CIMA P2 Exam Questions Free Practice Test

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Questions # 11:

Which TWO of the following statements are correct?

Options:

It is worthwhile for a company to sell further units when the marginal revenue is greater than the marginal cost.

Price is the only factor affecting the demand for products and services.

Premium pricing is possible when there is a measure of product or service differentiation.

Loss leadership pricing is appropriate for a new product which is not part of a range of products.

Demand functions can be predicted accurately and the relationship between price and quantity demanded is always constant.

Expert Solution

Questions # 12:

The following data are available for a division for the latest period.

Question # 12

What is the division's residual income for the period?

Options:

12.50%

31.25%

$36,000

$3,000

Expert Solution

Questions # 13:

Company S has two divisions, X and Y. Division X transfers 50,000 component units to Division Y each quarter. The market price of the component is $20. Division X's variable cost is $10 per unit and its fixed cost is $150,000 each quarter.

What price would be credited to Division X for each component that it transfers to Division Y under:

two-part tariff pricing (where the two divisions have agreed that the fixed fee will be $100,000); and dual pricing (based on market price and marginal cost).

Options:

Two-part tariff pricing = $10

Dual pricing = $22

Two-part tariff pricing = $12

Dual pricing = $18

Two-part tariff pricing = $10

Dual pricing = $20

Two-part tariff pricing = $13

Dual pricing = $22

Expert Solution

Questions # 14:

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

Options:

They are future costs.

They are committed costs.

They are incremental costs.

They are unavoidable costs.

They are cash flows.

Expert Solution

Questions # 15:

A company wishes to appraise a potential project. One of the project's relevant cash flows is the receipt, expressed in money terms, of $20,000 per year for the first 5 years.

The company's real cost of capital is 5% per year and the expected rate of inflation is 3% per year.

What is the real value of the expected receipt in year 2?

Give your answer to the nearest $10.

Expert Solution

Questions # 16:

One aspect of life cycle costing is the recognition of the fact that during the design or development stage a large proportion of many products' life cycle costs are:

Options:

determined

wasted

under absorbed

amortised

Expert Solution

Questions # 17:

A project is viable because it has a positive net present value (NPV).

Details of four of the input variables, together with the sensitivity of the viability of the project to a change in each one in isolation, are given below.

Question # 17

Which of the following statements is correct?

Options:

A 1% change in the initial investment will result in a change of 3% in the NPV.

The resale value at the end of the project is the most sensitive of the four variables.

If the incremental annual cash contributions reduce by more than 8% then the project will no longer be viable.

If the rate of taxation on profits increases to 40% then the project will no longer be viable.

Expert Solution

Questions # 18:

Which of the following statements is correct in respect of the key feature of dual pricing?

Options:

The selling price recorded by the selling division is higher than the cost recorded by the receiving division.

Internal customers are offered trade discounts depending on the number of units they purchase.

Internal transfers are priced at marginal cost and a lump sum payment is made subsequently to contribute to fixed costs.

Internal customers are charged a lower price than external customers to reflect savings in distribution costs.

Expert Solution

Questions # 19:

A goal congruent transfer price will always:

Options:

motivate divisional managers by maximising divisional autonomy.

align the decision making of divisional managers with the objectives of the organization as a whole.

align the decision making of divisional managers with the maximization of divisional profit.

ensure that profits are shared equally between the supplying and receiving divisions.

Expert Solution

Questions # 20:

An organization uses a balanced scorecard approach to performance measurement, both at the corporate level and to assess the performance of each of its responsibility centre managers.

Which THREE of the following statements are valid in respect of the effect of this approach on the behavior of the responsibility centre managers?

Options:

It encourages them to focus mainly on short-term financial measures.

It provides them with a range of performance measures to discourage a tendency to focus on only one measure.

It provides them with clear guidance as to how customer satisfaction problems should be solved.

It encourages them to make decisions that are in line with corporate objectives.

It encourages them to identify, and deal with, problems at an earlier stage.

Expert Solution

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