Free CIMA P1 Practice Exam with Questions & Answers | Set: 2

The standard output from a joint process is 4,000 litres of Product K, 6,000 litres of Product L and 3,000 litres of Product M.

The total cost of the joint process is $147,000.

The company is now deciding if it should further process Product L.

In the further processing decision the best way to apportion the joint costs to the products is:

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 marginal costing profit for the next month?

A company currently uses a rate of $32 per machine hour to absorb its total production overheads of $960,000.

Using this system the production overhead cost per unit of product X is $160.

An activity based costing exercise has revealed that only $345,000 of the production overhead is driven by machine hours. The remainder is driven by the number of machine set ups, at a rate of $9.60 per set up.

Product X requires 3 set ups per unit.

Calculate the total production overhead cost per unit of product X using an activity based costing system.

Give your answer to two decimal places.

Which of the following explain why standard costing is less appropriate in the contemporary business environment?

1. In a continuous improvement environment standard costing can restrict the impetus to remain as cost competitive as rivals.

2. Fixed overhead variances are less relevant as fixed costs represent a decreasing proportion of total manufacturing cost.

3. In a just-in-time environment there are fewer costs to control.

The manager of a recently opened cafe is deciding how many sandwiches to make each day.

The sandwiches are made in the morning before the cafe opens.

If demand exceeds the number of sandwiches made in the morning no extra sandwiches can be made during the day. Any unsold sandwiches are thrown away at the end of each day.

Daily demand is uncertain but is predicted to be 10, 20, 30 or 40 sandwiches.

The following regret matrix has been prepared:

If the minimax regret criterion is used to make the decision, the manager will choose to make:

Company LGF seeks to maximize profits and has a 'risk seeker' attitude when making decisions. The company has to choose between mutually exclusive projects. A range of possible profit outcomes has been estimated for each project along with their associated probabilities.

Company LGF would choose the project with the:

A company's product has the following standard selling price, variable costs and contribution:

Budgeted sales and production was 20,000 units and actual was 19,500 units.

Due to a market downturn the production and sales budget should have been 10% lower.

What is the operational sales volume contribution variance?

Company X is deciding which of Projects A, B or C to undertake. The profit earned from each of the projects is dependent on economic conditions.

The table below details the profit for each of the possible outcomes and the expected value of each of the projects.

What is the maximum amount that should be paid for perfect information about the economic conditions?

Two products being produced by a company require the same material which is limited to 2,600 kgs.

What is the optimal production plan?

A company is forecasting sales volume using time series analysis. The following equation has been derived from past data and is considered to be a reliable predictor of future sales volume:

y = 20,000+80x

Where y is the total sales units each quarter and x is the time period (the first quarter of year 1 is time period 1).

The following set of seasonal variations for each quarter has been calculated using the additive model.

What is the forecast sales units for the second quarter of year 3?