P2 Practice Exam Questions and Answers

Performance measures that monitor the extent to which a not-for-profit organization's objectives have been achieved are measures of:

SDF is a newly-established production company that is experiencing high staff turnover in its factory. The production department is studying the manufacturing process and its associated learning curve.

Which of the following statements is correct?

In an organization's transfer pricing system the selling division and the purchasing division each record a different price for the same transaction.

This is known as a:

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.

The cash flows from a project are detailed in the table below.

To the nearest 1%, what is the project's internal rate of return?

The following cost of quality report has been prepared for the latest period.

What is the difference between the cost of conformance and the cost of non-conformance?

A public sector service organization is considering whether to use a balanced scorecard or a value for money approach based on the three Es to assess its performance.

Which of the following are correct comparisons of the balanced scorecard and value for money based on the three Es as performance measurement frameworks?

Select ALL that apply.

Which TWO of the following actions taken during the budgetary planning process will result in the creation of budgetary slack?

Which TWO of the following expressions are correct?

A company has a maximum of $2 million to invest and has identified four viable projects, E, F, G and H.

The initial investment for each of the projects is the maximum amount that can be invested in the project, but any amount up to the maximum can be invested. The projects are divisible.

The projects have been evaluated using net present value, as below. All figures are $ millions.

In which project should the company invest $2 million?

An investment appraisal has identified that a project has a positive net present value when discounted at the company's cost of capital. If the cost of capital is now increased, indicate whether each of the following appraisal measures will increase, decrease or stay the same.

Which THREE of the following conditions are required for a sustained learning curve to apply?

K Supermarket spends $80,000 per year on checking and processing receipts of inventory. Annual warehouse costs are a further $70,000 per year. These costs are currently treated as fixed overheads in the company's costing system.

As an experiment, the company is preparing a direct profitability analysis of a small range of products, including fresh grapes.

K Supermarket receives a total of 3,600 deliveries every year. 20% of these deliveries are of perishable goods such as grapes. It takes twice as long to process a delivery of perishable goods compared to a normal delivery because perishable goods have to be checked more carefully.

Half of the warehouse costs are for the chilled store that is used to store perishable goods. At any time, the chilled store has 800 kilos of perishable goods in stock.

K Supermarket receives 150 deliveries of grapes every year. Each delivery is for 100 kilos of grapes. The grapes spend an average of two days in the chilled store before they are sold.

Calculate the total cost per kilo of checking, processing and storing grapes that should be taken into account in determining the profitability of grapes.

Give your answer to the nearest whole cent.

An organization has the right to mine for gold on its land. The price of gold and the cost of extraction are such that mining is not currently financially viable. However, the organization has the right to commence mining at any time in the future if the price of gold increases and makes mining financially viable.

This right to commence mining in the future is an option to:

A company is determining the selling price for its new product.

At a selling price of $16 per unit there will be zero demand but for every $1 reduction in the price, demand will increase by 100 units per period.

Production must be in batches of 100 units. The variable cost per unit will be $8 if 400 units are produced in a period. For each additional batch produced in a period the variable cost per unit will increase by $1 per unit for the additional batch only.

No inventories will be held.

Which of the following sales and production volumes will generate the highest contribution per period?

Which of the following statements about learning curves is correct?

Company D is about to launch an innovative and unique product which may face direct competition within three years. The company needs to achieve a rapid payback on all investments because it has limited access to external finance.

Which is the most appropriate pricing strategy for company D's new product, and for what reason?

Which of the following statements is true?

SDF makes cars. Demand for one of SDF's most popular models has declined because of a long-running television program. SDF's car is driven by a villainous character in the program and that has created such a negative association that sales have declined so significantly that SDF is planning to discontinue production.

Which of the following statements is correct? Select ALL that apply.

A supermarket group has experienced operational problems during recent years, including a shortage of warehousing space due to increasing turnover and poor inventory management. The product portfolio has expanded considerably. Although this has led to increased sales volume, marketing and logistics costs have increased disproportionately. Non product-specific costs have also increased significantly.

Management is now considering using Direct Product Profitability (DPP).

Which of the following statements are valid in respect of the possible implementation of DPP within the supermarket group?

Select ALL that apply.

A positive net present value (NPV) has been calculated for a project to launch a new product. An additional calculation is required to identify the sensitivity of the NPV to changes in the forecast total sales volume.

The present value of which of the following would be used in the calculation?

An 80% learning curve will apply to the production of a new product. The first unit will require 120 labor hours. The labor rate is $11 per hour.

To the nearest $1, the expected total labor cost for the first 4 units is:

Which TWO of the following are reasons why cost-based approaches to transfer pricing are often used in practice?

A company makes three products, E, F and

G.  

Cost driver information has been estimated as follows:

The company plans to make 10,000 units of product E in the year, with an expected direct cost of $0.60 per unit. This annual production of product E is expected to require 20 quality inspections, 28 purchase requisitions, and 400 kilogrammes of materials.

What is the overhead cost per unit of product E?

A manufacturing company is in the process of introducing just in time (JIT) and total quality management (TQM) into every aspect of its value chain.

Which TWO of the following are appropriate changes to make to the support activities in the organization's value chain?

A group consists of two divisions, Alpha and Beta, both of which are profit centers. Alpha sells a product to the external market and also sells it as an intermediate product to Beta.

Beta then processes further before selling the final product to the external market. The current group transfer pricing policy requires Alpha to charge Beta with the variable cost of production.

Which of the following statements is valid?

Company X is considering the launch of a new product. In order to compete in the market the selling price must be $100 per unit. Company X aims to achieve a sales margin of 25 per cent.

Direct materials cost is $75 for each unit. It takes 15 minutes for workers to assemble each unit. Workers are paid $16 per hour. 5 per cent of paid time is idle. Overheads are absorbed at $6.50 per unit.

What is the value of any cost gap between the forecast total cost and the target cost?

Which THREE of the following are advantages of changing from a 'top-down' to a 'bottom-up' (participative) style of budgeting?

Place each performance measure against the correct perspective of the Balanced Scorecard for a company that operates a chain of hotels.

Which of the following criticisms relate to traditional budgeting methods and which relate to the 'beyond budgeting' approach?