CIMA P1 - Management Accounting Question Tutorial Sample Questions:

1. A major company sells a range of electrical, clothing and homeware products through a chain of department stores. The main administration functions are provided from the company's head office. Each department store has its own warehouse which receives goods that are delivered from a central distribution center.
The company currently measures profitability by product group for each store using an absorption costing system. All overhead costs are charged to product groups based on sales revenue. Overhead costs account for approximately one-third of total costs and the directors are concerned about the arbitrary nature of the current method used to charge these costs to product groups.
A consultant has been appointed to analyses the activities that are undertaken in the department stores and to establish an activity based costing system.
The consultant has identified the following data for the latest period for each of the product groups for the X Town store:

Calculate the total profit for each of the product groups:
.... using the current absorption costing system;

A) The profit or loss in $ was.... Clothing 85; Electrical 36; Homeware (28)
B) The profit or loss in $ was.... Clothing (175); Electrical 86; Homeware 22
C) The profit or loss in $ was.... Clothing 122; Electrical 56; Homeware (178)
D) The profit or loss in $ was.... Clothing 192; Electrical (56); Homeware 148

2. A company produces trays of pre-prepared meals that are sold to restaurants and food retailers. Three varieties of meals are sold: economy, premium and deluxe.


Calculate, for the original budget, the budgeted fixed overhead costs, the budgeted variable overhead cost per tray and the budgeted total overheads costs.

A) The variable cost per tray = $0.85; The fixed cost = $ 530 000
B) The variable cost per tray = $0.45; The fixed cost = $ 320 000
C) The variable cost per tray = $0.65; The fixed cost = $ 550 000
D) The variable cost per tray = $0.75; The fixed cost = $ 490 000

3. A decision maker that makes decisions using the minimax regret criterion would be classified as:

A) Risk spreading
B) Risk seeking
C) Risk neutral
D) Risk averse

4. GH manufactures a product using skilled labour and high quality materials. The company operates a standard costing system and a just-in-time (JIT) purchasing and production system. The standard selling price and variable costs for one unit of the product are as follows:

Prepare a statement that reconciles the budgeted contribution with the actual contribution for October. Your statement should show the variances in as much detail as possible.
What was the actual contribution for October?

A) $ 1,414,000
B) $ 1,324,000
C) $ 1,594,000
D) $ 1,198,000
E) $ 1,494,000

5. CH is a building supplies company that sells products to trade and private customers.
Budget data for each of the six months to March are given below:

80% of the value of credit sales is received in the month after sale, 10% two months after sale and 8% three months after sale. The balance is written off as a bad debt.
75% of the value of credit purchases is paid in the month after purchase and the remaining 25% is paid two months after purchase.
All other operating costs are paid in the month they are incurred.
CH has placed an order for four new forklift trucks that will cost $25,000 each. The scheduled payment date is in February.
The cash balance at 1 January is estimated to be $15,000.
Prepare a cash budget for each of the THREE months of January, February and March.
Select All the correct answers.

A) The total receipts in January will be $320 000
B) The total receipts in January will be $245 000
C) Total payments in March will be $323 000
D) The total payments in February will be $405 000

Solutions: