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CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

Pillar P

Specimen Examination Paper


Instructions to candidates
You are allowed three hours to answer this question paper. You are allowed 20 minutes reading time before the examination begins during which you should read the question paper and, if you wish, highlight and/or make notes on the question paper. However, you will not be allowed, under any circumstances, to open the answer book and start writing or use your calculator during this reading time. You are strongly advised to carefully read ALL the question requirements before attempting the question concerned (that is all parts and/or subquestions). The requirements for questions 3 and 4 are highlighted in a dotted box. ALL answers must be written in the answer book. Answers or notes written on the question paper will not be submitted for marking. Answer the ONE compulsory question in Section A. This has eight subquestions on pages 2 to 4. Answer the ALL SIX compulsory sub-questions in Section B on pages 5 to 7. Answer the TWO compulsory questions in Section C on pages 8 to 11. Maths Tables are provided on pages 12 to 15. The list of verbs as published in the syllabus is given for reference on page 16. Write your candidate number, the paper number and examination subject title in the spaces provided on the front of the answer book. Also write your contact ID and name in the space provided in the right hand margin and seal to close. Tick the appropriate boxes on the front of the answer book to indicate which questions you have answered.

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The Chartered Institute of Management Accountants 2008

P1 Performance Operations

P1 Performance Operations

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

SECTION A 20 MARKS [Note: The indicative time for answering this section is 36 minutes] ANSWER ALL EIGHT SUB-QUESTIONS IN THIS SECTION

Instructions for answering Section A


The answers to the eight sub-questions in Section A should ALL be written in your answer book. Your answers should be clearly numbered with the sub-question number and ruled off so the markers know which sub-question you are answering. For multiple choice questions you need only write the sub-question number and the answer option you have chosen. You do not need to start a new page for each sub-question. Each of the sub-questions numbered from 1.1 to 1.5 inclusive, given below, has only ONE correct answer. Each is worth two marks.

Question One
1.1 WTD Ltd produces a single product. The management currently uses marginal costing, but is considering using absorption costing in the future. The budgeted fixed production overheads for the period are 500,000. The budgeted output for the period is 2,000 units. There were 800 units of opening inventory at the beginning of the period and 500 units of closing inventory at the end of the period. If absorption costing principles were applied, the profit for the period compared to the marginal costing profit would be A B C D 75,000 higher. 75,000 lower. 125,000 higher. 125,000 lower. (2 marks)

The following data is given for sub-questions 1.2 and 1.3 on the next page
The following data relate to a manufacturing company. At the beginning of August there was no inventory. During August 2,000 units of product X were produced, but only 1,750 units were sold. The financial data for product X for August were as follow: 40,000 12,600 9,400 22,500 6,000 19,300 109,800

Materials Labour Variable production overheads Fixed production overheads Variable selling costs Fixed selling costs Total costs for X for August

Performance Operations

Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

1.2 A B C D

The value of inventory of X at 31 August using a marginal costing approach is 6,575 7,750 8,500 10,562 (2 marks)

1.3 A B C D

The value of inventory of X at 31 August using a throughput accounting approach is 5,000 6,175 6,575 13,725 (2 marks)

The following data is given for sub-questions 14 and 1.5 below and on the next page
The following data relate to Product Z and its raw material content for September. Budget Output Standard materials content Actual Output Materials purchased and used 11,000 units of Z 3 kg per unit at $400 per kg

10,000 units of Z 32,000 kg at $480 per kg

It has now been agreed that the standard price for the raw material purchased in September should have been $5 per kg and that the variances should be reported as planning and operational.

1.4 A B C D

The materials planning price variance for September was $6,000 Adverse $30,000 Adverse $32,000 Adverse $33,000 Adverse (2 marks)

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CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

1.5 A B C D

The materials operational usage variance for September was $8,000 Adverse $9,600 Adverse $9,600 Favourable $10,000 Adverse (2 marks)

1.6

A manager is evaluating a three year project which has the following relevant pre-tax operating cashflows: Year Sales Costs 1 $000 4,200 2,850 2 $000 4,900 3,100 3 $000 5,300 4,150

The project requires an investment of $2 million at the start of year 1 and has no residual value. The company pays corporation tax on its net relevant operating cashflows at the rate of 20%. Corporation tax is payable in the same year as the net relevant pre-tax operating cashflows arise. There is no tax depreciation available on the investment. The manager has discounted the net relevant post-tax operating cashflows using the companys post-tax cost of capital of 7% and this results in a post-tax net present value of the project of $1018 million. The internal rate of return (IRR) of the project is 296% Calculate the sensitivity of the project to independent changes in (i) (ii) the selling price; the cost of capital. (4 marks)

1.7

A bond with a coupon rate of 7% is redeemable in eight years time for $100. Its current purchase price is $82.

Illustrate how the percentage yield to maturity would be assessed (4 marks)

1.8

Calculate the economic order quantity (EOQ) for the following item of inventory: Quantity required per year 32,000 items; Order costs are $15 per order; Inventory holding costs are estimated at 3% of inventory value per year; Each unit currently costs $40. (2 marks)

(Total for Section A = 20 marks)

End of Section A
Performance Operations 4 Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

SECTION B 30 MARKS [Note: The indicative time for answering this section is 54 minutes] ANSWER ALL SIX SUB-QUESTIONS
Question Two

The following data is given for sub-questions (a) and (b) below
QBQ produces one type of product. Details of the budgeted sales and production are given below: Selling Price and Costs per unit Selling price Material FX: 15kg @ 6 per kg Conversion costs (variable) Fixed production overheads 40 9 8 15

The fixed production overhead absorption rate is based on annual production overheads of 720,000 and budgeted annual output of 48,000 units. The fixed overheads will be incurred evenly throughout the year. The company also incurs fixed costs for administration of 200,000 per year. Budgeted Sales Quarter 1 2 3 4 Units 10,000 12,000 14,000 10,000

Inventory It has been decided that inventory levels are to be reduced. Details are as follows: Finished goods: 5,500 units are currently held but it has been decided that the closing inventories for quarters 1, 2 and 3 will be 45%, 40% and 35% of the following quarters sales respectively. 4,500 kg are currently held but it has been decided that the closing inventories for quarters 1 and 2 will be 25% and 20% of the following quarters production requirements respectively.

Raw materials:

(a)

Prepare a materials purchase budget for Quarter 1 and then for Quarter 2. (5 marks)

(b)

In Quarter 3 the opening and closing inventories of finished goods will be 5,600 units and 4,200 units respectively. QBQ adjusts for any under or over absorption of overheads at the end of each quarter.

Assuming that all costs and revenues were as budgeted, prepare for Quarter 3: (i) (ii) (iii) a marginal costing profit statement; an absorption costing profit statement; explain the difference, if any, in the profits you have calculated. (5 marks)

Specimen Exam Paper

Performance Operations

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

(c)

UV Limited is a catering company that provides meals for large events. It has a range of standard meals at fixed prices. It also provides meals to meet the exact requirements of a customer and prices for this service are negotiated individually with each customer.

Explain how a McDonaldisation approach to service delivery would impact on budget preparation and control within UV Limited. (5 marks)

(d)

A management consulting company had budgeted the staff requirements for a particular job as follows: 40 hours of senior consultant at 100 per hour 4,000 60 hours of junior consultant at 60 per hour 3,600 Budgeted staff cost for job 7,600 The actual hours recorded were: 50 hours of senior consultant at 100 per hour 55 hours of junior consultant at 60 per hour Actual staff cost for job 5,000 3,300 8,300

The junior consultant reported that for 10 hours of the 55 hours recorded there was no work that she could do. Calculate the following variances: Idle time variance; Labour mix variance; Labour efficiency variance. (5 marks)

(e)

ST plc is a medium-sized engineering company using advanced technology. It has just implemented an integrated enterprise resource planning (ERP) system in place of an old MRP (manufacturing resource planning) system.

