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P2 practice test questions answers

CIMA P2 Exam Dumps - Actual Questions Answers

Advanced Management Accounting

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  • Last Update: Nov 18, 2024
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P2 Questions and Answers

Question # 1

Which of the following statements about modified internal rate of return (MIRR) and internal rate of return (IRR) is correct?

A.

MIRR uses a more realistic reinvestment assumption than IRR.

B.

MIRR favours projects with long payback periods whereas IRR does not.

C.

MIRR and IRR will always rank competing projects in the same order.

D.

A project's MIRR will always be higher than its IRR.

Question # 2

Which of the following statements are correct with regard to responsibility centres?

Select ALL that apply.

A.

Revenue centre managers have a lower level of decision-making authority than profit centre managers.

B.

Revenue centre managers and profit centre managers are accountable for controllable costs only.

C.

Profit centre managers and investment centre managers are responsible for the majority of operating costs incurred.

D.

Investment centre managers have a higher level of managerial authority than profit centre managers.

E.

Managers of profit centres have authority over the level of investment in working capital but managers of cost centres do not.

Question # 3

A company operates a divisional structure. The manager of division D receives a bonus based on the division's annual return on capital employed (ROCE).

A minimum ROCE of 20% must be achieved to receive any bonus and thereafter the bonus increases in line with increases in ROCE.

This year division D achieved a ROCE of 24% and the divisional manager received a large bonus.

The manager is considering an investment in a new machine for next year. The incremental ROCE earned by the machine is expected to be 19% although the ROCE for the division as a whole with the machine is expected to be 22%. Without the machine, ROCE is likely to be stable at 24%.

The cost of capital for the company as a whole is 18% per year.

Which of the following statements is correct?

A.

The manager will accept the investment because overall the division will earn a ROCE that exceeds the minimum target of 20%.

B.

The manager will reject the investment because it will result in a lower bonus than without the investment.

C.

The manager will accept the investment because it will earn a ROCE that is higher than the company's cost of capital.

D.

The manager will reject the investment because it will result in the receipt of no bonus.

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