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Free CIMAPRO19-P01-1 Exam Braindumps
P1 Management Accounting Questions 121–125 (page: 26)

Updated On: 9-Feb-2026
Page 26 of 53
PDF with 260 Questions

Explain why sensitivity analysis is useful when dealing with uncertainty in project

appraisal.

Select all the true statements.

  1. Sensitivity analysis enables a company to determine the effect of changes to fixed costs on the planned outcome
  2. Sensitivity analysis enables a company to determine the effect of changes to variables on the planned outcome
  3. In project appraisal, an analysis can be made if all the key variables to ascertain by how much variable would need to change before the net present value (NPV) reaches zero i.e.
    the indifference point.
  4. In project appraisal, in analysis can be made of all the key variables to ascertain by how much each variable would need to change before the net present value (NPV) reaches 100% i.e. the maximum point.

Answer(s): B,C



CORRECT TEXT
A company's budgeted data for the period are shown in the table below.



There is a stepped increase in fixed overheads of $10,000 when production exceeds 52,000 units.

Actual production for the period was 60,000 units.

What is the flexed budgeted cost for the period?

Give your answer as a whole number (in '000s).

  1. $3070000
  2. $3000000

Answer(s): A



A company produces trays of pre-prepared meals that are sold to restaurants and food retailers. Three varieties of meals are sold: economy, premium and deluxe.





Discuss the benefits of flexible budgeting for planning and control purposes.

Select all the true statements.

  1. A fixed budget will provide meaningful control information when actual activity differs from budget and variable costs are significant.
  2. If actual sales revenue is compared to a fixed budget it is possible to tell whether a favourable sales variance is due to an increase in units sold or an increase in sales price.
  3. If sales volumes were well above budget, adverse variable cost variances will probably be reported, against the fixed budget, since more variable costs have to be incurred to support the higher level of activity.
  4. Reporting against a fixed budget tells management nothing about the efficiency of operations.
  5. If a flexible budget is prepared then the budget variances calculated will provide a better indication of performance since actual results will be compared against an appropriate benchmark.
  6. The fixed budget however provides more insight into actual performance.

Answer(s): C,D,E



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.

Discuss the usefulness of the planning and operational variances calculated for TP's management.

Select ALL the TRUE statements.

  1. The use of planning and operational variances will enable TP's management to draw a distinction between variances caused by factors extraneous to the business and planning errors (planning variances) and variances caused by factors that are within the control of management (operational variances).
  2. The purchasing manager's performance can't be compared with the adjusted standards that reflect the conditions the manager actually operated under during the reporting period.
  3. If planning and operational variances are not distinguished, there is potential for dysfunctional behavior especially where the manager has been operating efficiently and performance is being judged by factors outside the manager's control. In the case of TP it became evident during the period that the prevailing market prices for materials were significantly less than those set during the budget process.
  4. Where a revision of standards is required due to environmental changes that were not foreseeable at the time the budget was prepared, the planning variances are controllable.
  5. Standards that failed to anticipate known market trends when they were set will reflect faulty standard setting.

Answer(s): A,C,E



A medium-sized manufacturing company, which operates in the electronics industry, has employed a firm of consultants to carry out a review of the company's planning and control systems. The company presently uses a traditional incremental budgeting system and the inventory management system is based on economic order quantities (EOQ) and reorder levels. The company's normal production patterns have changed significantly over the previous few years as a result of increasing demand for customized products. This has resulted in shorter production runs and difficulties with production and resource planning.

The consultants have recommended the implementation of activity based budgeting and a manufacturing resource planning system to improve planning and resource management.

How will a manufacturing resource planning system improve the planning of purchases and production for the company?

Select ALL the correct answers.

  1. The traditional approach to determine material requirements is to monitor inventories constantly; whenever they fall to a predetermined level, a preset order is placed to replenish them. This traditional approach (involving re-order levels and economic order quantity calculations originates in the pre-computer era.
  2. A manufacturing resource planning approach to the management of all the company's manufacturing resources including inventory, labour and machine capacity.
  3. It seeks to ensure that resources are available just before they are needed by the next stage of production or dispatch. It also seeks to ensure that resources are delivered only when required so that raw material inventory is kept to a minimum.
  4. The technique will not enable managers to track orders through the manufacturing process and will not assist the purchasing and production control departments to move the right amount of material or sub-assemblies at the right time to the right place.
  5. The correct inventory management system relies on the assumption that there is constant demand. An MRP system begins with the setting of a master production schedule specifying both the timing and quantity demanded of each of the finished goods items and then works backwards to determine the resource requirements at each stage of the production process.
  6. It aims to generate an estimation of materials requirements after taking account of the number of employees quality and waste. The TQS model can be used within MRP provided that the major assumption in the TQS model of constant demand applies.

Answer(s): A,B,C,E



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