Free P2 Advanced Management Accounting Exam CIMAPRO19-P02-1 Exam Practice Test

A company expects to sell 3,600 units of Product A at a selling price of $750 per unit during the forthcoming year. The currently expected variable cost per unit is $860 per unit. The company requires a return of 15% during the forthcoming year on its investment of $2.4 million in Product

• Absorbed general overheads are expected to amount to $40 per unit. What is the target cost for each unit of product A in the forthcoming year?
• $650
• $250
• $900
• $850

Which of the following statements about the use of traditional budgeting compared with a beyond budgeting approach is correct?

• If the organization has devolved decision making, beyond budgeting is not appropriate because it does not allow the same level of empowerment as traditional budgeting.
• If the organization's products are subject to rapid technological change, beyond budgeting would allow managers to respond more quickly than under traditional budgeting.
• If there is a dynamic external environment with fast moving opportunities, beyond budgeting will inhibit the organization's ability to take advantage of these opportunities whereas traditional budgeting will not.
• If the organization's culture is such that a top down budgeting system is desired then this is better achieved by adopting beyond budgeting rather than traditional budgeting.

An organization wishes to make its investment decisions on the basis of more than simply a financial appraisal. Which of the following will assist it to take into account both qualitative and quantitative factors?

• Cost Benefit Analysis
• Profitability Index
• Discounted Payback
• Modified Internal Rate of Return

A manufacturing company has recently introduced a Total Quality Management (TQM) system. The company has invested heavily in the education and training of its staff, in addition to implementing new product design engineering. There is a plan to sample units from each batch of products manufactured to test for errors, although this has not yet been implemented due to budget constraints.The company is experiencing high levels of customer complaints, with many faulty units being returned by the customer for refund or replacement. Sales revenue has fallen recently, mainly due to negative press coverage linked to dissatisfied customers.Select the statement MOST likely to apply.

• The high level of external failure costs is the result of a lack of expenditure on prevention costs.
• The high level of internal failure costs is the result of a lack of expenditure on appraisal costs.
• The high level of external failure costs is the result of a lack of expenditure on appraisal costs.
• The high level of internal failure costs is the result of a lack of expenditure on prevention costs.

The starting point for developing a balanced scorecard for an organization should be:

• the organization's vision and strategy
• the external market that the organization is operating in
• benchmarking the organization's current performance
• the organization's non-financial targets

Which of the following statements are correct with regard to responsibility centres?Select ALL that apply.

• Revenue centre managers have a lower level of decision-making authority than profit centre managers.
• Revenue centre managers and profit centre managers are accountable for controllable costs only.
• Profit centre managers and investment centre managers are responsible for the majority of operating costs incurred.
• Investment centre managers have a higher level of managerial authority than profit centre managers.
• Managers of profit centres have authority over the level of investment in working capital but managers of cost centres do not.

Company X is considering the launch of a new product. In order to compete in the market the selling price must be $100 per unit. Company X aims to achieve a sales margin of 25 per cent.Direct materials cost is $75 for each unit. It takes 15 minutes for workers to assemble each unit. Workers are paid $16 per hour. 5 per cent of paid time is idle. Overheads are absorbed at $6.50 per unit.What is the value of any cost gap between the forecast total cost and the target cost?

• $10.71
• $5.50
• $10.50
• $9.10

In order to support decision making, management accounting information categorizes costs in a variety of ways.Responsibility accounting primarily distinguishes between costs on the basis that they are either:

• sunk or opportunity costs
• fixed or variable costs
• controllable or uncontrollable costs
• relevant or non-relevant costs

An organization has a decentralized structure in which division A supplies division B with an intermediate product for which there is no external market. Division B carries out further processing and then sells the final product on the external market. Due to organizational policy the current transfer pricing basis is variable cost.The manager of division A has stated, 'The current transfer price is unfair because it does not enable us to recoup our costs'.The manager of division B has stated, 'The current transfer pricing system enables us to quote competitive prices for the finished product'.The Chief Executive of the organization is considering imposing a transfer pricing policy that uses dual pricing.Dual pricing would:

• be welcomed by the manager of division A but the manager of division B would resist it.
• be welcomed by both divisional managers.
• increase divisional autonomy.
• involve a lump sum payment to division A in addition to the payment of the variable cost per unit.

A division of a company transfers all its output to other divisions in the same company.For this division, which of the following measures is NOT affected by the transfer price that the division uses?

• Operating profit
• Return on investment
• Cost of components purchased
• Sales revenue