Free P1 Management Accounting Exam CIMAPRO19-P01-1 Exam Practice Test

A musical instrument manufacturing company is considering a new project that will require 1000 kg of wood. They have 700 kgs of wood in stock which was purchased last year for 4 per kg. The wood in stock can be sold back to the supplier for 5 per kg. The wood in stock will have to be replaced if it is used. The current purchase price of wood is 8 per kg.Using this information, what is the relevant cost of wood for the manufacturers decision on this project?

• 8,000
• 5,000
• 11,500
• 5,600

A company operates a standard costing system.The company combines two raw materials in a process in order to produce a finished product. During month 6 the direct material mix variance was favourable and the direct material yield variance was adverse.Which of the following statements would explain both of the variances?

• There was more wastage in the process than standard and a greater proportion of the cheaper of the two materials was input than standard.
• Both of the materials were purchased at a lower price than standard and the lower quality increased wastage.
• Higher skilled labour resulted in less wastage from the process than standard and a lower proportion of the more expensive of the two materials was input than standard.
• The actual wastage from the process was equal to standard and a greater proportion of the cheaper of the two materials was input than standard.

Sales volumes reported for the latest period are used by managers as the basis to forecast sales for the forthcoming period. The forecasts are compared with the budgeted sales and plans are adjusted to ensure that the budgeted sales are achieved.This is an example of:

• Incremental budgeting
• Flexed budgets
• Feedforward control
• Feedback control

Which of the following statements is true?

• Standard costing is best suited to a stable environment.
• Standard costing is focused on achieving zero defects.
• Standard costing is focused on delivering quality products to customers.
• Standard costing embraces the philosophy of continual improvement.

What type of budget is prepared on an annual basis taking current year operating results and adjusting them for expected growth and inflation?

• Rolling budget
• Incremental budget
• Flexed budget
• Zero-based budget

A company makes two products, product X with a contribution per unit of $10 and product Y with a contribution per unit of $4.These products are sold in the mix 3:2 by volume and fixed costs are $38,000 per period.The breakeven point for product Y, based on the expected sales mix is:

Which of the following explain why standard costing is less appropriate in the contemporary business environment?1. In a continuous improvement environment standard costing can restrict the impetus to remain as cost competitive as rivals.2. Fixed overhead variances are less relevant as fixed costs represent a decreasing proportion of total manufacturing cost.3. In a just-in-time environment there are fewer costs to control.

• 1 only
• 1 and 2
• 2 and 3
• 1 and 3

CDF is a manufacturing company within the DF group. CDF has been asked to provide a quotation for a contract for a new customer and is aware that this could lead to further orders. As a consequence, CDF will produce the quotation by using relevant costing instead of its usual method of full cost plus pricing. The following information has been obtained in relation to the contract: Material D 40 tons of material D would be required. This material is in regular use by CDF and has a current purchase price of $38 per ton. Currently, there are 5 tons in inventory which cost $35 per ton. The resale value of the material in inventory is $24 per ton.Components 4,000 components would be required. These could be bought externally for $15 each or alternatively they could be supplied by RDF, another company within the DF manufacturing group. The variable cost of the component if it were manufactured by RDF would be $8 per unit, and RDF adds 30% to its variable cost to contribute to its fixed costs plus a further 20% to this total cost in order to set its internal transfer price. RDF has sufficient capacity to produce 2,500 components without affecting its ability to satisfy its own external customers. However, in order to make the extra 1,500 components required by CDF, RDF would have to forgo other external sales of $50,000 which have a contribution to sales ratio of 40%.Labour hours 850 direct labour hours would be required. All direct labour within CDF is paid on an hourly basis with no guaranteed wage agreement. The grade of labour required is currently paid $10 per hour, but department W is already working at 100% capacity. Possible ways of overcoming this problem are: * Use workers in department Z, because it has sufficient capacity. These workers are paid $15 per hour. * Arrange for sub-contract workers to undertake some of the other work that is performed in department W. The sub-contract workers would cost $13 per hour.Specialist machine The contract would require a specialist machine. The machine could be hired for $15,000 or it could be bought for $50,000. At the end of the contract if the machine were bought, it could be sold for $30,000. Alternatively, it could be modified at a cost of $5,000 and then used on other contracts instead of buying another essential machine that would cost $45,000. The operating costs of the machine are payable by CDF whether it hires or buys the machine. These costs would total $12,000 in respect of the new contract.Supervisor The contract would be supervised by an existing manager who is paid an annual salary of $50,000 and has sufficient capacity to carry out this supervision. The manager would receive a bonus of $500 for the additional work.Development time 15 hours of development time at a cost of $3,000 have already been worked in determining the resource requirements of the contract.Fixed overhead absorption rate CDF uses an absorption rate of $20 per direct labour hour to recover its general fixed overhead costs. This includes $5 per hour for depreciation.Calculate the relevant cost of the contract to CDF. You must present your answer in a schedule that clearly shows the relevant cost value for each of the items identified above. You should also explain each relevant cost value you have included in your schedule and why any values you have excluded are not relevant.Ignore taxation and the time value of money.Select all the true statements.

• Machine operating costs is a relevant cost.
• Development Cost is a relevant cost.
• General fixed overhead costs are relevant costs.
• Direct labour cist is a relevant cost
• The total relevant cost was $84990
• The total relevant cost was $94740
• The total relevant cost was $104320

A company's management is considering investing in a project with an expected life of 4 years. It has a positive net present value of $180,000 when cash flows are discounted at 8% per annum. The project's cash flows include a cash outflow of $100,000 for each of the four years. No tax is payable on projects of this type.The percentage increase in the annual cash outflow that would cause the company's management to reject the project from a financial perspective is, to the nearest 0.1%:

• 54.3%
• 45.0%
• 55,6%
• 184.0%

Petco's material price standard was 8 per kg.When looking over their accounts you calculate that in fact they they purchased 2,000kg at 6 per kg due to an overly abundant harvest that lowered global pet food prices.You have been asked by your manager to analyse these figures and come to a conclusion.With that in mind which of the following statements are correct? Select ALL that apply.

• The material price operational variance is 4,000
• The material price planning variance is 4,000
• Management had control over this variance
• Management had no control over this variance