Try CIMA : P2 valid & accurate questions and answers

In order to support decision making, management accounting information categorizes costs in a variety of ways.
Responsibility accounting primarily distinguishes between costs on the basis that they are either:

• A. relevant or non-relevant costs
• B. sunk or opportunity costs
• C. controllable or uncontrollable costs
• D. fixed or variable costs

An organization uses a balanced scorecard approach to performance measurement, both at the corporate level and to assess the performance of each of its responsibility centre managers.
Which THREE of the following statements are valid in respect of the effect of this approach on the behavior of the responsibility centre managers?

• A. It encourages them to focus mainly on short-term financial measures.
• B. It provides them with a range of performance measures to discourage a tendency to focus on only one measure.
• C. It provides them with clear guidance as to how customer satisfaction problems should be solved.
• D. It encourages them to make decisions that are in line with corporate objectives.
• E. It encourages them to identify, and deal with, problems at an earlier stage.

Endure Co. makes 1,000 units ofX and 2,000 units of Y.
Costs for X: Material $4, labour $8, direct overhead $2, fixed cost $4.
Costs for Y: Material $9, labour $9, direct overhead $4, fixed cost $6.
Selling price for X and Y are S19 and $25 respectively. Another company can sell ready made product X and product Y's to Endure Co, this company sells X at $12 and Y at $21. Advise Endure Co. on what would be the most cost effective way to source products X and Y.

• A. Endure should buy X but produce Y themselves.
• B. Endure should produce both X and Y themselves.
• C. Endure should buy X and Yfrom the other supplier.
• D. Endure should buy Y but produce X themselves.

A project has a positive net present value (NPV) when discounted at a company's weighted average cost of capital (WACC). The project has also been evaluated using a range of other investment appraisal techniques.
It has now been recognized that the project is of much higher risk than the average risk of the company's existing portfolio of projects. It has therefore been decided that the discount rate to be used when evaluating this project should be the WACC adjusted for risk.
As the result of changing the discount rate as described, which of following statements are correct?
Select ALL that apply.

• A. The internal rate of return would remain unchanged.
• B. The net present value would increase.
• C. The accounting rate of return would decrease.
• D. The profitability index would remain unchanged.
• E. The net present value would decrease.
• F. The internal rate of return would decrease.

It is often claimed that a two-part transfer pricing system offers a number of advantages to organizations which use it.
Which of the following statements is NOT an advantage of using a two-part transfer pricing system?

• A. Transfers are made at the marginal cost of the supplying division and both divisions should be able to report profits from inter-divisional trading.
• B. It stimulates planning, communication and coordination amongst divisions.
• C. The receiving division is made aware of and charged for the full cost of obtaining intermediate products from other divisions.
• D. The agreed fixed fee simply compensates the supplying division for incurring the fixed costs associated with the item transferred.