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Frequently Asked Questions

CIMA BA2 Sample Question Answers

Question # 1

Which of the following is a valid definition of a cash budget?

A. A detailed budget of estimated cash inflows and outflows incorporating both revenue and capital items. 
B. A detailed budget of estimated cash inflows only, incorporating receipts from cash salesas well as from credit customers. 
C. A detailed budget of estimated cash inflows and outflows incorporating revenue itemsonly. 
D. A detailed budget of estimated cash outflows only, incorporating both depreciation andcapital expenditure. 

Question # 2

A. $6,220 adverse. 
B. $9,267 adverse. 
C. $16,000 adverse. 
D. $5,666 adverse. 

Question # 3

Which of the following would NOT be an appropriate performance measure for a profitcentre manager?

A. Return on capital employed 
B. Contribution per unit 
C. Sales price variance 
D. Gross margin 

Question # 4

A. $37.80 
B. $46.20 
C. $45.00 
D. $55.00 

Question # 5

A confectionery manufacturer is considering adding a new product to the current range. Forecast data for the product are as follows.

A. The margin of safety is negative because the target profit will not be achieved from theforecast sales volume. 
B. If the fixed cost is changed to $20,000 the sales volume required to break even willdecrease. 
C. If the forecast sales volume is changed to 190 units the sales volume required toachieve the target profit will decrease. 
D. If the selling price is changed to $510 the sales volume required to achieve the targetprofit will increase. 

Question # 6

According to CIMA’s Code of Ethics, CIMA members should not allow bias, conflict ofinterest of the influence of other people to override their professional judgement.This is an example of:

A. objectivity. 
B. professional behaviour. 
C. integrity. 
D. professional competence and due care. 

Question # 7

In order for the information in a management accounting report to be authoritative itscontents must be:

A. trusted and from reliable sources. 
B. complete and reported in a timely manner. 
C. complete and relevant. 
D. both financial and non-financial. 

Question # 8

A. $21 
B. $27 
C. $35 
D. $29 

Question # 9

A project is about to be launched. Two of the three possible outcomes and their associatedprobabilities are as follows:

A. ($30,000 + $70,000 - $25,000) / 3 
B. ($30,000 + $70,000 - $25,000) x (0.7 + (1.0 - (0.2 + 0.7)) + 0.2) 
C. ($30,000 x 0.7) + ($70,000 x (1.0 - (0.2 + 0.7))) + ($25,000 x 0.2) 
D. ($30,000 x 0.7) + ($70,000 x (1.0 - (0.2 + 0.7))) - ($25,000 x 0.2) 

Question # 10

Based upon extensive historical evidence, a company’s daily sales volume is known to benormally distributed with a mean of 1,728 units and a standard deviation of 273 units.What is the probability that, on any one day, the sales volume will be at least 1,300 units?

A. 5.82% 
B. 73.89% 
C. 44.18% 
D. 94.18% 

Question # 11

A sales manager has analysed a sample of 350 sales transactions from the latest period.The manager wishes to investigate:how many customers made their purchase online using the internet and how manypurchased by telephone.how many were new customers and how many were placing repeat orders.The following table shows the results of the analysis.

A. 0.11 
B. 0.40 
C. 0.16 
D. 0.35 

Question # 12

A. $22,672 debit. 
B. $2,208 credit. 
C. $2,208 debit. 
D. $22,672 credit. 

Question # 13

The year-to-date results at the end of month 9 included sales revenue of $3,600,000 andvariable costs of $2,100,000.During month 10, sales revenue was $450,000 and variable costs were $270,000.What year-to-date contribution to sales ratio (C/S ratio) would be reported at the end ofmonth 10?

A. 58,5% 
B. 70,9% 
C. 41,5% 
D. 40,0% 

Question # 14

A. $3,260 adverse 
B. $18,580 adverse 
C. $3,340 adverse 
D. $3,260 favourable 

Question # 15

Which of the following would NOT require taking into account the time value of money?

A. Deciding to make a long-term investment in a project on the basis of its payback period. 
B. Selecting an investment project on the basis that it has a positive net present value(NPV). 
C. Calculating the present value of a five-year annuity. 
D. Taking a long-term investment decision on the basis of the project’s internal rate ofreturn (IRR). 

