IMANET CMA Exam - Topic 3 Question 59 Discussion

Actual exam question for IMANET's CMA exam

Question #: 59
Topic #: 3

Rosecrans Manufacturing produces kerosene lanterns. The Company can sell all of its output. Each unit sells for $120,and direct materials costing $48 per unit are added at the start of the frit operation. Other variable caste are immaterial. Production data for one of one of its products is presented below:

Rosecrans hires additional workers at a cost of $500,000 per year to expedite setups and materials handling in the bottleneck operation .As a result, the annual output of the bottleneck operation increases by 500 units. The Change in operating income Attributable to the increase in workers is

A$50,000

B$36,000

C$(14,000)

D$(20,000)

Show Suggested Answer

Suggested Answer: C

Decentralization results in greater speed in making operating decisions because they are made by lower-level managers instead of being referred to top management. The quality of operating decisions should also be enhanced, assuming proper training of managers, because those closest to the problems should be the most knowledgeable about them.

by Shenika at Oct 17, 2022, 02:35 AM

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Linette

8 months ago

$500,000 for 500 units? That seems off to me.

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Golda

8 months ago

Totally agree, the extra units should boost income!

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Antione

9 months ago

Wait, how can hiring more workers lead to a loss?

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Lavonna

9 months ago

I think the increase in output is worth it!

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Lettie

9 months ago

Each lantern sells for $120 and materials cost $48.

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Jeff

9 months ago

I think I remember that the change in operating income would be the additional revenue minus the costs. If we sell 500 more units, that’s $60,000 in revenue, but then we have to subtract the $500,000 cost. I’m leaning towards option C or D.

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Chandra

9 months ago

I feel a bit confused about the total costs involved. If the additional workers cost $500,000 and we only gain 500 units, does that mean we need to calculate the total revenue from those units first?

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Coletta

9 months ago

This question seems similar to one we practiced where we had to analyze the impact of fixed costs on operating income. I think the contribution margin here is $72 per unit.

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Jose

9 months ago

I remember we discussed how to calculate the contribution margin per unit, but I'm not entirely sure how to factor in the additional costs of hiring workers.

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Jeannetta

9 months ago

I'm a bit confused on the difference between isShareable, isEditable, and isCreatable. I'll need to review those Apex methods to make sure I'm using them correctly.

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Teri

9 months ago

Okay, let me see... I think the key is understanding the concept of "data protection by design" from the beginning.

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Kallie

9 months ago

Okay, I can see that we need to add an app to the Teams client for a specific group of users. The question mentions the Microsoft Teams admin center, so I'm guessing that's where we'll need to make the changes.

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Nina

9 months ago

This question reminds me of a similar practice one we did about overhead costs; I think I'll need to calculate the differences first.

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Micheline

10 months ago

I think we might be looking at a Full Release since it involves significant changes to related systems, right?

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Youlanda

1 year ago

Alright, let's do this! Time to put my accounting skills to the test and find the correct answer. No pressure, right?

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Marla

1 year ago

Hold on, I'm getting hungry just thinking about this. I wonder if Rosecrans makes any edible lanterns? Might be a good business opportunity.

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Sunshine

1 year ago

D) $(20,000)

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Crista

1 year ago

C) $(14,000)

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Kristofer

1 year ago

B) $36,000

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Virgina

1 year ago

A) $50,000

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Lashon

1 year ago

Ah, I see! So the variable costs are immaterial, which means the increase in output will directly translate to more revenue. Let's crunch the numbers.

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