CIMA Advanced Management Accounting - CIMAPRO19-P02-1 Exam Practice Test
Question 1
A company's competitor has just launched a rival product at a selling price of $38 per unit. Until now the company's selling price of $41.60 per unit has achieved a 30% mark-up on the product's unit cost. The company proposes to use a target costing approach to pricing to remain competitive.
Management has decided to match the competitor's selling price and has set a target cost to achieve a
20% return on the target price.
What is the cost gap?
Management has decided to match the competitor's selling price and has set a target cost to achieve a
20% return on the target price.
What is the cost gap?
Correct Answer: A
Question 2
When making an investment decision, which THREE of the following are reasons why receiving $1 today is preferable to receiving $1 in the future?
Correct Answer: B,C,E
Question 3
An organization is competing in the high technology market. It sets a high sales price for its products initially to target the early adopters, and then the price is gradually reduced.
This pricing strategy is known as:
This pricing strategy is known as:
Correct Answer: C
Question 4
A company has just completed the production of the first 16 batches of a product. A learning curve has been observed throughout. The following table gives further details.
To the nearest whole percentage, what rate of learning is implied?
To the nearest whole percentage, what rate of learning is implied?
Correct Answer: B
Question 5
PorkyCo is a leading bread manufacturer in Toyland operating two functional divisions: pulled and roasted. PorkyCo uses IT systems in all of its functions, for example, accounting has one system, manufacturing has its system, warehousing has another and human resources is the latest to develop a dedicated system to manage training and development The issue now is that when the CEO, Mr Button, needs information about two or more functions, he has to convene the department heads to get their reports and then study each in turn. As senior management accountant at PorkyCo, help free up Mr Button's time by suggesting the most efficient way of getting all the information he needs.
Correct Answer: B
Question 6
Juan is looking to invest in the mining industry. He has narrowed his options down to two rival companies, both with sales of £200m. Company A has an EBIT of £10m whereas Company B has an EBIT of £14m.
This would suggest that Company B is the better investment but Juan is suspicious that Company B has more financial backing than Company A.
Which ratios will tell him which company will use his investment the best?
This would suggest that Company B is the better investment but Juan is suspicious that Company B has more financial backing than Company A.
Which ratios will tell him which company will use his investment the best?
Correct Answer: C,D
Question 7
S is considering launching a new product.
The variable costs of manufacturing the product will be $6 per unit.
The product must be manufactured in batches of 2,000 units. The machine set up cost for each batch will be $4,000.
Maximum capacity will be 8,000 units each year.
Market research has shown that the unit selling price will affect the demand for the product as follows.
Which unit selling price will maximise annual profit?
The variable costs of manufacturing the product will be $6 per unit.
The product must be manufactured in batches of 2,000 units. The machine set up cost for each batch will be $4,000.
Maximum capacity will be 8,000 units each year.
Market research has shown that the unit selling price will affect the demand for the product as follows.
Which unit selling price will maximise annual profit?
Correct Answer: A
Question 8
The starting point for developing a balanced scorecard for an organization should be:
Correct Answer: B
Question 9
Place each method of analysing risk and uncertainty against the statement that describes it correctly.
Correct Answer:
Question 10
A company is considering four mutually exclusive projects. There are three possible future demand conditions but the company has no idea of the probability of each of these demand conditions occurring. The forecast net present values (NPVs) of each of the four projects, under each of the three possible future demand conditions, are as follows.
Which investment would be selected using the maximin criterion?
Which investment would be selected using the maximin criterion?
Correct Answer: A
Question 11
Which of the following statements are fundamental concepts that underlie the Beyond Budgeting approach?
1. Use traditional budgeting in conjunction with other techniques.
2. Use adaptive management processes rather than the more rigid annual budget.
3. Move towards devolved networks rather than centralized hierarchies.
4. Move towards centralized hierarchies rather than devolved networks.
1. Use traditional budgeting in conjunction with other techniques.
2. Use adaptive management processes rather than the more rigid annual budget.
3. Move towards devolved networks rather than centralized hierarchies.
4. Move towards centralized hierarchies rather than devolved networks.
Correct Answer: C
Question 12
The following cost of quality report has been prepared for the latest period.
What is the difference between the cost of conformance and the cost of non-conformance?
What is the difference between the cost of conformance and the cost of non-conformance?
Correct Answer:
$270000
