CIMA Performance Management and Control 1

Question 1

In standard costing, what does an 'adverse variance' indicate?

Accepted Answer

Actual performance was worse than standard, increasing costs or reducing profits

Answer

An adverse (unfavorable) variance indicates actual performance was worse than standard, either through higher costs or lower revenues than planned.

Question 2

Which budgeting approach requires managers to justify all expenditures from scratch each period, rather than basing the budget on previous years?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting requires all expenditures to be justified from zero each budget period, eliminating the assumption that prior spending levels are appropriate.

Question 3

What is 'throughput accounting' primarily focused on?

Accepted Answer

Maximizing throughput (sales minus direct materials) while managing operating expenses and inventory

Answer

Throughput accounting focuses on maximizing throughput contribution (sales less direct material costs) while keeping operating expenses and inventory as low as possible.

Question 4

A 'flexible budget' differs from a 'fixed budget' in that it:

Accepted Answer

Adjusts expenditure allowances to reflect actual activity levels

Answer

A flexible budget adjusts cost allowances to the actual level of activity achieved, enabling more meaningful variance analysis.

Question 5

In the context of responsibility accounting, what is a 'profit center'?

Accepted Answer

A unit accountable for both revenues and costs, and therefore profit

Answer

A profit center is a responsibility center where the manager is accountable for both revenues and costs, and therefore for the profit earned.

CIMA - Chartered Institute of Management Accountants Aptitude Test Practice Test

CIMA - Chartered Institute of Management Accountants Aptitude Test Practice Test

CIMA Performance Management and Control 1