Cima C01 Exam Question No 36

Question No 36:

W Ltd makes leather purses. It has drawn up the following budget for its next financial period:

Selling price per unit $11.60
Variable production cost per unit $3.40
Sales commission 5% of selling price
Fixed production costs $430,500
Fixed selling and administration costs $198,150
Sales 90,000 units

The margin of safety represents

A. 5.6% of budgeted sales
B. 8.3% of budgeted sales
C. 11.6% of budgeted sales
D. 14.8% of budgeted sales

Answer: B

Cima C01 Exam Question No 35

Question No 35:

This graph is known as a

A. Conventional breakeven chart
B. Contribution breakeven chart
C. Semi-variable cost chart
D. Profit volume chart

Answer: D

Cima C01 Exam Question No 34

Question No 34:

 Point K on the graph indicates the value of

A. Semi-variable cost
B. Total cost
C. Variable cost
D. Fixed cost

Answer: D

Cima C01 Exam Question No 33

Question No33:

A company has been asked to quote for a job. The company aims to make a net profit of
30% on sales. The estimated cost for the job is as follows:

Direct materials 10 kg @ £10 per kg
Direct labour 20 hours @ £5 per hour

Variable production overheads are recovered at the rate of £2 per labour hour.
Fixed production overheads for the company are budgeted to be £100,000 each year and
are recovered on the basis of labour hours.

There are 10,000 budgeted labour hours each year. Other costs in relation to selling, distribution and administration are recovered at the rate of £50 per job.
The company quote for the job should be

A. £572
B. £637
C. £700
D. £833

Answer: C

Cima C01 Exam Question No 32

Question No 32:

A company produces a single product that passes through two processes. The details for process 1 are as follows:

Materials input                        20,000 kg at $2·50 per kg
Direct labour                            $15,000
Production overheads             150% of direct labour

Normal losses are 15% of input in process 1 and without further processing any losses can be sold as scrap for $1 per kg.
The output for the period was 18,500 kg from process 1. There was no work-in-progress at the beginning or end of the period.
What value (to the nearest $) will be credited to the process 1 account in respect of the normal loss?

A. Nil
B. $3,000
C. $4,070
D. $5,250

Answer: B

Cima C01 Exam Question No 31

Question No 31:

In a standard cost bookkeeping system, when the actual material usage has been greater than the standard material usage, the double entry to record this is:

A. Debit the material usage variance account, Credit the raw material control account
B. Credit the material usage variance account, Debit the raw material control account
C. Debit the material usage variance account, Credit the work-in-progress account
D. Credit the material usage variance account, Debit the work-in-progress account

Answer: A

Cima C01 Exam Question No 30

Question No 30:

P operates a standard marginal costing system. The following budgeted and standard cost information is available:

Budgeted production and sales                               10,000 units
Variable production overheads – 5 hours x $4 $    20 per unit

Actual results for the period were as follows:

Production and sales                                                11,500 units
Variable production overheads – 52,000 hours      $195,000

The variable production overhead expenditure variance is

A. $35,000 adverse
B. $13,000 adverse
C. $13,000 favourable
D. $35,000 favourable

Answer: C

Cima C01 Exam Question No 29

Question No 29:

G repairs electronic calculators. The wages budget for the last period was based on a standard repair time of 24 minutes per calculator and a standard wage rate of $10.60 per hour.
Following the end of the budget period, it was reported that:

Number of repairs                         31,000
Labour rate variance                     $3,100 (A)
Labour efficiency variance             Nil

Based on the above information, the actual wage rate during the period was:
A. $10.35 per hour
B. $10.60 per hour
C. $10.85 per hour
D. $11.10 per hour

Answer: A

Cima C01 Exam Question No 28

Question No 28:

Which ONE of the following factors could explain a favourable direct material usage variance?

A. More staff were recruited to inspect for quality, resulting in a higher rejection rate.
B. When estimating the standard product cost, usage of material had been set using ideal standards.
C. The company had reduced training of production workers as part of a cost reduction exercise.
D. The material price variance was adverse.

Answer: D

Cima C01 Exam Question No 27

Question No 27:

X operates a standard marginal costing system. The following budgeted and standard cost information is available:

• Budgeted production and sales          10,000 units
• Direct material cost –                         3 kg x $10 $30 per unit

Actual results for the period were as follows:

• Production and sales                           11,500 units
• Direct material –                                 36,000 kg $342,000

The direct material price variance is

A. $18,000 adverse
B. $3,000 adverse
C. $3,000 favourable
D. $18,000 favourable

Answer: D

Cima C01 Exam Question No 26

Question No 26:

A standard cost is?

A. The planned unit cost of a product, component or service in a period.
B. The budgeted cost ascribed to the level of activity achieved in a budget centre in a control period.
C. The budgeted production cost ascribed to the level of activity in a budget period.
D. The budgeted non-production cost for a product, component or service in a period.

Answer: A

Cima C01 Exam Question No 25

Question No 25:

What is overtime premium is?

