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ACC 576 Final Exam Guide
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ACC 576 Final Exam Study
Question 1 (IFTC-0112)
Controls in the information technology area are classified into the
preventive, detective, and corrective categories. Which of the
following is a preventive control?
An organization relied heavily on e-commerce for its transactions.
Evidence of the organizations security awareness manual would be
an example of which of the following types of controls?
Which of the following types of control plans is particular to a
specific process or subsystem, rather than related to the timing of its
occurrence?
Question 4 (CGIC-0032)
Which of the following is true about the Sarbanes-Oxley requirements
regarding the audit committee financial expert?
Which of the following is not a component of COSOs enterprise risk
management framework?
Which of the following is not required by the Sarbanes-Oxley Act of
2002?
Which of the following is not an advantage of the employment of an
enterprise risk management (ERM) system?
A financial statement audit performed under the requirements of the
Sarbanes-Oxley Act of 2002 must include an examination and report
upon
An important benefit of an enterprise risk management system is
Which of the following bodies has developed a framework for
enterprise risk management?
Which of the following executives of an issuer corporation must
certify to the accuracy and truthfulness of financial reports filed with
the SEC?
Which of the following is not a responsibility that should be assigned
to the audit committee of the board of directors?
Which of the following components of internal control are
characterized by ongoing activities and separate evaluations?
Which of the following can be the most effective monitoring device
for effective corporate governance?
From a corporate governance standpoint which of the following best
describes the main goal of a form of executive compensation?
Which of the following components of internal control encompass
policies and procedures that ensure that managements directives are
carried out?
Which of the following forms of compensation is more likely to result
in shirking by management?
In the COSO framework, individuals within the company that monitor
internal controls are referred to as
The COSO definition of internal control considers control activities
a(n):
If internal control is properly designed, the same employee should not
be permitted to
Question 1 (ECON-0036)
If a government were to use only fiscal policy to stimulate the
economy from a recession, it would
Disposable income is calculated as
Which of the following changes would create pressure for the
Japanese yen to appreciate relative to the U.S. dollar?
If a group of consumers decide to boycott a particular product, the
expected result would be
The movement along the demand curve from one price-quantity
combination to another is called a(n)
In the long run, a firm may experience increasing returns due to
Which of the following is not accurate about product differentiation?
Which of the following segments of the economy will be least
affected by the business cycle?
What is the effect when a foreign competitors currency becomes
weaker compared to the U.S. dollar?
Some economic indicators lead the economy into a recovery or
recession, and some lag it. An example of a lag variable would be
If the U.S. dollar declines in value relative to the currencies of many
of its trading partners, the likely result is that
The rate of unemployment caused by changes in the composition of
employment opportunities over time is referred to as the
To address the problem of a recession, the Federal Reserve Bank most
likely would take which of the following actions?
Which of the following is a direct effect of imposing a protective
tariff on an imported product?
What does the consumer price index measure?
The discount rate of the Federal Reserve System is
Which of the following individuals would be most hurt by an
unanticipated increase in inflation?
Question 1 (FINM-0082)
Which of the following statements is correct regarding the weighted-
average cost of capital (WACC)?
The benefits of debt financing over equity financing are likely to be
highest in which of the following situations?
Question 3 (RMCB-0027)
Which of the following describes an option?
A company has $1,500,000 of outstanding debt and $1,000,000 of
outstanding common equity. Management plans to maintain the same
proportions of financing from each source if additional projects are
undertaken. If the company expects to have $60,000 of retained
earnings available for reinvestment in new projects in the coming
year, what dollar amount of new investments can be undertaken
without issuing new equity?
Value of equity
Value of debt + Value of equity
Since the question states that the firm will maintain the same weight
of each financing source, each dollar invested is composed of 40 cents
of equity and 60 cents of debt. The first $60,000 of equity used in
financing new projects is sourced from retained earnings. This source
of equity is exhausted when the firm reaches an investment level of
$60,000 / .4 = $150,000.When the level of investment exceeds this
amount, equity financing must be raised externally.
