Free CIPS L4M2 Practice Exam with Questions & Answers | Set: 3

Explanation

Benchmarking is 'the pursuit by organisations of enhanced performance by learning from the suc-cessful practices of others. Benchmarking is a continuous activity; key internal processes are adjusted, performance is monitored, new comparisons are made with the current best performers and further changes are explored. Where information about these key processes is obtained through a co-operative partnership with specific organisations (rather than via a third party such as an independently-maintained database), there is an expectation of mutual benefit over a period of time.

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Explanation

Traditional financial systems operate with a centralised database, usually with a single point of authority. Blockchain technology, on the other hand, allows for a distributed database that holds a growing number of records. Instead of existing in one place, the ledger is continually updated and synchronised across multiple computers in a network. Therefore, any participant in the network with the proper authorisation can view the entire ledger – without relying on an intermediary or any one authority.

Another key feature of blockchain technology is a “smart contract,” which is a self-executing protocol that enforces a previously agreed arrangement. For example, a smart contract could trigger an automatic refund under certain conditions or the automatic payment of an agreed commission after a sale. These smart contracts can eliminate delays in traditional Finance processes, while increasing transparency and reducing reliance on middlemen to follow through on their commitments. Moreover, like other parts of a blockchain, smart contracts are immutable, so they can enhance accuracy in the financial statements.

LO 2, AC 2.1

Explanation

The difference between the actual spend and budgeted spend is known as variance. The formula for variance is:

Variance = Actual spend - Budgeted spend

Variances can be adverse/unfavourable or favourable ie they can be positive or negative.

Be very careful with these terms. A positive or a negative variance may be favourable or it may be adverse/ unfavourable.

Adverse variances

Adverse variances are those variances that are unfavourable to the firm. Examples would be sales below plan; costs above budget, cash receipts lower than expected, and overtime payment more than forecast.

Favourable variances

Favourable variances are those variances that are beneficial to the business. Examples would be sales ahead of plan, costs below budget, and wages below forecast.

Positive variance

A positive variance occurs where 'actual' exceeds 'planned' or 'budgeted' value. Examples might be actual sales are ahead of the budget.

Negative variance

A negative variance occurs where 'actual' is less than 'planned' or 'budgeted' value. Examples would be when the raw materials cost less than expected, sales were less than predicted, and labour costs were below the budgeted figure.

When the operators create saving, it means that the Actual spend is less than Budgeted spend. Therefore the variance is negative.

Explanation

The quantity of aluminium Apple needs to buy is calculated as follows:

Quantity needed for production + the inventory needed at the end of the year - inventory at start of the year

That formula is quantified as: 200 + 54.8 - 27.4 = 227.4