Online Access Free CIMA.P1.v2022-03-02.q92 Practice Test (Page 9)

P1 Exam Question 36

N prepares budgets on an annual basis by using the budget from the previous year, and then adjusting it for growth and inflation.
This is an example of:

A.Zero based budgeting

B.A rolling budget

C.A flexed budget

D.An incremental budget

P1 Exam Question 37

A company produces trays of pre-prepared meals that are sold to restaurants and food retailers. Three varieties of meals are sold: economy, premium and deluxe.

Calculate, for the original budget, the budgeted fixed overhead costs, the budgeted variable overhead cost per tray and the budgeted total overheads costs.

A.The variable cost per tray = $0.75; The fixed cost = $ 490 000

B.The variable cost per tray = $0.45; The fixed cost = $ 320 000

C.The variable cost per tray = $0.65; The fixed cost = $ 550 000

D.The variable cost per tray = $0.85; The fixed cost = $ 530 000

P1 Exam Question 38

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

The optimal solution in 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.
What is the additional contribution that can be earned?

A.Thus the additional contribution that can be earned and therefore the penalty value at which WRX would decide not to supply the major customer order in full is $3, 825

B.Thus the additional contribution that can be earned and therefore the penalty value at which WRX would decide not to supply the major customer order in full is $4, 825

C.Thus the additional contribution that can be earned and therefore the penalty value at which WRX would decide not to supply the major customer order in full is $5, 825

D.Thus the additional contribution that can be earned and therefore the penalty value at which WRX would decide not to supply the major customer order in full is $4, 570

P1 Exam Question 39

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.
What are the benefits for the company that could occur following the introduction of an activity based budgeting system?
Select ALL the correct answers.

A.Under a traditional incremental budgeting system the focus is on existing resources and operations.
Adjustments are then made for changes in activity and price which results in past inefficiencies being perpetuated. Under an activity based budgeting system, only resources that are needed to perform activities required to meet the budgeted production and sales volumes are included.

B.The approach under an Activity based Budgeting System is to make arbitrary cuts in order to meet overall financial targets.

C.Under an activity based budgeting system, resource allocation is linked to the strategic plan and is prepared after considering alternative strategies. This approach ensures that new activities that are required to meet the company's strategic objectives are included in the budget.

D.Activity Based Budgeting Systems present costs under functional headings i.e. the emphasis is on the nature of the cost. The weakness if this approach is that it gives little indication of the link between the level of activity and the cost incurred.

E.Activity based techniques including activity based budgeting focus on the outputs of a process rather than the input to the process. This approach provides a clear framework for understanding the link between costs and the level of activity. It allows the ranking of activities and the determination of how limited resources should be allocated across competing activities.

P1 Exam Question 40

Company X is deciding which of Projects A, B or C to undertake. The profit earned from each of the projects is dependent on economic conditions.
The table below details the profit for each of the possible outcomes and the expected value of each of the projects.

What is the maximum amount that should be paid for perfect information about the economic conditions?

A.$57.50

B.$497

C.$442.50

D.$54.50

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P1 Exam Question 36

P1 Exam Question 37

P1 Exam Question 38

P1 Exam Question 39

P1 Exam Question 40

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