Exam P3 Topic 1 Question 46 Discussion

Actual exam question for CIMA's P3 exam
Question #: 46
Topic #: 1

UJK manufactures garden machinery. The company is dependent upon another manufacturer for the motors that power its products.
One of the factors that is being considered in a stress test requested by UJK's Board is the possibility that the motor manufacturer increases its selling prices by 10% The motor accounts for a significant proportion of the overall manufacturing cost of UJK's products Which of the following are correct?

A. The impact of absorbing the increased cost of motors on UJK's profits should be calculated. B. UJK should estimate the impact on demand of increasing selling prices to pass on the increased cost of the motors. C. The possibility of an increase in selling prices due to increased costs should be noted in the stress test report D. UJK should identify an alternative vendor of suitable motors as part of its stress test E. The motor manufacturer should be contacted and told that a substantial increase in selling prices would have a drastic impact on UJK

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