Free CIMA CIMAPRO19-P01-1-ENG Exam Questions

Question 1

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 : der 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.

B : der 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.

C : tivity 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.

D : tivity 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 : approach under an Activity based Budgeting System is to make arbitrary cuts in order to meet overall financial targets.

Answer: A,B,C

Question 2

A company's budget for the next period shows that it would breakeven at sales revenue of $800,000 and fixed costs of $320,000.

The sales revenue needed to achieve a profit of $200,000 in the next period would be:

A : $1,950,000

B : $1,780,000

C : $1,400,000

D : $1,300,000

E : $1,390,000

Answer: D

Question 3

THS produces two products from different combinations of the same resources. Details of the products are shown below:

Identify, using graphical linear programming, the optimal production plan for products E and R to maximize THS's profit in the month.

A : solution (from the graph0 is to produce 675 units of E and 470 units of R.

B : solution (from the graph0 is to produce 495 units of E and 670 units of R.

C : solution (from the graph0 is to produce 475 units of E and 770 units of R.

D : solution (from the graph0 is to produce 375 units of E and 750 units of R.

E : solution (from the graph0 is to produce 375 units of E and 870 units of R.

F : solution (from the graph0 is to produce 495 units of E and 470 units of R.

Answer: D

Question 4

Information about a company's only two products is as follows:

The revenue from the products must be in the constant mix of 2U:3V. Budgeted monthly sales revenue is $110,000.
Fixed costs are $23,095 each month.
To the nearest $10, what is the budgeted monthly margin of safety in terms of sales revenue?

A : $35,500

B : $74,500

C : $12,140

D : $38,940

Answer: A

Question 5

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 difference between the profit calculation using marginal costing and the profit calculation using absorption costing?

A : $2870

B : $3010

C : $2950

D : $3610

E : $2750

Answer: C