CIMA CIMAPRO19-P02-1 Quiz 2 Topic 1 Questions 6-10

Question: 1

How does beyond budgeting NOT help to resolve the weaknesses of traditional budgeting? Select ALL that apply.

AManagers are set goals and targets to achieve rather than abiding by strict budgets and variances.

BManagers have a much larger scope of business goals that when achieved, will increase shareholder value.

CManagers are given more freedom and control over their business units under Beyond budgeting.

DManagers focus on keeping costs low in the short term to ensure maximised profits.

EManagers are given incentives to meet or undercut budgets.

FManagers are encouraged to designate responsibility to others to lessen their workload so they may concentrate on important tasks.

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Question: 2

Product WB currently sells for $13 per unit. Annual demand at that price is 20,000 units. If the price increases to $15, the annual demand falls by 500 units.

What is the formula for the demand curve?

AQ = a - bP

BP = f(Q).

CQd = a -- b(P

DP = a -b(Q)

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Question: 3

Which THREE of the following are advantages of changing from a 'top-down' to a 'bottom-up' (participative) style of budgeting?

AThe budget will be based on information from employees who are familiar with the day to day activities.

BMotivation will improve due to a feeling of ownership of the budget.

CThere will be increased commitment to organizational objectives.

DBudget setters will be forced to justify every item on the budget.

EThere will be reduced likelihood of budgetary slack being built into the budgets for 'selfish' reasons.

FIt will be less time-consuming for operational managers.

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Question: 4

A company operates a divisional structure. The manager of division D receives a bonus based on the division's annual return on capital employed (ROCE).

A minimum ROCE of 20% must be achieved to receive any bonus and thereafter the bonus increases in line with increases in ROCE.

This year division D achieved a ROCE of 24% and the divisional manager received a large bonus.

The manager is considering an investment in a new machine for next year. The incremental ROCE earned by the machine is expected to be 19% although the ROCE for the division as a whole with the machine is expected to be 22%. Without the machine, ROCE is likely to be stable at 24%.

The cost of capital for the company as a whole is 18% per year.

Which of the following statements is correct?

AThe manager will accept the investment because overall the division will earn a ROCE that exceeds the minimum target of 20%.

BThe manager will reject the investment because it will result in a lower bonus than without the investment.

CThe manager will accept the investment because it will earn a ROCE that is higher than the company's cost of capital.

DThe manager will reject the investment because it will result in the receipt of no bonus.

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Question: 5

How does beyond budgeting NOT help to resolve the weaknesses of traditional budgeting? Select ALL that apply.

AManagers are set goals and targets to achieve rather than abiding by strict budgets and variances.

BManagers have a much larger scope of business goals that when achieved, will increase shareholder value.

CManagers are given more freedom and control over their business units under Beyond budgeting.

DManagers focus on keeping costs low in the short term to ensure maximised profits.

EManagers are given incentives to meet or undercut budgets.

FManagers are encouraged to designate responsibility to others to lessen their workload so they may concentrate on important tasks.

Show Answer

CIMA CIMAPRO19-P02-1 Quiz:2 Topic:1 Questions:6-10