CIMA CIMA Certifications CIMAPRO19-P02-1 Questions & Answers

• Question 121:

  One of a company's products is sold to three customers: A, B and C. These customers do not buy anything else from the company. The product costs $20 per unit to manufacture and is sold to the customers for $50 per unit. The following table shows data for sales and selling costs for the latest period.

  Delivery costs of $32,000 and general overheads of $60,000 were incurred during the period. Deliveries to customers A and B were made by a courier in batches of 100 units; the courier charged $300 for each batch delivered to customer A and $400 for each batch delivered to customer B. Deliveries to customer C were made by mail in batches of 10 units at a cost of $60 per batch.

  

  Which of the following statements is correct?

  A. Customers B and C have the same profit:sales ratio.

  B. Customer A has the highest sales revenue, the highest profit, and the highest profit:sales ratio

  C. Customer B has the lowest sales revenue, the lowest profit, and the lowest profit:sales ratio.

  D. Customer B has the highest profit:sales ratio.

  Correct Answer: D

• Question 122:

  Which of the following statements about modified internal rate of return (MIRR) and internal rate of return (IRR) is correct?

  A. MIRR uses a more realistic reinvestment assumption than IRR.

  B. MIRR favours projects with long payback periods whereas IRR does not.

  C. MIRR and IRR will always rank competing projects in the same order.

  D. A project's MIRR will always be higher than its IRR.

  Correct Answer: A

• Question 123:

  When considering a capital investment, relevant costs for decision making have which THREE of the following features?

  A. They are future costs.

  B. They are committed costs.

  C. They are incremental costs.

  D. They are unavoidable costs.

  E. They are cash flows.

  Correct Answer: ACE

• Question 124:

  An organization employs a dual pricing basis for the transfer of components between its divisions. This means that:

  A. each division has a separate transfer price for a single transaction.

  B. the transfer price is based on marginal cost with a separate charge to allow for fixed costs.

  C. the transfer price is based on the cost of the product plus a mark-up for profit.

  D. the transfer price is based on the market price less a discount.

  Correct Answer: A

• Question 125:

  The starting point for developing a balanced scorecard for an organization should be:

  A. the organization's vision and strategy

  B. the external market that the organization is operating in

  C. benchmarking the organization's current performance

  D. the organization's non-financial targets

  Correct Answer: A

• Question 126:

  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?

  A. Divisional autonomy

  B. A fair basis for divisional performance evaluation

  C. Motivation of divisional managers to produce and sell as much as possible

  D. Goal congruence

  Correct Answer: A

• Question 127:

  In an inflationary environment which is the correct way of calculating net present value (NPV)?

  A. Using nominal cash flows and a nominal discount rate.

  B. Forecasting the cash flows including the effect of inflation and then using a real discount rate.

  C. Using real cash flows and a nominal discount rate.

  D. Forecasting the cash flows excluding the effect of inflation and then using a nominal discount rate.

  Correct Answer: A

• Question 128:

  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?

  A. Dual transfer prices

  B. Two part tariff

  C. Cost-plus

  D. Variable cost plus opportunity cost

  Correct Answer: B

• Question 129:

  The following data are available for four projects with unequal lives.

  A 10% discount rate is appropriate for all four projects.

  

  Which project has the highest equivalent annual benefit?

  A. Project A

  B. Project B

  C. Project C

  D. Project D

  Correct Answer: B

• Question 130:

  An organization wishes to make its investment decisions on the basis of more than simply a financial appraisal. Which of the following will assist it to take into account both qualitative and quantitative factors?

  A. Cost Benefit Analysis

  B. Profitability Index

  C. Discounted Payback

  D. Modified Internal Rate of Return

  Correct Answer: A