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

A project with a 6 year life generates a positive net present value of $1,100. The discount rate is 8%.To the nearest $, the equivalent annual benefit is:

• $5,085
• $238
• $177
• $693

Which of the following is a correct description of the key features of net present value?

• It adjusts the relevant cash flows of a project to reflect the time value of money. The discount rate used is always the company's weighted average cost of capital.
• It adjusts the relevant cash flows of a project to reflect the time value of money. The discount rate used reflects the risk of the project.
• It adjusts the relevant profits of a project to reflect the time value of money. The discount rate used reflects the risk of the project.
• It adjusts the relevant cash flows of a project after the deduction of depreciation charges to reflect the time value of money. The discount rate used is always the company's weighted average cost of capital.

A learning curve applies to the manufacture of the first 256 units of a product.During the manufacture of the first 255 units, the time taken to produce each successive unit is expected to:

• Reduce at a decreasing rate.
• Reduce at a constant rate.
• Reduce at an increasing rate.
• Reach the steady state.

An organization employs a dual pricing basis for the transfer of components between its divisions. This means that:

• each division has a separate transfer price for a single transaction.
• the transfer price is based on marginal cost with a separate charge to allow for fixed costs.
• the transfer price is based on the cost of the product plus a mark-up for profit.
• the transfer price is based on the market price less a discount.

Which basis of transfer pricing retains the full autonomy of divisional managers?

• Full cost-plus pricing
• Variable cost-plus pricing
• Negotiated pricing
• Market based pricing

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

Which of the following statements is true?

• Risk transfer means the management of a portfolio of different risks.
• Insuring risks means that businesses will not need to take any measures to reduce those risks.
• High frequency, high severity risks are always strategic risks.
• Risk hedging is taking action to offset one risk by incurring a new risk in the opposite direction.

Which of the following factors would prevent a learning curve being observed for a task?

• The task has a significant automated element.
• The task is repetitive.
• The task has a significant manual element.
• There is a low rate of labor turnover of the staff carrying out the task.

A company wishes to appraise a potential project. One of the project's relevant cash flows is the receipt, expressed in money terms, of $20,000 per year for the first 5 years.The company's real cost of capital is 5% per year and the expected rate of inflation is 3% per year.What is the real value of the expected receipt in year 2?Give your answer to the nearest $10.

SDF is a newly-established production company that is experiencing high staff turnover in its factory. The production department is studying the manufacturing process and its associated learning curve.Which of the following statements is correct?

• SDF's staff turnover will disrupt the observation and measurement of the learning curve.
• SDF's staff turnover will affect the learning curve.
• SDF's rapid staff turnover means that knowledge of the learning curve has little value.
• SDF can use the learning curve to determine labor budgets for the remainder of the first year of operation.