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CIMA P2 Exam Questions

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Advanced Management Accounting

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CIMA P2 Practice Test Questions ( Updated) – Real Exam Questions & Dumps PDF

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CIMA P2 Sample Questions – Free Practice Test & Real Exam Prep

Question #1

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

  • A. 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. 
  • B. enables profit centre performance to be measured 'commercially'. 
  • C. encourages a balance of goal congruence, managerial effort and centralized management. 
  • D. 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. 
Answer: C 
Question #2

It is often claimed that a two-part transfer pricing system offers a number of advantages to organizations which use it.Which of the following statements is NOT an advantage of using a two-part transfer pricing system?  

  • A. Transfers are made at the marginal cost of the supplying division and both divisions should be able to report profits from inter-divisional trading. 
  • B. The receiving division is made aware of and charged for the full cost of obtaining intermediate products from other divisions. 
  • C. It stimulates planning, communication and coordination amongst divisions. 
  • D. The agreed fixed fee simply compensates the supplying division for incurring the fixed costs associated with the item transferred. 
Answer: D 
Question #3

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). 

  • A. Two-part tariff pricing = $10 Dual pricing = $22 
  • B. Two-part tariff pricing = $12 Dual pricing = $18 
  • C. Two-part tariff pricing = $10 Dual pricing = $20 
  • D. Two-part tariff pricing = $13 Dual pricing = $22 
Answer: C 
Question #4

The Chief Executive of a large manufacturing company has made the following comment."All of our competitors are using both just-in-time(JIT) and Total Quality Management (TQM) whereas we have never used either. Consequently we are lagging behind our competitors because their levels of inventory and quality costs are significantly below ours. I want to see JIT fully implemented, both for purchasing and for production, in 4 weeks' time and TQM fully implemented 4 weeks after that." Which of the following provide appropriate advice to the Chief Executive? Select ALL that apply.  

  • A. Full implementation of JIT is unlikely to be successful unless a TQM environment has first been established. 
  • B. Implementing TQM from scratch within 8 weeks should be feasible for a large manufacturing company, but implementing JIT within 4 weeks is unlikely to be feasible. 
  • C. Total quality costs are likely to begin declining immediately once the process of implementing TQM has commenced. 
  • D. JIT offers the long run prospect of significantly reducing inventory. 
  • E. It would be possible to implement TQM without implementing JIT. 
  • F. It is not possible to implement JIT for production without first implementing JIT for purchasing. 
Answer: A,D,E 
Question #5

The performance report for the production manager of a company for the last month included the following.1,000 direct labor hours were worked at a basic rate of pay of $10 per hour. 200 of these hours were worked during overtime for which a 30% overtime premium was paid. 80 of these overtime hours were to fulfill a customer order that had originally been planned for manufacture next month. The sales manager had agreed to bring forward the delivery of this order at the request of the customer. The remaining overtime hours were due to unexpected inefficiency of the workforce; this has been traced to poor supervision by a junior managerMaterial costs included the following: ? $5,300 of material A. Material A is a commodity and, due to changes on the global market, the actual unit cost of this material for last month was 6% higher than had been expected ? $5,250 of material B. The usage of material B last month was 5% higher than it should have been due to faulty workmanship on the production line. What is the total value of the above costs that was controllable by the production manager?  

  • A. $20,610 
  • B. $19,810 
  • C. $20,910 
  • D. $20,360 
Answer: A 
Question #6

GHY has two subsidiaries. GHY-Motor manufactures car engines and GHY-Build designs and assembles cars. In the car industry it is common for manufacturers to buy parts, including engines, from other manufacturers.GHY has granted GHY-Motor and GHY-Build full autonomy. GHY-Build is considering using an engine from another company for a new model that it is designing. GYY-Motor has a suitable engine, but it charges more than GHY-Build's preferred supplier. Which of the following statements is correct? Select ALL that apply.  

  • A. GHY should consider permitting GHY-Motor to charge part of the selling price on engines sold to GHY-Build to head office. 
  • B. Forcing GHY-Motor to grant a discount to GHY-Build could lead to dysfunctional behavior. 
  • C. There could be significant non-financial issues associated with GHY-Build's decision to buy another engine. 
  • D. Parent companies should never grant subsidiaries full autonomy on matters such as intragroup sales. 
  • E. The threat of dysfunctional behavior is largely theoretical and managers can be trusted to maximise shareholder wealth. 
Answer: A,B,C 
Question #7

Beyond Budgeting is essentially an approach that places modern management practices within a cultural framework. Analyze the following statements: 1. The organization structure should have clear principles and boundaries. 2. Managers should be given a high degree of freedom to make decisions. 3. Frontline managers should be made responsible for relationships with customers.  4. Information system should be transparent and ethical. Which of the above statements relate to Beyond Budgeting? 

  • A. 1, 2 and 4 only 
  • B. 2, 3 and 4 only 
  • C. 1, 2 and 3 only 
  • D. All the statements
 Answer: D 
Question #8

Which of the following statements is true? 

  • A. Risk transfer means the management of a portfolio of different risks. 
  • B. Insuring risks means that businesses will not need to take any measures to reduce those risks. 
  • C. High frequency, high severity risks are always strategic risks. 
  • D. Risk hedging is taking action to offset one risk by incurring a new risk in the opposite direction. 
Answer: D 
Question #9

LL produces an item, the Z, for which the demand curve is estimated to be:P = 10 - 0.0001Q where, P is the unit price in $ and Q is the annual sales volume in units;Marginal revenue (MR) = 10 - 0.0002QThe variable cost of producing the Z is $2 per unit. The annual fixed costs of production are $110,000. What is the profit maximizing output level? 

  • A. 50,000 units 
  • B. 45,000 units 
  • C. 40,000 units 
  • D. 35,000 units 
Answer: C
Question #10

Product WB currently sells for $13 per unit. Annual demand at that price is 20,000 units. If the price increases to $15, the annual demand falls by 500 units.What is the formula for the demand curve? 

  • A. {exhibit 6649} 
  • B. {exhibit 6660} 
  • C. {exhibit 6671} 
  • D. {exhibit 6682} 
Answer: C 
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