Pass with professional CIMAPRO15-P01-X1-ENG actual quiz materials

RS is a travel company providing daily tours of a major European capital city. The market is highly competitive and RS has commissioned some market research to help with the pricing decision for a new tour. The research identified the probability of three possible market conditions and the number of tickets that would be sold each day at three different price levels.

Demonstrate, using a decision tree and based on expected value, which ticket price RS should choose.

• A. RS should charge a ticket price of $90.
• B. RS should charge a ticket price of $80.
• C. RS should charge a ticket price of $75
• D. RS should charge a ticket price of $70.
• E. RS should charge a ticket price of $100.

JRL manufactures two products from different combinations of the same resources. Unit selling prices and unit cost details for each product are as follows:

* Refer to your answer in the previous question.
The optimal solution to the previous question shows that the shadow prices of skilled labour and direct material A are as follows:
Skilled labour $ Nil Direct Material A $11.70
Explain the relevance of these values to the management of JRL.
Select ALL the true statements.

• A. The shadow price for skilled labour is NIL because although there is a shortage of skilled labour it does have a constraining effect on output of JR as other resources are more scarce.
• B. The shadow price equals the additional contribution that would be earned from one extra unit of a scarce resource.
• C. The decrease in contribution as a result of this change is the value of the shadow price of material A. The shadow price thus represents the maximum premium that should be paid for an additional unit of material A.
• D. Since material A is one of the binding constraints, if the availability of material A could be increased by one unit, this would change the optimal plan.
• E. In a situation such as this, where a number of resources are scarce, the shadow price of any particular scarce resource will depend on whether or not the resource is not binding.

Assume that you have made profit calculations based on standard profit calculation methods and activity based costing methods.
In which ways will this information be beneficial to the management team?
Select all the true statements.

• A. The identification of cost drivers provides information to management to enable them to take actions to improve the overall profitability of the company.
• B. Through the tracing of costs to product in this way ABC establishes less accurate costs for the product or service.
• C. Under an activity based costing system the various support activities that are involved in the process of making products or providing services are identified.
• D. Operational analysis will provide information to management on how costs can be incurred and managed.
• E. The cost drivers that cause a change to the cost of activities are also identified and used as the basis to attach activity costs to a particular product or service.

A master budget comprises the...

• A. budgeted income statement and budgeted cash flow statement only.
• B. budgeted income statement and budgeted balance sheet only.
• C. budgeted income statement and budgeted capital expenditure only
• D. budgeted income statement, budgeted balance sheet and budgeted cash flow statement only.

CDF is a manufacturing company within the DF group. CDF has been asked to provide a quotation for a contract for a new customer and is aware that this could lead to further orders. As a consequence, CDF will produce the quotation by using relevant costing instead of its usual method of full cost plus pricing. The
following information has been obtained in relation to the contract: Material D 40 tons of material D would be required. This material is in regular use by CDF and has a current purchase price of $38 per ton. Currently, there are 5 tons in inventory which cost $35 per ton. The resale value of the material in inventory is $24 per ton.
Components 4,000 components would be required. These could be bought externally for $15 each or alternatively they could be supplied by RDF, another company within the DF manufacturing group. The variable cost of the component if it were manufactured by RDF would be $8 per unit, and RDF adds 30% to its variable cost to contribute to its fixed costs plus a further 20% to this total cost in order to set its internal transfer price. RDF has sufficient capacity to produce 2,500 components without affecting its ability to satisfy its own external customers. However, in order to make the extra 1,500 components required by CDF, RDF would have to forgo other external sales of $50,000 which have a contribution to sales ratio of 40%.
Labour hours 850 direct labour hours would be required. All direct labour within CDF is paid on an hourly basis with no guaranteed wage agreement. The grade of labour required is currently paid $10 per hour, but department W is already working at 100% capacity. Possible ways of overcoming this problem are:
* Use workers in department Z, because it has sufficient capacity. These workers are paid $15 per hour.
* Arrange for sub-contract workers to undertake some of the other work that is performed in department W.
The sub-contract workers would cost $13 per hour.
Specialist machine The contract would require a specialist machine. The machine could be hired for $15,000 or it could be bought for $50,000. At the end of the contract if the machine were bought, it could be sold for
$30,000. Alternatively, it could be modified at a cost of $5,000 and then used on other contracts instead of buying another essential machine that would cost $45,000. The operating costs of the machine are payable by CDF whether it hires or buys the machine. These costs would total $12,000 in respect of the new contract.
Supervisor The contract would be supervised by an existing manager who is paid an annual salary of $50,000 and has sufficient capacity to carry out this supervision. The manager would receive a bonus of $500 for the additional work.
Development time 15 hours of development time at a cost of $3,000 have already been worked in determining the resource requirements of the contract.
Fixed overhead absorption rate CDF uses an absorption rate of $20 per direct labour hour to recover its general fixed overhead costs. This includes $5 per hour for depreciation.
Calculate the relevant cost of the contract to CDF. You must present your answer in a schedule that clearly shows the relevant cost value for each of the items identified above. You should also explain each relevant cost value you have included in your schedule and why any values you have excluded are not relevant.
Ignore taxation and the time value of money.
Select all the true statements.

• A. Direct labour cist is a relevant cost
• B. General fixed overhead costs are relevant costs.
• C. Development Cost is a relevant cost.
• D. The total relevant cost was $84 990
• E. The total relevant cost was $94 740
• F. The total relevant cost was $104 320
• G. Machine operating costs is a relevant cost.