Question 1

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

Select ALL that apply.

A. Revenue centre managers have a lower level of decision-making authority than profit centre managers.
B. Revenue centre managers and profit centre managers are accountable for controllable costs only.
C. Profit centre managers and investment centre managers are responsible for the majority of operating costs incurred.
D. Investment centre managers have a higher level of managerial authority than profit centre managers.
E. Managers of profit centres have authority over the level of investment in working capital but managers of cost centres do not.

Question 2

The management of a leisure company, who are risk averse, have just approved an investment in a new amusement park. The country in which the amusement park will be located has a warm and mostly dry climate throughout the year.

A number of specific risks related to this investment have been identified as follows.

(1) Losses of very small amounts of revenue due to poor weather.

(2) A significant financial liability may arise due to the injury of a member of the public.

(3) Loss of several days of revenue due to rides being unavailable because of poor maintenance routines.

(4) Income fraud as a consequence of the high levels of cash handled by employees.

Using the TARA framework, which is the most appropriate way of managing each of these risks?

A. Transfer risk 1; accept risk 2; avoid risk 3; reduce risk 4
B. Accept risk 1; avoid risk 2; transfer risk 3; reduce risk 4
C. Accept risk 1; transfer risk 2; avoid risk 3; reduce risk 4
D. Reduce risk 1; transfer risk 2; avoid risk 3; accept risk 4

Updated CIMAPRO19-P02-1 Practice Questions BY Taylor

Other Popular CIMA Exams