FREE CIMA Management Accounting Questions and Answers

Question 1

The term 'budgetary slack' refers to the:

Accepted Answer

Intentional overestimation of costs and/or under-estimation of revenue in a budget

Answer

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

Answer

Difference between the budgeted output and the actual output

Answer

Difference between budgeted capacity utilization and full capacity

Question 2

You have just assessed an investment proposal, involving an immediate cash outflow followed by a series of cash inflows over the next 7 years, by deducing the NPV and the IRR. You have now discovered that you have underestimated the discount rate.

Correcting the underestimation will have the following effect, relative to your original deductions:

Accepted Answer

NPV will reduce, IRR will not change

Answer

NPV and IRR will not change

Answer

NPV will increase, IRR will reduce

Answer

NPV and IRR will both increase

Question 3

Juan is looking to invest in the mining industry. He has narrowed his options down to two rival companies, both with sales of 200m. Company A has an EBIT of 10m whereas Company B has an EBIT of 14m.

This would suggest that Company B is the better investment but Juan is suspicious that Company B has more financial backing than Company A.

Which ratios will tell him which company will use his investment the best?

Accepted Answer

R.O.C.E

Answer

Profit margin

Answer

Current ratio

Answer

Quick ratio

Question 4

TTR Ltd plans to purchase a new plant for $1,000m on the 1st of January 20X6. The annual sales expected from the production of this plant is S400m per year. The plant has an expected life of five years. The financial accountant has computed the NPV of the project at $61.42m considering a discount rate of 10%. The marketing director wants to know the percentage drop in revenue that the sales team can afford before the project becomes unviable. Which of the following indicates the percentage required by the marketing director?

Accepted Answer

4.05%

Answer

5.05%

Answer

4.50%

Answer

10%

Question 5

The net present value of the cost of operating a machine for the next 4 years is 6,340. The discount rate used is 10%.

What is the equivalent annual cost and the present value of the cost in perpetuity of operating this machine?

Use discount factors to 3 decimal places.

Accepted Answer

Equivalent annual cost = 2,000
Present value of cost in perpetuity = 20,000

Answer

Equivalent annual cost = 92,825
Present value of cost in perpetuity = 9,283

Answer

Equivalent annual cost = 9,283
Present value of cost in perpetuity = 92,825

Answer

Equivalent annual cost = 20,000
Present value of cost in perpetuity = 2,000

Question 6

According to Kotter's process of change, what is the purpose of building a guiding coalition?

Accepted Answer

To give the change direction and focus.

Answer

To ensure all key stakeholders are brought into the process.

Answer

To communicate the long-term vision and strategy.

Answer

To enable actions by removing barriers.

Question 7

A flexible budget is a budget that is __________.

Accepted Answer

changed in response to changes in the level of activity

Answer

set before the control period and not subsequently changed in response to changes in the activity period has expired

Answer

continuously updated by adding a further accounting period when the earliest accounting period has expired

Answer

changed in response to changes in costs

Question 8

AAA is a car manufacturer that has undertaken a strategy to lobby a regional authority to include Its flagship hybrid model in a regional initiative to grant low-emission cars access to faster-moving vehicle lanes. These faster vehicle lanes were historically only available to cars carrying passengers. Given the benefits of AAA's low-emission vehicles, AAA's cars were authorized to make use of the faster lanes, even when no passengers were on board providing AAA with a decisive competitive edge.

Which of the following strategies is AAA pursuing?

Accepted Answer

A non-market strategy.

Answer

An environmental strategy.

Answer

A sustainability strategy.

Answer

A market strategy

Question 9

A has a portfolio of business units. One of A's units has a total market share of 25% and its largest competitor has a market share of 20%. In the last year, the overall market of this business unit has declined by 2%, although its revenues have increased by 12%. following a successful marketing campaign.

According to the BCG matrix. A's business unit would be classified as which of the following?

Accepted Answer

Star

Answer

Dog

Answer

Cash Cow

Answer

Question Mark

Question 10

Company Y is a global business selling a selection of technological items including phones, laptops, and other computer-related items. In addition, Y sells accessory items, music downloads, apps: digital books, and video downloads including films and television series through a cooperative partnership with other companies, designed to create value for the customer.

Which of the following terms best describes what Y has created?

Accepted Answer

A digital ecosystem

Answer

Artificial intelligence

Answer

A blockchain arrangement

Answer

An entirely cloud-based offering