P1 CIMA Management Accounting exact Exam Questions

Management Accounting

Last Update 5 hours ago Total Questions : 260

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Question # 31

A manager in your organisation says, " I have spare capacity and I need a unit cost as a basis for pricing a special one-off contract. You have provided me with a relevant cost of $6.50 per unit and a full production cost of $8.00 per unit. Please explain which unit cost I should use. "

Which cost should be used in this decision and why?

The relevant cost because it is the lower unit cost.

The full production cost because it will be used in the financial accounting reporting system.

The relevant cost because it represents the cash flows that will be affected if the contract is accepted.

The full production cost because it is important to ensure that all costs are covered by the selling price.

Question # 32

Which of the following, regarding costing methods, is true?

A company produces two products which undergo similar processes. The company has very low overhead costs. This company should consider activity based costing rather than traditional absorption costing to ensure that its pricing decisions are more accurate.

A company which has introduced technology to reduce labour costs now incurs a greater proportion of non volume-related support activities. Activity based costing would be more appropriate than traditional absorption costing in this environment.

A company is making short term decisions based on the contribution per unit of its different products. These decisions are based upon full absorption costing data.

In traditional absorption costing, overheads are charged to a product by absorbing them at the cost driver rate for an activity based on their usage of the activity.

Question # 33

A company is launching a new product with a selling price of $20.

Demand and variable cost are both uncertain and possible demand levels and variable costs are given below:

Outcomes for demand and variable cost are independent.

What is the expected contribution from the product?

Give your answer as a whole number.

Question # 34

Company M is preparing its budgeted profit statement for the next year.

The initial budget for Product A is as follows with some changes proposed by the sales director to increase the quality of the product.

What would the budgeted profit of Product A be if the proposed changes are made?

Give your answer as a whole number.

Question # 35

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:

$ 1, 540 Favourable

$ 1, 540 Adverse

$ 1, 288 Favourable

$ 1, 540 Adverse

Question # 36

Select the benefits to a company of using sensitivity analysis in investment appraisal.

(Select all the true statements.)

Sensitivity analysis enables a company to determine the effect of changes to variables on the planned outcome.

Sensitivity analysis enables a company to assess the risk associated with a project.

Sensitivity analysis enables identification of fixed costs that are of special significance.

Sensitivity analysis enables risk management strategies to be put in place to focus on those variables of special significance.

Question # 37

How would the cost of recycling scrap be classified in an environmental costing system?

Environmental internal failure cost

Environmental appraisal cost

Environmental prevention cost

Environmental external failure cost

Question # 38

The budgetary control report of XYZ for the latest period is shown below. Variances in brackets are adverse.

What is the sales volume profit variance?

$18,700 favorable

$78,900 adverse

$38,200 adverse

$37,200 adverse

Question # 39

D3 makes 2 types of toilets - the Executive (Ex) and the Classic (CI). Direct labour costs $6 per hr and overheads are absorbed on a machine hour basis. The overhead absorption rate for the period is $28 per machine hour. What is the traditional cost per unit for (Ex) and (CI)?

(Ex) 60, (CI) 56

(Ex) 58, (CI) 53

(Ex) 65, (CI) 49

(Ex) 62, (CI) 52

(Ex) 63, (CI) 48

Question # 40

A healthcare company specializes in hip, knee and shoulder replacement operations, known as surgical procedures. As well as providing these surgical procedures the company offers pre operation and post operation in-patient care, in a fully equipped hospital, for those patients who will be undergoing the surgical procedures.

Surgeons are paid a fixed fee for each surgical procedure they perform and an additional amount for any follow-up consultations. Post procedure follow-up consultations are only undertaken if there are any complications in relation to the surgical procedure. There is no additional fee charged to patients for any follow up consultations. All other staff are paid annual salaries.

The company’s existing costing system uses a single overhead rate, based on revenue, to charge the costs of support activities to the procedures. Concern has been raised about the inaccuracy of procedure costs and the company’s accountant has initiated a project to implement an activity-based costing (ABC) system. The project team has collected the following data on each of the procedures.