Question # 16

A company’s policy is to hold closing inventory each month equal to 10% of the nextmonth’s budgeted sales volume. The budgeted sales volumes of product Q for months 1and 2 are 1,660 units and 2,300 units respectively.The production budget for product Q for month 1 is:

A. 1,596 units 
B. 1,494 units 
C. 1,724 units 
D. 1,890 units 

Question # 17

In responsibility accounting, costs and revenues are grouped according to:

A. the budget holder. 
B. their function. 
C. the service provided. 
D. their behaviour.

Question # 18

A company makes and sells a range of products. The standard details per unit for one of these products, product X, are as follows.

A. $20,000 
B. $30,000 
C. $27,500 
D. $5,000 

Question # 19

The International Federation of Accountants (IFAC) stated that it was important that“accountants in business” should understand what the drivers of stakeholder value are.Which of the following statements is valid?

A. Anyone with an interest in an organisation can be considered to be one of itsstakeholders. 
B. Stakeholders must be external to the organisation. 
C. Only an organisation’s shareholders and employees can be considered to be itsstakeholders. 
D. Only an organisation’s shareholders can be considered to be its stakeholders. 

Question # 20

Which TWO of the following are characteristics of Management Accounts? (Choose two.)

A. Governed by rules and regulations 
B. Provide information to managers 
C. Provide information needed by shareholders 
D. Internally focused 
E. Statutory requirement 

Question # 21

Which of the following is NOT a valid purpose of budgeting?

A. To communicate targets to managers. 
B. To comply with financial reporting requirements. 
C. To coordinate the different activities of an organisation. 
D. To authorise managers to incur expenditure. 

Question # 22

A. An annuity could be used to calculate the net present value of the projects. 
B. The annuity factor for project A would be lower than the annuity factor for the project B. 
C. A perpetuity could be used to calculate the net present value of the projects. 
D. The annuity factor for project A would double the annuity factor for project B. 

Question # 23

A. $6 
B. $7 
C. $8 
D. $9 

Question # 24

An organisation produces and sells a single product. The organisation’s managementaccountant has reported the following information for the most recent period.

A. If the contribution to sales ratio changed to 30%, the breakeven point would becomehigher. 
B. If the fixed cost changed to $445,000, the breakeven point would not change. 
C. If the sales volume changed to 220,000 units, the breakeven point would not change. 
D. If the selling price changed to $22 per unit, the breakeven point would become lower. 
E. If the variable cost changed to $16 per unit, the breakeven point would become lower. 

Question # 25

Which of the following statements regarding variances is valid?

A. Using higher quality material than standard could explain an adverse labour efficiencyvariance. 
B. Improved maintenance of production machinery could explain an adverse materialusage variance. 
C. An adverse labour rate variance could explain a favourable labour efficiency variance. 
D. Poor supervision could explain a favourable labour rate variance. 

Question # 26

Which THREE of the following are included in the Global Management AccountingPrinciples? (Choose three.)

A. Accountability 
B. Influence
C. Value 
D. Professional behaviour 
E. Relevance 
F. Integrity 

Question # 27

A. $54.00 
B. $50.77 
C. $47.00 
D. $44.55 

Question # 28

Which of the following statements relating to risk and uncertainty is correct?

A. Risk exists when we do not know all of the possible outcomes. 
B. Risk exists when we know all of the possible outcomes but not their probabilities. 
C. Uncertainty exists when we know all of the possible outcomes but not their probabilities. 
D. Uncertainty exists when we know all of the possible outcomes and their probabilities. 

Question # 29

Which THREE of the following are parts of the master budget? (Choose three.)

A. Finished goods inventory budget. 
B. Budgeted statement of profit or loss. 
C. Cash flow budget.
D. Sales budget. 
E. Administration overhead budget. 
F. Budgeted statement of financial position. 

Question # 30

A. A favourable labour rate variance. 
B. A favourable sales volume contribution variance. 
C. An adverse sales price variance. 
D. An adverse labour efficiency variance. 
E. An adverse material price variance. 

Question # 31

Which of the following is a relevant cost?

A. A sunk cost 
B. A committed cost 
C. An incremental cost 
D. A historical cost 

Question # 32

Which of the following statements about batch costing is true?

A. Batch costing must use absorption costing. 
B. The cost of a batch is found by multiplying the cost of one unit by the number of units inthe batch. 
C. Batch costing must use marginal costing. 
D. The cost of a unit is found by dividing the cost of a batch by the number of units in thebatch. 

