CIMA CIMAPRO19-P01-1 Exam Practice Test Instant Access

Question 1

A flexible budget is a budget that is:

Aset prior to the control period and not subsequently changed in response to changes in activity period has expired

Bcontinuously updated by adding a further accounting period when the earliest accounting period has expired

Cchanged in response to changes in the level of activity

Dchanged in response to changes in costs

Answer : C

References:

Question 2

A company produces a product that requires two materials, Material A and Material B. Details of the material quantities and costs for August are given in the table below.

Budgeted and actual output of the product for August was 12,000 units.

The material mix variance for August is:

A$ 1, 540 Favourable

B$ 1, 540 Adverse

C$ 1, 288 Favourable

D$ 1, 540 Adverse

Answer : A

References:

Question 3

A company is preparing its annual budget and is estimating the number of units of Product W that it will sell in each quarter of year 2. Past experience has shown that the trend for sales of the product is represented by the following relationship:

Calculate the expected unit sales of Product W for each quarter of year 2, after adjusting for seasonal variations using the multiplicative model.

AThe sales forecast for year 2 Quarter 4 = 35,100 units

BThe sales forecast for year 2 Quarter 4 = 25,100 units

CThe sales forecast for year 2 Quarter 4 = 22,600 units

DThe sales forecast for year 2 Quarter 4 = 38,100 units

Answer : A

References:

Question 4

A company's budget for the next period shows that it would breakeven at sales revenue of $800,000 and fixed costs of $320,000.

The sales revenue needed to achieve a profit of $200,000 in the next period would be:

A$1,950,000

B$1,780,000

C$1,400,000

D$1,300,000

E$1,390,000

Answer : D

References:

Question 5

The term 'budgetary slack' refers to the:

ALead time between the preparation of the functional budgets and the approval of the master budget by senior management

BDifference between the budgeted output and the actual output

CDifference between budgeted capacity utilization and full capacity

DIntentional over estimation of costs and/or under estimation of revenue in a budget

Answer : D

References:

Question 6

A medium-sized manufacturing company, which operates in the electronics industry, has employed a firm of consultants to carry out a review of the company's planning and control systems. The company presently uses a traditional incremental budgeting system and the inventory management system is based on economic order quantities (EOQ) and reorder levels. The company's normal production patterns have changed significantly over the previous few years as a result of increasing demand for customized products. This has resulted in shorter production runs and difficulties with production and resource planning.

The consultants have recommended the implementation of activity based budgeting and a manufacturing resource planning system to improve planning and resource management.

Select ALL the benefits for the company that could occur following the introduction of an activity based budgeting system.

AUnder an activity based budgeting system, resource allocation is linked to the strategic plan is prepared after considering alternative strategies. This approach ensures that new activities that are required to meet the company's strategic objectives are included in the budget.

BUnder an activity based budgeting system the focus is on existing resources and operations. Adjustments are then made for changes in activity and price which results in past inefficiencies being perpetuated. Under a traditional budgeting system, only resources that are needed to perform activities required to meet the budgeted production and sales volumes are included.

CActivity based techniques including activity based budgeting focus on the outputs of a process rather than the input to the process. This approach provides a clear framework for understanding the link between costs and the level of activity. It allows the ranking of activities and the determination of how limited resources should be allocated across competing activities.

DABB systems present costs under functional headings i.e. the emphasis is on the nature of the cost. The weakness of this approach is that it gives little indication of the link between the level of activity and the cost incurred.

EThe approach under an activity based system is to make arbitrary cuts in order to meet overall financial targets.

FActivity based budgeting allows the identification of value added and non-value added activities and ensures that cuts are made to non-value added activities. ABB is also useful for review of capacity utilization.

Answer : A, C, D, F

References:

Question 7

A company has to choose between three mutually exclusive projects. Market research has shown that customers could react to the projects in three different ways depending on their preferences. There is a 30% chance that customers will exhibit preferences 1, a 20% chance they will exhibit preferences 2 and a 50% chance they will exhibit preferences 3. The company uses expected value to make this type of decision.

The net present value of each of the possible outcomes is as follows:

A market research company believes it can provide perfect information about the preferences of customers in this market.

What is the maximum amount that should be paid for the information from the market research company?

A$145 000

B$140 000

C$125 000

D$135 000

Answer : B

References:

CIMAPRO19-P01-1 P1 Management Accounting Exam Practice Test