Question 1

Firefighters risk serious and potentially fatal accidents whenever they attend an incident.
Which of the following statements is correct?

Options :

A : The risk of serious accidents should be accepted in all but the most extreme incidents.

B : The risk of serious accidents should always be accepted because that is what firefighters are paid to do.

C : The risk of serious accidents should be avoided because the risk has a high probability and a high impact.

D : Every incident should be the subject of a detailed and thorough risk assessment before the firefighters are permitted to respond.

Answer: A

Question 2

Company D is about to launch an innovative and unique product which may face direct competition within three years. The company needs to achieve a rapid payback on all investments because it has limited access to external finance.
Which is the most appropriate pricing strategy for company D's new product, and for what reason?

Options :

A : Market skimming because it exploits areas of the market which are sensitive to price.

B : Penetration pricing because it can be used to rapidly build sales volume in mature markets.

C : Market skimming because it enables high prices to be charged to buyers who want the product as soon as possible.

D : Penetration pricing because it can be used to rapidly build sales volume in high growth markets.

Answer: C

Question 3

Which of the following statements about the use of traditional budgeting compared with a beyond budgeting approach is correct?

Options :

A : If the organization has devolved decision making, beyond budgeting is not appropriate because it does not allow the same level of empowerment as traditional budgeting.

B : If the organization-s products are subject to rapid technological change, beyond budgeting would allow managers to respond more quickly than under traditional budgeting.

C : If there is a dynamic external environment with fast moving opportunities, beyond budgeting will inhibit the organization-s ability to take advantage of these opportunities whereas traditional budgeting will not.

D : If the organization-s culture is such that a top down budgeting system is desired then this is better achieved by adopting beyond budgeting rather than traditional budgeting.

Answer: B

Question 4

When considering a capital investment, relevant costs for decision making have which THREE of the following features?

Options :

A : They are future costs.

B : They are committed costs.

C : They are incremental costs.

D : They are unavoidable costs.

E : They are cash flows.

Answer: A,C

Question 5

A company has three divisions, each of which is an investment centre. The divisional managers' performance is assessed using return on investment (ROI). A higher ROI will result in a higher bonus for the divisional manager.
The company's cost of capital is 15%.

For the forthcoming year each divisional manager has one investment opportunity available as follows:

The manager(s) of which division(s) will proceed with their respective investment opportunity?

Options :

A : Division 1 and Division 3

B : Division 2 and Division 3

C : Division 3 only

D : Division 1 only

Answer: B

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