Question # 33

A company that uses standard costing wishes to reconcile the difference between the profitfor a period calculated using absorption costing with that calculated using marginal costing.Which TWO of the following will NOT help with this reconciliation? (Choose two.)

A. The actual fixed production overheads. 
B. The closing inventory. 
C. The opening inventory. 
D. The under or over absorbed fixed production overheads. 
E. The fixed production overhead absorption rate. 

Question # 34

In a company that manufactures many different products on the same production line,which TWO of the following would NOT be classified as indirect production costs? (Choosetwo.)

A. Salary paid to the factory manager. 
B. Factory rent. 
C. Maintenance costs for the company’s only production line. 
D. Commissions paid to the sales team. 
E. Royalties paid to the designers of the products. 

Question # 35

A. 6.22 
B. 6.50 
C. 6.38 
D. 8.50 

Question # 36

A. Division A 
B. Division B 
C. Division C 
D. Division D 

Question # 37

A company operates an integrated standard cost accounting system. The standard price ofraw material A is $20 per litre. At the start of period 1, the inventory of 500 litres of rawmaterial A was valued at $20 per litre. During period 1, 100 litres of raw material A werepurchased at an actual price of $21 per litre. During period 2, 550 litres of raw material Awere issued to Job 789.In respect of the above events, which TWO of the following statements are correct?(Choose two.)

A. The raw material inventory at the end of period 1 should include 100 litres valued at $21per litre. 
B. An adverse material price variance should be recorded in the statement of profit or lossfor period 1. 
C. The raw material inventory at the end of period 2 should be valued at $20 per litre. 
D. An adverse material price variance should be recorded in the statement of profit or lossfor period 2. 
E. The first 500 litres of raw material A issued should be debited to the Job 789 account at$20 per litre, and the remaining 50 litres at $21 per litre. 

Question # 38

The concept of the time value of money:

A. recognises the fact that a cash flow received today will always be worth more than alarger cash flow received in the future. 
B. is used for making short term decisions. 
C. determines the higher interest rates that must be paid on longer term loans. 
D. recognises the fact that earlier cash flows are worth more because they can bereinvested. 

Question # 39

Which of the following is NOT a characteristic of useful operational level information?

A. Sufficiently accurate. 
B. Focused on the decision to be made. 
C. Available immediately. 
D. Governed by financial reporting standards. 

Question # 40

A management accountant has forecast the following cash inflows from four potential projects.

A. Project A 
B. Project B 
C. Project C 
D. Project D 

Question # 41

A. The expected value of the total return is $41,500 gain. 
B. The probability of the total return being a loss is 0.10. 
C. The probability of making a total return of exactly $5,000 gain is 0.02. 
D. The probability of the total return being a gain is less than 1.00. 
E. The expected value of the total return is $40,000 gain. 

Question # 42

A. $462 favourable. 
B. $462 adverse. 
C. $2,202 favourable. 
D. $2,202 adverse. 

Question # 43

The staffing policy for a supermarket is to have one cashier station open for everyforecasted 20 customers per hour. Cashiers are hired by the hour as and when required,and do not perform any other duties.The cost of the cashiers in relation to the number of customers would be classified aswhich type of cost?

A. Stepped fixed cost 
B. Variable cost 
C. Semi-variable cost 
D. Fixed cost 

Question # 44

A company is considering investing $57,000 in a machine that will last for five years, afterwhich time it will have no value. The machine will generate additional revenue of $190,000each year. Annual running costs, including depreciation of $11,400 will amount to$168,400.Assuming that all cash flows occur evenly, the payback period of the investment in themachine is closest to:

A. 2 years 8 months 
B. 1 year 9 months 
C. 1 year 7 months 
D. 2 years 6 months 

Question # 45

A. The fixed costs should be flexed to $40,000 + 10% = $44,000. 
B. The material quantity should be flexed to 60,000 + 10% = 66,000 kg. 
C. The basic pay hours should not be flexed; they should remain at 1,000 hours. 
D. The overtime hours should be flexed to (1,000 + 10%) - 900 = 200 hours. 
E. The material price should be flexed to the actual figure of $3.10 per kg. 

Question # 46

Which type of budget would be the most suitable for a cash budget?

