P1 Management Accounting Exam Questions and Answers

QUESTION: 6

A company's management is considering investing in a project with an expected life of 4 years. It has a positive net present value of $180,000 when cash flows are discounted at 8% per annum. The project's cash flows include a cash outflow of $100,000 for each of the four years. No tax is payable on projects of this type.

The percentage increase in the annual cash outflow that would cause the company's management to reject the project from a financial perspective is, to the nearest 0.1%:

54.3%
45.0%
55,6%
184.0%

Answer(s): A

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QUESTION: 7

What type of budget is prepared on an annual basis taking current year operating results and adjusting them for expected growth and inflation?

Rolling budget
Incremental budget
Flexed budget
Zero-based budget

Answer(s): B

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QUESTION: 8

Which of the following would help to explain a favourable material price variance?

A decision to reduce the raw materials inventory during the period led to a reduced level of material purchases.
An increase in the quantity of material purchased resulted in unexpected bulk discounts.
The material purchased was of a higher quality than standard.
Improved processing methods meant that material purchases were lower than standard for the output achieved.

Answer(s): B

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QUESTION: 9

A master budget comprises which of the following?

The budgeted income statement and the budgeted cash flow statement only.
The budgeted income statement and the budgeted statement of financial position only.
The budgeted income statement and budgeted capital expenditure only.
The budgeted income statement, the budgeted statement of financial position and the budgeted cash flow statement only.

Answer(s): D

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QUESTION: 10

A company makes and sells three products A, B and C.

The selling prices and costs of the three products, using a traditional absoprtion costing system, are shown in the table below.

The company has undertaken an analysis of overhead costs using activity-based costing (ABC).

The revised overhead costs for products A, B and C are $6, $32 and $55 respectively.

When comparing the figures obtained under the two costing methods, which of the following statements are true?

Select ALL that apply.

Product B makes a profit under both methods, but the profit is lower using ABC.
The product that is the most profitable under traditional absorption costing makes a loss under the ABC methodology.
Product C is currently overpriced based on cost plus pricing and the selling price should be reduced.
Activity-based costing results in a lower level of overhead costs for the company.
Product A shows a profit under ABC but had appeared loss making under traditional absorption costing.

Answer(s): A,B,E

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CIMA P1 Management Accounting Exam (page: 2) CIMA P1 Management Accounting Updated on: 07-Feb-2026

QUESTION: 6

QUESTION: 7

QUESTION: 8

QUESTION: 9

QUESTION: 10

CIMA P1 Management Accounting Exam (page: 2)
CIMA P1 Management Accounting
Updated on: 07-Feb-2026