Free CIMA CIMAPRA19-P03-1-ENG Exam Questions

Question 1

M, a manufacturing company, has had some problems with defects in one of the main productsitproduces. This product has been made by the company for many years and is very profitable. Last monthithad over 300 defects reported by customers which is more than 15% of products sold. This is a reputation risk for M and is also affecting profitability
Which of the following controls could M introduce to reduce defects and also increase profitability?

A : could increase the number of quality control staff.

B : could introduce a procedure where quality control staff sign a form at the end of each dayto say they have examined 1 in 10 products for defects and they are satisfied with the quality.

C : production director could examine one in every 10 products and sign a form to say they are satisfactory.

D : could service machinery at least once a month as recommended by the machinery supplier.

E : could check all employees qualifications to ensure they are qualified for their jobs.

Answer: A,B,D

Question 2

Company M has lost 25% of its revenue in the last three months due to bad debts. One of thereceivables written offwasfroma long standing customer and the other three werefromnew customers. The management accountant has warned the sales team that the company cannot survive any more substantial bad debts.
Which of the following internal controls should be put in place to try and prevent further bad debts?

A : credit check should be carried out on each new customer.

B : edit limits should be set for all customers. However, if the credit limit will cost a sale then sales staff can override this limit.

C : o sales staff must authorise new customers and sign a form stating that they have done so.

D : aged analysis of customer balances must be reviewed every month.

E : soon as a customer payment is overdue they should not be allowed to purchase more until their balance has been reduced

Answer: A,D

Question 3

An electricity company owns and operates a nuclear power station located ten miles from a large city. A recent and very extensive engineering examination of the power station concludes with the estimate that the probability of a major nuclear disaster within the next 20 years is 0.2%.
Which of the following best explains the relevance of quantifying the risk in that way?

A : ere is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.

B : probability is so low as to be ignored.

C : directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.

D : The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.

Answer: A

Question 4

TRF is conducting a post completion audit on an investment in a pollution control machine that has reached the end of its five year useful life.
TRF could have been heavily fined if the machine had failed to keep pace with the output of emissions, measured in units. TRF's cost of capital is 10%. When the machine was purchased, there was a choice of three machines on the market:
TRF purchased the Big machine, but annual requirements only exceeded 600,000once, in year 3, when 720,000 units of emissions were emitted.
Calculate the amount that the post completion audit showsTRF overpaid for the ownership costs associated with this machine.
Give your answer to the nearest whole $ (in $'000s).

A :

Answer: A

Question 5

GHY is a listed company. Tom isGHY'sCEO and Peter isitsnon-executive Chair of the Board. Tom and Peterbothhave substantial relevant business and industrial experience andboth are believed to have considerable integrity. Tom and Peter quickly developed a good working relationship after Peter's appointment. They have become close friends.
Tom briefs Peter on every aspect of the business. Tom and Peter jointlyagreethe agenda foreveryboard meetingandboth agree on the manner in which matterswill be presented to theboard.
Taking account of the principles of goodcorporategovernance, which of the following statements is correct?

A : is entirely appropriate that Tom and Peter have this kind of relationship and both are acting in the best interests of the company

B : n-contentious board meetings show how well Tom and Peter are running the company and shows that the management is cohesive.

C : relationship between Peter and Tom may have a detrimental effect on company decision making as the Boardis not always being informed about matters in an unbiased manner.

D : nce the non-executive chair clearly has a significant role within this company there is little danger that any individual will become excessively dominant.

Answer: C