P2 – Mock Exam 2 – Free Mode

An organisation currently operates a Just-in-Time Production process and has two production departments: cutting and assembly. Each department currently has sufficient resources to ensure there is no bottleneck and the operation works as smoothly as possible.

The organisation currently produces 500 units per week, with staff working a 40 hour week.

The Manager of the cutting department has identified a new method of production reducing the labour time required from 2.5 to 1.25 hours per unit.  The one requirement from senior management is that there is no build up of Work-in-Progress.

Should the organisation make the change in production to the cutting department?

Calculate the IRR is the following project:

An organisation has the following investment opportunity at a cost of capital of 11%:

The organisation has the option of investing a further £750,000 in year 4 and extending the project for two further years generating £350,000 in each year.

What is the correct decision?

A parent company has three subsidiaries, Subsidiary A manufactures Component A, and sells only to Subsidiary B. Subsidiary B develops the component and sells Finished Good B to both external customers and must supply Subsidiary C.

Subsidiary A currently adopts a cost plus transfer price resulting in a 20% margin.

Subsidiary B buys Component A for £36/unit and sells Finished Good B for £45/unit to external customers and to Subsidiary B for £42/unit.  Subsidiary B adopts a cost plus transfer price resulting in a 12.5% margin when sold externally.

The external customers have started negotiations with Subsidiary B and are demanding a price reduction of £6, or they will take their custom to a competitor.

Who will be the most frustrated with this proposal?

Which of the following are core principles of TQM?

Select all that apply

Calculate the EAA of the following, before deciding what project to invest in:

Project A will cost £10m and will generate £3.5m per annum for 5 years. Project B will cost £17m and will generate £5.5m for 7 years.
The rate of return is 10%

Perform your workings to 3 decimal places.

Which of the following would be completed for each responsibility centre under Responsibility Accounting?

Select all that apply

Consider the following costs, and selling prices:

What will the impact on the organisation be under the Proposed if it produces 10,000 units?

Under Process re-enginneering, which of the following should be reduced and eliminated?

Select all that apply

Calculate the EAA of the following, before deciding what project to invest in:

Project A will cost £10m and will generate £3.5m per annum for 4 years. Project B will cost £17m and will generate £5m for 6 years.
The rate of return is 10%

Perform your workings to 3 decimal places.

A Manager of a Cost Centre has received his latest budget and is running at a loss of £100,000, which of the following can the manager do to improve the performance of the department?

Select all that apply.

An Organisation has analysed its Footfall to Sales, and has identified the following:

The organisation has Fixed costs of £15,000 and is currently benefiting from footfall of 300 people.

The road to the front of the shop is going to be dug up by the water company, which will reduce the footfall – by what percentage must the footfall decrease for the organisation to be loss making?

Which of the following could not be used to close a cost gap?

What is being described below:

ending a price with a nine makes it appear disproportionately cheaper

Which of the following KPIs would be appropriate for a Manager of a Profit Centre?

Select all that apply

An organisation has calculated the mean price of a component at £42/unit and a standard deviation of £2.61.

What percentage of prices can we expect to be within one standard deviation?

If an organisation adopted a Differentiator Competitive Advantage and were to conduct a Value Chain Analysis, which of the following would aid the organisation in increasing profits?

Select all that apply?

A duopoly exists in in this market, both companies are gearing up for the release of the next generation of this product.  Company A knows that company B are behind on their development and are likely to be six months behind releasing their product.

Which pricing strategy is the most suitable?

Which of the following variances should a Cost Centre Manager be concerned with?

Select all that apply.

An organisation has went out to tender for a key components, three suppliers have responded:

Which Supplier should the organisation select if they need to produce 1,000 units which require 1 kg/unit?

When a product is at the maturity stage of its life cycle, which of the following would be appropriate?

Select all that apply.

When should the ‘Money Method’ be used when completing a NPV with inflation?

Select all that apply

The finance department are drafting a report on the performance of a subsidiary, the subsidiary is considered a Profit Centre by the parent.  Which of the following ratios will be of value to the subsidiary manager?

Select all that apply

Consider the decision tree below:

If a department manager had a new machine they wished to purchase, costing £275,000, an IRR of 31% and had the option of being delayed 12 months, what would the outcome be?

A product is entering the decline stage of its lifecycle, which one of the following costing models would be most appropriate?

An organisation is considering a new investment which would last four years, it has already invested £20,000 into a feasibility study and has the following information:

Asset would cost £160,000

Annual sales in Years 1 and 2: 40,000 units before reducing by 10,000 units per year in both Years 3 and 4. Selling price in the first year to be £12.50 and will increase at 2% per annum. Variable costs in Year 1 are £4.50 per unit and expected to increase at 2% per annum. Fixed costs are currently £240,000 and are expected to increase to £300,000 if this project is selected, growing by 5% per annum.

The asset is expected to have a residual value of £80,000 in money terms.

The working capital will need to increase by 15% of the expected sales revenue. The additional working capital is required from the outset.

Corporation tax is 20% per annum and is paid one year in arrears. 20% reducing balance writing-down allowances are available on the asset cost.

The necessary return on investment is 15%

Calculate the total of the Variable Costs over the four years.

Input your answer in the format “£X,XXX”, to the nearest pound.

A Manager of Cost Centre Manager has incurred expenses of £1.5m in materials and £0.9m in direct labour producing 800,000 units. They have been set a target of reducing the cost per unit from its current cost by 2% next financial year on a production volume of 850,000 units.  Assuming that direct labour will increase by 1%, what will the cost of materials per unit need to be to deliver the 2% reduction?

Calculate your workings and answer to two decimal places and provide your answer in the format “£X.XX”.

