CIMA CIMAPRO19-P02-1 Exam Questions Instant Access

Question 1

It is often claimed that a two-part transfer pricing system offers a number of advantages to organizations which use it.

Which of the following statements is NOT an advantage of using a two-part transfer pricing system?

ATransfers are made at the marginal cost of the supplying division and both divisions should be able to report profits from inter-divisional trading.

BThe receiving division is made aware of and charged for the full cost of obtaining intermediate products from other divisions.

CIt stimulates planning, communication and coordination amongst divisions.

DThe agreed fixed fee simply compensates the supplying division for incurring the fixed costs associated with the item transferred.

Answer : D

Question 2

Which THREE of the following are advantages of changing from a 'top-down' to a 'bottom-up' (participative) style of budgeting?

AThe budget will be based on information from employees who are familiar with the day to day activities.

BMotivation will improve due to a feeling of ownership of the budget.

CThere will be increased commitment to organizational objectives.

DBudget setters will be forced to justify every item on the budget.

EThere will be reduced likelihood of budgetary slack being built into the budgets for 'selfish' reasons.

FIt will be less time-consuming for operational managers.

Answer : A, B, C

Question 3

ZZZ is a divisionalised company that uses the balanced scorecard approach to monitor divisional performance. Each measure on the scorecard is classified as green (if they are better than expected), amber (if expectations have been met) or red (if they are poorer than expected).

The Southern Division's scorecard shows that 90% of the measures are amber, 3% are green and 7% are red.

All of the red classifications are listed under the Learning and Growth perspective and have arisen largely because the division has lost a lot of staff to a major competitor who offered a better rate of pay.

Which THREE of the following statements are correct?

AThe Southern Division's financial performance is acceptable.

BThe numbers for the measures that have been classified as red and green are not necessarily indicative of overall performance.

CThe Southern Division's managers should be asked to provide a commentary on the scorecard.

DThe Southern Division's managers should be reprimanded for having only a small proportion of green classifications.

EThe Southern Division's managers should be reprimanded for having red classifications.

Answer : A, B, C

Question 4

In accordance with a just-in-time (JIT) philosophy, which of the following is regarded as a value added activity?

AInspecting raw material deliveries

BMoving work in progress around production facilities

CHolding inventory

DDispatching products to customers

Answer : D

Question 5

Which of the following statements about modified internal rate of return (MIRR) and internal rate of return (IRR) is correct?

AMIRR uses a more realistic reinvestment assumption than IRR.

BMIRR favours projects with long payback periods whereas IRR does not.

CMIRR and IRR will always rank competing projects in the same order.

DA project's MIRR will always be higher than its IRR.

Answer : A

Question 6

A company has a maximum of $2 million to invest and has identified four viable projects, E, F, G and H.

The initial investment for each of the projects is the maximum amount that can be invested in the project, but any amount up to the maximum can be invested. The projects are divisible.

The projects have been evaluated using net present value, as below. All figures are $ millions.

In which project should the company invest $2 million?

AProject E

BProject F

CProject G

DProject H

Answer : B

Question 7

A not-for-profit organization measures performance using the three Es.

If the organization has been acquiring the resources it needs as cheaply as possible it should be described as having been:

AEfficient

BEffective

CEconomic

DEnterprising

Answer : C

CIMA P2 Advanced Management Accounting CIMAPRO19-P02-1 Exam Questions