Question 1

Division A is an investment centre with assets of $7.3 million. The following is an extract from the annual budget for division A:

The cost of capital is 14%.
Calculate the residual income for division A.

Options :

A : $808,000

B : $1,727,800

C : $358,000

D : $2,008,000

Answer: A

Question 2

When considering a capital investment, relevant costs for decision making have which THREE of the following features?

Options :

A : They are future costs.

B : They are committed costs.

C : They are incremental costs.

D : They are unavoidable costs.

E : They are cash flows.

Answer: A,C

Question 3

How does beyond budgeting NOT help to resolve the weaknesses of traditional budgeting? Select ALL that apply.

Options :

A : Managers are set goals and targets to achieve rather than abiding by strict budgets and variances.

B : Managers have a much larger scope of business goals that when achieved, will increase shareholder value.

C : Managers are given more freedom and control over their business units under Beyond budgeting.

D : Managers focus on keeping costs low in the short term to ensure maximised profits.

E : Managers are given incentives to meet or undercut budgets.

F : Managers are encouraged to designate responsibility to others to lessen their workload so they may concentrate on important tasks.

Answer: A,D

Question 4

An organization is competing in the high technology market. It sets a high sales price for its products initially to target the early adopters, and then the price is gradually reduced.
This pricing strategy is known as:

Options :

A : Market skimming

B : Penetration pricing

C : Premium pricing

D : Loss leader pricing

Answer: A

Question 5

A manufacturing company is in the process of introducing just in time (JIT) and total quality management (TQM) into every aspect of its value chain.
Which TWO of the following are appropriate changes to make to the support activities in the organization's value chain?

Options :

A : Inbound logistics would need to ensure that materials of appropriate quality are delivered on a just in time basis.

B : Operations would need to be carried out on a right first time basis as any failure could delay production.

C : After sales service would need to ensure that appraisal costs are kept to a minimum.

D : Procurement would need to arrange to purchase goods so that they are delivered as required.

E : Firm infrastructure would need to arrange appropriate training courses for staff.

F : Technology development would need to ensure that processes are continually improving.

Answer: A,D