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CIMA Official Exam Practice Kit Performance Management

2010 Edition

5th Edition - June 1, 2009

Author: Jo Avis

Editor: Julia Killick

eBook ISBN:

9 7 8 - 0 - 0 8 - 0 9 6 1 5 3 - 8

CIMA EXAM PRACTICE KITS ARE THE ONLY PRACTICE MATERIALS ENDORSED BY CIMA Fully updated for the new 2010 syllabus examinations, the CIMA Official Exam Practice Kit contains a bank… Read more

CIMA Official Exam Practice Kit Performance Management

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CIMA EXAM PRACTICE KITS ARE THE ONLY PRACTICE MATERIALS ENDORSED BY CIMA Fully updated for the new 2010 syllabus examinations, the CIMA Official Exam Practice Kit contains a bank of questions to help you prepare for your examination. Supplementing the Official Learning System, this Exam Practice Kit focuses purely on applying what has been learned to pass the exam. It is ideal for independent study or tutored revision courses, helping you to prepare with confidence for exam day and pass the new syllabus first time. The CIMA Exam Practice Kit includes: • Exam standard multiple choice questions • detailed explanations or calculations for each answer, showing why the answer is correct • Type and weighting of questions which match the format of the exam • CBA style mock paper • Tailor-made design closely following the structure of the CIMA learning system and CIMA’s learning outcomes OFFICIALLY BY CIMA AND WRITTEN BY LEADING CIMA TUTORS, THE EXAM PRACTICE KITS PROVIDE A VALUABLE INSIGHT ON HOW TO SCORE TOP MARKS

Contents

Syllabus Guidance, Learning Objectives and Verbs ix

Learning Outcomes, Syllabus Content and Examintaion Format xii

Examination Techniques xviii

1. Revision of Basic Aspects, Classifications and Approaches to Cost Accounting

Cost Accounting 1

Classification of costs 3

The high-low method 3

Questions 3

Answers 6

2. Absorption Costing, Activity-based Costing and Marginal Costing 9

Absorption costing 11

Under- or over-absorption 11

Activity-based costing 11

Steps 11

Advantages 12

Disadvantages 12

Marginal costing 12

Questions 12

Answers 15

3. Breakeven Analysis 21

Questions 24

Answers 30

4. Relevant Cost and Short-term Decisions 43

Questions 46

Answers 53

5. Linear Programming 65

Questions 67

Answers 72

6. Pricing 83

Questions 86

Answers 91

7. The Value Chain – TQM 103

Questions 106

Answers 110

8. Activity-based Approaches 117

Direct product profitability (DPP) 119

Activity-based costing 119

Customer profitability anlysis 119

Activity-based management 120

Pareto analysis 120

Questions 120

Answers 123

9. Learning Curves 129

Questions 131

Answers 134

10. Costing Systems 141

Throughput accounting (TA) 143

Key measures 143

Backflush accounting 144

Purchases 144

Issue to production / movements between processes 144

Items completed 144

Items sold 144

Target costing 144

Life cycle costing 145

Questions 145

Answers 151

11. The Principles of Budgeting 165

Key requirements in the design of a budget plan 167

Fixed budgets 167

Sensitivity analysis 168

Rolling budgets 168

Questions 168

Answers 169

12. Budgetary Control 173

Systems approach 175

Flexed budgets 175

Budget centre 175

Behavioural issues 176

Beyond Budgeting (BB) 176

Questions 177

Answers 179

13. Budgeting and Performance Evaluation 183

Profitability 185

Return on capital employed (ROCE) / Return on Investment (ROI) 185

Asset turnover 185

Liquidity 186

Reporting performance indicators 186

Non-financial performance indicators 186

Benchmarking 186

Competitive benchmarking 187

Internal benchmarking 187

Functional benchmarking 187

Strategic benchmarking 187

Balanced scorecard 187

Questions 188

Answers 189

14. Responsibility Centres and Transfer pricing 193

Return on investment (ROI) 195

Residual income (RI) 196

Transfer pricing 186

Aims 196

Methods 196

Optimum transfer pricing 196

International transfer pricing 197

Questions 197

Answers 200

Exam Q & As 205