CIMA CIMA Certifications CIMAPRO19-P02-1 Questions & Answers

• Question 81:

  A positive net present value (NPV) has been calculated for a project to launch a new product. An additional calculation is required to identify the sensitivity of the NPV to changes in the forecast total sales volume. The present value of which of the following would be used in the calculation?

  A. Contribution

  B. Operating profit

  C. Fixed overheads

  D. Net profit

  Correct Answer: A

• Question 82:

  A company makes three products, E, F and G. Total overheads for the year are expected to be $1.2 million, with the following split between cost pools: Cost driver information has been estimated as follows:

  

  The company plans to make 10,000 units of product E in the year, with an expected direct cost of $0.60 per unit. This annual production of product E is expected to require 20 quality inspections, 28 purchase requisitions, and 400

  kilogrammes of materials.

  What is the overhead cost per unit of product E?

  A. $0.10

  B. $0.70

  C. $3.57

  D. $4.17

  Correct Answer: A

• Question 83:

  A manufacturing company has recently introduced a Total Quality Management (TQM) system. The company has invested heavily in the education and training of its staff, in addition to implementing new product design engineering. There is

  a plan to sample units from each batch of products manufactured to test for errors, although this has not yet been implemented due to budget constraints.

  The company is experiencing high levels of customer complaints, with many faulty units being returned by the customer for refund or replacement. Sales revenue has fallen recently, mainly due to negative press coverage linked to dissatisfied

  customers.

  Select the statement MOST likely to apply.

  A. The high level of external failure costs is the result of a lack of expenditure on prevention costs.

  B. The high level of internal failure costs is the result of a lack of expenditure on appraisal costs.

  C. The high level of external failure costs is the result of a lack of expenditure on appraisal costs.

  D. The high level of internal failure costs is the result of a lack of expenditure on prevention costs.

  Correct Answer: C

• Question 84:

  A company is deciding whether to invest in project A or project B. A decision tree has been prepared to illustrate the investment decision and its associated possible net present values (NPVs).

  

  Which of the following statements is correct?

  A. A risk neutral decision maker would select project B because it shows less variation of outcomes.

  B. Project A is more likely to reduce shareholder wealth than to increase it.

  C. Project A will generate a positive net present value of $1.3m.

  D. decision maker who is risk seeking would select project A.

  Correct Answer: D

• Question 85:

  In an organization's transfer pricing system the selling division and the purchasing division each record a different price for the same transaction. This is known as a:

  A. Dual pricing system.

  B. Two part tariff system.

  C. Full cost pricing system.

  D. Marginal cost plus pricing system.

  Correct Answer: A

• Question 86:

  The following data relate to an investment opportunity. The percentage reduction in the annual revenue that could occur before the project is no longer financially viable is: A. 15.9%

  

  B. 56.0%

  C. 28.6%

  D. 212.3%

  Correct Answer: A

• Question 87:

  $30.328 million is to be invested in a project that will yield annual net cash inflows of $8 million for 5 years.

  What is the project's internal rate of return (IRR)?

  Give your answer to the nearest whole percentage.

  A. 9 %, 10 %, 11 %

  Correct Answer: A

• Question 88:

  Which of the following factors would prevent a learning curve being observed for a task?

  A. The task has a significant automated element.

  B. The task is repetitive.

  C. The task has a significant manual element.

  D. There is a low rate of labor turnover of the staff carrying out the task.

  Correct Answer: A

• Question 89:

  Which basis of transfer pricing retains the full autonomy of divisional managers?

  A. Full cost-plus pricing

  B. Variable cost-plus pricing

  C. Negotiated pricing

  D. Market based pricing

  Correct Answer: C

• Question 90:

  A division of a company transfers all its output to other divisions in the same company. For this division, which of the following measures is NOT affected by the transfer price that the division uses?

  A. Operating profit

  B. Return on investment

  C. Cost of components purchased

  D. Sales revenue

  Correct Answer: C