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CIMA P1 - Management Accounting

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Total 260 questions

A company manufactures a single product. The cost card for a unit of this product is as follows:

During month 6, finished goods inventory increased by 350 units.

By how much would the profit differ in month 6 if finished goods inventory was valued at standard marginal cost rather than standard absorption cost?

A.

$1,050 lower

B.

$1,050 higher

C.

$2,450 lower

D.

$2,450 higher

A company currently uses a rate of $32 per machine hour to absorb its total production overheads of $960,000.

Using this system the production overhead cost per unit of product X is $160.

An activity based costing exercise has revealed that only $345,000 of the production overhead is driven by machine hours. The remainder is driven by the number of machine set ups, at a rate of $9.60 per set up.

Product X requires 3 set ups per unit.

Calculate the total production overhead cost per unit of product X using an activity based costing system.

Give your answer to two decimal places.

GH manufactures a product using skilled labour and high quality materials. The company operates a standard costing system and a just-in-time (JIT) purchasing and production system. The standard selling price and variable costs for one unit of the product are as follows:

Prepare a statement that reconciles the budgeted contribution with the actual contribution for October. Your statement should show the variances in as much detail as possible.

What was the actual contribution for October?

A.

$ 1,324,000

B.

$ 1,414,000

C.

$ 1,594,000

D.

$ 1,494,000

E.

$ 1,198,000

Which TWO of the following statements are true for obtaining a reliable forecast from a time series?

A.

There must be an increasing trend.

B.

The past trend must continue in the future.

C.

The past pattern of seasonal variations must continue in the future.

D.

Extrapolation of the trend must be avoided.

E.

There must be a decreasing trend.

‘A zero-based budgeting system involves establishing decision packages that are then ranked in order of their relative importance in meeting the organization’s objectives’. 

Which of the following is true regarding he difficulties that a not-for-profit organization may experience when trying to rank decision packages.

Select ALL true statements.

A.

The activities that are being proposed in a budget are described in variable packages. There will often be more less than one decision package proposed for an activity.

B.

The activities that are being proposed in a budget are described in decision packages. There will often be more than one decision package proposed for an activity.

C.

Some of these packages will be inclusive and will require operations to select the best solution to the issue involved.

D.

Some of these packages will be mutually inclusive and will require management to select the best solution to the issue involved.

E.

Each decision package is evaluated. Its costs are compared to its benefits and net present values or other measures calculated.

F.

Management may decide to reject packages even though the activity was done last year. In this way the organization is said to be starting from a zero base with each package given due consideration.

G.

Management may decide to accept packages even though the activity was done last year. In this way the organization is said to be starting from a 100% cost base with each package given due consideration.

A bakery manager is deciding how many batches of birthday cakes to decorate each day.

Demand for the birthday cakes varies from 12 to 15 batches per day. Each batch decorated and sold earns a contribution of $40 but each batch unsold leads to loss of contribution of $15.

The payoff table below shows the total $ contribution from each of the possibilities:

Based on expected values, the number of batches of birthday cakes the bakery manager should decorate each day is:

Each finished unit of product G contains 2 litres of ingredient L. Losses during production are 10% of input of ingredient L. Budgeted data for next period are as follows:

The budgeted purchases of ingredient L for next period are:

A.

5,770 litres

B.

6,230 litres

C.

5,710 litres

D.

5,170 litres

Which of the following would help to explain a favourable material price variance?

A.

A decision to reduce the raw materials inventory during the period led to a reduced level of material purchases.

B.

An increase in the quantity of material purchased resulted in unexpected bulk discounts.

C.

The material purchased was of a higher quality than standard.

D.

Improved processing methods meant that material purchases were lower than standard for the output achieved.

Explain why sensitivity analysis is useful when dealing with uncertainty in project

appraisal.

Select all the true statements.

A.

Sensitivity analysis enables a company to determine the effect of changes to fixed costs on the planned outcome

B.

Sensitivity analysis enables a company to determine the effect of changes to variables on the planned outcome

C.

In project appraisal, an analysis can be made if all the key variables to ascertain by how much variable would need to change before the net present value (NPV) reaches zero i.e. the indifference point.

D.

In project appraisal, in analysis can be made of all the key variables to ascertain by how much each variable would need to change before the net present value (NPV) reaches 100% i.e. the maximum point.

XY manufactures a range of products and uses an activity based costing system.

Budgeted production of Product B is 7,500 units.

Overheads have been identified by activity and related to appropriate cost drivers.

Product B is produced in batches of 250 units. Machines have to be reset after every batch and quality inspections are carried out on every third batch.

What is the total overhead cost per unit of Product B?

Give your answer to two decimal places.