Pass the CIMA Management P2 Questions and answers with ExamsMirror

An investment appraisal has identified that a project has a positive net present value when discounted at the company's cost of capital. If the cost of capital is now increased, indicate whether each of the following appraisal measures will increase, decrease or stay the same.

An airline prides itself on using highly reliable aircraft that are maintained to the highest possible standard and that its flight crews are arguably the best in the industry. Despite that, the directors accept that there remains a slight possibility that there will be a fatal accident.

Which THREE of the following statements are correct?

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?

An organization's transfer pricing system involves:

• The transferring division receiving $20 per unit; an amount equal to its variable costs.

• The receiving division paying an additional $30,000 every month to the transferring division.

Which transfer pricing system is the organization using?

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:

An organization uses a balanced scorecard approach to performance measurement, both at the corporate level and to assess the performance of each of its responsibility centre managers.

Which THREE of the following statements are valid in respect of the effect of this approach on the behavior of the responsibility centre managers?

A company has three divisions, each of which is an investment centre. The divisional managers' performance is assessed using return on investment (ROI). A higher ROI will result in a higher bonus for the divisional manager.

The company's cost of capital is 15%.

For the forthcoming year each divisional manager has one investment opportunity available as follows:

The manager(s) of which division(s) will proceed with their respective investment opportunity?

IOP's product is manufactured using a production process that is known to have a defect rate of 10%.

IOP's quality control department has developed a test that has a 98% probability of classifying a non-defective item correctly and a 2% probability of classifying a non-defective item as defective.

The same test has a 95% probability of classifying a defective item correctly and a 5% probability of classifying a defective item as non-defective.

Calculate the proportion of IOP's output that will be classified as non-defective by the quality control department's test.

Give your answer to one decimal place.

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

$30.328 million is to be invested in a project that will yield annual net cash inflows of $8 million for 5 years.

What is the project's internal rate of return (IRR)?

Give your answer to the nearest whole percentage.