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P2 Exam Dumps : Advanced Management Accounting

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Advanced Management Accounting Questions and Answers

Question 1

SkillWeave Industries are focused on managing the risk of selling their cars to the region due to economic turmoil, and have now begun using funds from sales in the region to fund supplier purchases from that region to

reduce the risk from the volatile currency. However, SkillWeave want to go a step further and make the risk even less sizeable.

Which of the following is a method by which SkillWeave can operate in the market and transfer the risk of exchange rate exposure to another party?

Options:

A.

Invoice international sales in domestic currency

B.

Temporarily stop operating in that target market

C.

Arrange a forward foreign exchange rate contract agreeing to buy a given amount of the foreign currency in 3 months time for a fixed exchange rate based on current rates

D.

Put a sale on all vehicles stationed in the region to clear stock quickly

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Question 2

An investment centre manager is considering the purchase of a new machine. If purchased, the new machine would replace an existing one that is used to manufacture one of the investment centre's existing products.

The new machine would incur $800 per month additional running costs; this includes $300 per month of additional depreciation.

The new machine would save on direct labor time. This means that the fixed production overhead absorbed by the product on the basis of direct labor hours would reduce by $100 per month.

What is the total cost of the above that is relevant to the decision to purchase the machine?

Options:

A.

$500; only the additional running costs, excluding depreciation, are relevant.

B.

$700; all of the additional running costs and the reduction in absorbed overhead are relevant.

C.

$400; only the reduction in absorbed overhead and the additional running costs, excluding depreciation, are relevant.

D.

$800; all of the additional running costs are relevant, but the reduction in absorbed overhead is not relevant.

Question 3

Which of the following is a correct description of the key features of net present value?

Options:

A.

It adjusts the relevant cash flows of a project to reflect the time value of money. The discount rate used is always the company's weighted average cost of capital.

B.

It adjusts the relevant cash flows of a project to reflect the time value of money. The discount rate used reflects the risk of the project.

C.

It adjusts the relevant profits of a project to reflect the time value of money. The discount rate used reflects the risk of the project.

D.

It adjusts the relevant cash flows of a project after the deduction of depreciation charges to reflect the time value of money. The discount rate used is always the company's weighted average cost of capital.