QUESTION: 5

JDM is considering whether to go ahead with the launch of a new product. Profit from the new product is dependent on the level of demand.

The following table shows the estimated profits and their respective probabilities at different levels of demand.

The company could still cancel the launch of the product but would incur a cost of $7,000.

What is the maximum amount that the company should pay for perfect information about demand for the product?

$13,350
$41,000
$16,500
$37,850

Answer(s): A

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QUESTION: 6

A company's management is considering investing in a project with an expected life of 4 years. It has a positive net present value of $180,000 when cash flows are discounted at 8% per annum. The project's cash flows include a cash outflow of $100,000 for each of the four years. No tax is payable on projects of this type.

The percentage increase in the annual cash outflow that would cause the company's management to reject the project from a financial perspective is, to the nearest 0.1%:

54.3%
45.0%
55,6%
184.0%

Answer(s): A

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QUESTION: 7

What type of budget is prepared on an annual basis taking current year operating results and adjusting them for expected growth and inflation?

Rolling budget
Incremental budget
Flexed budget
Zero-based budget

Answer(s): B

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QUESTION: 8

Which of the following would help to explain a favourable material price variance?

A decision to reduce the raw materials inventory during the period led to a reduced level of material purchases.
An increase in the quantity of material purchased resulted in unexpected bulk discounts.
The material purchased was of a higher quality than standard.
Improved processing methods meant that material purchases were lower than standard for the output achieved.

Answer(s): B

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Free P1 Management Accounting Exam Braindumps (page: 3)

QUESTION: 5

QUESTION: 6

QUESTION: 7

QUESTION: 8

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