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P2 – Advanced Management Accounting

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Showing 4–6 of 10 questions

Question 4

Which of the following statements are correct with regard to responsibility centres?

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    Revenue centre managers have a lower level of decision-making authority than profit centre managers.
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    Revenue centre managers and profit centre managers are accountable for controllable costs only.
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    Profit centre managers and investment centre managers are responsible for the majority of operating costs incurred.

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    Investment centre managers have a higher level of managerial authority than profit centre managers.
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    Managers of profit centres have authority over the level of investment in working capital but managers of cost centres do not.
Question 5

Which TWO of the following actions taken during the budgetary planning process will result in the creation of budgetary slack?

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    Overestimating costs
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    Underestimating costs
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    Underestimating revenues
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    Overestimating revenues
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    Overestimating profit
Question 6

The Chief Executive of a large manufacturing company has made the following comment.

"All of our competitors are using both just-in-time(JIT) and Total Quality Management (TQM) whereas we have never used either. Consequently we are lagging behind our competitors because their levels of inventory and quality costs are significantly below ours. I want to see JIT fully implemented, both for purchasing and for production, in 4 weeks' time and TQM fully implemented 4 weeks after that."

Which of the following provide appropriate advice to the Chief Executive?

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    Full implementation of JIT is unlikely to be successful unless a TQM environment has first been established.
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    Implementing TQM from scratch within 8 weeks should be feasible for a large manufacturing company, but implementing JIT within 4 weeks is unlikely to be feasible.
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    Total quality costs are likely to begin declining immediately once the process of implementing TQM has commenced.
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    JIT offers the long run prospect of significantly reducing inventory.
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    It would be possible to implement TQM without implementing JIT.
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    It is not possible to implement JIT for production without first implementing JIT for purchasing.