Which one of the following will not aid decision making in time of uncertainty?

Calculate the NPV on this investment opportunity:

Initial investment: £200,000
Net Cashflow Yr 1: £60,000
Net Cashflow Yr 2: 110,000
Net Cashflow Yr 3: £70,000
Net Cashflow Yr 4: £30,000

Scrap value of investment in Yr 4: £15,000

The required rate of return is 15%

Perform your calculations to three decimal places and complete the field below in the format “£X,XXX” to the nearest whole pound.

An organisation is considering a project with the following information:

The cost of capital is 10% and the growth is 4%.

The organisation is forecasting sales of £40,000 from year 3 onwards.

Complete the field below, in the format “£X,XXX” note that is to the nearest pound.

A Manager of a subsidiary that is considered an Investment Centre, has been set the following KPIs:

1. Increase residual income by 10%
2. Increase profitability by 15%
3. Increase liquidity by 5%

Which of the following would be an issue for the Manager to realise these targets?

What is being described below:

Managing risk in this context means using management techniques to reduce the probability or impact of the negative event without undue cost

An organisation has the following overhead and product information:

After a redesign of how materials are purchased, the number of activities will decrease to 9,600 and costs will reduce to £172,800, finally Product B will require only 9 purchasing materials activities.

What impact will this change have on the total overhead allocated to Product B?

Which of the following would be categorised as non-financial factors?

Select all that apply

A magazine publisher wants to charge 10% less for its advertising than similar publications, what type of benchmarking will assist in answering this query?

An organisation has the opportunity to take out an insurance policy against a disaster – under the TARA framework this is an example of what?

An organisation only produces two products, A and B, they also share a factory, some of the expense are shown below:

Running machines is the cost pool for the expense incurred in using the highly specialist equipment needed to make each of these products.  Production set up is completed by a specialist team who spend their time equally between the two products.  Machine Maintenance is the expense allocated in respect for maintaining the specialist machines and Management Salaries is a 50/50 split in costs between the two departments.

The Manager for Product B has called into question the appropriateness of one of the expenses.  Based on the available information above, which level of the cost hierarchy is being questioned?

Which of the following are factors of High Quality Data?

Select three

Which of the following are non-financial performance indicators for a Human Resource department?

Select all that apply.

An organisation has operated very successful in a field where new legislation has been introduced, with the potential impact of fines and significant costs to become compliant should the current machinery not be at the standard required by the new legislation.  The organisation has therefore decided to withdraw from this sector.  Under the TARA framework, this is an example of what?

Which of the following are advantages of Just In Time Production?

Select all that apply

A fast-growing organisation wants to develop a data driven marketing plan.  The organisation has a functioning accounting department which has remained unchanged since the organisation was founded. The organisation wants to grow its market share but lacks the systems necessary to capture and analyse the data.

If the organisation was to introduce a Business Intelligence Systems, which of the following problems could be overcome?

Select all that apply

Match the KPI to the correct perspective of the Balanced Scorecard.

Which one of the following would be in the public interest?

Rearrange the steps below of Calculating the full production cost of a unit using Activity Based Costing, starting with the earliest task at the top.

Which of the following would be included as part of the Technical feasibility section of a project proposal?

Select all that apply.

A Manager of a subsidiary which is considered a Cost Centre in a declining market, has received the following targets for the financial year ahead:

1. Increase revenue by 15%
2. Increase output by 10%
3. Maintain costs at current levels
4. Increase Profit by 10%

Which of the following statements are true?

One issue often faced by organisations new to analysing Big Data is defined below:

Much of the information gathered by companies’ conducting big data is sensitive or personal information, this means the firm need to ensure that they are meeting industry standards or legislation when storing the data.

What is being defined?

Activity Based Costing depends on which one of the following to drive improvements in profitability?

Several investors are considering the following investment, each has their own cost of capital:

Investor A: 10%
Investor B: 12%
Investor C: 15%
Investor D: 18%

Which investors would consider this investment?

Select all that apply

Which method of transfer pricing is being described below?

In a perfectly competitive market place for a product, then the market price is the best transfer price

Which of the following ignores the time value of money?

Select all that apply

Calculate the EAA of the following, before deciding what project to invest in:

Project A @ 10% cost of capital

Project B @ 18% cost of capital

Perform your workings to 3 decimal places.

With regards to transfer pricing, if no external market exists for a product, the producing department is most likely considered which of the following?

Which of the following is not true regarding NPV?

Calculate the EAA of the following, before deciding what project to invest in:

Project A @ 15% cost of capital

Project B @ 18% cost of capital

Perform your workings to 3 decimal places.

Two managers are negotiating a transfer price.  The cost of the component is £12 and the company has a policy of adding 20% for costing jobs.  The market price of this component is £16/unit.

If the managers agree on a cost plus approach what would the price be?

In put your answer in the format “£X.XX”.

An organisation is considering two possible projects, it has a rate or return of 15% and a payback period of less than two years, which project should they select?

An organisation has £5,500,000 to invest in projects, using Profitability Indexing and the projects NPV, which projects should be selected?

Select all that apply

A department manager had only one internal customer until recently, under the current transfer pricing arrangement the department sold the component at cost.  However, the department manager has been approached by an external customer who is willing to pay £20/unit, which would result in a profit mark-up of 30%.

The department manager wants this profit to be reflected in internal sales, however the internal customer is refusing to move from the current arrangement.  Senior Management have decided to adopt a dual pricing model based, allowing the department to sell at the market rate and the internal customer to record the purchase at cost.

What is the difference per unit?

Input your answer int he field below int he format “£X.XX”.