: 2
[All CMA Questions]

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?

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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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Donte
14 days ago
I'll take 'Curves that look like a roller coaster' for $500, Alex!
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Avery
20 days 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
23 days 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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Brande
1 months 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
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
2 days 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
15 days 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
2 months 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
2 months 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
2 months 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
25 days 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
29 days 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
2 months ago
I think the answer is C) III.
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