P1 Practice Exam Questions with Answers Management Accounting Certification

A company is basing its budget on predicted sales of one of its products. They have tasked you with forecasting the sales in year 2. The company has found that a fairly accurate prediction can be found when the trend

is calculated like so:

a = 10,000

b = 2,000

The sales of year 1 were affected by seasonal variation and were as follows:

Q1:12,500

Q2:14,200

Q3:15,400

Q4:19,650

You use a multiplicative model and round percentages to the nearest whole percent.

Select ALL the correct quarterly forecasts of year 2 from the list.

Calculate the sensitivity of the investment decision to a change in the annual fixed costs.

By how much should the present value of the fixed cost increase, before this project is not viable?

For the past year a manufacturing company has recorded the number of units produced (x) each week and the total production cost (y) for that week. The company intends to use this data to predict future costs.

For the circumstance described above, linear regression is more useful and accurate than the high-low method because:

1. It uses all the sets of data observed to calculate the line of best fit.

2. The coefficient of variation can estimate what percentage of x is due to a change in y.

3. Forecasts remain valid for values for x outside of the observed range.

Which of the above statements are true?

A company has a budgeted contribution to sales (C/S) ratio of 30% and a budgeted operating profit margin of 20%. Budgeted sales were $100,000.

In month 2, actual production and sales volumes and all costs were as budgeted. The actual C/S ratio was 33% .

Which of the following statements, about the company's contribution and operating profit in month 2, is correct?

A company's initial budget for month 3 includes sales of $100,000, a contribution to sales (C/S) ratio of 40% and fixed costs of $20,000.

If the budgeted sales volume in month 3 is reduced by 5% but contribution per unit, total fixed costs and sales mix are unchanged, which of the following statements, about the change to the budgeted profit or contribution in month 3 is true?

Company X is deciding which of Projects A, B or C to undertake. The profit earned from each of the projects is dependent on economic conditions.

The table below details the profit for each of the possible outcomes and the expected value of each of the projects.

What is the maximum amount that should be paid for perfect information about the economic conditions?

Traditional absorption costing is more suitable than activity-based costing when:

A company is considering whether to launch a new product. The selling price and costs for each unit of the product are shown in table below:

The fixed overhead cost is based on expected production of 2,000 units.

The company will only launch the product if it is expected to be profitable.

To which of the following is the decision to launch the product most sensitive?

The performance of a production manager is assessed on efficient use of materials during the production process.

Actual data and data from the fixed budget for Month 4 are as follows:

What figures should be compared in order to assess the production manager's performance for Month 4?

A company manufactures a single product. The company absorbs fixed production overhead using a pre-determined rate per unit.

The following data applies for month 7:

During month 7 fixed production overhead was over absorbed by $40,000.

What was the actual number of units produced during month 7?

A company reports planning and operational variances to its managers. The following data are available concerning the price of direct material M in the last period. Material M is the only material used by the company. The company operates a just-in-time (JIT) purchasing system.

Which TWO of the following statements about last period are definitely correct based on this information?

The direct material price operational variance was adverse.

Information about a company's only two products is as follows:

The revenue from the products must be in the constant mix of 2U:3V. Budgeted monthly sales revenue is $110,000.

Fixed costs are $23,095 each month.

To the nearest $10, what is the budgeted monthly margin of safety in terms of sales revenue?

Which one of the following would NOT be included in a decision to close a division of an organization?

A company is considering the use of Material V in a special order.

The material is used regularly and a sufficient quantity of the material is in inventory.

It could also be sold, at just below the current market price, to a local competitor.

What is the relevant cost of Material V to be used in the special contract?

For a company that does not have any production resource limitations, what would be the correct sequence for budget preparation?

Your company operates using TQM. As the accountant you have been tasked with producing a quality report so that management can understand how well their new range of products is being received and how the

quality of the products has improved. In order to produce the report you have requested information from different departments, but you soon realise not all the information is relevant. You have information regarding the

following:

Cost of downtime Training costs Environmental costs Customer returns and refunds Number of defects per unit

Which pieces of information are relevant to your report? Select ALL that apply.

Explain why sensitivity analysis is useful when dealing with uncertainty in project

appraisal.

Select all the true statements.

You are a management accounting working for a car manufacturer. The company is publicly listed and has been around for many years.

The company produces 2 products. Car 1 and Car 2. Car 1 sells for £20,000 and Car 2 for £27,000.

Car 1 can be upgraded post production to the 1ZC model for £5,000 and Car 2 to the 2ZC model for £3,500.

Post production upgrade the 1ZC sells for £25,500 and the 2ZCfor £30,000.

The company sources all of its supplies for the same supplier and has access to a large workforce. As a result there are no bottlenecks or limiting factors to production.

Based on the information above the company should...

The following information is available regarding a company's two products for last period.

What is the favourable sales quantity profit variance for last period?

Give your answer to the nearest whole $.

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.

What are the benefits for the company that could occur following the introduction of an activity based budgeting system?

Select ALL the correct answers.

When a moving average is plotted onto a graph, where should the plotted points be located?

Since there is no likelihood of them receiving a pay rise in the foreseeable future, your colleagues are considering leaving their current employment and starting their own business.

When preparing the data to evaluate their decision, their current salaries would be:

XY can choose from four mutually exclusive projects. The projects will each last for one year and their net cash inflows will be determined by market conditions. The forecast net cash inflows for each of the possible outcomes are shown below.

If the company applies the maximax criterion the project chosen would be:

Company Y absorbs fixed production overheads using a rate per machine hour. Budgeted and actual data for month 8 are as follows:

What is the fixed production overhead efficiency variance?

JRL manufactures two products from different combinations of the same resources. Unit selling prices and unit cost details for each product are as follows:

Identify, using graphical linear programming, the weekly production schedule for products J and L that will maximize the profits of JRL during the next four weeks.

MBB is considering the costs to be incurred in respect of a special order.

The order would require 625 kg of Material K.

This is a material that is readily available and regularly used by the organization in its other products.

There are 265 kg of Material K in inventory which cost $1,590 when it was purchased.

The current market price is $6.48 per kg.

Material K is normally used to make Product X. Each unit of Material X requires 3 kg of Material K, and if Material K is costed at $6 per kg, each unit of Product X yields a contribution of $30.

The relevant cost of Material K to be included in the costing of the special order is:

Explain THREE benefits that organizations gain from using budgetary planning and control systems.

Select ALL the true statements.

A flexible budget is a budget that is:

Find the weighted average contribution per unit using the following information:

Your company want to know how many units they'd have to sell this season to break even. However, you have some reservations over whether or not breakeven analysis is suitable for the company.

Which of these assumptions over product range limit the accuracy of break even analysis? Select ALL that apply.

The term ‘budgetary slack’ refers to the:

A company makes and sells three products A, B and C. The products are sold in the ratio of A:B:C = 1:1:4.

Monthly fixed costs are $150,000. Product details are shown below:

What sales value of product C is required to achieve a target profit of $72,000 next month?

Give your answer to the nearest whole $ (in '000s).

The daily demand for a perishable product has the following probability distribution:

Each unit of the product costs $6 and is sold for $10.

Unsold items are thrown away at the end of the day.

Orders must be placed each morning before the daily demand is known.

The payoff table below shows the profit that would be earned for each of the combinations of purchases and demand.

The number of units that should be purchased at the beginning of each day in order to maximize expected profit is: