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CIMA P2 - Advanced Management Accounting exam in just 24 HOURS!

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Question No 1: Which TWO of the following are examples of management information made possible by the availability of big data? A. B. C. D.

Customer profitability analysis to identify key strategic customers Customer information harvested from social media to target products Production cycle time analysis to improve production efficiency Real-time inventory management information shared with producers to influence their production plans E. A five-year history of a company's aged debtor list to assess the long-run effectiveness of credit control

Answer: B, D Question No 2: Company D is about to launch an innovative and unique product which may face direct competition within three years. The company needs to achieve a rapid payback on all investments because it has limited access to external finance. Which is the most appropriate pricing strategy for company D's new product, and for what reason? A. Market skimming because it exploits areas of the market which are sensitive to price. B. Penetration pricing because it can be used to rapidly build sales volume in mature markets. C. Market skimming because it enables high prices to be charged to buyers who want the product as soon as possible. D. Penetration pricing because it can be used to rapidly build sales volume in high growth markets.

Answer: C Question No 3: Performance measures that monitor the extent to which a not-for-profit organization's objectives have been achieved are measures of: A. B. C. D.

Economy Efficiency Effectiveness Enterprise


Answer: C Question No 4: An organization employs a dual pricing basis for the transfer of components between its divisions. This means that: A. Each division has a separate transfer price for a single transaction. B. The transfer price is based on marginal cost with a separate charge to allow for fixed costs. C. The transfer price is based on the cost of the product plus a mark-up for profit. D. The transfer price is based on the market price less a discount.

Answer: A Question No 5: For a complex and repetitive task, which of the following correctly describes a steep learning curve? A. Repeated training may be required but this will not necessarily result in a reduction in the time taken to complete the task. B. After the initial learning period there will be a rapid reduction in the time taken to complete the task. C. There will be a long period before there is a reduction in the time taken to complete the task. D. After the initial learning period there will be a slow reduction in the time taken to complete the task.

Answer: B Question No 6: A manufacturing company has recently introduced a Total Quality Management (TQM) system. The company has invested heavily in the education and training of its staff, in addition to implementing new product design engineering. There is a plan to sample units from each batch of products manufactured to test for errors, although this has not yet been implemented due to budget constraints. The company is experiencing high levels of customer complaints, with many faulty units being returned by the customer for refund or replacement. Sales revenue has fallen recently, mainly due to negative press coverage linked to dissatisfied customers. Select the statement MOST likely to apply.


A. The high level of external failure costs is the result of a lack of expenditure on prevention costs. B. The high level of internal failure costs is the result of a lack of expenditure on appraisal costs. C. The high level of external failure costs is the result of a lack of expenditure on appraisal costs. D. The high level of internal failure costs is the result of a lack of expenditure on prevention costs.

Answer: C Question No 7: A company is considering four mutually exclusive projects. There are three possible future demand conditions but the company has no idea of the probability of each of these demand conditions occurring. The forecast net present values (NPVs) of each of the four projects, under each of the three possible future demand conditions, are as follows. Which investment would be selected using the maximin criterion?

A. B. C. D.

Investment A Investment B Investment C Investment D

Answer: C


Question No 8: The following data are available for an investment centre for the latest period. Where appropriate the data have been adjusted to reflect economic values. What cost of capital has been used to calculate the EVA?

Give your answer to the nearest percentage.

Answer: 9 % Question No 9: A company has three divisions, each of which is an investment centre. The divisional managers' performance is assessed using return on investment (ROI). A higher ROI will result in a higher bonus for the divisional manager. The company's cost of capital is 15%. For the forthcoming year each divisional manager has one investment opportunity available as follows:

The manager(s) of which division(s) will proceed with their respective investment opportunity?


A. B. C. D.

Division 1 and Division 3 Division 2 and Division 3 Division 3 only Division 1 only

Answer: B Question No 10: A company makes three products, E, F and G. Total overheads for the year are expected to be $1.2 million, with the following split between cost pools: Cost driver information has been estimated as follows:

The company plans to make 10,000 units of product E in the year, with an expected direct cost of $0.60 per unit. This annual production of product E is expected to require 20 quality inspections, 28 purchase requisitions, and 400 kilogrammes of materials. What is the overhead cost per unit of product E? A. B. C. D.

$0.10 $0.70 $3.57 $4.17

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