CIMA Advanced Management Accounting (P2) Free Practice Test
Question 1
Which of the following statements are fundamental concepts that underlie the Beyond Budgeting approach?
1. Use traditional budgeting in conjunction with other techniques.
2. Use adaptive management processes rather than the more rigid annual budget.
3. Move towards devolved networks rather than centralized hierarchies.
4. Move towards centralized hierarchies rather than devolved networks.
1. Use traditional budgeting in conjunction with other techniques.
2. Use adaptive management processes rather than the more rigid annual budget.
3. Move towards devolved networks rather than centralized hierarchies.
4. Move towards centralized hierarchies rather than devolved networks.
Correct Answer: A
Question 2
An airline prides itself on using highly reliable aircraft that are maintained to the highest possible standard and that its flight crews are arguably the best in the industry. Despite that, the directors accept that there remains a slight possibility that there will be a fatal accident.
Which THREE of the following statements are correct?
Which THREE of the following statements are correct?
Correct Answer: B,C,D
Question 3
An organization's transfer pricing system involves:
* The transferring division receiving $20 per unit; an amount equal to its variable costs.
* The receiving division paying an additional $30,000 every month to the transferring division.
Which transfer pricing system is the organization using?
* The transferring division receiving $20 per unit; an amount equal to its variable costs.
* The receiving division paying an additional $30,000 every month to the transferring division.
Which transfer pricing system is the organization using?
Correct Answer: B
Question 4
SDF makes cars. Demand for one of SDF's most popular models has declined because of a long-running television program. SDF's car is driven by a villainous character in the program and that has created such a negative association that sales have declined so significantly that SDF is planning to discontinue production.
Which of the following statements is correct? Select ALL that apply.
Which of the following statements is correct? Select ALL that apply.
Correct Answer: A,C,D
Question 5
A very large organization is financed by both debt and equity. It evaluates all projects on the basis of their net present value (NPV) using an organization wide weighted average cost of capital as the discount rate.
For a small project, which TWO of the following would affect the project's cash flows AND the discount rate?
For a small project, which TWO of the following would affect the project's cash flows AND the discount rate?
Correct Answer: A,D
Question 6
Using Porter's value chain, place the tokens to correctly categories the following activities of a manufacturing company.
Correct Answer:
Question 7
We have 2 divisions with the following information: Profit before depreciation: B1=$800,000, B2=S1,000,000; Assets: B1 =$2,000,000, B2=S3,000,000; Capital employed: B1 = $1,700,000 and B2 =
$2,550,000. 20%
straight-line depreciation is used.
Calculate ROI for each division.
$2,550,000. 20%
straight-line depreciation is used.
Calculate ROI for each division.
Correct Answer: A
Question 8
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?
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?
Correct Answer: A
Question 9
A company is comprised of two divisions, each of which manufactures a single product. Division A manufactures a product which can be sold in a perfect external market or transferred as an intermediate product to division B. Division B finishes the intermediate product and sells this in a perfect external market.
Due to company policy, internal transfers are recorded at the external market price. At this transfer price both divisions make a profit from their activities.
Which of the following will NOT be achieved by the company's transfer pricing policy?
Due to company policy, internal transfers are recorded at the external market price. At this transfer price both divisions make a profit from their activities.
Which of the following will NOT be achieved by the company's transfer pricing policy?
Correct Answer: A
Question 10
Oliver owns a computer repair company. He is looking to close of of his departments as the demand for computer cleaning has dropped dramatically in the last 2 years and is no longer profitable.
The contribution margin of the department is £12,000, and the overheads are £23,000 (out of which
£4,000 cannot be eliminated).
How would closing this department impact operating income?
The contribution margin of the department is £12,000, and the overheads are £23,000 (out of which
£4,000 cannot be eliminated).
How would closing this department impact operating income?
Correct Answer: D
Question 11
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