Free Access CIMA.P1.v2025-10-10.q95 Practice Test (Page 20)

Question 91

The term 'budgetary slack' refers to the:

A.Difference between budgeted capacity utilization and full capacity

B.Lead time between the preparation of the functional budgets and the approval of the master budget by senior management

C.Intentional over estimation of costs and/or under estimation of revenue in a budget

D.Difference between the budgeted output and the actual output

Question 92

FGH used to manufacture components that required raw material Q.
Currently there are 80 kg of material Q in inventory.
The company has no use for the material in the foreseeable future and intends to sell it for scrap.
A potential new customer has asked for a price for a large order.
This order would require 100 kg of material Q.
The company management has decided to quote a price for this work on a relevant cost basis.
Details of costs for material Q are as follows:

What would be the relevant cost of Material Q to use in this order?

A.$198

B.$46

C.$230

D.$110

Question 93

Which of the following, regarding costing methods, is true?

A.In traditional absorption costing, overheads are charged to a product by absorbing them at the cost driver rate for an activity based on their usage of the activity.

B.A company produces two products which undergo similar processes. The company has very low overhead costs. This company should consider activity based costing rather than traditional absorption costing to ensure that its pricing decisions are more accurate.

C.A company is making short term decisions based on the contribution per unit of its different products.
These decisions are based upon full absorption costing data.

D.A company which has introduced technology to reduce labour costs now incurs a greater proportion of non volume-related support activities. Activity based costing would be more appropriate than traditional absorption costing in this environment.

Question 94

Which of the following statements about total quality management are incorrect? Select ALL that apply.

A.The culture of an organisation should be to get things right the first time.

B.The organisation should rely on inspection to achieve quality standards.

C.Everyone within an organisation should be involved in improving quality.

D.All costs relating to quality should be examined, particularly those relating to failure costs.

E.There is an acceptable quality level that an organisation must try to achieve.

F.The costs of conformance are more important than the costs of non-conformance.

Question 95

Select the benefits to a company of using sensitivity analysis in investment appraisal.
(Select all the true statements.)

A.Sensitivity analysis enables a company to determine the effect of changes to variables on the planned outcome.

B.Sensitivity analysis enables identification of fixed costs that are of special significance.

C.Sensitivity analysis enables risk management strategies to be put in place to focus on those variables of special significance.

D.Sensitivity analysis enables a company to assess the risk associated with a project.

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Question 91

Question 92

Question 93

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