CIMA P1 - Management Accounting Question Tutorial Sample Questions:

1. RS is a travel company providing daily tours of a major European capital city. The market is highly competitive and RS has commissioned some market research to help with the pricing decision for a new tour. The research identified the probability of three possible market conditions and the number of tickets that would be sold each day at three different price levels.

Demonstrate, using a decision tree and based on expected value, which ticket price RS should choose.

A) RS should charge a ticket price of $75
B) RS should charge a ticket price of $80.
C) RS should charge a ticket price of $90.
D) RS should charge a ticket price of $100.
E) RS should charge a ticket price of $70.

2. 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) E, D, F
B) D, F, E
C) D, E, F
D) F, D, E

3. A marketing manager is trying to decide which of four potential selling prices to charge for a new product. The state of the economy is uncertain and may show signs of recession, growth or boom. The manager has prepared a regret matrix showing the regret for each of the possible outcomes depending on the decision made.

If the manager applies the minimax regret criterion to make decisions, which selling price would be chosen?

A) $55
B) $40
C) $50
D) $45

4. A major company sells a range of electrical, clothing and homeware products through a chain of department stores. The main administration functions are provided from the company's head office. Each department store has its own warehouse which receives goods that are delivered from a central distribution center.
The company currently measures profitability by product group for each store using an absorption costing system. All overhead costs are charged to product groups based on sales revenue. Overhead costs account for approximately one-third of total costs and the directors are concerned about the arbitrary nature of the current method used to charge these costs to product groups.
A consultant has been appointed to analyses the activities that are undertaken in the department stores and to establish an activity based costing system.
The consultant has identified the following data for the latest period for each of the product groups for the X Town store:

Calculate the total profit for each of the product groups:
.... using the current absorption costing system;

A) The profit or loss in $ was.... Clothing 122; Electrical 56; Homeware (178)
B) The profit or loss in $ was.... Clothing 85; Electrical 36; Homeware (28)
C) The profit or loss in $ was.... Clothing 192; Electrical (56); Homeware 148
D) The profit or loss in $ was.... Clothing (175); Electrical 86; Homeware 22

5. A company produces trays of pre-prepared meals that are sold to restaurants and food retailers. Three varieties of meals are sold: economy, premium and deluxe.


Calculate, for the original budget, the budgeted fixed overhead costs, the budgeted variable overhead cost per tray and the budgeted total overheads costs.

A) Original budget contribution = $172 000, Flexed budget contribution = $ 148 200, Actual Contribution $ 221 960
B) Original budget contribution = $272 000, Flexed budget contribution = $ 248 200, Actual Contribution $ 321 960
C) Original budget contribution = $162 000, Flexed budget contribution = $ 178 200, Actual Contribution $ 201 960
D) Original budget contribution = $242 000, Flexed budget contribution = $ 148 200, Actual Contribution $ 121 960

Solutions: