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Free CIMA P1 Exam Questions and Answer
NEW QUESTION 70
A company has budgeted to produce 5,000 units of Product B per month. The opening and closing inventories of Product B for next month are budgeted to be 400 units and 900 units respectively. The budgeted selling price and variable production costs per unit for Product B are as follows:
Total budgeted fixed production overheads are $29,500 per month.
The company absorbs fixed production overheads on the basis of the budgeted number of units produced. The budgeted profit for Product B for next month, using absorption costing, is $20,700.
Prepare a marginal costing statement which shows the budgeted profit for Product B for next month.
What was the marginal costing profit for the next month?
- A. $17 750
- B. $18 750
- C. $17 890
- D. $18 600
Answer: A
NEW QUESTION 71
A small manufacturing company makes a single product. Direct labour costs and factory rent account for
80% and 15% of total cost respectively. Activity levels have not varied by more than 5% for a number of years and there is no evidence of operational inefficiency.
Which of the following is the most appropriate approach to budgeting for this company?
- A. Activity based budgeting (ABB)
- B. Rolling budgeting
- C. Zero based budgeting (ZBB)
- D. Incremental budgeting
Answer: D
NEW QUESTION 72
The performance of a production manager is assessed on efficient use of materials during the production process.
Actual data and data from the fixed budget for Month 4 are as follows:
What figures should be compared in order to assess the production manager's performance for Month
4?
- A. 15,500 kg and 14,000 kg
- B. 11,000 kg and 14,000 kg
- C. 16,500 kg and 16,000 kg
- D. 15,500 kg and 11,000 kg
Answer: D
NEW QUESTION 73
Two products being produced by a company require the same material which is limited to 2,600 kgs.
What is the optimal production plan?
- A. 500 units of S & 400 units of T
- B. 50 units of S & 400 units of T
- C. 400 units of S & 167 units of T
- D. 500 units of S & 100 units of T
Answer: D
NEW QUESTION 74
A company manufactures a range of products. It is deciding whether to make one of its products internally or to buy the product partially completed from an external source and complete the manufacture in-house. The table below gives details of the variable costs of the two alternatives. Fixed production costs will remain the same under both alternative.
What is the sensitivity of the decision to a change in the external purchase price?
Give your answer as a whole percentage.
Answer:
Explanation:
10%
NEW QUESTION 75
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. 5,170 litres
- B. 5,770 litres
- C. 6,230 litres
- D. 5,710 litres
Answer: B
NEW QUESTION 76
Which of the following managers is most likely to be responsible for an favourable labour efficiency variance?
- A. Production Manager
- B. Marketing Manager
- C. Purchasing Manager
- D. Human Resources Manager
Answer: A
NEW QUESTION 77
Which one of the following would NOT be included in a decision to close a division of an organization?
- A. Redundancy pay for employees of the division
- B. Head office overheads absorbed on the basis of the number of units produced
- C. Fixed costs directly attributable to the division
- D. Sale of unwanted non-current assets
Answer: B
NEW QUESTION 78
FGH used to manufacture components that required raw material Q.
Currently there are 80 kg of material Q in inventory.
The company has no use for the material in the foreseeable future and intends to sell it for scrap.
A potential new customer has asked for a price for a large order.
This order would require 100 kg of material Q.
The company management has decided to quote a price for this work on a relevant cost basis.
Details of costs for material Q are as follows:
What would be the relevant cost of Material Q to use in this order?
- A. $110
- B. $230
- C. $46
- D. $198
Answer: A
NEW QUESTION 79
Which of the following is a definition of a rolling budget?
- A. A budget which changes in response to uncontrollable events.
- B. A budget that adjusts for changes in the volume of activity as they occur through the budget year.
- C. A budget that uses the current year budget as the basis for the next year budget.
- D. A budget that is continuously updated by adding a further accounting period (month or quarter) when the earliest accounting period has expired.
Answer: D
NEW QUESTION 80
MBM is considering introducing a new product and has to decide if the sales price should be $80, $90,
$100 or $120.
There is a 30% chance that demand could be high, a 50% chance that demand will be at a medium level and a 20% chance that demand will be low.
A payoff table below shows the profits based on the sales price and the level of demand.
MBM has decided, using an expected value approach, that the sales price should be set at $80 as this gives the highest expected profit of $860,000.
A market research company has since approached MBM offering to provide perfect information on the demand level.
What is the maximum amount that should be paid for the perfect information?
Give your answer as a whole number (in '000s).
Answer:
Explanation:
$60000
NEW QUESTION 81
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:
Answer:
Explanation:
14 batches
NEW QUESTION 82
A company makes two products, product X with a contribution per unit of $10 and product Y with a contribution per unit of $4.
These products are sold in the mix 3:2 by volume and fixed costs are $38,000 per period.
The breakeven point for product Y, based on the expected sales mix is:
Answer:
Explanation:
2000 units per
period
NEW QUESTION 83
A project has five possible outcomes as follows:
The probability of a contribution of $68,000 is equal to the probability of a contribution of $75,000.
Fixed costs are $70,000.
What is the probability of the project making a profit?
Answer:
Explanation:
0.45
NEW QUESTION 84
A musical instrument manufacturing company is considering a new project that will require 1000 kg of wood. They have 700 kgs of wood in stock which was purchased last year for £4 per kg. The wood in stock can be sold back to the supplier for £5 per kg. The wood in stock will have to be replaced if it is used. The current purchase price of wood is £8 per kg.
Using this information, what is the relevant cost of wood for the manufacturers decision on this project?
- A. £8,000
- B. £11,500
- C. £5,600
- D. £5,000
Answer: A
NEW QUESTION 85
Product G has the following sales information:
If moving averages of annual sales over 3-year periods are calculated, what is the moving average at Year 3?
- A. 0
- B. 1
- C. 2
- D. 3
Answer: A
NEW QUESTION 86
Which THREE of the following are advantages of activity-based costing (ABC), in a multi-product environment, when compared with traditional absorption costing?
- A. ABC leads to better product pricing decisions.
- B. ABC results in increased unit profit for each product.
- C. ABC provides more accurate product costs in a complex business environment.
- D. ABC is cheaper to operate.
- E. ABC provides a better understanding of overhead costs.
Answer: A,C,E
NEW QUESTION 87
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