A. The additional amount paid for hours worked in excess of the basic working week.
B. The additional amount paid over and above the normal hourly rate for hours worked in excess of the basic working week.
C. The additional amount paid over and above the overtime rate for hours worked in excess of the basic working week.
D. The overtime rate.

Answer: B

Cima C01 Exam Question No 24

Question No 24:

Which of the following would NOT be included in a cash budget?
(i) Depreciation
(ii) Provisions for doubtful debts
(iii) Wages and salaries

A. (i) and (ii) only
B. (ii) and (iii) only
C. (iii) only
D. (i) only

Answer: A

Cima C01 Exam Question No 23

Question No 23:

The principal budget factor is the?

A. Factor which limits the activities of the organisation and is often the starting point in budget preparation.
B. Budgeted revenue expected in a forthcoming period.
C. Main budget into which all subsidiary budgets are consolidated.
D. Overestimation of revenue budgets and underestimation of cost budgets, which operates as a safety factor against risk.

Answer: A

Cima C01 Exam Question No 22

Question No 22:

RS is currently preparing the production budget for Product A and the material purchase budget for material X for the forthcoming year. Each unit of Product A requires 5 kgs of material X.
The anticipated opening inventory for Product A is 5,000 units and the company wishes to increase the closing inventory by 30% by the end of the year.

The anticipated opening inventory for material X is 50,000 kgs and in order to avoid stock outs the required closing inventory has been increased to 60,000 kgs.
The Sales Director has confirmed a sales requirement of 70,000 units of Product A. What will be the purchases budget for material X?

A. 347,500 kgs
B. 350,000 kgs
C. 357,500 kgs
D. 367,500 kgs

Answer: D

Cima C01 Exam Question No 21

Question No 21:

RS is currently preparing the production budget for Product A and the material purchase budget for material X for the forthcoming year. Each unit of Product A requires 5 kgs of material X.
The anticipated opening inventory for Product A is 5,000 units and the company wishes to increase the closing inventory by 30% by the end of the year.
The anticipated opening inventory for material X is 50,000 kgs and in order to avoid stock outs the required closing inventory has been increased to 60,000 kgs.
The Sales Director has confirmed a sales requirement of 70,000 units of Product A.
How many units of Product A will need to be produced?

A. 68,500 units
B. 71,500 units
C. 76,500 units
D. 80,000 units

Answer: B

Cima C01 Exam Question No 20

Question No 20:

The term “budget slack” refers to the

A. Extended lead time between the preparation of the functional budgets and the master budget.
B. Difference between the budgeted output and the break even output.
C. Additional capacity available which can be budgeted for.
D. Deliberate over-estimation of costs and under-estimation of revenues in a budget.

Answer: D

Cima C01 Exam Question No 19

Question No 19:

The following extract is taken from the overhead budget of X:

Budgeted activity                50%         75%
Budgeted overhead         $100,000     $112,500

The overhead budget for an activity level of 80% would be
A. $115,000
B. $120,000
C. $136,000
D. $160,000

Answer: A

Cima C01 Exam Question No 18

Question No 18:

A flexible budget is?

A. A budget which by recognizing different cost behavior patterns is designed to change as the volume of activity changes.
B. A budget for a defined period of time which includes planned revenues, expenses, assets, liabilities and cash flow.
C. A budget which is prepared for a period of one year which is reviewed monthly, whereby each time actual results are reported, a further forecast period is added and the intermediate period forecasts are updated.
D. A budget of semi-variable production costs only.

Answer: A

Cima C01 Exam Question No 17

Question No 17:

What is the divisionalisation and controlling people
Centralization - Advantages?
The following details have been extracted from the receivables records of X:
Invoices paid in the month after sale             60%
Invoices paid in the second month after sale        20%
Invoices paid in the third month after sale         15%
Bad debts                         5%
Credit sales for June to August 2011 are budgeted as follows:
June                             $100,000
July                             $150,000
August                             $130,000
Customers paying in the month after sale are entitled to deduct a 2% settlement discount.
Invoices are issued on the last day of the month.
The amount budgeted to be received in September 2011 from credit sales is:

A. $115,190
B. $116,750
C. $121,440
D. $123,000

Answer: C

Cima C01 Exam Question No 16

Question No 16:

Based on the data below, what is the amount of the overhead under-/over-absorbed?

Budgeted overheads                      $493,200
Budgeted machine hours             10,960 
Actual machine hours                  10,493
Actual overheads                          $514,157

A. $20,957 under-absorbed
B. $21,015 over-absorbed
C. $21,015 under-absorbed
D. $41,972 under-absorbed

Answer: D

Cima C01 Exam Question No 15

Question No 15:

Fixed costs are conventionally deemed to be:

A. Constant per unit of output
B. Constant in total when production volume changes
C. Outside the control of management
D. Those unaffected by inflation

Answer: B

Cima C01 Exam Question No 14

Question No 14:

Which ONE of the following statements is true?

A. The total variable cost varies with a measure of activity.
B. A variable cost is an unavoidable cost.
C. A variable cost is not relevant for decision-making.
D. A variable cost becomes fixed in the long run.

Answer: A

Cima C01 Exam Question No 13

Question No 13

A hospital’s records show that the cost of carrying out health checks in the last five accounting periods have been as follows:
Period         Number of patients seen            Total cost ($)
1            650                                                        17,125
2            940                                                        17,800
3            1260                                                      18,650
4            990                                                        17,980
5            1150                                                      18,360
Using the high-low method and ignoring inflation, the estimated cost of carrying out health checks on 850 patients in period 6 is:

A. $17,515
B. $17,570
C. $17,625
D. $17,680

Answer: C

Cima C01 Exam Question No 12

Question No 12:

The diagram represents the behavior of a cost item as the level of output changes.



Which ONE of the following situations is described by the graph?

A. Discounts are received on additional purchases of material when certain quantities are purchased.
B. Employees are paid a guaranteed weekly wage, together with bonuses for higher levels of production.
C. A license is purchased from the government which allows unlimited production.
D. Additional space is rented to cope with the need to increase production.

Answer: A

Cima C01 Exam Question No 11

Question No 11:

An engineering firm operates a job costing system. Production overhead is absorbed at the rate of $8.50 per machine hour. In order to allow for non-production overhead costs and profit, a mark up of 60% of prime cost is added to the production cost when preparing price estimates.
The estimated requirements of job number 808 are as follows:
Direct materials             $10,650
Direct labor                 $3,260
Machine hours                 140
The estimated price notified to the customer for job number 808 will be

A. $22,256
B. $22,851
C. $23,446
D. $24,160

Answer: C

Cima C01 Exam Question No 10

Question No 10:

Which ONE of the following costs would NOT be classified as a production overhead cost in a food processing company?

A. The cost of renting the factory building
B. The salary of the factory manager
C. The depreciation of equipment located in the materials store
D. The cost of ingredients

Answer: D

Cima C01 Exam Question No 9

Question No 9:

A company uses the repeated distribution method to reapportion service department costs. The use of this method suggests

A. The company’s overhead rates are based on estimates of cost and activity levels, rather than actual amounts
B. There are more service departments than production cost centres
C. The company wishes to avoid under- or over-absorption of overheads in its production cost centres
D. The service departments carry out work for each other

Answer: D

Cima C01 Exam Question No 8

Question No 8:

Cost centres are?

A. Units of output or service for which costs are ascertained.
B. Functions or locations for which costs are ascertained.
C. A segment of the organisation for which budgets are prepared.
D. Amounts of expenditure attributable to various activities.

Answer: B

Cima C01 Exam Question No 7

Question No 7:

The audit fee paid by a manufacturing company would be classified by that company as:

A. A production overhead cost
B. A selling and distribution cost
C. A research and development cost
D. An administration cost

Answer: D

Cima C01 Exam Question No 6

Question No 6:

ABC absorbs fixed production overheads in one of its departments on the basis of machine hours. There were 100,000 budgeted machine hours for the forthcoming period. The fixed production overhead absorption rate was £2·50 per machine hour.
During the period, the following actual results were recorded:
Standard machine hours 110,000
Fixed production overheads $300,000
Which ONE of the following statements is correct?

A. Overhead was $25,000 over-absorbed
B. Overhead was $25,000 under-absorbed
C. Overhead was $50,000 over-absorbed
D. No under- or over-absorption occurred

Answer: B

Cima C01 Exam Question No 5

Question No 5:

Which THREE of the following statements about CIMA are true?

A. CIMA was established over 90 years ago
B. CIMA members may only work in the UK
C. CIMA members and students must comply with the CIMA code of ethics
D. CIMA members work mainly on the production of financial accounts
E. CIMA members are not qualified to work as finance directors
F. CIMA members work in all areas of business

Answer: A,C,F

Cima C01 Exam Question No 4

Question No 4:

Which of the following words complete the statement below?
____________ accounts are prepared for external stakeholders.
Management accounts are prepared for _____________ stakeholders.

A. Shadow, Internal
B. Financial, Internal
C. Financial, External
D. Internal, Budget

Answer: B

Cima C01 Exam Question No 3

Question No 3:

Which of the following statements are true?
1. The main role of the management accountant is to produce financial accounts
2. Management accountants always work within the finance function
3. Management accountants always work in partnership with business managers

A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. None of the above.


Answer: D

Cima C01 Exam Question No 2

Question No 2:

CIMA defines management accounting as:
“The application of the principles of accounting and financial management to create, protect, preserve and increase value for the _________________ of for-profit and not-for profit enterprises in the public and private sectors”.

A. Auditors
B. Stakeholders
C. Owners
D. Customers

Answer: B

Cima C01 Exam Question No 1

Question No 1:

Which of the following words DOES NOT describe a main focus of management accounting?

A. Planning
B. Control
C. External
D. Decision-making

Answer: C