1. CIMA P1 - Management Accounting

2. What is CIMA?
The Chartered Institute of Management Accountants (CIMA) is a UK professional accountancy body whose focus is on the training and qualifying of accountants in business. It represents financial managers and accountants who work in industry, commerce, not-for-profit and public sector organizations.

3. Certification Cima P1 Cima E1 Cima F1 Cima P2 Cima E2 Cima F2 Cima P3
Cima C01
Cima C02
Cima C03
Cima C04
Cima C05
Cima G1
Certification

4. CIMA P1 - Management Accounting
It combines accounting, finance and management with the leading edge techniques needed to drive successful businesses. Management accountants operate in financial and non-financial roles throughout organizations and carry out all their training and experience requirements within business itself, providing them with a unique insight into how their organizations operate.

5. Here are some questions that you will get same in your exam.

6. Question No 1:
A purchasing manager is deciding how many units of a product to purchase for the winter season. The demand for the product is uncertain. The purchasing manager has prepared a regret matrix showing the regret based on the contribution that each of the possible outcomes would earn.
Regret Matrix
Quantity purchased (units)
Demand 10, , , ,000
10,000 $0 $35,000 $70,000 $105,000
15,000 $21,000 $0 $32,000 $62,000
20,000 $120,000 $26,000 $0 $33,000
25,000 $180,000 $120,000 $22,000 $0
If the manager applies the minimax regret criterion to make decisions, which quantity would be purchased?
A 10,000 units
B 15,000 units
C 20,000 units
D 25,000 units
The maximum regret if 10,000 units are purchased is $180,000
The maximum regret if 15,000 units are purchased is $120,000
The maximum regret if 20,000 units are purchased is $70,000
The maximum regret if 25,000 units are purchased is $105,000
Therefore if the manager wants to minimise the maximum regret 20,000 units will be purchased.
The correct answer is C.

7. Question No 2:
A company is considering an investment project for which the possible cash inflows and their respective probabilities are given in the table below:
Year 1 Year 2
Cash inflow
$000 Probability Cash inflow
$000 Probability
The cash flows for Year 1 and Year 2 are independent. The initial cash outflow for the project is $300,000. The company’s cost of capital is 10% per annum. Ignore tax and inflation.
Expected cash inflow in Year 1 = ($200k x 0.2) + ($300k x 0.7) + ($360k x 0.1) = $286k
Expected cash inflow in Year 2 = ($100 x 0.6) + ($320 x 0.4) = $188k
Expected net present value Year Cash flow Discount factor Present value
$ $
0 (300,000) (300,000)
1 286, ,974
2 188, ,288
Net present value 115,262

8. Question No 3: A certificate of deposit is best described as:
A. A debt instrument which offers a fixed rate of interest over a fixed period of time and with a fixed redemption value.
B. A negotiable instrument which provides evidence of a fixed term deposit with a bank.
C. A document which sets out a commitment to deposit a sum of money at a specified point in time.
D. A certificate which shows ownership of part of the share capital of a company.
Answer: B

9. Question No 4:
A company is considering offering its customers an early settlement discount. The company currently receives payments from customers on average 65 days after the invoice date. The company is considering offering a 2% early settlement discount for payment within 30 days of the invoice date.
The effective annual interest rate of the early settlement discount using compound interest methodology and assuming a 365 day year is:
A 22.94%
B 20.86%
C 23.45%
D 27.85%
Answer: C

10. Question No 5: The material mix variance for August is:
A. $1,540 Favorable
B. $1,540 Adverse
C. $1,288 Favorable
D. $1,288 Adverse
Answer: A

11. Question No 6: The material yield variance for August is:
A. $200 Adverse
B. $1,740 Adverse
C. $200 Favorable
D. $1,740 Favorable
Answer: B

12. Question No 7:
A company budgets maintenance costs by analysing past data and then adjusting for inflation.
The relationship between the monthly maintenance costs and activity levels, before adjusting for inflation, was determined to be:
y = 22, x2
where y = total monthly maintenance costs ($) and
x = machine hours
An inflation rate of 4% was then applied to the above formula to determine the budgeted costs for August.
In August the actual machine hours were 1,820 and the actual maintenance cost incurred was $106,500.
Required:
Calculate the maintenance cost variance for August.
Answer:
Budgeted maintenance cost for August:
y = 22, x2
y = 22, (1,8202)
y = 22, ,810
y = 104,810
Increase for inflation:
$104,810 x 1.04 = $109,002
The maintenance cost variance for August is therefore:
$109,002 - $106,500 = $2,502 Favourable

13. Question No 8:
A Treasury bill with 91 days to maturity and a face value of $1,000 is issued at a discount yield of 7% per annum.
Required:
(i) Calculate the issue price of the Treasury bill, to the nearest $0.01, assuming there are 365 days in the year.
(ii) State FOUR features of a Treasury bill.
Answer:
(i)
The discount = $1000 x 7% x 91/365 = $17.45
The issue price is therefore $1,000 - $17.45 = $982.55
(ii)
• Treasury bills are negotiable instruments issued by the Government
• They have a maturity of less than one year, normally 91 days
• They have high credit quality and therefore low risk and low return
• They are redeemable at face value
• They are issued at a discount to face value
• There is a large and active secondary market in treasury bills

14. CIMA P1 - Management Accounting