CIMA Management Accounting - P1 Exam Practice Test
MBM is considering introducing a new product and has to decide if the sales price should be $80, $90,
$100 or $120.
There is a 30% chance that demand could be high, a 50% chance that demand will be at a medium level and a 20% chance that demand will be low.
A payoff table below shows the profits based on the sales price and the level of demand.
MBM has decided, using an expected value approach, that the sales price should be set at $80 as this gives the highest expected profit of $860,000.
A market research company has since approached MBM offering to provide perfect information on the demand level.
What is the maximum amount that should be paid for the perfect information?
Give your answer as a whole number (in '000s).
$100 or $120.
There is a 30% chance that demand could be high, a 50% chance that demand will be at a medium level and a 20% chance that demand will be low.
A payoff table below shows the profits based on the sales price and the level of demand.
MBM has decided, using an expected value approach, that the sales price should be set at $80 as this gives the highest expected profit of $860,000.
A market research company has since approached MBM offering to provide perfect information on the demand level.
What is the maximum amount that should be paid for the perfect information?
Give your answer as a whole number (in '000s).
Correct Answer:
$60000
A company manufactures a single product and absorbs fixed production overheads at a predetermined rate based on budgeted expenditure and budgeted units.
Which TWO of the following would definitely lead to an over absorption of fixed production overheads?
Which TWO of the following would definitely lead to an over absorption of fixed production overheads?
Correct Answer: A,B
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JL is preparing its cash budget for the next three quarters. The following data have been extracted from the operational budgets:
Additional information is available as follows:
* JL sells 20% of its goods for cash. Of the remaining sales value, 70% is received within the same quarter as sale and 30% is received in the following quarter. It is estimated that trade receivables will be
$125,000 at the beginning of Quarter 1. No bad debts are anticipated.
* 50% of payments for direct material purchases are made in the quarter of purchase, with the remaining 50% in the quarter following purchase. It is estimated that the amount owing for direct material purchases will be $60,000 at the beginning of Quarter 1.
* JL pays labour and overhead costs when they are incurred. It has been estimated that labour and overhead costs in total will be $303,600 per quarter. This figure includes depreciation of $19,600.
* JL expects to repay a loan of $100,000 in Quarter 3.
* The cash balance at the beginning of Quarter 1 is estimated to be $49,400 positive.
Required:
Prepare a cash budget for each of the THREE quarters.
What will the closing balance of cash flows in quarter THREE be?
Additional information is available as follows:
* JL sells 20% of its goods for cash. Of the remaining sales value, 70% is received within the same quarter as sale and 30% is received in the following quarter. It is estimated that trade receivables will be
$125,000 at the beginning of Quarter 1. No bad debts are anticipated.
* 50% of payments for direct material purchases are made in the quarter of purchase, with the remaining 50% in the quarter following purchase. It is estimated that the amount owing for direct material purchases will be $60,000 at the beginning of Quarter 1.
* JL pays labour and overhead costs when they are incurred. It has been estimated that labour and overhead costs in total will be $303,600 per quarter. This figure includes depreciation of $19,600.
* JL expects to repay a loan of $100,000 in Quarter 3.
* The cash balance at the beginning of Quarter 1 is estimated to be $49,400 positive.
Required:
Prepare a cash budget for each of the THREE quarters.
What will the closing balance of cash flows in quarter THREE be?
Correct Answer: A
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Which THREE of the following are never relevant costs for short-term decision making?
Correct Answer: B,C,E
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Which of the following statements about expected value is NOT correct?
Correct Answer: B
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For the forthcoming period, the number of units of product L produced must be no more than four times the number of units of product M produced.
The equation to represent this constraint in a linear programming exercise is:
The equation to represent this constraint in a linear programming exercise is:
Correct Answer: B
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The standard production cost of making a product is as follows:
What is the fixed production overhead capacity variance?
What is the fixed production overhead capacity variance?
Correct Answer: D
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200 units each of components F, G and H are required next period.
All three components are made by skilled labour of which only 4,000 hours are available.
An external supplier is able to supply any requirements of the components.
No inventories are held.
