CIMA CIMAPRO19-P01-1 Quiz 1 Topic 1 Questions 1-5

Question: 1

A manager has not yet used all oh his budget. He is worried that his budget maybe reduced next year if he is not seen to have needed all the funds. He decides to spend the remaining 1,580 on another team building exercise as well as a catered lunch for his department.

This example falls under which behavioural aspect of budgetary control?

AIrrational spending

BMotivation

CBudget negotiation

DShort term focus

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Question: 2

Explain why sensitivity analysis is useful when dealing with uncertainty in project

appraisal.

Select all the true statements.

ASensitivity analysis enables a company to determine the effect of changes to fixed costs on the planned outcome

BSensitivity analysis enables a company to determine the effect of changes to variables on the planned outcome

CIn project appraisal, an analysis can be made if all the key variables to ascertain by how much variable would need to change before the net present value (NPV) reaches zero i.e. the indifference point.

DIn project appraisal, in analysis can be made of all the key variables to ascertain by how much each variable would need to change before the net present value (NPV) reaches 100% i.e. the maximum point.

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Question: 3

A company is considering two mutually exclusive projects.

The returns on each project, at both high and low demand, have been multipled by the estimated probabilities to calculate the expected values shown in the table below:

q3_CIMAPRO19-P01-1

Market research would be able to determine with certainty what the level of demand will be.

What is the maximum amount that the company should pay for this certainty?

A$600

B$700

C$360

D$2,300

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Question: 4

A snowboard manufacturer is considering investing in technology that will give a good indication of how heavy snowfall will be in the future. The predictions tend to be reasonably accurate.

The current budgeted profit for the year is 2,560,000 but if they invest in this technology and it works, the expected profit will be 2,640,000. The manufacturer is willing to invest a maximum of 40,000 into the venture.

What is the expected profit if the investment is NOT made?

A2,560,000

B2,640,000

C2,520,000

D2,600,000

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Question: 5

The term 'budgetary slack' refers to the:

ALead time between the preparation of the functional budgets and the approval of the master budget by senior management

BDifference between the budgeted output and the actual output

CDifference between budgeted capacity utilization and full capacity

DIntentional over estimation of costs and/or under estimation of revenue in a budget

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CIMA CIMAPRO19-P01-1 Quiz:1 Topic:1 Questions:1-5