Summer Sale Special Limited Time 65% Discount Offer - Ends in 0d 00h 00m 00s - Coupon code: s2p65

Easiest Solution 2 Pass Your Certification Exams

P2 CIMA Advanced Management Accounting Free Practice Exam Questions (2025 Updated)

Prepare effectively for your CIMA P2 Advanced Management Accounting certification with our extensive collection of free, high-quality practice questions. Each question is designed to mirror the actual exam format and objectives, complete with comprehensive answers and detailed explanations. Our materials are regularly updated for 2025, ensuring you have the most current resources to build confidence and succeed on your first attempt.

CIMA P2 Premium Access     Download Demo    
Page: 2 / 3
Total 202 questions

Which of the following criticisms relate to traditional budgeting methods and which relate to the 'beyond budgeting' approach?

Firefighters risk serious and potentially fatal accidents whenever they attend an incident.

Which of the following statements is correct?

A.

The risk of serious accidents should be accepted in all but the most extreme incidents.

B.

The risk of serious accidents should always be accepted because that is what firefighters are paid to do.

C.

The risk of serious accidents should be avoided because the risk has a high probability and a high impact.

D.

Every incident should be the subject of a detailed and thorough risk assessment before the firefighters are permitted to respond.

Which TWO of the following actions taken during the budgetary planning process will result in the creation of budgetary slack?

A.

Overestimating costs

B.

Underestimating costs

C.

Underestimating revenues

D.

Overestimating revenues

E.

Overestimating profit

An organization employs a dual pricing basis for the transfer of components between its divisions. This means that:

A.

each division has a separate transfer price for a single transaction.

B.

the transfer price is based on marginal cost with a separate charge to allow for fixed costs.

C.

the transfer price is based on the cost of the product plus a mark-up for profit.

D.

the transfer price is based on the market price less a discount.

The discount rate at which the net present value (NPV) is zero is known as the

A.

accounting rate of return

B.

risk adjusted discount rate

C.

internal rate of return

D.

breakeven point

Which of the following statements is NOT correct?

Transfer prices between responsibility centers should be set at a level that:

A.

provides an artificial selling price that enables the transferring division to earn a return for its efforts and the receiving division to incur a cost for benefits received.

B.

enables profit centre performance to be measured 'commercially'.

C.

encourages a balance of goal congruence, managerial effort and centralized management.

D.

encourages profit centre managers to agree on the amount of goods and services to be transferred at a level that is consistent with organizational aims.

Three years ago the large number of faulty products being returned by its customers resulted in a company adopting total quality management (TQM). The company has increased expenditure on staff training and product inspections. This has resulted in a reduction in the number of faulty products returned.

Which of the following statements is correct?

A.

Spending more on conformance costs has resulted in a reduction in internal failure costs.

B.

Spending more on conformance costs has resulted in a reduction in external failure costs.

C.

Spending more on non-conformance costs has resulted in a reduction in conformance costs.

D.

Spending more on prevention costs has resulted in a reduction in appraisal costs.

Which of the following is the ideal basis to use for a transfer price when there is a perfect external market?

A.

Actual variable cost

B.

Market price

C.

Standard variable cost

D.

Full cost plus

A machine requires an initial investment of $500,000. The net present value (NPV) of the investment in the machine is $36,500.

Which of the following statements is correct in relation to the sensitivity of the investment?

A.

The initial investment can increase by no more than 7.3% before the project is not viable.

B.

The NPV can decrease by no more than 7.3% before the project is not viable.

C.

The initial investment can increase by no more than 13.7% before the project is not viable.

D.

The NPV can decrease by no more than 13.7% before the project is not viable.

A positive net present value (NPV) has been calculated for a project to launch a new product. An additional calculation is required to identify the sensitivity of the NPV to changes in the forecast total sales volume.

The present value of which of the following would be used in the calculation?

A.

Contribution

B.

Operating profit

C.

Fixed overheads

D.

Net profit

In accordance with a just-in-time (JIT) philosophy, which of the following is regarded as a value added activity?

A.

Inspecting raw material deliveries

B.

Moving work in progress around production facilities

C.

Holding inventory

D.

Dispatching products to customers

Which THREE of the following conditions are required for a sustained learning curve to apply?

A.

Labor intensive production

B.

Continuous production

C.

A complex production process

D.

Frequent machine maintenance

E.

Continuous product development

F.

Frequent staff rotation

An investment centre is appraising a potential project that is expected to yield a Return on Investment (ROI) of 12%.

Without the project the investment centre expects to earn an ROI of 14%. The cost of capital is 10%.

What would be the impact on the investment centre's performance measures if the project is accepted?

A.

Residual Income would decrease and ROI would increase.

B.

Residual Income would decrease and ROI would decrease.

C.

Residual Income would increase and ROI would increase.

D.

Residual Income would increase and ROI would decrease.

Which of the following is a correct description of the key features of net present value?

A.

It adjusts the relevant cash flows of a project to reflect the time value of money. The discount rate used is always the company's weighted average cost of capital.

B.

It adjusts the relevant cash flows of a project to reflect the time value of money. The discount rate used reflects the risk of the project.

C.

It adjusts the relevant profits of a project to reflect the time value of money. The discount rate used reflects the risk of the project.

D.

It adjusts the relevant cash flows of a project after the deduction of depreciation charges to reflect the time value of money. The discount rate used is always the company's weighted average cost of capital.

Residual income is an appropriate performance measure for which type of responsibility centre?

A.

Cost centre

B.

Revenue centre

C.

Investment centre

D.

Profit centre

For a complex and repetitive task, which of the following correctly describes a steep learning curve?

A.

Repeated training may be required but this will not necessarily result in a reduction in the time taken to complete the task.

B.

After the initial learning period there will be a rapid reduction in the time taken to complete the task.

C.

There will be a long period before there is a reduction in the time taken to complete the task.

D.

After the initial learning period there will be a slow reduction in the time taken to complete the task.

A company is considering two mutually exclusive projects, an analysis of which is given below:

The company's cost of capital is 12%.

Assuming an objective of maximising shareholders' wealth, which project would be recommmended?

A.

Project B because it has the higher net present value.

B.

Project B because it has the shorter payback period.

C.

Project A because it has the higher accounting rate of return.

D.

Project A because it has the higher internal rate of return.

The following cost of quality report has been prepared for the latest period.

What is the difference between the cost of conformance and the cost of non-conformance?

Juan is looking to invest in the mining industry. He has narrowed his options down to two rival companies, both with sales of £200m. Company A has an EBIT of £10m whereas Company B has an EBIT of £14m.

This would suggest that Company B is the better investment but Juan is suspicious that Company B has more financial backing than Company A.

Which ratios will tell him which company will use his investment the best?

A.

Profit margin

B.

R.O.C.E

C.

Current ratio

D.

Quick ratio

The money cost of capital is 12%. The expected rate of inflation is 4%. What is the real cost of capital?

Give your answer to 2 decimal places.

CIMA P2 Premium Access     Download Demo    
Page: 2 / 3
Total 202 questions
Copyright © 2014-2025 Solution2Pass. All Rights Reserved