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LM operates a parcel delivery service. Last year its employees delivered 15,120 parcels and travelled 120,960 kilometers. Total costs were $194,400.

LM has estimated that 70% of its total costs are variable with activity and that 60% of these costs vary with the number of parcels and the remainder vary with the distance travelled.

LM is preparing its budget for the forthcoming year using an incremental budgeting approach and has produced the following estimates:

* All costs will be 3% higher than the previous year due to inflation

* Efficiency will remain unchanged

* A total of 18,360 parcels will be delivered and 128,800 kilometers will be travelled.

Calculate the following costs to be included in the forthcoming year's budget:

(i) the total variable costs related to the number of parcels delivered.

(ii) the total variable costs related to the distance travelled.

AParcel related cost for next year = $112,308; Distance related costs for next year = $79,590

BParcel related cost for next year = $109,118; Distance related costs for next year = $89,699

CParcel related cost for next year = $112,118; Distance related costs for next year = $59,699

DParcel related cost for next year = $105,306; Distance related costs for next year = $30,590

EParcel related cost for next year = $115,306; Distance related costs for next year = $31,590

THS produces two products from different combinations of the same resources. Details of the products are shown below:

q2_CIMAPRO19-P01-1

Identify, using graphical linear programming, the optimal production plan for products E and R to maximize THS's profit in the month.

AThe solution (from the graph0 is to produce 675 units of E and 470 units of R.

BThe solution (from the graph0 is to produce 495 units of E and 670 units of R.

CThe solution (from the graph0 is to produce 475 units of E and 770 units of R.

DThe solution (from the graph0 is to produce 375 units of E and 750 units of R.

EThe solution (from the graph0 is to produce 375 units of E and 870 units of R.

FThe solution (from the graph0 is to produce 495 units of E and 470 units of R.

Explain THREE benefits that organizations gain from using budgetary planning and control systems.

Select ALL the true statements.

AThe budget acts as a variable mechanism, with actual results being compared with budget.

BBudgeting forces an organization's management to look ahead and set performance targets.

CThe budget provides an external benchmark against which performance against which performance can be evaluated.

DThe budget ensures actions of different parts of the organization are coordinated are reconciled otherwise managers take actions for the benefit of their own part of organization that may not benefit the organization as a whole.

EAnother benefit of budgeting is to set targets to motivate managers and optimize their performance.

FThe budget is a useful device of influencing an operator's thoughts and motivating operators to perform in line with the organization's marketing budget.

GIt provides a standard which managers may be motivated to achieve. It can also encourage inefficiency and conflict between managers particularly if the budget is imposed from above, whereby it may act as a threat rather than as a challenge.

CH is a building supplies company that sells products to trade and private customers.

Budget data for each of the six months to March are given below:

q4_CIMAPRO19-P01-1

80% of the value of credit sales is received in the month after sale, 10% two months after sale and 8% three months after sale. The balance is written off as a bad debt.

75% of the value of credit purchases is paid in the month after purchase and the remaining 25% is paid two months after purchase.

All other operating costs are paid in the month they are incurred.

CH has placed an order for four new forklift trucks that will cost $25,000 each. The scheduled payment date is in February.

The cash balance at 1 January is estimated to be $15,000.

Prepare a cash budget for each of the THREE months of January, February and March.

Select All the correct answers.

PL currently earns an annual contribution of $2,880,000 from the sale of 90,000 units of product B. Fixed costs are $800,000 per annum.

The management of PL is considering reducing the selling price per unit to $48. The estimated levels of demand at the revised selling price and the probabilities of them occurring are as follows:

q5_CIMAPRO19-P01-1

Calculate the probability that the profit will increase from its current level if the selling price is reduced to $48.

AThe probability therefore that the contribution will exceed $2,880,000 is 90%.

BThe probability therefore that the contribution will exceed $2,880,000 is 50%.

CThe probability therefore that the contribution will exceed $2,880,000 is 70%.

DThe probability therefore that the contribution will exceed $2,880,000 is 40%.

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