Changing the Concept of P1 Exam Preparation 2022
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What do you learn in P1?
- How budgets are prepared and implemented across the organisation, the impact these have, and how techniques are applied to ensure sound short term decision making, against a backdrop of risk and uncertainty, by using appropriate risk management tools.
- Why costing is done and what it is used for, including appropriate costing methods and techniques and where digital costing might be used.
Understanding function and technical aspects of Prepare information to support short-term decision-making
The following will be discussed in CIMA P1 exam dumps:
- Explain factors that could influence short-term decisions
- Apply appropriate techniques that support short-term decision-making
- Identify relevant costs and benefits
- Prepare information to support operational decisions
- Apply appropriate techniques to deal with situations where there is risk and uncertainty
NEW QUESTION 134
GH manufactures a product using skilled labour and high quality materials. The company operates a standard costing system and a just-in-time (JIT) purchasing and production system. The standard selling price and variable costs for one unit of the product are as follows:
Prepare a statement that reconciles the budgeted contribution with the actual contribution for October.
Your statement should show the variances in as much detail as possible.
What was the actual contribution for October?
- A. $ 1,198,000
- B. $ 1,324,000
- C. $ 1,494,000
- D. $ 1,414,000
- E. $ 1,594,000
Answer: D
NEW QUESTION 135
Forecast sales demand of product W next period is 6,800 units. Product W requires 5 kg of material Y, seven hours of skilled labour and six hours of semi-skilled labour.
Availability of resources for next period is forecast as follows:
No inventories are held.
What is the principal budget factor for next period?
- A. Availability of semi-skilled labour
- B. Sales demand
- C. Availability of skilled labour
- D. Availability of material Y
Answer: C
NEW QUESTION 136
XY manufactures a range of products and uses an activity based costing system.
Budgeted production of Product B is 7,500 units.
Overheads have been identified by activity and related to appropriate cost drivers.
Product B is produced in batches of 250 units. Machines have to be reset after every batch and quality inspections are carried out on every third batch.
What is the total overhead cost per unit of Product B?
Give your answer to two decimal places.
Answer:
Explanation:
$1.40
NEW QUESTION 137
Which costing method, used in just-in-time (JIT) production systems, attaches cost directly to output rather than following the flow of product through the production process?
- A. Backflush costing
- B. Absorption costing
- C. Process costing
- D. Marginal costing
Answer: A
NEW QUESTION 138
The following information is available about direct material T for the last period.
A JIT purchasing system is in operation.
Calculate the actual price paid per kg of material T.
Give your answer to 2 decimal places.
Answer:
Explanation:
$2.80
NEW QUESTION 139
The inventory level of Product Y has reduced by 40 units over a single period. The cost card for Product Y is as follows:
The profit for Product Y using marginal costing is $26,000.
If the company used absorption costing, what would the profit for Product Y be?
Give your answer to the nearest whole $.
Answer:
Explanation:
$24600
NEW QUESTION 140
A manager must select one of three projects, W, X or Y.
The following payoff table has been prepared to show the outcomes in $000 at three possible levels of demand:
The manager is now preparing a regret matrix.
What figure (in $000) will be shown for Project Y in the regret matrix if the average demand arises?
- A. 0
- B. 1
- C. 2
- D. 3
Answer: C
NEW QUESTION 141
A company manufactures three products X, Y and Z.
The company is currently operating at full capacity and is unable to meet the full sales demand for Product Z.
According to the latest management accounts, Product Y is loss making, whilst X and Z both make strong positive contributions.
Which of the following is relevant when making a decision on whether or not to discontinue the manufacture of Product Y?
- A. The cost of market research carried out last month to establish if sales of Product Y are likely to improve.
- B. The salary of the sales manager who deals with all three products.
- C. The contribution from additional sales of Product Z.
- D. The rent and rates of the factory used to make the three products.
Answer: C
NEW QUESTION 142
CH is a building supplies company that sells products to trade and private customers.
Budget data for each of the six months to March are given below:
80% of the value of credit sales is received in the month after sale, 10% two months after sale and 8% three months after sale. The balance is written off as a bad debt.
75% of the value of credit purchases is paid in the month after purchase and the remaining 25% is paid two months after purchase.
All other operating costs are paid in the month they are incurred.
CH has placed an order for four new forklift trucks that will cost $25,000 each. The scheduled payment date is in February.
The cash balance at 1 January is estimated to be $15,000.
Prepare a cash budget for each of the THREE months of January, February and March.
Select All the correct answers.
- A. The total receipts in January will be $245 000
- B. Total payments in March will be $323 000
- C. The total receipts in January will be $320 000
- D. The total payments in February will be $405 000
Answer: B,C
NEW QUESTION 143
A company sells and services photocopying machines. Its sales department sells the machines and consumables, including ink and paper, and its service department provides an after sales service to its customers. The after sales service includes planned maintenance of the machine and repairs in the event of a machine breakdown. Service department customers are charged an amount per copy that differs depending on the size of the machine.
