Study with CIMAPRO15-P01-X1-ENG most valid questions & verified answers

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CIMA P1 - Management Accounting Question Tutorial Sample Questions:

1. A company is preparing its annual budget and is estimating the number of units of Product W that it will sell in each quarter of year 2. Past experience has shown that the trend for sales of the product is represented by the following relationship:

Calculate the expected unit sales of Product W for each quarter of year 2, after adjusting for seasonal variations using the multiplicative model.

A) The sales forecast for year 2 Quarter 4 = 22,600 units
B) The sales forecast for year 2 Quarter 4 = 35,100 units
C) The sales forecast for year 2 Quarter 4 = 38,100 units
D) The sales forecast for year 2 Quarter 4 = 25,100 units

2. A company uses a standard costing system.
The company's sales budget for the latest period includes 1,500 units of a product with a selling price of $400 per unit.
The product has a budgeted contribution to sales ratio of 30%.
Actual sales for the period were 1,630 units at a selling price of $390 per unit.
The actual contribution to sales ratio was 28%.
The sales volume contribution variance for the product for the latest period is:

A) $32, 900 F
B) $15, 600 F
C) $17, 800 F
D) $55, 600 F

3. Explain the advantages of management participation in budget setting and the potential problems that may arise in the use of the resulting budget as a control mechanism.
Select all the correct answers.

A) The participation of managers in the budget setting process has several advantages. Managers are more likely to be motivated to achieve the target if they have participated in setting process has several advantages. managers are more likely to be motivated to achieve the target if they have participated in setting the target.
B) Participation in budget setting can cause problems; in particular, managers may attempt to negotiate budgets that they feel are easy to achieve which gives rise to "budget padding" or budgetary slack.
C) Another purpose of a budget is to set targets to motivate managers and optimize their performance.
D) A purposes of budgeting is to act as a control mechanism, with actual results being compared against budget.
E) Participation in budget setting can reduce the information asymmetry gap that can arise when targets are imposed by senior management. Imposed targets are likely to make managers feel demotivated and alienated and result in poor performance.
F) Managers will not 'empire build' because they don't believe that the size of their budget reflects their importance within the organization.

4.
Select the benefits to a company of using sensitivity analysis in investment appraisal.
(Select all the true statements.)

A) Sensitivity analysis enables risk management strategies to be put in place to focus on those variables of special significance.
B) Sensitivity analysis enables a company to assess the risk associated with a project.
C) Sensitivity analysis enables a company to determine the effect of changes to variables on the planned outcome.
D) Sensitivity analysis enables identification of fixed costs that are of special significance.

5. A decision maker that makes decisions using the minimax regret criterion would be classified as:

A) Risk seeking
B) Risk neutral
C) Risk averse
D) Risk spreading

Solutions: