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 accountant is trying to determine the optimum production plan for the period using linear programming.
The accountant has correctly formulated the linear programming problem as follows:
Variables (products): x and y
Objective function: Maximise contribution, C = 10x + 15y
Material constraint: 4x + 6y 500 (kg)
Labour constraint: x + 2y 350 (hours)
Machine constraint: 10x + 4y 1,500 (hours)
x constraint: 50 x 200
y constraint: y 0
Which of the following statements is true?

A : selling price of y is $15.

B : maximum demand for product x is 50 units.

C : oduct x requires twice as much labour time as Product y.

D : oduct y requires 4 machine hours to manufacture.

Answer: D

Question 3

Which THREE of the following statements about different costing systems are correct?

A : ntribution per unit is the selling price per unit minus the variable costs per unit.

B : a period during which finished goods inventory levels fall, profit using marginal costing will be higher than if absorption costing is used.

C : en valuing inventory using throughput costing, the direct labour cost is excluded.

D : er-absorption of fixed production overhead is caused by actual sales exceeding budgeted sales.

E : nished goods inventory will be assigned a higher value using throughput costing than absorption costing.

Answer: A,B,C

Question 4

Christian the management accountant at a car manufacturer has been given a list of costs that have been incurred due to accidents and errors either occurring or being prevented.
Which of the following are examples of non-conformance costs? Select ALL that apply.

A : t of scrap

B : of goodwill

C : t of repairs to products

D : pection costs

E : t of repairs to equipment

Answer: A,B,C

Question 5

The standard production cost of making a product is as follows:

What is the fixed production overhead capacity variance?

A : $9,000F

B : $6,000F

C : $3,000F

D : $6,000A

Answer: B