CIMA CIMA-P1 Online Practice Questions and Exam Preparation

CIMA CIMA-P1 Online Questions & Answers

• Question 151:

  XY can choose from four mutually exclusive projects. The projects will each last for one year and their net cash inflows will be determined by market conditions. The forecast net cash inflows for each of the possible outcomes are shown below.

  

  If the company applies the maximax criterion the project chosen would be:

  A. Project A
  B. Project B
  C. Project C
  D. Project D
  B. Project B

• Question 152:

  The primary objective of Company A is to maximise profit. It is now deciding on the optimum production mix for the next period and has one limited production resource.

  The production mix decision should be based on:

  A. Sales price per unit
  B. Contribution per unit of limiting factor
  C. Profit per unit
  D. Contribution per unit
  B. Contribution per unit of limiting factor

• Question 153:

  CORRECT TEXT

  The following information is available about direct material T for the last period.

  

  A JIT purchasing system is in operation.

  Calculate the actual price paid per kg of material T.

  Give your answer to 2 decimal places.

  $2.80

• Question 154:

  A company produces trays of pre-prepared meals that are sold to restaurants and food retailers. Three varieties of meals are sold: economy, premium and deluxe.

  

  Discuss the benefits of flexible budgeting for planning and control purposes. Select all the true statements.

  A. A fixed budget will provide meaningful control information when actual activity differs from budget and variable costs are significant.
  B. If actual sales revenue is compared to a fixed budget it is possible to tell whether a favourable sales variance is due to an increase in units sold or an increase in sales price.
  C. If sales volumes were well above budget, adverse variable cost variances will probably be reported, against the fixed budget, since more variable costs have to be incurred to support the higher level of activity.
  D. Reporting against a fixed budget tells management nothing about the efficiency of operations.
  E. If a flexible budget is prepared then the budget variances calculated will provide a better indication of performance since actual results will be compared against an appropriate benchmark.
  F. The fixed budget however provides more insight into actual performance.
  C. If sales volumes were well above budget, adverse variable cost variances will probably be reported, against the fixed budget, since more variable costs have to be incurred to support the higher level of activity.
  D. Reporting against a fixed budget tells management nothing about the efficiency of operations.
  E. If a flexible budget is prepared then the budget variances calculated will provide a better indication of performance since actual results will be compared against an appropriate benchmark.

• Question 155:

  CH is a building supplies company that sells products to trade and private customers. Budget data for each of the six months to March are given below:

  

  80% of the value of credit sales is received in the month after sale, 10% two months after sale and 8% three months after sale. The balance is written off as a bad debt.

  75% of the value of credit purchases is paid in the month after purchase and the remaining 25% is paid two months after purchase.

  All other operating costs are paid in the month they are incurred.

  CH has placed an order for four new forklift trucks that will cost $25,000 each. The scheduled payment date is in February.

  The cash balance at 1 January is estimated to be $15,000. Prepare a cash budget for each of the THREE months of January, February and March.

  Select All the correct answers.

  A. The total receipts in January will be $245 000
  B. Total payments in March will be $323 000
  C. The total receipts in January will be $320 000
  D. The total payments in February will be $405 000
  B. Total payments in March will be $323 000
  C. The total receipts in January will be $320 000

• Question 156:

  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.

  How will a manufacturing resource planning system improve the planning of purchases and production for the company?

  Select ALL the correct answers.

  A. The traditional approach to determine material requirements is to monitor inventories constantly; whenever they fall to a predetermined level, a preset order is placed to replenish them. This traditional approach (involving re-order levels and economic order quantity calculations originates in the pre-computer era.
  B. A manufacturing resource planning approach to the management of all the company's manufacturing resources including inventory, labour and machine capacity.
  C. It seeks to ensure that resources are available just before they are needed by the next stage of production or dispatch. It also seeks to ensure that resources are delivered only when required so that raw material inventory is kept to a minimum.
  D. The technique will not enable managers to track orders through the manufacturing process and will not assist the purchasing and production control departments to move the right amount of material or sub-assemblies at the right time to the right place.
  E. The correct inventory management system relies on the assumption that there is constant demand. An MRP system begins with the setting of a master production schedule specifying both the timing and quantity demanded of each of the finished goods items and then works backwards to determine the resource requirements at each stage of the production process.
  F. It aims to generate an estimation of materials requirements after taking account of the number of employees quality and waste. The TQS model can be used within MRP provided that the major assumption in the TQS model of constant demand applies.
  A. The traditional approach to determine material requirements is to monitor inventories constantly; whenever they fall to a predetermined level, a preset order is placed to replenish them. This traditional approach (involving re-order levels and economic order quantity calculations originates in the pre-computer era.
  B. A manufacturing resource planning approach to the management of all the company's manufacturing resources including inventory, labour and machine capacity.
  C. It seeks to ensure that resources are available just before they are needed by the next stage of production or dispatch. It also seeks to ensure that resources are delivered only when required so that raw material inventory is kept to a minimum.
  E. The correct inventory management system relies on the assumption that there is constant demand. An MRP system begins with the setting of a master production schedule specifying both the timing and quantity demanded of each of the finished goods items and then works backwards to determine the resource requirements at each stage of the production process.

• Question 157:

  Which of the following statements about relevant costs is correct?

  A. Relevant costs will always be lower than the full costs used in external profit reporting.
  B. Relevant costs will always be higher than the full costs used in external profit reporting.
  C. Relevant costs may not be used in external profit reporting because they do not adhere to the accruals basis of accounting.
  D. Relevant costs must be used in external profit reporting so that reported profits follow the pattern of cash flow.
  C. Relevant costs may not be used in external profit reporting because they do not adhere to the accruals basis of accounting.

• Question 158:

  When using linear programming, which of the following correctly represents a resource constraint?

  A. Maximize: 12x + 15y
  B. 5x + 3y
  C. x + y = profit
  D. x
  B. 5x + 3y

• Question 159:

  TP makes wedding cakes that are sold to specialist retail outlets which decorate the cakes according to the customers' specific requirements. The standard cost per unit of its most popular cake is as follows:

  

  The general market prices at the time of purchase for Ingredient A and Ingredient B were $23 per kg and $20 per kg respectively.

  TP operates a JIT purchasing system for ingredients and a JIT production system; therefore, there was no inventory during the period.

  Prepare a statement which reconciles the flexed budget material cost and the actual material cost. Your statement should include the material price planning variances, and the operational variances including material price, material mix and

  material yield.

  What was the material price planning variance for ingredient A?

  A. The Material price planning variance ?Ingredient A was $73 000 F
  B. The Material price planning variance ?Ingredient A was $72 000 F
  C. The Material price planning variance ?Ingredient A was $71 000 F
  D. The Material price planning variance ?Ingredient A was $75 000 F
  B. The Material price planning variance ?Ingredient A was $72 000 F

• Question 160:

  A company manufactures two products and has two production constraints.

  When the graphical approach to linear programming is used, the axes of the graph will show:

  A. the two constraints restricting production
  B. the two objectives of the company
  C. the two products manufactured
  D. the contribution generated by the two products
  C. the two products manufactured