A. Fixed budget 
B. Rolling budget 
C. Incremental budget 
D. Flexible budget 

Question # 47

A company has spent $5,000 on a report into the viability of using a subcontractor. Thereport highlighted the following:A machine purchased six years ago for $30,000 would become surplus to requirements. Ithas a written-down value of $10,000 but would be resold for $12,000.A machine operator would be made redundant and would receive a redundancy paymentof $40,000.The administration of the subcontractor arrangement would cost the company $25,000each year.Which THREE of the following are relevant for the decision? (Choose three.)

A. A relevant cost of $5,000 for the viability report.
B. A relevant cost of $30,000 for the machine. 
C. A relevant cost of $40,000 for the redundancy payment. 
D. A relevant cost of $10,000 for the machine. 
E. A relevant cost of $25,000 each year for administration. 
F. A relevant revenue of $12,000 for the machine. 

Question # 48

The following data are available for a company that produces and sells a single product.The company’s opening finished goods inventory was 2,500 units.The fixed overhead absorption rate is $8.00 per unit.The profit calculated using marginal costing is $16,000.The profit calculated using absorption costing and valuing its inventory at standard cost is$22,400.The company’s closing finished goods inventory is:

A. 3,300 units 
B. 1,700 units 
C. 3,900 units 
D. 8,900 units 

Question # 49

Assume that a unit of output is the cost object. Which of the following statements is valid?

A. Royalties paid on per unit basis are an example of an indirect expense. 
B. Materials consumed in the maintenance of machinery used to manufacture severaldifferent products are an example of a direct material cost. 
C. The salaries of supervisors who oversee the manufacture of several different productsare an example of a direct labour cost. 
D. Rent paid for a factory in which several different products are produced is an example ofan indirect expense. 

Question # 50

A company which manufactures and sells one product has fixed costs of $80,000 perperiod. The selling price per unit of $25 generates a contribution/sales ratio of 40%.How many units would need to be sold in a period to earn a profit of $10,000?

A. 9,000 
B. 8,000 
C. 36,000 
D. 32,000 

Question # 51

S = 5,800 + 0.2MWhere M = total Maintenance overhead after reapportionment from StoresS = total Stores overhead after reapportionment from Maintenance60% of the total Maintenance overhead and 50% of the total Stores overhead are to beapportioned to Production Department 1.The total production overhead for Production Department 1 after reapportionment of theservice departments’ overhead costs is closest to:

A. $71,672 
B. $75,500 
C. $70,720 
D. $71,821 

Question # 52

A. Outlet A 
B. Outlet B 
C. Outlet C 
D. Outlet D 

Question # 53

A company’s management accountant wishes to calculate the present value of the cost ofrenting a delivery vehicle. There will be five annual rental payments of $5,000, the first ofwhich is due immediately. The company’s discount rate is 12%.Which TWO of the following are valid ways to calculate the present value of the rentalpayments? (Choose two.)

A. $5,000 + ($5,000 x 3.605) 
B. $5,000 + $5,000/1.12 + $5,000/(1.12)2 + $5,000/(1.12)3 + $5,000/(1.12)4 
C. $5,000/1.12 + $5,000/(1.12)2 + $5,000/(1.12)3 + $5,000/(1.12)4+ $5,000/(1.12)5 
D. $5,000 x 3.605 
E. $5,000 + ($5,000 x 3.037) 

Question # 54

Variable costs can best be described as:

A. Costs that fluctuate widely 
B. Uncontrollable costs 
C. Costs that are not affected by changes in the level of activity 
D. Costs that vary with a measure of activity 

Question # 55

A. Option A 
B. Option B 
C. Option C 
D. Option D 

Question # 56

A cash budget is an example of a:

A. Fixed budget 
B. Flexible budget 
C. Rolling budget 
D. Variable budget 

Question # 57

When sales and output have passed the break-even point, the contribution per unit, foreach unit then sold, becomes:

A. The profit per unit 
B. Smaller 
C. Bigger 
D. The margin of safety 

Question # 58

A. $70,000 
B. $65,000 
C. $73,000 
D. $39,000 

Question # 59

Which one of the following is an advantage of placing the management accounting functionwithin a centralized finance department?

