Question 1

Which of the following statements are correct with regard to responsibility centres?
Select ALL that apply.

Options :

A : Revenue centre managers have a lower level of decision-making authority than profit centre managers.

B : Revenue centre managers and profit centre managers are accountable for controllable costs only.

C : Profit centre managers and investment centre managers are responsible for the majority of operating costs incurred.

D : Investment centre managers have a higher level of managerial authority than profit centre managers.

E : Managers of profit centres have authority over the level of investment in working capital but managers of cost centres do not.

Answer: A,C,D

Question 2

Company D is about to launch an innovative and unique product which may face direct competition within three years. The company needs to achieve a rapid payback on all investments because it has limited access to external finance.
Which is the most appropriate pricing strategy for company D's new product, and for what reason?

Options :

A : Market skimming because it exploits areas of the market which are sensitive to price.

B : Penetration pricing because it can be used to rapidly build sales volume in mature markets.

C : Market skimming because it enables high prices to be charged to buyers who want the product as soon as possible.

D : Penetration pricing because it can be used to rapidly build sales volume in high growth markets.

Answer: C

Question 3

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?

Options :

A : $250,000

B : $227,500

C : $75,000

D : $68,175

Answer: D

Question 4

One of an investment centre's products is sold on an external market. Output is limited because the specialist machine that manufactures the product is operating at full capacity.

Current data for the product are as follows.

Options :

A : $21,400

B : $17,800

C : $23,900

D : $26,160

Answer: A

Question 5

A manufacturing company is in the process of introducing just in time (JIT) and total quality management (TQM) into every aspect of its value chain.
Which TWO of the following are appropriate changes to make to the support activities in the organization's value chain?

Options :

A : Inbound logistics would need to ensure that materials of appropriate quality are delivered on a just in time basis.

B : Operations would need to be carried out on a right first time basis as any failure could delay production.

C : After sales service would need to ensure that appraisal costs are kept to a minimum.

D : Procurement would need to arrange to purchase goods so that they are delivered as required.

E : Firm infrastructure would need to arrange appropriate training courses for staff.

F : Technology development would need to ensure that processes are continually improving.

Answer: A,D

Free CIMAPRO19-P02-1-ENG Mock Exam – Practice Online Confidently

Buying Options: