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Chartered Institute of Management Accountants (CIMA) Management Level: Management Accounting (E2, F2, P2) Flashcards
74 question-and-answer cards covering Management Level: Management Accounting (E2, F2, P2) as it is examined in Chartered Institute of Management Accountants (CIMA). 24 of them are printed below, taken from across the deck — no signup, no paywall on the preview.
24 sample cards from the Management Level: Management Accounting (E2, F2, P2) deck
Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.
What is the contribution per unit, and how does it relate to the break-even point?
$$\text{Contribution} = \text{Selling price} - \text{Variable cost per unit}; \qquad \text{Break-even units} = \frac{\text{Fixed costs}}{\text{Contribution per unit}}$$
What is the margin of safety and how is it calculated (in units or %)?
The amount by which expected sales exceed break-even sales. $$\text{Margin of safety \%} = \frac{\text{Budgeted sales} - \text{Break-even sales}}{\text{Budgeted sales}} \times 100\%$$
What is the key difference between absorption costing and marginal costing in valuing inventory?
Absorption costing includes fixed production overheads in unit/inventory cost; marginal costing values inventory at variable cost only and treats fixed overheads as period costs. Profits differ when inventory levels change.
In Activity-Based Costing (ABC), what is a 'cost driver'?
The factor that causes the cost of an activity to change (e.g. number of set-ups, orders, or inspections). Overheads are assigned to products based on their consumption of cost drivers, giving more accurate product costs.
What is 'target costing' and how is the target cost derived?
A market-led technique where price is set first. $$\text{Target cost} = \text{Target selling price} - \text{Required profit margin}$$ The firm then engineers the product/process to meet that cost; any shortfall is the 'cost gap' to close.
What is the difference between value-added and non-value-added activities in lean/cost management?
Value-added activities increase the worth of a product to the customer; non-value-added activities (e.g. inspection, storage, waiting) consume resources without adding customer value and should be minimised or eliminated.
State the formula for net present value (NPV) and the decision rule.
$$NPV = \sum_{t=0}^{n} \frac{C_{t}}{(1+r)^{t}}$$ Accept the project if $NPV > 0$ (it increases shareholder wealth); reject if $NPV < 0$.
Define the internal rate of return (IRR) and its decision rule.
The discount rate at which $NPV = 0$. Decision rule: accept a project if $\text{IRR} > \text{cost of capital}$. It can be estimated by interpolation: $$IRR \approx L + \frac{N_{L}}{N_{L}-N_{H}}(H-L)$$
What is the formula for the discounted payback period concept, and one advantage over simple payback?
It is the time taken for cumulative discounted cash flows to recover the initial outlay. Advantage: it accounts for the time value of money, unlike simple payback which ignores it.
How is the present value of a perpetuity calculated (and a growing perpetuity)?
$$PV = \frac{C}{r}; \qquad \text{growing perpetuity } PV = \frac{C}{r-g}$$ where $C$ = annual cash flow, $r$ = discount rate, $g$ = growth rate.
What is the accounting rate of return (ARR) formula?
$$ARR = \frac{\text{Average annual accounting profit}}{\text{Average (or initial) investment}} \times 100\%$$ A project is accepted if ARR exceeds a target rate; it ignores the time value of money.
How is the equivalent annual cost (EAC) used to compare assets with different lives?
$$EAC = \frac{\text{PV of costs}}{\text{Annuity factor for the asset's life}}$$ The asset with the lowest EAC is preferred, since it converts differing-life cash flows into a comparable annual figure.
In transfer pricing, what is the general rule for the minimum transfer price a selling division should accept?
$$\text{Minimum transfer price} = \text{Marginal (variable) cost} + \text{Opportunity cost of the transferred unit}$$ If there is spare capacity, opportunity cost is zero, so the minimum is marginal cost.
Distinguish Residual Income (RI) from Return on Investment (ROI) as divisional performance measures.
ROI = controllable profit / divisional investment (a %). RI = controllable profit − (notional interest × investment), an absolute money figure. RI is goal-congruent because it accepts any project earning above the cost of capital, whereas ROI may reject such projects that lower the average.