The company's existing costing system uses a single overhead rate, based on total sales revenue from copy charges, to charge the cost of the Service Department's support activities to each size of machine.
The Service Manager has suggested that the copy charge should more accurately reflect the costs involved. The company's accountant has decided to implement an activity-based costing system and has obtained the following information about the support activities of the service department:
Calculate the annual profit per machine for each of the three sizes of machine using activity-based costing.
- A. Profit Per Machine using ABC: Small $166, Medium $1241, Large $746
- B. Profit Per Machine using ABC: Small $196, Medium $1191, Large $1046
- C. Profit Per Machine using ABC: Small $376, Medium $2341, Large $986
- D. Profit Per Machine using ABC: Small $1076, Medium $1041, Large $1946
- E. Profit Per Machine using ABC: Small $176, Medium $1341, Large $946
- F. Profit Per Machine using ABC: Small $186, Medium $1441, Large $2046
Answer: A
NEW QUESTION 144
RFT, an engineering company, has been asked to provide a quotation for a contract to build a new engine. The potential customer is not a current customer of RFT, but the directors of RFT are keen to try and win the contract as they believe that this may lead to more contracts in the future. As a result, they intend pricing the contract using relevant costs. The following information has been obtained from a two-hour meeting that the Production Director of RFT had with the potential customer. The Production Director is paid an annual salary equivalent to $1,200 per 8-hour day. 110 square meters of material A will be required. This is a material that is regularly used by RFT and there are 200 square meters currently in inventory. These were bought at a cost of $12 per square meter. They have a resale value of
$10.50 per square meter and their current replacement cost is $12.50 per square meter. 30 liters of material B will be required. This material will have to be purchased for the contract because it is not otherwise used by RFT. The minimum order quantity from the supplier is 40 liters at a cost of $9 per liter. RFT does not expect to have any use for any of this material that remains after this contract is completed. 60 components will be required. These will be purchased from HY. The purchase price is $50 per component. A total of 235 direct labour hours will be required. The current wage rate for the appropriate grade of direct labour is $11 per hour. Currently RFT has 75 direct labour hours of spare capacity at this grade that is being paid under a guaranteed wage agreement. The additional hours would need to be obtained by either (i) overtime at a total cost of $14 per hour; or (ii) recruiting temporary staff at a cost of $12 per hour. However, if temporary staff are used they will not be as experienced as RFT's existing workers and will require 10 hours supervision by an existing supervisor who would be paid overtime at a cost of $18 per hour for this work. 25 machine hours will be required.
The machine to be used is already leased for a weekly leasing cost of $600. It has a capacity of 40 hours per week. The machine has sufficient available capacity for the contract to be completed. The variable running cost of the machine is $7 per hour. The company absorbs its fixed overhead costs using an absorption rate of $20 per direct labour hour.
Select ALL the true statements.
- A. The cost for the production director meeting was a relevant cost.
- B. The machine is currently being leased and it has spare capacity so it will either stand idle or be used on this work. The lease cost will be a relevant cost or $10 per hour.
- C. Material A was a relevant cost.
- D. The relevant cost is $7010
- E. The components are to be purchased from HY at a cost of $50 each. This is a relevant cost because it is future expenditure that will be incurred as a result of the work being undertaken.
- F. The relevant cost is $7100
- G. The company absorbs its fixed overhead costs using an absorption rate of $20 per direct labour hour.
This is a relevant cost. - H. The relevant cost is $7080
- I. Material B was a relevant cost.
Answer: C,D,E,I
NEW QUESTION 145
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:
- A. Incremental costs
- B. Past costs
- C. Opportunity costs
- D. Sunk costs
Answer: C
NEW QUESTION 146
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:
- A. $3,990
- B. $3,923
- C. $4,050
- D. $6,250
Answer: C
NEW QUESTION 147
TP makes wedding cakes that are sold to specialist retail outlets which decorate the cakes according to the customers' specific requirements. The standard cost per unit of its most popular cake is as follows:
The general market prices at the time of purchase for Ingredient A and Ingredient B were $23 per kg and
$20 per kg respectively. TP operates a JIT purchasing system for ingredients and a JIT production system; therefore, there was no inventory during the period.
What was the material price planning variance for ingredient B?
- A. The material price planning variance - Ingredient B was $59 000 F
- B. The material price planning variance - Ingredient B was $54 000 F
- C. The material price planning variance - Ingredient B was $64 000 F
- D. The material price planning variance - Ingredient B was $57 000 F
Answer: B
NEW QUESTION 148
A company's budget for the next period shows that it would breakeven at sales revenue of $800,000 and fixed costs of $320,000.
The sales revenue needed to achieve a profit of $200,000 in the next period would be:
- A. $1,390,000
- B. $1,300,000
- C. $1,400,000
- D. $1,780,000
- E. $1,950,000
Answer: B
NEW QUESTION 149
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