Pass CIMA P2 PDF Dumps Recently Updated 205 Questions [Q79-Q100]

4.5/5 - (6 votes)

Pass CIMA P2 PDF Dumps | Recently Updated 205 Questions

Updated Test Engine to Practice P2 Dumps & Practice Exam

NEW QUESTION 79
An investment centre manager is considering the purchase of a new machine. If purchased, the new machine would replace an existing one that is used to manufacture one of the investment centre’s existing products.
The new machine would incur $800 per month additional running costs; this includes $300 per month of additional depreciation.
The new machine would save on direct labor time. This means that the fixed production overhead absorbed by the product on the basis of direct labor hours would reduce by $100 per month.
What is the total cost of the above that is relevant to the decision to purchase the machine?

$500; only the additional running costs, excluding depreciation, are relevant.

$700; all of the additional running costs and the reduction in absorbed overhead are relevant.

$400; only the reduction in absorbed overhead and the additional running costs, excluding depreciation, are relevant.

$800; all of the additional running costs are relevant, but the reduction in absorbed overhead is not relevant.

NEW QUESTION 80
A division of a company transfers all its output to other divisions in the same company.
For this division, which of the following measures is NOT affected by the transfer price that the division uses?

Operating profit

Return on investment

Cost of components purchased

Sales revenue

NEW QUESTION 81
Which TWO of the following expressions are correct?

1 + money rate = (1 + real rate) x (1 + inflation rate)

1 + real rate = (1 + money rate) / (1 + inflation rate)

1 + real rate = (1 + inflation rate) / (1 + money rate)

1 + money rate = (1 + inflation rate) / (1 + real rate)

1 + inflation rate = (1 + money rate) x (1 + real rate)

NEW QUESTION 82
A large company that sells a single product has many customers. The contribution per unit of the product is $40. Data for the company as a whole are given below.

Using customer profitability analysis, what is the total annual profit for this customer?

$1,660,000

$1,780,000

$1,460,000

$2,340,000

NEW QUESTION 83
The following cost of quality report has been prepared for the latest period.

What is the difference between the cost of conformance and the cost of non-conformance?

NEW QUESTION 84
The following data are available for an investment centre for the latest period. Where appropriate the data have been adjusted to reflect economic values.
What cost of capital has been used to calculate the EVA?

Give your answer to the nearest percentage.

NEW QUESTION 85
Which of the following would change if the cost of capital of a proposed project was increased?

Internal rate of return

Payback period

Accounting rate of return

Net present value

NEW QUESTION 86
Which of the following statements is NOT correct?
Transfer prices between responsibility centers should be set at a level that:

provides an artificial selling price that enables the transferring division to earn a return for its efforts and the receiving division to incur a cost for benefits received.

enables profit centre performance to be measured ‘commercially’.

encourages a balance of goal congruence, managerial effort and centralized management.

encourages profit centre managers to agree on the amount of goods and services to be transferred at a level that is consistent with organizational aims.

NEW QUESTION 87
A company is considering four mutually exclusive projects. There are three possible future demand conditions but the company has no idea of the probability of each of these demand conditions occurring. The forecast net present values (NPVs) of each of the four projects, under each of the three possible future demand conditions, are as follows.

Using the maximax criterion, which investment should be selected?

Investment A

Investment B

Investment C

Investment D

NEW QUESTION 88
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?

Transfer risk 1; accept risk 2; avoid risk 3; reduce risk 4

Accept risk 1; avoid risk 2; transfer risk 3; reduce risk 4

Accept risk 1; transfer risk 2; avoid risk 3; reduce risk 4

Reduce risk 1; transfer risk 2; avoid risk 3; accept risk 4

NEW QUESTION 89
The following summarised financial statements have been prepared by JNM’s North subsidiary for the year just ended:

Calculate the North subsidiary’s Residual Income, assuming that JNM’s cost of capital is 10%.
Give your answer to the nearest $ million.

NEW QUESTION 90
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.

Which of the following statements is correct?

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.

NEW QUESTION 91
Which of the following investment appraisal methods provides an absolute monetary value on which to base decisions?

Accounting rate of return

Net present value

Internal rate of return

Profitability index

NEW QUESTION 92
Which of the following statements is true?

Risk transfer means the management of a portfolio of different risks.

Insuring risks means that businesses will not need to take any measures to reduce those risks.

High frequency, high severity risks are always strategic risks.

Risk hedging is taking action to offset one risk by incurring a new risk in the opposite direction.

NEW QUESTION 93
A very large organization is financed by both debt and equity. It evaluates all projects on the basis of their net present value (NPV) using an organization wide weighted average cost of capital as the discount rate.
For a small project, which TWO of the following would affect the project’s cash flows AND the discount rate?

Taxation rates

Inflation rates

Depreciation rates

Changes in working capital

The project’s terminal value

NEW QUESTION 94
A machine requires an initial investment of $500,000. The net present value (NPV) of the investment in the machine is $36,500.
Which of the following statements is correct in relation to the sensitivity of the investment?

The initial investment can increase by no more than 7.3% before the project is not viable.

The NPV can decrease by no more than 7.3% before the project is not viable.

The initial investment can increase by no more than 13.7% before the project is not viable.

The NPV can decrease by no more than 13.7% before the project is not viable.

NEW QUESTION 95
Which of the following statements is correct in respect of the key feature of dual pricing?

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.

NEW QUESTION 96
A company is investing in a huge diversification project. The plan is to develop and sell a whole new product line that they have never sold before. They’ve already started a massive marketing campaign for this new product line and they are getting good feedback in their market research.
They’ve had to use debt funding in order to finance the project, but they hope that the returns will be worth the investment and restructuring. If they are successful they will be a step ahead of all their competitors and offer something none of them can.
What is the risk appetite of this company?

Risk seeking

Risk averse

Risk neutral

Impossible to say

NEW QUESTION 97
A company manufactures and sells a range of products. Relevant data for one unit of a particular product are as follows.

The company is using target costing to ensure that it achieves a contribution of 40% of the market selling price.
In order to achieve the target cost, by how much does the company need to reduce the variable cost per unit?

$ 2.10

$ 0.50

$ 1.40

$ 2.60

NEW QUESTION 98
In order to support decision making, management accounting information categorizes costs in a variety of ways.
Responsibility accounting primarily distinguishes between costs on the basis that they are either:

sunk or opportunity costs

fixed or variable costs

controllable or uncontrollable costs

relevant or non-relevant costs

NEW QUESTION 99
When considering a capital investment, relevant costs for decision making have which THREE of the following features?

They are future costs.

They are committed costs.

They are incremental costs.

They are unavoidable costs.

They are cash flows.

NEW QUESTION 100
$30.328 million is to be invested in a project that will yield annual net cash inflows of $8 million for 5 years.
What is the project’s internal rate of return (IRR)?
Give your answer to the nearest whole percentage.