Question 1

Explain how probability analysis could be used to assess the risk of the evaluated projects.

Select all the true statements.

Options :

A : The company can determine a range of possible outcomes for each of the cash flows in the project, for example, a high, low and medium estimate of each cash flow could be determined.

B : The net present value (NPV) of the project, if all high, low or medium estimates occurred, can be calculated along with the combined probabilities of their occurrence.

C : The probabilities can be combined to calculate the expected value of each cash flow element and of the project as a whole

D : The NPVs of a sample range of possible outcomes and the probability of each NPV can be calculated. If a small sample is taken the distribution of outcomes can be used to calculate the zero activities deviation of the NPVs and the probability of success of the projects.

Answer: A,B,C

Question 2

A company is preparing its annual budget and is estimating the number of units of Product A that it will sell in each quarter of year 2. Past experience has shown that the trend for sales of the product is represented by the following relationship:

y = a + bx where

y = number of sales units in the quarter a = 10,000 units b = 3,000 units x = the quarter number where 1 = quarter 1 of year 1

Actual sales of Product A in Year 1 were affected by seasonal variations and were as follows:

Quarter 1:14,000 units Quarter2: 18,000 units Quarter 3: 18,000 units Quarter 4: 20,000 units

Calculate the expected sales of Product A (in units) for each quarter of year 2, after adjusting for seasonal variations using the additive model.

Options :

A : The expected sales for year 2 Quarter 4 was 32700 units

B : The expected sales for year 2 Quarter 4 was 32000 units

C : The expected sales for year 2 Quarter 4 was 33000 units

D : The expected sales for year 2 Quarter 4 was 40000 units

Answer: B

Question 3

The standard production cost of making a product is as follows:

What is the fixed production overhead capacity variance?

Options :

A : $9,000F

B : $6,000F

C : $3,000F

D : $6,000A

Answer: B

Question 4

A company has budgeted to produce 5,000 units of Product B per month. The opening and closing inventories of Product B for next month are budgeted to be 400 units and 900 units respectively. The budgeted selling price and variable production costs per unit for Product B are as follows:

Total budgeted fixed production overheads are $29,500 per month. The company absorbs fixed production overheads on the basis of the budgeted number of units produced. The budgeted profit for Product B for next month, using absorption costing, is $20,700.

Prepare a marginal costing statement which shows the budgeted profit for Product B for next month.

What was the difference between the profit calculation using marginal costing and the profit calculation using absorption costing?

Options :

A : $2870

B : $3010

C : $2950

D : $3610

E : $2750

Answer: C

Question 5

Which THREE of the following statements about different costing systems are correct?

Options :

A : Contribution per unit is the selling price per unit minus the variable costs per unit.

B : In a period during which finished goods inventory levels fall, profit using marginal costing will be higher than if absorption costing is used.

C : When valuing inventory using throughput costing, the direct labour cost is excluded.

D : Over-absorption of fixed production overhead is caused by actual sales exceeding budgeted sales.

E : Finished goods inventory will be assigned a higher value using throughput costing than absorption costing.

Answer: A,B,C

Free CIMAPRO19-P01-1-ENG Mock Exam – Practice Online Confidently

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