P2 Exam Questions and Answers | Exam-Dumps (Page: 7)

QUESTION: 31

Which THREE of the following are advantages of changing from a 'top-down' to a 'bottom- up' (participative) style of budgeting?

The budget will be based on information from employees who are familiar with the day to day activities.
Motivation will improve due to a feeling of ownership of the budget.
There will be increased commitment to organizational objectives.
Budget setters will be forced to justify every item on the budget.
There will be reduced likelihood of budgetary slack being built into the budgets for 'selfish' reasons.
It will be less time-consuming for operational managers.

Answer(s): A,B,C

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A company manufactures and sells a range of products. Relevant data for one unit of a particular product are as follows.

The company is using target costing to ensure that it achieves a contribution of 40% of the market selling price.

In order to achieve the target cost, by how much does the company need to reduce the variable cost per unit?

$ 2.10
$ 0.50
$ 1.40
$ 2.60

Answer(s): B

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QUESTION: 33

Four mutually exclusive projects have been appraised as follows using net present value (NPV), internal rate of return (IRR), accounting rate of return (ARR) and payback period (PP).

Recommend which of the projects should be chosen.

Project A
Project B
Project C
Project D

Answer(s): D

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QUESTION: 34

In an inflationary environment which is the correct way of calculating net present value (NPV)?

Using nominal cash flows and a nominal discount rate.
Forecasting the cash flows including the effect of inflation and then using a real discount rate.
Using real cash flows and a nominal discount rate.
Forecasting the cash flows excluding the effect of inflation and then using a nominal discount rate.

Answer(s): A

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QUESTION: 35

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?

The manager will accept the investment because overall the division will earn a ROCE that exceeds the minimum target of 20%.
The manager will reject the investment because it will result in a lower bonus than without the investment.
The manager will accept the investment because it will earn a ROCE that is higher than the company's cost of capital.
The manager will reject the investment because it will result in the receipt of no bonus.

Answer(s): B

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CIMA P2 Exam (page: 7)
CIMA Advanced Management Accounting
Updated on: 09-Feb-2026

QUESTION: 31

QUESTION: 32

QUESTION: 33

QUESTION: 34

QUESTION: 35

CIMA P2 Exam (page: 7) CIMA Advanced Management Accounting Updated on: 09-Feb-2026

QUESTION: 31

QUESTION: 32

QUESTION: 33

QUESTION: 34

QUESTION: 35

CIMA P2 Exam (page: 7)
CIMA Advanced Management Accounting
Updated on: 09-Feb-2026