A. The management accountant obtains better knowledge of specific parts of the business 
B. Costs are reduced 
C. Communications are improved between the managers and the management accountant 
D. The management accounting function is an integral part of the business 

Question # 60

There are four global principles for management accounting which are intended to supportorganisations in setting a standard and improving their management accounting systems.Which one of the following helps management determine whether a certain decision willpotentially generate, preserve, or destroy value within the business?

A. Impact 
B. Communication 
C. Trust 
D. Information 

Question # 61

Which of the following may result in a favourable material price variance? (Select ALL thatapply.)

A. Material price decrease 
B. Discounted products 
C. Efficient purchasing 
D. Inflation of prices 
E. Inefficient purchasing 

Question # 62

Which of the following statements are true of Risk? Select ALL that apply.

A. Various outcomes are expected but their probabilities are unknown. 
B. The outcomes are quantifiable. 
C. The future outcome is completely unknown. 
D. There is no previous experience to base predictions on. 
E. Risks are always worth taking. 
F. Risks are never worth taking. 

Question # 63

A. 75500 
B. 77010 
C. 77041 
D. 75990 

Question # 64

A. £1,000 Adverse 
B. £750 Adverse 
C. £750 Favorable 
D. £1,000 Favorable 

Question # 65

In order to minimize cost, how many units of component X should be purchased from theexternal supplier?

A. None 
B. 500 
C. 1,500 
D. 2,000 

Question # 66

Refer to the exhibit.

A. $450 adverse 
B. $650 favorable 
C. $650 adverse 
D. $450 favorable 

Question # 67

The gradient of the line plotted on a profit/volume (PV) graph is determined by:

A. The fixed costs 
B. The number of units sold 
C. The margin of safety 
D. The profit/volume ratio 

Question # 68

A. £5,000 adverse
B. £3,000 adverse 
C. £2,000 adverse 
D. £19,750 favourable 

Question # 69

In an integrated accounting system, the accounting entries for over absorption ofproduction overheads would be. 

A. Debit: Income statementCredit: Work in progress control account 
B. Debit: Finished Goods control accountCredit: Income statement 
C. Debit: Production overhead control accountCredit: Income statement 
D. Debit: Finished goods control accountCredit: Production overhead control account 

Question # 70

The wages of a machine operator who is paid by the hour would be described as A.

A. Fixed cost 
B. Semi-variable cost 
C. Variable cost 
D. Stepped fixed cost 

Question # 71

Which one of the global principles of management accounting should be tailored to theknowledge of the decision maker?

A. Information 
B. Communication 
C. Trust 
D. Impact 

Question # 72

The direct labor rate variance is:

A. The difference between the actual wages paid and the standard labor cost for the outputproduced 
B. The difference between the actual wages paid and what should have been paid for thehours worked 
C. The difference between the actual rate of efficiency and the standard rate of efficiencyfor direct labor 
D. The standard wage rate multiplied by the difference between the actual hours worked and the standard hours needed for the output produced 

Question # 73

Which of the following are not examples of intangible and nonfinancial factors in decisionmaking? (Select ALL that apply.)

A. Profitability ratios 
B. Market share 
C. Return on investment 
D. Employee morale 
E. Competitor reaction 
F. Government regulations 

Question # 74

A. £7,500 favorable 
B. £7,500 adverse 
C. £6,500 favorable 
D. £6,500 adverse 

Question # 75

Which one of the following is an advantage of business partnering roles for themanagement accounting function within an organisation?

A. The management accountant is more likely to be focused on the objectives of theorganisation as a whole 
B. Communications are improved between the managers and the management accountant 
C. Costs are reduced 
D. Management accounting practices are more likely to be consistent throughout theorganisation 

Question # 76

A. $85,400 
B. $81,200 
C. $72,400 
D. $76,600 

Question # 77

The standard labour hours for all products manufactured by a company include anallowance for idle time. Idle time is budgeted to be 5% of total hours worked. Each unit ofproduct G requires an input of 9.5 active labour hours. The labour rate is $12 per hour.The standard labour cost shown on the standard cost card for one unit of product G will be

A. $10.00 
B. $114.00 
C. $119.70 
D. $120.00 

Question # 78

Which ONE of the following is a characteristic of operational financial information?

A. Provides information for long term decision making 
B. Provided mainly to senior managers 
C. Provided infrequently and at irregular intervals 
D. Provides detailed information focussed on one business area 

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