Explain the changes that are likely to be seen after the implementation of the ERP system in (i) (ii) the budget-setting process; and the budgetary control process. (5 marks)

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Performance Operations

Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

(f)

J Limited has recently been taken over by a much larger company. For many years, the budgets in J have been set by adding an inflation adjustment to the previous years budget. The new owners of J are insisting on a zero-base approach when the next budget is set, as they believe many of the indirect costs in J are much higher than in other companies under their control. Explain the main features of zero-based budgeting. (2 marks)

(i)

(ii)

Describe the problems that might arise when implementing this approach in J Limited. (3 marks) (Total for sub-question (f) = 5 marks)

(Total for Section B = 30 marks)

End of Section B

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CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

SECTION C 50 MARKS [Note: The indicative time for answering this section is 90 minutes] ANSWER BOTH QUESTIONS IN THIS SECTION. EACH QUESTION IS WORTH 25 MARKS.
Question Three
JK plc prepares its accounts to 31 December each year. It is considering investing in a new computer controlled production facility on 1 January 2007 at a cost of 50 million. This will enable JK plc to produce a new product which it expects to be able to sell for four years. At the end of this time it has been agreed to sell the new production facility for 1 million cash. Sales of the product during the year ended 31 December 2007 and the next three years are expected to be as follows: Year ended 31 December Sales units (000) 2007 100 2008 105 2009 110 2010 108

Selling price, unit variable cost and fixed overhead costs (excluding depreciation) are expected to be as follows during the year ended 31 December 2007: 1,200 750 100 4,000,000 2,000,000 1,000,000

Selling price per unit Variable production cost per unit Variable selling and distribution cost per unit Fixed production cost for the year Fixed selling and distribution cost for the year Fixed administration cost for the year

The following rates of annual inflation are expected for each of the years 20082010: % 5 8 6 5

Selling prices Production costs Selling and distribution costs Administration costs

The company pays taxation on its profits at the rate of 30%, with half of this being payable in the year in which the profit is earned and the remainder being payable in the following year. Investments of this type qualify for tax depreciation at the rate of 25% per annum on a reducing balance basis. The Board of Directors of JK plc has agreed to use a 12% post-tax discount rate to evaluate this investment.

The requirements for this question are on the next page

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Performance Operations

Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

Required: (a) (b) (c)


Advise JK plc whether the investment is financially worthwhile. (17 marks) Calculate the Internal Rate of Return of the investment. (3 marks) Define and contrast (i) the real rate of return and (ii) the money rate of return, and explain how they would be used when calculating the net present value of a projects cash flows. (5 marks) (Total for Question Three = 25 marks)

Section C continues on the next page

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Specimen Exam Paper

Performance Operations

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

Question Four
CK is an entity that sells computer parts. The entitys sales and purchases accrue evenly throughout the year and inventory is managed in such a way as to give a constant inventory level throughout the year. CK had the following figures for the year ended 31 March 2008: Revenue from credit sales during the year Purchases on credit during the year Trade receivables balance at 31 March 2008 Trade payables balance at 31 March 2008 Inventory balance at 31 March 2008 Cash balance at 31 March 2008 $000 6,192 4,128 1,083 344 1,020 622

The directors want to improve working capital management and have targeted the following areas: Trade receivables reduced to 45 days. Suppliers would be willing to wait a total of 40 days for payment. Inventory reduced by 40% (from 31 March 2008 $ value levels) without having an adverse impact on sales. The budgets for the year to 31 March 2009 have been commenced, but are incomplete. Budgeted revenue from credit sales is based on the year to 31 March 2008 figure, plus a price increase of 10% from 1 April 2008 and a reduction of an estimated 3% in volume caused by the price increase. Cost of sales is budgeted at the same percentage of credit sales revenue as the year to 31 March 2008. $000 Salaries and wages are budgeted at 620 for the year Other operating expenses budget is 432 for the year Budgeted capital expenditure is 2,500 It is recommended that $1,500,000 of the proposed purchase of non-current tangible assets could be leased instead of purchased. The terms of the lease would be five payments of $400,000 each, payable in advance of 1 April each year, commencing on 1 April 2008. The lease would be classified as a finance lease by IAS 17 Leases. The implicit interest rate is 16875%.

