CIMA CIMAPRO19-P02-1 : Advanced Management Accounting

A company is considering the replacement of its outdated information system.
Which of the following are appropriate approaches for the company to take to assess the potential qualitative benefits of a replacement information system?
(1) Ignore the qualitative benefits that may arise because there is too much subjectivity involved in their assessment.
(2) Attempt to attribute monetary values to each of the qualitative benefits identified.
(3) Acknowledge the existence of qualitative benefits and attempt to assess them in a reasonable manner that is acceptable to all parties.
(4) Attempt to express qualitative benefits in general terms linked to a hierarchy of organizational objectives.

• A. (1), (3) and (4) only
• B. (2), (3) and (4) only
• C. (1), (2) and (4) only
• D. (1), (2) and (3) only

The performance report for the production manager of a company for the last month included the following.
1,000 direct labor hours were worked at a basic rate of pay of $10 per hour. 200 of these hours were worked during overtime for which a 30% overtime premium was paid. 80 of these overtime hours were to fulfill a customer order that had originally been planned for manufacture next month. The sales manager had agreed to bring forward the delivery of this order at the request of the customer. The remaining overtime hours were due to unexpected inefficiency of the workforce; this has been traced to poor supervision by a junior manager.
Material costs included the following:
$5,300 of material A. Material A is a commodity and, due to changes on the global market, the actual unit cost of this material for last month was 6% higher than had been expected
$5,250 of material B. The usage of material B last month was 5% higher than it should have been due to faulty workmanship on the production line.
What is the total value of the above costs that was controllable by the production manager?

• A. $19,810
• B. $20,610
• C. $20,910
• D. $20,360

Which of the following is a correct description of the key features of net present value?

• A. It adjusts the relevant cash flows of a project to reflect the time value of money. The discount rate used reflects the risk of the project.
• B. It adjusts the relevant cash flows of a project to reflect the time value of money. The discount rate used is always the company's weighted average cost of capital.
• C. It adjusts the relevant cash flows of a project after the deduction of depreciation charges to reflect the time value of money. The discount rate used is always the company's weighted average cost of capital.
• D. It adjusts the relevant profits of a project to reflect the time value of money. The discount rate used reflects the risk of the project.

Juan is looking to invest in the mining industry. He has narrowed his options down to two rival companies, both with sales of £200m. Company A has an EBIT of £10m whereas Company B has an EBIT of £14m.
This would suggest that Company B is the better investment but Juan is suspicious that Company B has more financial backing than Company A.
Which ratios will tell him which company will use his investment the best?

• A. Profit margin
• B. R.O.C.E
• C. Current ratio
• D. Quick ratio

Which of the following statements is true?

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