P1 - Error in CIMA exam paper - nov 2006?? Budgeting

Posted: Monday 21 November 2011 by Cima Student2011

Replies : 5

Keywords: budgeting & forecasting, P1

well, refer to the CIMA NOV 2006 MAPE paper - Section B QUestion 2, ( it is a Budgeting problem),...note here that THERE IS NO opening inventory figure given. So are we to suppose that ( as it is worked out in the solution) that opening inventory is to be calculated at the same rate that closing is used. ( why , for god's sake is this supposition taken?)

Here's the link : http://www.cimaglobal.com/Documents/ImportedDocuments/NOV06P1BOOK.pdf

The best i know is :

1. closing of the previous period is opening of next period. ( why this is not used)
2. Opening figures are given....( they are not even hidden in this problem anywhere)

( i came across a modified version of this problem in BPP p1 revision kit)
frankly, am shocked! Is it a sub-standard problem? sub standard problem setting? Or am I just too dumb?

Not an error

Posted by Rebecca McCaffry on Monday 21 November 2011 16:51

Hi CIMA Student2011

The question looks fine to me and I am not really sure what you are asking. Yes, closing inventory of one period is opening inventory of the next. The opening inventory of period 1 is the closing inventory of the previous period, which is calculated, as given in the question, as a % of the next period's sales or material usage.

You are better to focus your studies on current syllabus papers (2010 onwards) as there have been significant changes in the P1 syllabus since 2006.

Rebecca
CIMAsphere moderator
http://community.cimaglobal.com/blogs/rebecca-mccaffry

Report content

Stated the Question better

Posted by Cima Student2011 on Monday 21 November 2011 18:22

Hey Rebecca,...

thks for the reply. It was in BPP revision kit for this year,.., a budgeting problem that twinged me a bit.

Clearly one period's closing equals next period's opening does not apply here as we have sales forecasts for several quarters.

Now regarding the problem,

the opening inventory has been calculated ( in the answer) as 30% of the current month's sales( projected) figure. Secondly, the closing inventory is calculated as 30% of the coming month's figure. This is for finished goods( clearely mentioned w.r.t closing inventory). the problem never mentions anything remotely with how opening inventory should be handled! So that leap of imagination ( of taking the same figures of/ for opening inventory as closing when nothing is mentioned for the opening) is quite confusing, and that is what has me stumped.is it not a leap of faith? ( for both finished goods and materials same method has been used)

hope i have stated the question better.