Required: (a)
Calculate the following for CK at 31 March 2009: Trade receivables days outstanding; Trade payables days outstanding; Inventory days outstanding. (3 marks)

(b)

Prepare a cash budget for the year to 31 March 2009 based on the budgeted data and the improvements to the working capital (but not the lease). (10 marks) Explain the effect on CKs cash budget if it decides to lease $1,500,000 of the non-current assets, instead of purchasing them. (Note: You are not required to recalculate CKs cash budget) (2 marks) 10 Specimen Exam Paper

(c)

Performance Operations

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

CK is planning to send some of its employees to a conference. The estimated budgeted cost of $10,860 included estimated hotel costs of $5,000 and estimated fuel costs of $1,500. After the initial budget had been prepared, it was realised that there is some uncertainty concerning the hotel cost and the fuel cost. Further investigation has shown that these costs may be higher or lower than the original estimates. Estimated costs with their associated probabilities are as follows: Estimated hotel cost ($) 4,000 5,000 6,000 Probability % 20 50 30 Estimated fuel cost ($) 1,200 1,500 2,000 Probability % 10 50 40

The following two-way data table shows the effect on the total relevant cost of these alternative values. All figures are in $: Hotel $5,000 300 0 +500

Fuel

$1,200 $1,500 $2,000

$4,000 1,300 1,000 500

$6,000 +700 +1,000 +1,500

(d) (e)

Explain the meaning of the above two-way data table. (3 marks) Explain, giving examples, how the two-way data table may be used in conjunction with the probabilities to improve the information available to the directors of CK. (7 marks) (Total for Question Four = 25 marks)

(Total marks for Section C = 50 marks)

End of Question Paper Maths Tables and Formulae follow

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Performance Operations

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

PRESENT VALUE TABLE


Present value of $1, that is (1+ r ) payment or receipt.
Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1% 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.861 0.853 0.844 0.836 0.828 0.820 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 0.743 0.728 0.714 0.700 0.686 0.673 3% 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 0.642 0.623 0.605 0.587 0.570 0.554
n

where r = interest rate; n = number of periods until

4% 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.555 0.534 0.513 0.494 0.475 0.456

Interest rates (r) 5% 6% 0.952 0.943 0.907 0.890 0.864 0.840 0.823 0.792 0.784 0.747 0.746 0705 0.711 0.665 0.677 0.627 0.645 0.592 0.614 0.558 0.585 0.527 0.557 0.497 0.530 0.469 0.505 0.442 0.481 0.417 0.458 0.394 0.436 0.371 0.416 0.350 0.396 0.331 0.377 0.312 Interest rates (r) 15% 16% 0.870 0.862 0.756 0.743 0.658 0.641 0.572 0.552 0.497 0.476 0.432 0.410 0.376 0.354 0.327 0.305 0.284 0.263 0.247 0.227 0.215 0.195 0.187 0.168 0.163 0.145 0.141 0.125 0.123 0.108 0.107 0.093 0.093 0.080 0.081 0.069 0.070 0.060 0.061 0.051

7% 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 0.362 0.339 0.317 0.296 0.277 0.258

8% 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.315 0.292 0.270 0.250 0.232 0.215

9% 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 0.252 0.231 0.212 0.194 0.178

10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149

11% 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352 0.317 0.286 0.258 0.232 0.209 0.188 0.170 0.153 0.138 0.124

12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.287 0.257 0.229 0.205 0.183 0.163 0.146 0.130 0.116 0.104

13% 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.295 0.261 0.231 0.204 0.181 0.160 0.141 0.125 0.111 0.098 0.087

14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 0.237 0.208 0.182 0.160 0.140 0.123 0.108 0.095 0.083 0.073

17% 0.855 0.731 0.624 0.534 0.456 0.390 0.333 0.285 0.243 0.208 0.178 0.152 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.043

18% 0.847 0.718 0.609 0.516 0.437 0.370 0.314 0.266 0.225 0.191 0.162 0.137 0.116 0.099 0.084 0.071 0.060 0.051 0.043 0.037

