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P2 – Advanced Management Accounting

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Showing 7–9 of 10 questions

Question 7

A positive net present value (NPV) has been calculated for a project to launch a new product. An additional calculation is required to identify the sensitivity of the NPV to changes in the forecast total sales volume.

The present value of which of the following would be used in the calculation?

Select an option, then click Submit answer.

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    Contribution
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    Operating profit
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    Fixed overheads
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    Net profit
Question 8

It is often claimed that a two-part transfer pricing system offers a number of advantages to organizations which use it.

Which of the following statements is NOT an advantage of using a two-part transfer pricing system?

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    Transfers are made at the marginal cost of the supplying division and both divisions should be able to report profits from inter-divisional trading.
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    The receiving division is made aware of and charged for the full cost of obtaining intermediate products from other divisions.
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    It stimulates planning, communication and coordination amongst divisions.
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    The agreed fixed fee simply compensates the supplying division for incurring the fixed costs associated with the item transferred.
Question 9

A company is considering two mutually exclusive projects, an analysis of which is given below:

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The company's cost of capital is 12%.

Assuming an objective of maximising shareholders' wealth, which project would be recommmended?

Select an option, then click Submit answer.

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    Project B because it has the higher net present value.
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    Project B because it has the shorter payback period.
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    Project A because it has the higher accounting rate of return.
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    Project A because it has the higher internal rate of return.