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Exam P1 Management Accounting)
Number CIMAPRO15-P01-X1-ENG
File Name P1 Management Accounting.Testking.CIMAPRO15-P01-X1-ENG.2019-04-12.1e.31q.vcex
Size 1.47 Mb
Posted April 12, 2019
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Demo Questions

Question 1
A company produces three products D, E and F. The statement below shows the selling price and product costs per unit for each product, based on a traditional 
absorption costing system. 

  

Each of the products is produced using Process A which has a maximum capacity of 2,500 hours per period. 
If a throughput accounting approach is used, the ranking of products, in order of priority, for the profit maximizing product mix will be:

  • A: D, E, F
  • B: E, D, F
  • C: F, D, E
  • D: D, F, E



Question 2
‘A zero-based budgeting system involves establishing decision packages that are then ranked in order of their relative importance in meeting the organization’s 
objectives’.  
Which of the following is true regarding he difficulties that a not-for-profit organization may experience when trying to rank decision packages. 
Select ALL true statements.

  • A: The activities that are being proposed in a budget are described in variable packages. There will often be more less than one decision package proposed for an activity.
  • B: The activities that are being proposed in a budget are described in decision packages. There will often be more than one decision package proposed for an activity.
  • C: Some of these packages will be inclusive and will require operations to select the best solution to the issue involved.
  • D: Some of these packages will be mutually inclusive and will require management to select the best solution to the issue involved.
  • E: Each decision package is evaluated. Its costs are compared to its benefits and net present values or other measures calculated.
  • F: Management may decide to reject packages even though the activity was done last year. In this way the organization is said to be starting from a zero base with each package given due consideration.
  • G: Management may decide to accept packages even though the activity was done last year. In this way the organization is said to be starting from a 100% cost base with each package given due consideration.
  • H: In a public sector body, for example, decision packages will relate profit making activities.
  • I: In a public sector body, for example, decision packages will relate to very disparate activities.



Question 3
A company has budgeted to produce 5,000 units of Product B per month. The opening and closing inventories of Product B for next month are budgeted to be 400 units and 900 units respectively. The budgeted selling price and variable production costs per unit for Product B are as follows:

  
  
Total budgeted fixed production overheads are $29,500 per month. The company absorbs fixed production overheads on the basis of the budgeted number of units produced. The budgeted profit for Product B for next month, using absorption costing, is $20,700. 
Prepare a marginal costing statement which shows the budgeted profit for Product B for next month. 
What was the difference between the profit calculation using marginal costing and the profit calculation using absorption costing?

  • A: $2870
  • B: $3010
  • C: $2950
  • D: $3610
  • E: $2750



Question 4
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.  

  

Calculate the profit per procedure for each of the three procedures, using the current basis for charging the costs of support activities to procedures. 
What was the profit for the knee procedure?

  • A: $1510
  • B: $1210
  • C: $1390
  • D: $1485



Question 5
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. 

  

Calculate the profit per procedure for each of the three procedures using activity-based costing. 
What was the profit for the knee procedure, using ABC costing?

  • A: $2466
  • B: $781
  • C: $1808
  • D: $2305



Question 6
Assume that you have made profit calculations based on standard profit calculation methods and activity based costing methods. 
In which ways will this information be beneficial to the management team? 
Select all the true statements.

  • A: Under an activity based costing system the various support activities that are involved in the process of making products or providing services are identified.
  • B: The cost drivers that cause a change to the cost of activities are also identified and used as the basis to attach activity costs to a particular product or service.
  • C: Through the tracing of costs to product in this way ABC establishes less accurate costs for the product or service.
  • D: The identification of cost drivers provides information to management to enable them to take actions to improve the overall profitability of the company.
  • E: Operational analysis will provide information to management on how costs can be incurred and managed.



Question 7
Explain the advantages of management participation in budget setting and the potential problems that may arise in the use of the resulting budget as a control mechanism. 
Select all the correct answers.

  • A: A purposes of budgeting is to act as a control mechanism, with actual results being compared against budget.
  • B: Another purpose of a budget is to set targets to motivate managers and optimize their performance.
  • C: The participation of managers in the budget setting process has several advantages. Managers are more likely to be motivated to achieve the target if they have participated in setting process has several advantages. managers are more likely to be motivated to achieve the target if they have participated in setting the target.
  • D: Participation in budget setting can reduce the information asymmetry gap that can arise when targets are imposed by senior management. Imposed targets are likely to make managers feel demotivated and alienated and result in poor performance.
  • E: Participation in budget setting can cause problems; in particular, managers may attempt to negotiate budgets that they feel are easy to achieve which gives rise to “budget padding” or budgetary slack.
  • F: Managers will not ‘empire build’ because they don’t believe that the size of their budget reflects their importance within the organization.



Question 8
JRL manufactures two products from different combinations of the same resources. Unit selling prices and unit cost details for each product are as follows:

  

Identify, using graphical linear programming, the weekly production schedule for products J and L that will maximize the profits of JRL during the next four weeks.

  • A: The solution from the graph is to produce 330 units of J and 280 units of L. (A simplex solution shows the true optimum to be 332.333 units of J and 283.333 units of L.)
  • B: The solution from the graph is to produce 310 units of J and 280 units of L. (A simplex solution shows the true optimum to be 308.333 units of J and 283.333 units of L.)
  • C: The solution from the graph is to produce 330 units of J and 290 units of L. (A simplex solution shows the true optimum to be 332.333 units of J and 293.333 units of L.)
  • D: The solution from the graph is to produce 315 units of J and 290 units of L. (A simplex solution shows the true optimum to be 316.333 units of J and 293.333 units of L.)
  • E: The solution from the graph is to produce 312 units of J and 295 units of L. (A simplex solution shows the true optimum to be 312.333 units of J and 294.999 units of L.)
  • F: The solution from the graph is to produce 317 units of J and 270 units of L. (A simplex solution shows the true optimum to be 316.666 units of J and 269.666 units of L.) 



Question 9
JRL manufactures two products from different combinations of the same resources. Unit selling prices and unit cost details for each product are as follows:

  
  
* Refer to your answer in the previous question. 
The optimal solution to the previous question shows that the shadow prices of skilled labour and direct material A are as follows:
Skilled labour $ Nil Direct Material A $11.70 
Explain the relevance of these values to the management of JRL. 
Select ALL the true statements.

  • A: The shadow price equals the additional contribution that would be earned from one extra unit of a scarce resource.
  • B: In a situation such as this, where a number of resources are scarce, the shadow price of any particular scarce resource will depend on whether or not the resource is not binding.
  • C: The shadow price for skilled labour is NIL because although there is a shortage of skilled labour it does have a constraining effect on output of JR as other resources are more scarce.
  • D: Since material A is one of the binding constraints, if the availability of material A could be increased by one unit, this would change the optimal plan.
  • E: The decrease in contribution as a result of this change is the value of the shadow price of material A. The shadow price thus represents the maximum premium that should be paid for an additional unit of material A.



Question 10
A master budget comprises the...

  • A: budgeted income statement and budgeted cash flow statement only.
  • B: budgeted income statement and budgeted balance sheet only.
  • C: budgeted income statement and budgeted capital expenditure only
  • D: budgeted income statement, budgeted balance sheet and budgeted cash flow statement only.









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