DQZ Telecom is considering a project for the coming year that will
cost $50,000,000. DQZ plans to use the following combination of
debt and equity to finance the investment:
Which of the following describes a normal yield curve?
Which of the following types of bonds is most likely to maintain a
constant market value?
Which of the following is an advantage of net present value
modeling?
The calculation of depreciation is used in the determination of the net
present value of an investment for which of the following reasons?
Net present value as used in investment decision-making is stated in
terms of which of the following options?
Essex Corporation is evaluating a lease that takes effect on March 1,
2012. The company must make eight equal payments, with the first
payment due on March 1, 2012. The concept most relevant to the
evaluation of the lease is
On January 1, 2012, Colt Company issued 10-year bonds with a face
amount of $1,000,000 and a stated interest rate of 8% payable
annually on January 1. The bonds were priced to yield 10%. Present
value factors are as follows:
Present value of 1 for 10 periods
Present value of an ordinary annuity of 1 for 10 periods
The total issue price (rounded) of the bonds was
Net working capital is the difference between
Assume that management of Trayco has generated the following data
about an investment project that has a five-year life:
Initial investment
Additional investment in working capital
Cash flows before income taxes for years 1 through 5
Yearly depreciation for tax purposes
Terminal value of machine
Cost of capital
Present value of $1 received after 5 years discounted at 8%
Present value of an ordinary annuity of $1 for 5 years at 8%
Assume that Trayco's marginal tax rate is 30% and all cash flows
come at the end of the year. Calculate the net present value of the
investment of the project.
Which one of the following statements correctly compares bond
financing alternatives?
A client wants to know how many years it will take before the
accumulated cash flows from an investment exceed the initial
investment, without taking the time value of money into account.
Which of the following financial models should be used?
Harvey Co. is evaluating a capital investment proposal for a new
machine. The investment proposal shows the following information:
Initial cost
Life
Annual net cash inflows
Salvage value
If acquired, the machine will be depreciated using the straight-line
method. The payback period for this investment is
Which of the following statements is correct regarding financial
decision making?
Which of the following formulas should be used to calculate the
economic rate of return on common stock?
All of the following are features of just-in-time (JIT) systems except
Because log-on procedures may be cumbersome and tedious, users
often store log-on sequences in their personal computers and invoke
them when they want to use mainframe facilities. A risk of this
practice is that
Employee numbers have all numeric characters. To prevent the input
of alphabetic characters, what technique should be used?
An organization's computer help desk function is usually a
responsibility of the
First Federal S&L has an online real-time system, with terminals
installed in all of its branches. This system will not accept a
customer's cash withdrawal instructions in excess of $1,000 without
the use of a "terminal audit key." After the transaction is authorized
by a supervisor, the bank teller then processes the transaction with the
audit key. This control can be strengthened by
A brokerage firm has changed a program so as to permit higher
transaction volumes. After proper testing of the change, the revised
programs were authorized and copied to the production library. This
practice is an example of
In a daily computer run to update checking account balances and print
out basic details on any customer's account that was overdrawn, the
overdrawn account of the computer programmer was never printed.
Which of the following control procedures would have been most
effective in detecting this fraud?
In which of the following locations should a copy of the accounting
system data backup of year-end information be stored?
A computer input control is designed to ensure that
Which of the following would lessen internal control in a computer
processing system?
A value-added network (VAN) is a privately owned network that
performs which of the following functions?
Which of the following is usually a benefit of using electronic funds
transfer for international cash transactions?
The machine language for a specific computer
Securing client/server systems is a complex task because of all of the
following factors except:
A data warehouse in an example of
Compared to batch processing, real-time processing has which of the
following advantages?
Which of the following is not a characteristic of a batch processed
computer system?
Which of the following is an advantage of a computer-based system
for transaction processing over a manual system? A computer-based
system
When a client's accounts payable computer system was relocated, the
administrator provided support through a dial-up connection to a
server. Subsequently, the administrator left the company. No
changes were made to the accounts payable system at that time.
Which of the following situations represents the greatest security risk?
