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CIMA P2 Exam
Advanced Management Accounting (Page 5 )

Updated On: 1-Feb-2026
Page 5 of 42
PDF with 202 Questions

If transfer prices are set at variable costs, the supplying division does not cover its fixed costs.

Which of the following does NOT resolve this problem?

  1. Each division can be given a share of the overall contribution earned by the organization.
  2. A system of dual pricing can be adopted.
  3. Reduce the level of fixed costs.
  4. Central management can impose a range within which the transfer price should fall.

Answer(s): C



An organization wishes to achieve cost reductions for a product it already has in production without affecting the customer's perception of the product.

It has decided to carry out a systematic examination of the factors affecting the cost of the product in order to identify ways of achieving the specified purpose at lower cost while maintaining the required standard and quality.

Which of the following correctly identifies the activity that the organization is undertaking?

  1. Value analysis
  2. Kaizen costing
  3. Standard costing
  4. Process innovation

Answer(s): A



The starting point for developing a balanced scorecard for an organization should be:

  1. the organization's vision and strategy
  2. the external market that the organization is operating in
  3. benchmarking the organization's current performance
  4. the organization's non-financial targets

Answer(s): A



Oliver owns a computer repair company. He is looking to close of of his departments as the demand for computer cleaning has dropped dramatically in the last 2 years and is no longer profitable.

The contribution margin of the department is £12,000, and the overheads are £23,000 (out of which £4,000 cannot be eliminated).

How would closing this department impact operating income?

  1. Increase operating income by £7,000
  2. Decrease operating income by £7,000
  3. Decrease operating income by £12,000
  4. Increase operating income by £12,000

Answer(s): A



A company produces a single product which is sold to one customer.

Components for the product are stored in a warehouse and when required for production they are inspected. Those passing the quality check are moved to the initial production line. Part-completed items are then inspected and those passing this second quality check are moved to the warehouse until required in the finishing process. After the finishing process the products are inspected, packaged and returned to the warehouse until required by the customer.

The company is considering implementing a full just-in-time (JIT) system for both purchasing and production and has asked your advice about the activities that will be necessary if this system is implemented.

Which THREE of the following activities will definitely be required in the proposed JIT
system?

  1. Components received
  2. Components inspected
  3. Product manufactured
  4. Part finished product inspected
  5. Finished product stored
  6. Finished product despatched to customer

Answer(s): A,C,F



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