Free CIMA P2 Practice Exam with Questions & Answers | Set: 5

A company manufactures and sells a range of products. Relevant data for one unit of a particular product are as follows.

The company is using target costing to ensure that it achieves a contribution of 40% of the market selling price.

In order to achieve the target cost, by how much does the company need to reduce the variable cost per unit?

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.

Product WB currently sells for $13 per unit. Annual demand at that price is 20,000 units. If the price increases to $15, the annual demand falls by 500 units.

What is the formula for the demand curve?

Beyond Budgeting is essentially an approach that places modern management practices within a cultural framework. Analyze the following statements:

1. The organization structure should have clear principles and boundaries.

2. Managers should be given a high degree of freedom to make decisions.

3. Frontline managers should be made responsible for relationships with customers.

4. Information system should be transparent and ethical.

Which of the above statements relate to Beyond Budgeting?

SkillWeave are an international clothing manufacturer known for their durable and high quality products. Recently their biggest market in the world's premier customs union has had some economic volatility. This has

resulted in the currency of this market being very unstable and difficult to predict in terms of whether it will retain, lose or gain relative value to domestic currency.

Which of the following is an effective risk reduction technique for SkillWeave's clothing sales to this region?

One of a company's products is sold to three customers: A, B and C. These customers do not buy anything else from the company. The product costs $20 per unit to manufacture and is sold to the customers for $50 per unit.

The following table shows data for sales and selling costs for the latest period.

Delivery costs of $32,000 and general overheads of $60,000 were incurred during the period.

Deliveries to customers A and B were made by a courier in batches of 100 units; the courier charged $300 for each batch delivered to customer A and $400 for each batch delivered to customer B. Deliveries to customer C were made by mail in batches of 10 units at a cost of $60 per batch.

Which of the following statements is correct?

An organization is considering purchasing a new machine which will cost $600,000. The new machine will generate cost savings of $200,000 each year for five years. The cost of capital is 12%.

The profitability index (PI) for the investment in the new machine is:

Give your answer to one decimal place.

A company produces a single product which is sold to one customer.

Components for the product are stored in a warehouse and when required for production they are inspected. Those passing the quality check are moved to the initial production line. Part-completed items are then inspected and those passing this second quality check are moved to the warehouse until required in the finishing process. After the finishing process the products are inspected, packaged and returned to the warehouse until required by the customer.

The company is considering implementing a full just-in-time (JIT) system for both purchasing and production and has asked your advice about the activities that will be necessary if this system is implemented.

Which THREE of the following activities will definitely be required in the proposed JIT system?

The following forecast data relate to the first three years of a five year project.

The project will require an initial investment of $30,000 in non-current assets.

All revenue will be received in the year it is earned and all operating costs will be paid in the year they are incurred. Tax will be paid in the following year.

Tax depreciation will be 25% per annum of the reducing balance.

The taxation rate will be 30% of taxable profits.

What is the forecast after tax cash flow for year 3 (to the nearest $10)?

A company expects to sell 3,600 units of Product A at a selling price of $750 per unit during the forthcoming year. The currently expected variable cost per unit is $860 per unit. The company requires a return of 15% during the forthcoming year on its investment of $2.4 million in Product A. Absorbed general overheads are expected to amount to $40 per unit.

What is the target cost for each unit of product A in the forthcoming year?