CIMA Advanced Management Accounting : CIMAPRO19-P02-1

During a Board meeting at a manufacturing company, concerns regarding the analysing of the current inventory management systems and processes are brought up.
Attendees of the meeting have made several claims and suggestions but the managing director admits that he does not know who to believe and so has asked you to let him know which statements of the following statements are TRUE?
Select ALL that apply.

• A. Standard Costing is ideal for organisations running a JIT inventory system
• B. Standard costing is ideal for organisations in a TQM environment
• C. ABC is ideal for organisations running a JIT inventory system
• D. A JIT system is likely to result in economies of scale
• E. A JIT inventory system reduces inventory costs

Which of the following correctly defines the expected value of a project?

• A. The most likely amount of incremental wealth that the project will generate.
• B. The present value of the positive cash flows that the project will generate.
• C. The actual amount of incremental wealth that the project will generate.
• D. The weighted average of the possible outcomes of the project.

In order to remain competitive an organization wishes to achieve cost savings for one of its existing products.
Which of the following correctly describes methods which the organization can use to achieve these cost savings?
Select ALL that apply.

• A. Target costing is continuously setting new stretch targets while the product is in production.
• B. Value engineering is a fundamental rethinking and radical redesign of an organization's existing processes.
• C. Value analysis is examining a product's costs in order to achieve its purpose at a reduced cost while maintaining its reliability and quality.
• D. Functional analysis is carried out only on existing products and is concerned only with minimizing the cost of the originally defined functions of a product.
• E. Kaizen costing is seeking to make cost savings by continuously making small incremental cost reductions while the product is in production.

A manufacturing company has just developed a new product and must now determine the most appropriate pricing strategy for its initial launch.
The product will initially be unique because it will include highly desirable features that no competitive product offers. Its development has involved substantial expenditure and the company wishes to recover this as soon as possible.
The product's uniqueness is expected to last for only six months before a competitor launches a similar product. It is expected that the competitor will avoid any significant development costs by reverse engineering the company's own product.
At that point, to remain competitive, the company must ensure that its selling price matches that of the competitor.
Which of the following pricing strategies would be most suitable for the initial launch of the company's product?

• A. Market skimming
• B. Dual pricing
• C. Penetration pricing
• D. Own label pricing

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. Operations would need to be carried out on a right first time basis as any failure could delay production.
• B. Technology development would need to ensure that processes are continually improving.
• C. After sales service would need to ensure that appraisal costs are kept to a minimum.
• D. Firm infrastructure would need to arrange appropriate training courses for staff.
• E. Procurement would need to arrange to purchase goods so that they are delivered as required.
• F. Inbound logistics would need to ensure that materials of appropriate quality are delivered on a just in time basis.