CIMA CIMA-P1 Online Practice Questions and Exam Preparation

CIMA CIMA-P1 Online Questions & Answers

• Question 101:

  Which of the following is not a benefit of zero-based budgeting (ZBB)?

  A. It ensures that all activities must be justified
  B. It encourages efficient resource allocation
  C. It simplifies the budgeting process
  D. It helps eliminate outdated activities
  C. It simplifies the budgeting process

• Question 102:

  A medium-sized manufacturing company, which operates in the electronics industry, has employed a firm of consultants to carry out a review of the company's planning and control systems. The company presently uses a traditional incremental budgeting system and the inventory management system is based on economic order quantities (EOQ) and reorder levels. The company's normal production patterns have changed significantly over the previous few years as a result of increasing demand for customized products. This has resulted in shorter production runs and difficulties with production and resource planning. The consultants have recommended the implementation of activity based budgeting and a manufacturing resource planning system to improve planning and resource management.

  Select ALL the benefits for the company that could occur following the introduction of an activity based budgeting system.

  A. Under an activity based budgeting system, resource allocation is linked to the strategic plan is prepared after considering alternative strategies. This approach ensures that new activities that are required to meet the company's strategic objectives are included in the budget.
  B. Under an activity based budgeting system the focus is on existing resources and operations. Adjustments are then made for changes in activity and price which results in past inefficiencies being perpetuated. Under a traditional budgeting system, only resources that are needed to perform activities required to meet the budgeted production and sales volumes are included.
  C. Activity based techniques including activity based budgeting focus on the outputs of a process rather than the input to the process. This approach provides a clear framework for understanding the link between costs and the level of activity. It allows the ranking of activities and the determination of how limited resources should be allocated across competing activities.
  D. ABB systems present costs under functional headings i.e. the emphasis is on the nature of the cost. The weakness of this approach is that it gives little indication of the link between the level of activity and the cost incurred.
  E. The approach under an activity based system is to make arbitrary cuts in order to meet overall financial targets.
  F. Activity based budgeting allows the identification of value added and non-value added activities and ensures that cuts are made to non-value added activities. ABB is also useful for review of capacity utilization.
  A. Under an activity based budgeting system, resource allocation is linked to the strategic plan is prepared after considering alternative strategies. This approach ensures that new activities that are required to meet the company's strategic objectives are included in the budget.
  C. Activity based techniques including activity based budgeting focus on the outputs of a process rather than the input to the process. This approach provides a clear framework for understanding the link between costs and the level of activity. It allows the ranking of activities and the determination of how limited resources should be allocated across competing activities.
  D. ABB systems present costs under functional headings i.e. the emphasis is on the nature of the cost. The weakness of this approach is that it gives little indication of the link between the level of activity and the cost incurred.
  F. Activity based budgeting allows the identification of value added and non-value added activities and ensures that cuts are made to non-value added activities. ABB is also useful for review of capacity utilization.

• Question 103:

  DRAG DROP

  A company makes Product A and Product B.

  The production process for both products uses one type of material, one type of labour, and utilises one machine. All three of these resources will be limited in November. The company has performed a linear programming model and the constraints and optimal solution, to maximise contribution, are as follows:

  Constraints:

  

  For November, which of the above constraints are binding, and which are non-binding?

  Select and Place:

  

  

• Question 104:

  Changing to a just-in-time, from a traditional, manufacturing environment can affect cost accounting systems. Which of the following statements is correct?

  A. Larger volumes of inventory must be recorded
  B. A greater number of individual supplier records must be maintained
  C. More frequent, smaller deliveries from suppliers must be recorded
  D. Less frequent, larger deliveries from suppliers must be recorded
  C. More frequent, smaller deliveries from suppliers must be recorded

• Question 105:

  In a manufacturing company, breakeven occurs at which TWO of the following?

  A. When contribution is equal to zero
  B. When profit is equal to zero
  C. When revenue is equal to contribution
  D. When revenue is equal to fixed costs
  E. When fixed costs are equal to contribution
  B. When profit is equal to zero
  E. When fixed costs are equal to contribution

• Question 106:

  When preparing data for a short term decision, which THREE of the following are relevant costs?

  A. Differential costs
  B. Incremental cost
  C. Unavoidable costs
  D. Opportunity costs
  E. Committed costs
  A. Differential costs
  B. Incremental cost
  D. Opportunity costs

• Question 107:

  A company develops computer software programs to meet each client's specific requirements. The management accountant is considering introducing a standard costing system. Which THREE of the following are reasons that support the case for the company's introduction of a standard costing system?

  A. It will enable the company to make a direct comparison of costs for each program developed.
  B. It will enable the company to better focus on the quality of its service.
  C. It will provide a system of control.
  D. It will aid the budget setting process.
  E. It will simplify the work-in-progress valuation.
  C. It will provide a system of control.
  D. It will aid the budget setting process.
  E. It will simplify the work-in-progress valuation.

• Question 108:

  A company sells and services photocopying machines. Its sales department sells the machines and consumables, including ink and paper, and its service department provides an after sales service to its customers. The after sales service includes planned maintenance of the machine and repairs in the event of a machine breakdown. Service department customers are charged an amount per copy that differs depending on the size of the machine.

  The company's existing costing system uses a single overhead rate, based on total sales revenue from copy charges, to charge the cost of the Service Department's support activities to each size of machine. The Service Manager has suggested that the copy charge should more accurately reflect the costs involved. The company's accountant has decided to implement an activity-based costing system and has obtained the following information about the support activities of the service department:

  

  Calculate the annual profit per machine for each of the three sizes of machine using activity-based costing.

  A. Profit Per Machine using ABC: Small $1076, Medium $1041, Large $1946
  B. Profit Per Machine using ABC: Small $186, Medium $1441, Large $2046
  C. Profit Per Machine using ABC: Small $196, Medium $1191, Large $1046
  D. Profit Per Machine using ABC: Small $376, Medium $2341, Large $986
  E. Profit Per Machine using ABC: Small $166, Medium $1241, Large $746
  F. Profit Per Machine using ABC: Small $176, Medium $1341, Large $946
  E. Profit Per Machine using ABC: Small $166, Medium $1241, Large $746

• Question 109:

  A company is preparing its annual budget and is estimating the number of units of Product W that it will sell in each quarter of year 2. Past experience has shown that the trend for sales of the product is represented by the following relationship: Calculate the expected unit sales of Product W for each quarter of year 2, after adjusting for seasonal variations using the multiplicative model.

  

  A. The sales forecast for year 2 Quarter 4 = 35,100 units
  B. The sales forecast for year 2 Quarter 4 = 25,100 units
  C. The sales forecast for year 2 Quarter 4 = 22,600 units
  D. The sales forecast for year 2 Quarter 4 = 38,100 units
  A. The sales forecast for year 2 Quarter 4 = 35,100 units

• Question 110:

  A clinic offers two types of procedure, A and

  B.

  The clinic uses activity-based costing. The general facility overhead cost for next year is budgeted to be $8,601,600. The cost driver is the length of patient stay.

  Additional data:

  

  What is the general facility overhead cost for each Procedure B?

  A. $90
  B. $3,072
  C. $64
  D. $1,536
  B. $3,072