Data for the three components are as follows:
In order to minimise cost, how many units of component H should be purchased from the external supplier?
All three components are made by skilled labour of which only 4,000 hours are available.
An external supplier is able to supply any requirements of the components.
No inventories are held.
Data for the three components are as follows:
In order to minimise cost, how many units of component H should be purchased from the external supplier?
Correct Answer: C
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GP is launching a new product. The annual forecast costs are as follows:
What is the expected value of the total costs?
Give your answer to the nearest whole $.
What is the expected value of the total costs?
Give your answer to the nearest whole $.
Correct Answer:
$36935
Your company operates using TQM. As the accountant you have been tasked with producing a quality report so that management can understand how well their new range of products is being received and how the quality of the products has improved. In order to produce the report you have requested information from different departments, but you soon realise not all the information is relevant. You have information regarding the following:
Cost of downtime Training costs Environmental costs Customer returns and refunds Number of defects per unit Which pieces of information are relevant to your report? Select ALL that apply.
Cost of downtime Training costs Environmental costs Customer returns and refunds Number of defects per unit Which pieces of information are relevant to your report? Select ALL that apply.
Correct Answer: C,E
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A company is choosing between three projects, Project P, Project Q and Project R using minimax regret as the criterion for the decision. The outcome from each project is dependent on future economic growth. If this is strong, returns will be P $5,000, Q $6,500 and R $7,200. If it is weak, returns will be P
$3,500, Q $4,800 and R $4,200.
Place the correct figures into the table to show the maximum regret for each project.
$3,500, Q $4,800 and R $4,200.
Place the correct figures into the table to show the maximum regret for each project.
Correct Answer:
ABC uses an activity-based costing system.
The company manufactures three products, details of which are given below:
Total material movement costs for the period are $10,000.
The material movement cost per unit for Product Z (to the nearest $0.01) is:
The company manufactures three products, details of which are given below:
Total material movement costs for the period are $10,000.
The material movement cost per unit for Product Z (to the nearest $0.01) is:
Correct Answer: B
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A healthcare company specializes in hip, knee and shoulder replacement operations, known as surgical procedures. As well as providing these surgical procedures the company offers pre operation and post operation in-patient care, in a fully equipped hospital, for those patients who will be undergoing the surgical procedures.
Surgeons are paid a fixed fee for each surgical procedure they perform and an additional amount for any follow-up consultations. Post procedure follow-up consultations are only undertaken if there are any complications in relation to the surgical procedure. There is no additional fee charged to patients for any follow up consultations. All other staff are paid annual salaries.
The company's existing costing system uses a single overhead rate, based on revenue, to charge the costs of support activities to the procedures. Concern has been raised about the inaccuracy of procedure costs and the company's accountant has initiated a project to implement an activity-based costing (ABC) system. The project team has collected the following data on each of the procedures.
Calculate the profit per procedure for each of the three procedures using activity-based costing.
What was the profit for the knee procedure, using ABC costing?
Surgeons are paid a fixed fee for each surgical procedure they perform and an additional amount for any follow-up consultations. Post procedure follow-up consultations are only undertaken if there are any complications in relation to the surgical procedure. There is no additional fee charged to patients for any follow up consultations. All other staff are paid annual salaries.
The company's existing costing system uses a single overhead rate, based on revenue, to charge the costs of support activities to the procedures. Concern has been raised about the inaccuracy of procedure costs and the company's accountant has initiated a project to implement an activity-based costing (ABC) system. The project team has collected the following data on each of the procedures.
Calculate the profit per procedure for each of the three procedures using activity-based costing.
What was the profit for the knee procedure, using ABC costing?
Correct Answer: D
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A company makes and sells three products A, B and C. The products are sold in the ratio of A:B:C = 1:1:4.
Monthly fixed costs are $150,000. Product details are shown below:
What sales value of product C is required to achieve a target profit of $72,000 next month?
Give your answer to the nearest whole $ (in '000s).
Monthly fixed costs are $150,000. Product details are shown below:
What sales value of product C is required to achieve a target profit of $72,000 next month?
Give your answer to the nearest whole $ (in '000s).
Correct Answer:
270000