Free Access CIMA.CIMAPRO19-P01-1.v2022-02-10.q92 Practice Test (Page 19)

Question 86

Company NBO is providing a quote to manufacture 500 passenger seats for a bus company.
Relevant cost is being used as the basis for the quote.
Which THREE of the following should be included as relevant costs or savings in the production of the
500 passenger seats?

A.Electricity charges of $1,500 for the completion of the order.

B.Equipment depreciation of $2,000 for the time the passenger seats are in production.

C.Administration overheads of $3,200 apportioned on the basis of labour hours in production.

D.Seat cover material, to be bought for $6,000, which cannot be used on other products.

E.$750 paid for a consultant's advice on quoting for the order.

F.Idle time pay of $1,000 which would be paid to workers if the quote is not accepted

Question 87

A medium-sized manufacturing company, which operates in the electronics industry, has employed a firm of consultants to carry out a review of the company's planning and control systems. The company presently uses a traditional incremental budgeting system and the inventory management system is based on economic order quantities (EOQ) and reorder levels. The company's normal production patterns have changed significantly over the previous few years as a result of increasing demand for customized products. This has resulted in shorter production runs and difficulties with production and resource planning.
The consultants have recommended the implementation of activity based budgeting and a manufacturing resource planning system to improve planning and resource management.
Select ALL the benefits for the company that could occur following the introduction of an activity based budgeting system.

A.ABB systems present costs under functional headings i.e. the emphasis is on the nature of the cost.
The weakness of this approach is that it gives little indication of the link between the level of activity and the cost incurred.

B.Under an activity based budgeting system, resource allocation is linked to the strategic plan is prepared after considering alternative strategies. This approach ensures that new activities that are required to meet the company's strategic objectives are included in the budget.

C.The approach under an activity based system is to make arbitrary cuts in order to meet overall financial targets.

D.Activity based techniques including activity based budgeting focus on the outputs of a process rather than the input to the process. This approach provides a clear framework for understanding the link between costs and the level of activity. It allows the ranking of activities and the determination of how limited resources should be allocated across competing activities.

E.Activity based budgeting allows the identification of value added and non-value added activities and ensures that cuts are made to non-value added activities. ABB is also useful for review of capacity utilization.

F.Under an activity based budgeting system the focus is on existing resources and operations.
Adjustments are then made for changes in activity and price which results in past inefficiencies being perpetuated. Under a traditional budgeting system, only resources that are needed to perform activities required to meet the budgeted production and sales volumes are included.

Question 88

A master budget comprises which of the following?

A.The budgeted income statement and the budgeted statement of financial position only.

B.The budgeted income statement and the budgeted cash flow statement only.

C.The budgeted income statement and budgeted capital expenditure only.

D.The budgeted income statement, the budgeted statement of financial position and the budgeted cash flow statement only.

Question 89

Which of the following statements regarding marginal and absorption costing are true in the context of pricing decisions?
Select ALL that apply.

A.Absorption costing when used for pricing decisions includes the 'total-cost' of the product.

B.Absorption costing is more appropriate for use in one-off pricing decisions.

C.Marginal costing ensures the recovery of all costs incurred in selling prices.

D.Marginal costing is appropriate for long-term pricing decisions.

E.Marginal costing is appropriate for short-term pricing decisions.

F.Marginal costing is more appropriate for use in one-off pricing decisions.

Question 90

Changing to a just-in-time, from a traditional, manufacturing environment can affect cost accounting systems.
Which of the following statements is correct?

A.Larger volumes of inventory must be recorded

B.A greater number of individual supplier records must be maintained

C.Less frequent, larger deliveries from suppliers must be recorded

D.More frequent, smaller deliveries from suppliers must be recorded

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Question 86

Question 87

Question 88

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Question 90

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