CIMA CIMAPRO15-P01-X1-ENG Value Pack (Frequently Bought Together)

A company produces three products D, E and F. The statement below shows the selling price and product costs per unit for each product, based on a traditional absorption costing system.

Each of the products is produced using Process A which has a maximum capacity of 2,500 hours per period.
If a throughput accounting approach is used, the ranking of products, in order of priority, for the profit maximizing product mix will be:

• A. F, D, E
• B. D, E, F
• C. D, F, E
• D. E, D, F

Explain THREE benefits that organizations gain from using budgetary planning and control systems.
Select ALL the true statements.

• A. Budgeting forces an organization's management to look ahead and set performance targets.
• B. The budget is a useful device of influencing an operator's thoughts and motivating operators to perform in line with the organization's marketing budget.
• C. The budget acts as a variable mechanism, with actual results being compared with budget.
• D. The budget provides an external benchmark against which performance against which performance can be evaluated.
• E. It provides a standard which managers may be motivated to achieve. It can also encourage inefficiency
  and conflict between managers particularly if the budget is imposed from above, whereby it may act as a threat rather than as a challenge.
• F. The budget ensures actions of different parts of the organization are coordinated are reconciled otherwise managers take actions for the benefit of their own part of organization that may not benefit the organization as a whole.
• G. Another benefit of budgeting is to set targets to motivate managers and optimize their performance.

QR uses an activity based budgeting (ABB) system to budget product costs. It manufactures two products, product Q and product R. The budget details for these two products for the forthcoming period are as follows:

The total budgeted cost of setting up the machines is $74,400.
Select TWO potential benefits of using an activity based budgeting system.

• A. Activity based budgeting allows the ranking of activities and the determination of how limited resources should be allocated across competing activities.
• B. Activity based budgeting provides a clear framework for understanding the link between turnover and the level of activity.
• C. Activity based budgeting is useful for the review of quality systems utilization.
• D. Activity based budgeting allows the identification of value added and non-value added activity and ensures that any budget cuts are made to non-value added activities.

A healthcare company specializes in hip, knee and shoulder replacement operations, known as surgical procedures. As well as providing these surgical procedures the company offers pre operation and post operation in-patient care, in a fully equipped hospital, for those patients who will be undergoing the surgical procedures.
Surgeons are paid a fixed fee for each surgical procedure they perform and an additional amount for any follow-up consultations. Post procedure follow-up consultations are only undertaken if there are any complications in relation to the surgical procedure. There is no additional fee charged to patients for any follow up consultations. All other staff are paid annual salaries.
The company's existing costing system uses a single overhead rate, based on revenue, to charge the costs of support activities to the procedures. Concern has been raised about the inaccuracy of procedure costs and the company's accountant has initiated a project to implement an activity-based costing (ABC) system.
The project team has collected the following data on each of the procedures.

Calculate the profit per procedure for each of the three procedures, using the current basis for charging the costs of support activities to procedures.
What was the profit for the knee procedure?

• A. $1390
• B. $1510
• C. $1485
• D. $1210

A company is preparing its annual budget and is estimating the number of units of Product W that it will sell in each quarter of year 2. Past experience has shown that the trend for sales of the product is represented by the following relationship:

Calculate the expected unit sales of Product W for each quarter of year 2, after adjusting for seasonal variations using the multiplicative model.

• A. The sales forecast for year 2 Quarter 4 = 35,100 units
• B. The sales forecast for year 2 Quarter 4 = 38,100 units
• C. The sales forecast for year 2 Quarter 4 = 25,100 units
• D. The sales forecast for year 2 Quarter 4 = 22,600 units