19% 0.840 0.706 0.593 0.499 0.419 0.352 0.296 0.249 0.209 0.176 0.148 0.124 0.104 0.088 0.079 0.062 0.052 0.044 0.037 0.031

20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.135 0.112 0.093 0.078 0.065 0.054 0.045 0.038 0.031 0.026

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Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

Cumulative present value of $1 per annum, Receivable or Payable at the end of each year for n years
1 (1+ r ) n r

Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

1% 0.990 1.970 2.941 3.902 4.853 5.795 6.728 7.652 8.566 9.471 10.368 11.255 12.134 13.004 13.865 14.718 15.562 16.398 17.226 18.046

2% 0.980 1.942 2.884 3.808 4.713 5.601 6.472 7.325 8.162 8.983 9.787 10.575 11.348 12.106 12.849 13.578 14.292 14.992 15.679 16.351

3% 0.971 1.913 2.829 3.717 4.580 5.417 6.230 7.020 7.786 8.530 9.253 9.954 10.635 11.296 11.938 12.561 13.166 13.754 14.324 14.878

4% 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 8.111 8.760 9.385 9.986 10.563 11.118 11.652 12.166 12.659 13.134 13.590

Interest rates (r) 5% 6% 0.952 0.943 1.859 1.833 2.723 2.673 3.546 3.465 4.329 4.212 5.076 5.786 6.463 7.108 7.722 8.306 8.863 9.394 9.899 10.380 10.838 11.274 11.690 12.085 12.462 4.917 5.582 6.210 6.802 7.360 7.887 8.384 8.853 9.295 9.712 10.106 10.477 10.828 11.158 11.470

7% 0.935 1.808 2.624 3.387 4.100 4.767 5.389 5.971 6.515 7.024 7.499 7.943 8.358 8.745 9.108 9.447 9.763 10.059 10.336 10.594

8% 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 8.244 8.559 8.851 9.122 9.372 9.604 9.818

9% 0.917 1.759 2.531 3.240 3.890 4.486 5.033 5.535 5.995 6.418 6.805 7.161 7.487 7.786 8.061 8.313 8.544 8.756 8.950 9.129

10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.814 7.103 7.367 7.606 7.824 8.022 8.201 8.365 8.514

11% 0.901 1.713 2.444 3.102 3.696 4.231 4.712 5.146 5.537 5.889 6.207 6.492 6.750 6.982 7.191 7.379 7.549 7.702 7.839 7.963

12% 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 5.938 6.194 6.424 6.628 6.811 6.974 7.120 7.250 7.366 7.469

13% 0.885 1.668 2.361 2.974 3.517 3.998 4.423 4.799 5.132 5.426 5.687 5.918 6.122 6.302 6.462 6.604 6.729 6.840 6.938 7.025

14% 0.877 1.647 2.322 2.914 3.433 3.889 4.288 4.639 4.946 5.216 5.453 5.660 5.842 6.002 6.142 6.265 6.373 6.467 6.550 6.623

Interest rates (r) 15% 16% 0.870 0.862 1.626 1.605 2.283 2.246 2.855 2.798 3.352 3.274 3.784 4.160 4.487 4.772 5.019 5.234 5.421 5.583 5.724 5.847 5.954 6.047 6.128 6.198 6.259 3.685 4.039 4.344 4.607 4.833 5.029 5.197 5.342 5.468 5.575 5.668 5.749 5.818 5.877 5.929

17% 0.855 1.585 2.210 2.743 3.199 3.589 3.922 4.207 4.451 4.659 4.836 4.988 5.118 5.229 5.324 5.405 5.475 5.534 5.584 5.628

18% 0.847 1.566 2.174 2.690 3.127 3.498 3.812 4.078 4.303 4.494 4.656 7.793 4.910 5.008 5.092 5.162 5.222 5.273 5.316 5.353

19% 0.840 1.547 2.140 2.639 3.058 3.410 3.706 3.954 4.163 4.339 4.486 4.611 4.715 4.802 4.876 4.938 4.990 5.033 5.070 5.101