State the formulas for ROI and Residual Income.
$$ROI = \frac{\text{Controllable divisional profit}}{\text{Divisional capital employed}} \times 100\%; \qquad RI = \text{Profit} - (\text{Cost of capital} \times \text{Investment})$$
What are the four perspectives of Kaplan and Norton's Balanced Scorecard?
Financial, customer, internal business process, and learning and growth (innovation) perspectives — linking long-term strategy to operational measures beyond purely financial ones.
In variance analysis, give the formula for the total sales margin variance and its two sub-variances.
Total sales margin variance splits into: sales price variance = $(\text{actual price} - \text{standard price}) \times \text{actual units}$, and sales volume variance = $(\text{actual units} - \text{budgeted units}) \times \text{standard margin per unit}$.
How are the material price and material usage variances calculated?
Material price variance $= (\text{standard price} - \text{actual price}) \times \text{actual quantity purchased}$. Material usage variance $= (\text{standard quantity for actual output} - \text{actual quantity}) \times \text{standard price}$.
What is the difference between feedback control and feedforward control?
Feedback control compares actual results with plan after the event and corrects future action (e.g. variance reports). Feedforward control compares a forecast of expected results with the desired outcome before the event and acts in advance to prevent deviation.
What is the difference between business risk and financial risk?
Business risk is the variability of operating profits arising from the nature of operations (demand, costs, competition). Financial risk is the additional variability in returns to shareholders caused by the use of debt (gearing) and fixed financing costs.
Name the four generic risk responses in the 'TARA' framework.
Transfer (e.g. insurance), Avoid (cease the activity), Reduce (controls to lower likelihood/impact), and Accept (retain the risk). The choice depends on the risk's likelihood and impact.
What are the three lines of defence in a risk management/internal control model?
First line: operational management that owns and manages risk. Second line: risk and compliance functions that oversee and monitor. Third line: internal audit providing independent assurance to the board/audit committee.
In COSO's framework, what is the difference between 'risk appetite' and 'risk tolerance'?
Risk appetite is the amount and type of risk an organisation is willing to pursue or retain to achieve its objectives. Risk tolerance is the acceptable level of variation around specific objectives — the practical boundary within the appetite.
What is the purpose of internal controls, and name the main categories in a typical classification.
To safeguard assets, ensure reliable reporting, promote efficiency and ensure compliance. Categories (e.g. mnemonic SPAMSOAP): Segregation of duties, Physical, Authorisation, Management, Supervision, Organisation, Arithmetic, and Personnel controls.
What this deck covers
The Management Level: Management Accounting (E2, F2, P2) deck follows the Chartered Institute of Management Accountants (CIMA) Management Level: Management Accounting (E2, F2, P2) syllabus — 3 chapters and 13 topics — so questions land on material that is genuinely examinable rather than trivia around it. That works out to roughly 24.7 cards per chapter.
Answers are written to be recallable, not just readable — averaging about 212 characters, which is long enough to carry the reasoning and short enough to say out loud.
A deck like this earns its keep on the second and third pass. Read the syllabus first so you know the shape of the subject, then use the cards to find the specific facts that have not stuck.
Management Level: Management Accounting (E2, F2, P2) flashcards FAQ
How many Management Level: Management Accounting (E2, F2, P2) flashcards are in this Chartered Institute of Management Accountants (CIMA) deck?
74 cards. This page previews 24 of them, sampled evenly across the deck so you can judge the difficulty before installing anything.
Are these Chartered Institute of Management Accountants (CIMA) flashcards free?
Yes. The preview here is free to read with no signup, and the full 74-card deck is free inside the Examius app.
What do the Management Level: Management Accounting (E2, F2, P2) cards cover?
They follow the Chartered Institute of Management Accountants (CIMA) Management Level: Management Accounting (E2, F2, P2) syllabus — 3 chapters and 13 topics — so the questions track what is actually examinable.
How should I use these flashcards?
Read the syllabus first so you know the shape of the subject, then drill the deck. Examius schedules each card with spaced repetition, so cards you keep missing come back sooner and ones you know drift further apart.