Cima P1 Practice Questions

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Sample Questions

Question No 1: In short-term decision making, which TWO of the following are relevant costs?

A. B. C. D. E.

Sunk costs Avoidable costs Committed costs Opportunity costs Notional costs

Answer: B, D Question No 2: Which of the following are examples of feedforward control? Select ALL that apply.

F. Labour costs for individual jobs are forecast. The forecasts are used as the basis to determine the correct selling price to be quoted to the customer.

G. The sales volume for the next quarter is forecast and compared with the planned volume. If there is a forecast shortfall action is taken to correct the difference.

H. A target is set for the cash balance at the period end. The balance shown in the cash forecast is compared with the target and action is taken to ensure that the target balance is achieved.

I. Actual inventory volumes are compared with planned volumes and control action is taken to correct any differences.

Answer: B, C Question No 3: Since there is no likelihood of them receiving a pay rise in the foreseeable future, your colleagues are considering leaving their current employment and starting their own business.

When preparing the data to evaluate their decision, their current salaries would be: J. K. L. M.

Incremental costs Opportunity costs Sunk costs Past costs

Answer: B

Question No 4: A company develops computer software programs to meet each client's specific requirements. The management accountant is considering introducing a standard costing system. Which THREE of the following are reasons that support the case for the company's introduction of a standard costing system?

A. It will enable the company to make a direct comparison of costs for each program developed.

B. It will enable the company to better focus on the quality of its service.

C. It will provide a system of control.

D. It will aid the budget setting process.

E. It will simplify the work-in-progress valuation.

Answer: C, D, E Question No 5: 8fb9be1c-b0d5-4acb-8cfb-f4b4426e641B. The primary objective of Company A is to maximise profit. It is now deciding on the optimum production mix for the next period and has one limited production resource.

The production mix decision should be based on:

Answer: B Question No 6: A company is bidding to win a special contract. Which of the following is NOT a relevant cost to the company of undertaking the contract?

F. G. H. I.

The purchase cost of direct materials not currently in inventory.

The cost of hiring a machine which will be hired if the contract is won.

The cost of a training course for staff which will be undertaken if the contract is won.

The depreciation charge on the tools which will be used during the contract.

Answer: D

Question No 7: Which of the following managers is most likely to be responsible for an favourable labour efficiency variance?

A. B. C. D.

Production Manager Purchasing Manager Human Resources Manager Marketing Manager

Answer: A Question No 8: Which of the following distinguishes risk from uncertainty?

E. Risk can be quantified whereas uncertaint y cannot.

F. Risk can have both upside and downside whereas uncertaint y is always downside.

G. Risk should be taken into account in decision making whereas uncertaint y should not.

H. Risk is relevant to financial decisions whereas

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