P2 Practice Exam Questions with Answers Advanced Management Accounting Certification

Under the absorption costing system, which simply allocates our entire amount of production overheads based on machine hours, we have found that out of our 4 products, 2 are profitable, 1 breaks even and 1 is

making a loss.

Model D the most recent addition to the range is making a large loss after the price of a major component rose dramatically. Model A is only just breaking now too as costs have risen. The only two products making profit

are Models B and C. These two require the least about of machine hours so this makes sense.

However, the management have a few reservations. They cannot understand how B is so profitable. It requires several more stages of production than the other models and a whole day longer to be customised by an

expert.

Select the correct answer from the list below that can help to explain this situation.

The cash flows from a project are detailed in the table below.

To the nearest 1%, what is the project's internal rate of return?

TTR Ltd plans to purchase a new plant for $1,000m on the 1st of January 20X6. The annual sales expected from the production of this plant is S400m per year. The plant has an expected life of five years. The financial

accountant has computed the NPV of the project at $61.42m considering a discount rate of 10%.

The marketing director wants to know the percentage drop in revenue that the sales team can afford before the project becomes unviable. Which of the following indicates the percentage required by the marketing

director?

Using the Value Chain model for a manufacturing company, place the correct primary activity classification against each of the activities described.

A company has just launched a new product at a selling price that is designed to rapidly gain market share and to discourage other competitors from entering the market.

Which pricing strategy is the company using?

SDF is a newly-established production company that is experiencing high staff turnover in its factory. The production department is studying the manufacturing process and its associated learning curve.

Which of the following statements is correct?

The following cash flows are forecast for a potential investment project.

The cost of capital for the project is 12% per year and the company uses a straight line depreciation policy.

What is the modified internal rate of return (MIRR) of the project?

Give your answer to the nearest whole percentage.

Which of the following is a correct description of the key features of net present value?

Division A and Division B are divisions of the same group. Division A transfers all of its output to Division B.

Which THREE of these alternative transfer pricing bases will prevent any cost inefficiencies in Division A being passed on to Division B?

The management of a leisure company, who are risk averse, have just approved an investment in a new amusement park. The country in which the amusement park will be located has a warm and mostly dry climate throughout the year.

A number of specific risks related to this investment have been identified as follows.

(1) Losses of very small amounts of revenue due to poor weather.

(2) A significant financial liability may arise due to the injury of a member of the public.

(3) Loss of several days of revenue due to rides being unavailable because of poor maintenance routines.

(4) Income fraud as a consequence of the high levels of cash handled by employees.

Using the TARA framework, which is the most appropriate way of managing each of these risks?

In accordance with a just-in-time (JIT) philosophy, which of the following is regarded as a value added activity?

An organization wishes to make its investment decisions on the basis of more than simply a financial appraisal. Which of the following will assist it to take into account both qualitative and quantitative factors?

A company must decide today whether to proceed with a proposed project. If the project proceeds, the initial investment of $150,000 would be made in one year's time. The benefit of the project would be a perpetuity of $22,000 per year commencing one year after the investment is made. The company's cost of capital is 14% per year.

To the nearest $100, what is the net present value of the project?

A company has a maximum of $2 million to invest and has identified four viable projects, E, F, G and H.

The initial investment for each of the projects is the maximum amount that can be invested in the project, but any amount up to the maximum can be invested. The projects are divisible.

The projects have been evaluated using net present value, as below. All figures are $ millions.

In which project should the company invest $2 million?

Performance measures that monitor the extent to which a not-for-profit organization's objectives have been achieved are measures of:

Which of the following statements about learning curves is correct?

A company has a 31 December year end and pays corporation tax at a rate of 30%. Corporation tax is payable 12 months after the end of the year to which the cash flows relate. The company can claim tax allowable depreciation at a rate of 25% reducing balance. It pays $1 million for a machine on 31 December 20X4. The company's cost of capital is 10%.

What is the present value of the benefit of the first portion of tax allowable depreciation?

The starting point for developing a balanced scorecard for an organization should be:

Which of the following statements are correct with regard to responsibility centres?

Select ALL that apply.

Which TWO of the following are examples of management information made possible by the availability of big data?

A company is investing $150,000 in a project which will yield an annual cash inflow of $40,000 for eight years. The company's cost of capital is 10%.

To the nearest $100, what is the project's equivalent annual net present value?

When considering a capital investment, relevant costs for decision making have which THREE of the following features?

An organization wants to increase the use value that customers place on one of its products - a laptop computer.

Which of the following actions, taken to increase the value to the customer, would increase the product's use value?

Select ALL that apply.

Which TWO of the following statements are correct?

A project with a 6 year life generates a positive net present value of $1,100. The discount rate is 8%.

To the nearest $, the equivalent annual benefit is: