CIMA CIMA Certifications CIMAPRO19-P02-1 Questions & Answers

• Question 11:

  Company B, a video games developer, wants to use data to track the amount of traffic it receives on its social media pages. It specifically wants to find out the demographic it is most popular with on this platform, and how it can branch out to different demographics through further advertising. How best could the company use big data to expand its demographic reach? Select ALL that apply.

  A. Use other data detailing regional sales to target areas where the demographics in question form a large part of the population.

  B. Resolve to focus advertising on the demographics with which the company is popular so as to save money.

  C. Implement an aggressive marketing campaign targeted at the demographics in question.

  D. Use the data to create new products that would appeal more to the demographics with which the company is not popular.

  E. Create a blog appealing to the demographics in question with news about the company.

  Correct Answer: ABC

• Question 12:

  PorkyCo is a leading bread manufacturer in Toyland operating two functional divisions: pulled and roasted. PorkyCo uses IT systems in all of its functions, for example, accounting has one system, manufacturing has its system, warehousing has another and human resources is the latest to develop a dedicated system to manage training and development. The issue now is that when the CEO, Mr Button, needs information about two or more functions, he has to convene the department heads to get their reports and then study each in turn. As senior management accountant at PorkyCo, help free up Mr Button's time by suggesting the most efficient way of getting all the information he needs.

  A. Deploy ERP technology.

  B. Merge loaves and rolls into a single vertical.

  C. Move to a networked organisation.

  D. Create an intranet.

  E. Deploy an extranet.

  Correct Answer: A

• Question 13:

  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?

  A. Increase operating income by £7,000

  B. Decrease operating income by £7,000

  C. Decrease operating income by £12,000

  D. Increase operating income by £12,000

  Correct Answer: A

• Question 14:

  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?

  A. 4.05%

  B. 5.05%

  C. 4.5%

  D. 10%

  Correct Answer: A

• Question 15:

  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.

  A. ABC would show that only a small amount of our overheads are based on machine hours.

  B. ABC could have shown that some products are selling poorly and should be discontinued.

  C. ABC would show that if overheads are shared equally that model B would be less profitable.

  Correct Answer: A

• Question 16:

  Which of the following statements regarding multinational transfer pricing is INCORRECT?

  A. Transfer prices affect tax liabilities and royalties because of different laws in countries.

  B. If transfer prices are inflated, this will increase profits of buying division.

  C. Companies have incentives to set transfer price to increase revenues in low-tax countries.

  D. Companies have incentives to set transfer price to increase costs in high-tax countries.

  Correct Answer: B

• Question 17:

  A company is investing in a huge diversification project. The plan is to develop and sell a whole new product line that they have never sold before. They've already started a massive marketing campaign for this new product line and they are

  getting good feedback in their market research. They've had to use debt funding in order to finance the project, but they hope that the returns will be worth the investment and restructuring. If they are successful they will be a step ahead of all

  their competitors and offer something none of them can.

  What is the risk appetite of this company?

  A. Risk seeking

  B. Risk averse

  C. Risk neutral

  D. Impossible to say

  Correct Answer: A

• Question 18:

  A company uses activity based costing. The total production overheads of $16,050 for the next period are for set up costs of $6,450 and quality inspection costs of $9,600. The company produces two products, Product F and Product G. Details relating to the next period are as follows: A new customer has offered to purchase Product F for $28.00 per unit. The only costs incurred would be those shown above. What is the profit per unit of Product F that would be gained by accepting the offer? Give your answer to two decimal places.

  

  A. $3.90

  Correct Answer: A

• Question 19:

  A company currently absorbs production overheads based on labor hours. The overheads absorbed by the two products that are made, L and M, are $4 per unit and $10 per unit respectively. These were based on the budgeted overheads of

  $7,000 and budgeted labor hours of 1,750. The budgeted output was 500 units of each product.

  The company is investigating the use of activity based costing (ABC). Analysis has shown that the total production overheads of $7,000 are made up of $4,000 for set up costs and $3,000 for inspection costs. The cost driver for set up costs is

  the number of set ups and for inspection costs it is the number of inspections.

  The cost driver rate for set ups is $160 per set up. Product L would need 5 production runs. Both types of product would need 1 set up for each production run. Product L would need 2 inspections for each production run. Product M would

  need 1 inspection per production run.

  The products are made in the same department and use the same equipment and staff but they are produced separately.

  Which of the following statements are correct?

  Select ALL that apply.

  A. The current production overhead absorption rate is $4.00 per hour.

  B. The current production overhead absorption rate is $500 per hour.

  C. If ABC was used, set up costs per unit of Product L would be $1.60.

  D. If ABC was used, set up costs per unit of Product M would be $4.00.

  E. If ABC was used, inspection costs per unit of Product L would be $4.00.

  F. If ABC was used, inspection costs per unit of Product M would be $4.00.

  Correct Answer: ACF

• Question 20:

  How does beyond budgeting NOT help to resolve the weaknesses of traditional budgeting? Select ALL that apply.

  A. Managers are set goals and targets to achieve rather than abiding by strict budgets and variances.

  B. Managers have a much larger scope of business goals that when achieved, will increase shareholder value.

  C. Managers are given more freedom and control over their business units under Beyond budgeting.

  D. Managers focus on keeping costs low in the short term to ensure maximised profits.

  E. Managers are given incentives to meet or undercut budgets.

  F. Managers are encouraged to designate responsibility to others to lessen their workload so they may concentrate on important tasks.

  Correct Answer: DEF