Free CIMA P1 Practice Exam with Questions & Answers | Set: 4

A budget that is continuously updated by adding a further accounting period (month or quarter) when the earliest accounting period has expired.

A budget that adjusts for changes in the volume of activity as they occur through the budget year.

A budget that uses the current year budget as the basis for the next year budget.

A budget which changes in response to uncontrollable events.

Actual output was higher than budgeted

Actual output was lower than budgeted

Actual expenditure was higher than budgeted

Actual expenditure was lower than budgeted

Contribution per unit is the selling price per unit minus the variable costs per unit.

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

When valuing inventory using throughput costing, the direct labour cost is excluded.

Over-absorption of fixed production overhead is caused by actual sales exceeding budgeted sales.

Finished goods inventory will be assigned a higher value using throughput costing than absorption costing.

An incremental; approach is not as easy and fast to implement than other forms of budgeting approaches e.g. zero based budgeting.

Public sector organizations tend to be fairly complex and in many cases outputs cannot be measured in monetary terms therefore the link between inputs and outputs is difficult to establish. An incremental approach can therefore provide a cost effective approach to budgeting.

Under an incremental approach to budgeting, existing operations and the current budgeted allowance for these existing activities are taken as the base level for preparing the budget.

The main advantage of incremental budgeting is that the cost of past activities becomes fixed and any inefficiencies or wastage is perpetuated.

The incremental approach means that budget holders in public sector organizations will be encouraged to use up this year’s budget will be as high as possible.

The incremental approach encourages managers in public sector organizations to look at the efficiency and effectiveness of activities undertaken.

There was more wastage in the process than standard and a greater proportion of the cheaper of the two materials was input than standard.

Both of the materials were purchased at a lower price than standard and the lower quality increased wastage.

Higher skilled labour resulted in less wastage from the process than standard and a lower proportion of the more expensive of the two materials was input than standard.

The actual wastage from the process was equal to standard and a greater proportion of the cheaper of the two materials was input than standard.

$15, 600 F

$17, 800 F

$55, 600 F

$32, 900 F

Environmental internal failure cost

Environmental appraisal cost

Environmental prevention cost

Environmental external failure cost

It assumes that the decision is repeated a very large number of times.

It draws management attention to the possibility of very high or very low outcomes.

It is the weighted average outcome based on the probability of each outcome.

It represents the distribution of possible outcomes by a single figure.