CIMA Advanced Management Accounting (CIMAPRO19-P02-1) Free Practice Test
Question 1
A project requires an initial investment of $50,000. It will generate positive cash flows for two years as follows.
The cost of capital is 12% per year.
What is the equivalent annual net present value of the project?
Give your answer to the nearest $10.
The cost of capital is 12% per year.
What is the equivalent annual net present value of the project?
Give your answer to the nearest $10.
Correct Answer:
$8190, $8191
Question 2
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:
During the manufacture of the first 255 units, the time taken to produce each successive unit is expected to:
Correct Answer: D
Question 3
A long established organization has recognised the need to make urgent changes to the way it operates in order to remain competitive. The organization wishes to dramatically improve its performance through a fundamental rethinking and radical redesign of its existing activities.
Which of the following techniques should be used to achieve this?
Which of the following techniques should be used to achieve this?
Correct Answer: B
Question 4
TTR Ltd plans to purchase a new plant for $1,000m on the 1st of January 20X6. The annual sales expected from the production of this plant is S400m per year. The plant has an expected life of five years. The financial accountant has computed the NPV of the project at $61.42m considering a discount rate of 10%.
The marketing director wants to know the percentage drop in revenue that the sales team can afford before the project becomes unviable. Which of the following indicates the percentage required by the marketing director?
The marketing director wants to know the percentage drop in revenue that the sales team can afford before the project becomes unviable. Which of the following indicates the percentage required by the marketing director?
Correct Answer: A
Question 5
The starting point for developing a balanced scorecard for an organization should be:
Correct Answer: C
Question 6
An organization is considering purchasing a new machine which will cost $600,000. The new machine will generate cost savings of $200,000 each year for five years. The cost of capital is 12%.
The profitability index (PI) for the investment in the new machine is:
Give your answer to one decimal place.
The profitability index (PI) for the investment in the new machine is:
Give your answer to one decimal place.
Correct Answer:
1.2, 0.2
Question 7
A company is considering four mutually exclusive projects. There are three possible future demand conditions but the company has no idea of the probability of each of these demand conditions occurring. The forecast net present values (NPVs) of each of the four projects, under each of the three possible future demand conditions, are as follows.
Which investment would be selected using the maximin criterion?
Which investment would be selected using the maximin criterion?
Correct Answer: A
Question 8
A company must decide today whether to proceed with a proposed project. If the project proceeds, the initial investment of $150,000 would be made in one year's time. The benefit of the project would be a perpetuity of $22,000 per year commencing one year after the investment is made. The company's cost of capital is 14% per year.
To the nearest $100, what is the net present value of the project?
To the nearest $100, what is the net present value of the project?
Correct Answer: A
Question 9
Which of the following statements is NOT correct?
Transfer prices between responsibility centers should be set at a level that:
Transfer prices between responsibility centers should be set at a level that:
Correct Answer: C
Question 10
A supermarket group has experienced operational problems during recent years, including a shortage of warehousing space due to increasing turnover and poor inventory management. The product portfolio has expanded considerably. Although this has led to increased sales volume, marketing and logistics costs have increased disproportionately. Non product-specific costs have also increased significantly.
Management is now considering using Direct Product Profitability (DPP).
Which of the following statements are valid in respect of the possible implementation of DPP within the supermarket group?
Select ALL that apply.
Management is now considering using Direct Product Profitability (DPP).
Which of the following statements are valid in respect of the possible implementation of DPP within the supermarket group?
Select ALL that apply.
Correct Answer: A,C,E
Question 11
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 A. 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?
What is the target cost for each unit of product A in the forthcoming year?
Correct Answer: A
Question 12
How does beyond budgeting NOT help to resolve the weaknesses of traditional budgeting? Select ALL that apply.
Correct Answer: B,E,F
Question 13
Under the absorption costing system, which simply allocates our entire amount of production overheads based on machine hours, we have found that out of our 4 products, 2 are profitable, 1 breaks even and
1 is
making a loss.
Model D the most recent addition to the range is making a large loss after the price of a major component rose dramatically. Model A is only just breaking now too as costs have risen. The only two products making profit are Models B and C. These two require the least about of machine hours so this makes sense.
However, the management have a few reservations. They cannot understand how B is so profitable. It requires several more stages of production than the other models and a whole day longer to be customised by an expert.
Select the correct answer from the list below that can help to explain this situation.
1 is
making a loss.
Model D the most recent addition to the range is making a large loss after the price of a major component rose dramatically. Model A is only just breaking now too as costs have risen. The only two products making profit are Models B and C. These two require the least about of machine hours so this makes sense.
However, the management have a few reservations. They cannot understand how B is so profitable. It requires several more stages of production than the other models and a whole day longer to be customised by an expert.
Select the correct answer from the list below that can help to explain this situation.
Correct Answer: A
Question 14
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?
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?
Correct Answer: A,B,E
Question 15
Which of the following is a key objective when agreeing a basis for setting transfer prices?
Correct Answer: D