CIMA Management Accounting 5

Question 1

Which performance measure is calculated as Net Profit Before Interest and Tax ÷ Capital Employed?

Accepted Answer

Return on capital employed (ROCE)

Answer

ROCE = PBIT ÷ Capital Employed and measures how efficiently a business uses its capital to generate profit.

Question 2

Residual income (RI) is superior to return on investment (ROI) as a divisional performance measure because:

Accepted Answer

RI encourages managers to accept projects that exceed the cost of capital even if they lower ROI

Answer

RI deducts a capital charge from profit, so managers are incentivized to accept any project earning above the cost of capital, avoiding the ROI sub-optimization problem.

Question 3

A company uses a balanced scorecard. Which perspective evaluates metrics such as employee training hours and innovation rates?

Accepted Answer

Learning and growth perspective

Answer

The learning and growth perspective of the balanced scorecard focuses on employee capabilities, information systems, and organizational culture that enable future performance.

Question 4

In a make-or-buy decision, a company should buy externally if:

Accepted Answer

The external price is lower than the relevant (incremental) cost of making

Answer

The financial decision hinges on comparing the external buy price to the relevant (avoidable) cost of making, not the full absorbed cost.

Question 5

Which inventory valuation method results in the highest closing inventory value during a period of rising prices?

Accepted Answer

FIFO (First In, First Out)

Answer

Under FIFO, older (cheaper) costs are charged to cost of goods sold first, leaving newer (more expensive) units in closing inventory — giving the highest closing inventory value when prices rise.

CIMA - Chartered Institute of Management Accountants Aptitude Test Practice Test

CIMA - Chartered Institute of Management Accountants Aptitude Test Practice Test

CIMA Management Accounting 5