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CIMA P2 Exam
Advanced Management Accounting (Page 3 )

Updated On: 1-Feb-2026
Page 3 of 42
PDF with 202 Questions

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?

  1. The initial investment can increase by no more than 7.3% before the project is not viable.
  2. The NPV can decrease by no more than 7.3% before the project is not viable.
  3. The initial investment can increase by no more than 13.7% before the project is not viable.
  4. The NPV can decrease by no more than 13.7% before the project is not viable.

Answer(s): A



Residual income is an appropriate performance measure for which type of responsibility centre?

  1. Cost centre
  2. Revenue centre
  3. Investment centre
  4. Profit centre

Answer(s): C



Which of the following statements is true?

  1. Risk transfer means the management of a portfolio of different risks.
  2. Insuring risks means that businesses will not need to take any measures to reduce those risks.
  3. High frequency, high severity risks are always strategic risks.
  4. Risk hedging is taking action to offset one risk by incurring a new risk in the opposite direction.

Answer(s): D



A product requires one each of three different components.

Faulty components are identified only at the end of the manufacturing process.

The following average fault rates have been identified:

Component A ­ 1 in 100

Component B ­ 1 in 20

Component C ­ 1 in 10

The probability that a unit of finished product contains no faulty components is:

  1. 0.84645
  2. 0.00005
  3. 0.99231
  4. 0.97692

Answer(s): A



The following calculation of the net present value (NPV) of a project has been produced.



By how much can the forecast revenue decrease before the project is not viable?

  1. 7.2%
  2. 35.6%
  3. $20,000 per year
  4. $21,380 in total

Answer(s): A



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