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CIMA P1 - Management Accounting

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Total 260 questions

The maximum availability of a material is 8,000 kg.

Product A requires 5 kg of this material and Product B requires 7 kg of this material which is in short supply.

The correct constraint to include for the material when formulating the linear programming problem is:

A.

5B + 7A ≤ 8,000

B.

5A + 7B ≤ 8,000

C.

5A + 7B = 8,000

D.

5B + 7A ≥ 8,000

JRL manufactures two products from different combinations of the same resources. Unit selling prices and unit cost details for each product are as follows:

* Refer to your answer in the previous question.

The optimal solution to the previous question shows that the shadow prices of skilled labour and direct material A are as follows:

Skilled labour $ Nil Direct Material A $11.70

Explain the relevance of these values to the management of JRL.

Select ALL the true statements.

A.

The shadow price equals the additional contribution that would be earned from one extra unit of a scarce resource.

B.

In a situation such as this, where a number of resources are scarce, the shadow price of any particular scarce resource will depend on whether or not the resource is not binding.

C.

The shadow price for skilled labour is NIL because although there is a shortage of skilled labour it does have a constraining effect on output of JR as other resources are more scarce.

D.

Since material A is one of the binding constraints, if the availability of material A could be increased by one unit, this would change the optimal plan.

E.

The decrease in contribution as a result of this change is the value of the shadow price of material A. The shadow price thus represents the maximum premium that should be paid for an additional unit of material A.

Company M is preparing its budgeted profit statement for the next year.

The initial budget for Product A is as follows with some changes proposed by the sales director to increase the quality of the product.

What would the budgeted profit of Product A be if the proposed changes are made?

Give your answer as a whole number.

JDM is considering whether to go ahead with the launch of a new product. Profit from the new product is dependent on the level of demand.

The following table shows the estimated profits and their respective probabilities at different levels of demand.

The company could still cancel the launch of the product but would incur a cost of $7,000.

What is the maximum amount that the company should pay for perfect information about demand for the product?

A.

$13,350

B.

$41,000

C.

$16,500

D.

$37,850

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

JRL manufactures two products from different combinations of the same resources. Unit selling prices and unit cost details for each product are as follows:

Identify, using graphical linear programming, the weekly production schedule for products J and L that will maximize the profits of JRL during the next four weeks.

A.

The solution from the graph is to produce 330 units of J and 280 units of L. (A simplex solution shows the true optimum to be 332.333 units of J and 283.333 units of L.)

B.

The solution from the graph is to produce 310 units of J and 280 units of L. (A simplex solution shows the true optimum to be 308.333 units of J and 283.333 units of L.)

C.

The solution from the graph is to produce 330 units of J and 290 units of L. (A simplex solution shows the true optimum to be 332.333 units of J and 293.333 units of L.)

D.

The solution from the graph is to produce 315 units of J and 290 units of L. (A simplex solution shows the true optimum to be 316.333 units of J and 293.333 units of L.)

E.

The solution from the graph is to produce 312 units of J and 295 units of L. (A simplex solution shows the true optimum to be 312.333 units of J and 294.999 units of L.)

F.

The solution from the graph is to produce 317 units of J and 270 units of L. (A simplex solution shows the true optimum to be 316.666 units of J and 269.666 units of L.)

Which of the following statements is true?

A.

Standard costing is best suited to a stable environment.

B.

Standard costing is focused on achieving zero defects.

C.

Standard costing is focused on delivering quality products to customers.

D.

Standard costing embraces the philosophy of continual improvement.

Company NBO is providing a quote to manufacture 500 passenger seats for a bus company.

Relevant cost is being used as the basis for the quote.

Which THREE of the following should be included as relevant costs or savings in the production of the 500 passenger seats?

A.

Equipment depreciation of $2,000 for the time the passenger seats are in production.

B.

Electricity charges of $1,500 for the completion of the order.

C.

Administration overheads of $3,200 apportioned on the basis of labour hours in production.

D.

Seat cover material, to be bought for $6,000, which cannot be used on other products.

E.

Idle time pay of $1,000 which would be paid to workers if the quote is not accepted

F.

$750 paid for a consultant's advice on quoting for the order.

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 manufacturing company has more units of finished goods inventory at the end of a period than at the beginning of the period.

Which of the following statements is true?

A.

Profit is higher and opening inventory valuation is higher using marginal costing than if throughput costing is used.

B.

Profit is higher and opening inventory valuation is lower using marginal costing than if throughput costing is used.

C.

Profit is higher and opening inventory valuation is lower using absorption costing than if marginal costing is used.

D.

Profit is lower and opening inventory valuation is higher using marginal costing than if throughput costing is used.