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  1. Home
  2. IIA Certification
  3. IIA-CIA-Part3 Exam
  4. IIA.IIA-CIA-Part3.v2023-01-15.q275 Dumps
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Question 236

An entity must select from among several methods of financing arrangements when meeting its capital requirements. To acquire additional growth capital while attempting to maximize earnings per share, an entity should normally

Correct Answer: B
Earnings per share will ordinarily be higher if debt is used to raise capital instead of equity, provided that the entity is not over-leveraged. The reason is that the cost of debt is lower than the cost of equity because interest is tax deductible. However, the prospect of higher EPS is accompanied by greater risk to the entity resulting from required interest costs, creditors' liens on the entity's assets, and the possibility of a proportionately lower EPS if sales volume fails to meet projections.
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Question 237

Which of the following lists best describes the classification of manufacturing costs?

Correct Answer: A
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Question 238

When comparing the residual income of several investment centers the validity of comparisons may be destroyed by:

Correct Answer: A
Residual income is income of an investment center, minus an imputed interest charge for invested capital. The theory is that earning an income greater than residual income indicates that expansion is desirable. However, comparisons of investment centers based on residual income may be misleading because of differences in products, markets, costs, and local conditions.
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Question 239

Company F applies a target pricing and costing approach. The following information about costs and revenues of Company F's product are available for the year just ended:

Company F plans to increase unit sales to 80,000 by reducing the product's unit price to US $320. If Company F desires a unit target operating income of 12%, by what amount must it reduce the full cost per unit?

Correct Answer: C
Unit target operating income is US $38.40 12% > $320 unit target price). Hence, the unit target full cost is US $281.60 $320 - $38.40). The current full cost per unit is US $352.00 [($13,200,000 CGS + $7,920,000 other value chain operating costs) - 60,000 units sold], so the necessary reduction in the full cost per unit is US $70.40 $352.00 - $281.60).
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Question 240

Through the use of decision models, managers thoroughly analyze many alternatives and decide on the best alternative for the company. Often the actual results achieved from a particular decision are not what was expected when the decision was made. In addition, an alternative that was not selected would have actually been the best decision for the company.
The appropriate technique to analyze the alternatives by using expected inputs and altering them before a decision is made is:

Correct Answer: D
Sensitivity modeling can be used to determine the outcome of a variety of decisions. A trial and- error method may be adopted, usually in a computer model, to calculate the sensitivity of the solution variability of outcomes) to changes in a variable.
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