Cima P2Advanced Management Accounting

What is Advanced Management Accounting?Advanced Management Accounting play a vital role in

managing business opportunities. They inform the strategy and help secure the future of your business.

CIMA Advanced Management Accounting redefine how business is done.

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How CIMA benefit your business

Analysis - Understanding the history behind numbers and use it to make business decisions

Strategy – Using the insight from analysis to help formulate business strategy to create wealth and shareholder value.

Risk - The application of analytical skills to observe business processes end end a pair identify and manage risks.

Planning – using accounting techniques to plan and budget. Communication – knowing what information management needs and explaining

the numbers to non-financial managers.

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Your All Study Problems SolutionsCIMA P2Advanced Management Accounting

Question & Answers

Question No 1:

An electronics company sells a range of tablet computers. Tablet computers come complete with an operating system that is regarded as the market leader. The company aims to launch a new version of its hardware every eighteen months and a major update to its software every three years. The latest version of the tablet computer is always sold at a higher price, but the older version that has been replaced is then sold for a time at a discounted price. Which pricing model does this company appear to be using?

A. Penetration and loss leader pricing B. Penetration and product bundling C. Skimming and loss leader pricing D. Skimming and product bundling

Answer: D

Question No 2:

K Supermarket spends $80,000 per year on checking and processing receipts of inventory. Annual warehouse costs are a further $70,000 per year. These costs are currently treated as fixed overheads in the company's costing system. As an experiment, the company is preparing a direct profitability analysis of a small range of products, including fresh grapes. K Supermarket receives a total of 3,600 deliveries every year. 20% of these deliveries are of perishable goods such as grapes. It takes twice as long to process a delivery of perishable goods compared to a normal delivery because perishable goods have to be checked more carefully. Half of the warehouse costs are for the chilled store that is used to store perishable goods. At any time, the chilled store has 800 kilos of perishable goods in stock. K Supermarket receives 150 deliveries of grapes every year. Each delivery is for 100 kilos of grapes. The grapes spend an average of two days in the chilled store before they are sold. Calculate the total cost per kilo of checking, processing and storing grapes that should be taken into account in determining the profitability of grapes. Give your answer to the nearest whole cent.

Answer: 61 cents

Question No 3:

A company is classifying its quality costs to prepare a quality cost report. Which of the following are conformance costs? Select ALL that apply.

A. Internal Failure Costs B. External Failure Costs C. Prevention Costs D. Appraisal Costs Answer: C, D

Question No 4:

A company has a maximum of $2 million to invest and has identified four viable projects, E, F, G and H. The initial investment for each of the projects is the maximum amount that can be invested in the project, but any amount up to the maximum can be invested. The projects are divisible. The projects have been evaluated using net present value, as below. All figures are $ millions.

A. Project E B. Project F C. Project G D. Project H Answer: B

In which project should the company invest $2 million?

Question No 5:

To which technique for dealing with risk and uncertainty do ALL of the following statements apply? • It requires that only one factor is considered at a time. • It identifies areas which are crucial to a project, which can then be monitored if the project is chosen. • It does not provide an indication of the likelihood of any change in the factors. • Following the calculation, it requires the exercising of judgement to decide whether to accept or reject a project.

A. Sensitivity analysis B. Probability analysis C. Scenario analysis D. Adjusting the discount rate to reflect risk.

Answer: A

Question No 6:

A company has a cost of capital of 12% and a maximum of $20 million to invest. It has identified three possible investment projects, none of which is divisible, as follows.

A. Project 1 only B. Project 2 only C. Project 3 only D. Projects 1 and 3 only Answer: D

Which project(s) should the company invest in?

Question No 7:

Place each method of analysing risk and uncertainty against the statement that describes it correctly.

Answer:

Question No 8:

Place each of the activities described below against the correct classification of quality costs.

Answer:

Question No 9:

Place each performance measure against the correct perspective of the Balanced Scorecard for a company that operates a chain of hotels.

Answer:

Question No 1:

The performance of an investment centre manager is assessed by return on investment (ROI) alone. At present, his expected ROI for next year is 15%. The manager must now decide whether to invest in a new project that is expected to yield an ROI of 14%. The cost of capital is 12%. Indicate whether each of the following statements is true or false.

Answer:

Question No 1:

Place the correct category of Value Chain activity against each of the activities described below.

Answer:

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Cima P2Advanced Management Accounting