20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.327 4.439 4.533 4.611 4.675 4.730 4.775 4.812 4.843 4.870

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Performance Operations

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

FORMULAE
PROBABILITY A B = A or B. A B = A and B (overlap). P(B A) = probability of B, given A. Rules of Addition If A and B are mutually exclusive: P(A B) = P(A) + P(B) If A and B are not mutually exclusive: P(A B) = P(A) + P(B) P(A B) Rules of Multiplication If A and B are independent: P(A B) = P(A) * P(B) If A and B are not independent: P(A B) = P(A) * P(B | A) E(X) = (probability * payoff) Quadratic Equations If aX2 + bX + c = 0 is the general quadratic equation, the two solutions (roots) are given by:
X = b b 2 4ac 2a

DESCRIPTIVE STATISTICS Arithmetic Mean x x = n Standard Deviation


SD =
( x x ) 2 n

x=

fx f

(frequency distribution)

SD =

fx 2 x 2 (frequency distribution) f

INDEX NUMBERS Price relative = 100 * P1/P0


P w 1 P o w

Quantity relative = 100 * Q1/Q0

Price:

x 100

Quantity: TIME SERIES Additive Model

Q w 1 Q o x 100 w

Series = Trend + Seasonal + Random Multiplicative Model Series = Trend * Seasonal * Random

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Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

LINEAR REGRESSION AND CORRELATION The linear regression equation of Y on X is given by:

Y = a + bX or Y - Y = b(X X)
where
Covariance ( XY) n XY ( X)( Y ) = Variance ( X) n X 2 ( X) 2

b=

and or solve

a = Y bX

Y = na + b X XY = a X + bX2
Coefficient of correlation
r= Covariance ( XY) Var ( X).Var ( Y ) 6d2
n(n 2 1)

n XY ( X)( Y ) {n X 2 ( X) 2 }{n Y 2 ( Y ) 2 }

R(rank) = 1 -

FINANCIAL MATHEMATICS Compound Interest (Values and Sums) Future Value S, of a sum of X, invested for n periods, compounded at r% interest

S = X[1 + r]n
Annuity Present value of an annuity of 1 per annum receivable or payable for n years, commencing in one year, discounted at r% per annum: PV =
1 1 1 r [1 + r ] n

Perpetuity Present value of 1 per annum, payable or receivable in perpetuity, commencing in one year, discounted at r% per annum: 1 PV = r

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Performance Operations

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P1

LIST OF VERBS USED IN THE QUESTION REQUIREMENTS


A list of the learning objectives and verbs that appear in the syllabus and in the question requirements for each question in this paper. It is important that you answer the question according to the definition of the verb. LEARNING OBJECTIVE
Level 1 - Knowledge What you are expected to know.

VERBS USED
List State Define

DEFINITION
Make a list of Express, fully or clearly, the details/facts of Give the exact meaning of

Level 2 - Comprehension What you are expected to understand.

Describe Distinguish Explain Identify Illustrate

Communicate the key features Highlight the differences between Make clear or intelligible/state the meaning or purpose of Recognise, establish or select after consideration Use an example to describe or explain something

Level 3 - Application How you are expected to apply your knowledge.

Apply Calculate Demonstrate Prepare Reconcile Solve Tabulate

Put to practical use Ascertain or reckon mathematically Prove with certainty or to exhibit by practical means Make or get ready for use Make or prove consistent/compatible Find an answer to Arrange in a table

Level 4 - Analysis How are you expected to analyse the detail of what you have learned.

Analyse Categorise Compare and contrast Construct Discuss Interpret Prioritise Produce

Examine in detail the structure of Place into a defined class or division Show the similarities and/or differences between Build up or compile Examine in detail by argument Translate into intelligible or familiar terms Place in order of priority or sequence for action Create or bring into existence

Level 5 - Evaluation How are you expected to use your learning to evaluate, make decisions or recommendations.

Advise Evaluate Recommend

Counsel, inform or notify Appraise or assess the value of Propose a course of action

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Specimen Exam Paper