In a large multinational organization, which of the following job
responsibilities should be assigned to the network administrator?
Today organizations are using microcomputers for data presentation
because microcomputer use, compared to mainframe use, is more
Question 1 (COST-0056)
The following is selected information from the records of Ray, Inc.:
Purchases of raw materials
Raw materials, beginning
Raw materials, ending
Work-in-process, beginning
Work-in-process, ending
Cost of goods sold
Finished goods, beginning
Finished goods, ending
What is the total amount of conversion costs?
Question 2 (PLAN-0049)
A defense contractor for a government space project has incurred
$2,500,000 in actual design costs to date for a guidance system whose
total budgeted design cost is $3,000,000. If the design phase of the
project is 60% complete, what is the amount of the contractor's
current overrun/savings on this design work?
A company with three products classifies its costs as belonging to five
functions: design, production, marketing, distribution, and customer
services. For pricing purposes, all company costs are assigned to the
three products. The direct costs of each of the five functions are traced
directly to the three products. The indirect costs of each of the five
business functions are collected into five separate cost pools and then
assigned to the three products using appropriate allocation bases. The
allocation base that would most likely be the best for allocating the
indirect costs of the distribution function is
Which of the following is assigned to goods that were either
purchased or manufactured for resale?
A company manufactures a product that has the direct material
standard cost presented below. Budgeted and actual information for
the current month for the manufacture of the finished product and the
purchase and use of the direct material are also presented.Standard
cost for direct material1.60 lb. @ $2.50 per lb. = $4.00
Finished goods (in units)

Direct material usage (in pounds)
Direct material purchases (in pounds)
Total cost of direct material purchases
The direct material price variance for the current month is
A favorable material price variance coupled with an unfavorable
material usage variance would most likely result from
Question 7 (PERM-0001)
A strategy map in the balanced scorecard framework is
Comparing actual results with a budget based on achieved volume is
possible with the use of a
The cash receipts budget includes
A company is attempting to determine if there is a cause and effect
relationship between scrap value and output produced. The following
exhibit presents the company's scrap data for the last fiscal year:
Scrap Value as a Percent of Standard Dollar Value of Output
Produced
Month
Nov. 11
Dec. 11
Jan. 12
Feb. 12
Mar. 12
Apr. 12
May-12
Jun. 12
Jul. 12
Aug. 12
Sep. 12
Oct. 12
Based on the above data, the company's scrap value in relation to the
standard dollar value of output produced appears to be
In preparing its cash budget for July 2012, Reed Company made the
following projections:
Sales
Gross profit (based on sales)
Decrease in inventories
Decrease in accounts payable for inventories
For July 2012 what were the estimated cash disbursements for
inventories?
The following selected data is for the Consumer Products Division of
Gerriod Corp.
Sales
Average invested capital (total assets)
Net operating profit
Cost of capital
Calculate the spread between the return on investment and the
required rate of return for the Consumer Products Division.
A company is considering exchanging an old asset for a new asset.
Ignoring income tax considerations, which of the following is
economically relevant to the decision?
Carter Co. paid $1,000,000 for land three years ago. Carter estimates
it can sell the land for $1,200,000, net of selling costs. If the land is
not sold, Carter plans to develop the land at a cost of $1,500,000.
Carter estimates net cash flow from the development in the first year
of operations would be $500,000. What is Carter's opportunity cost of
the development?
In the cost of quality, liability claims are examples of
The following selected data is for the Consumer Products Division of
Gerriod Corp.
Sales
Average invested capital (total assets)
Net operating profit
Cost of capital
Calculate the asset turnover ratio for the Consumer Products Division.
A company that produces 10,000 units has fixed costs of $300,000,
variable costs of $50 per unit, and a sales price of $85 per unit. After
learning that its variable costs will increase by 20%, the company is
considering an increase in production to 12,000 units. Which of the
following statements is correct regarding the company's next steps?
Which of the following listings correctly describes the order in which
the four types of budgets must be prepared?
All else being equal, the breakeven point in units will be higher if
Relevant information for material A follows:
Quantity purchased
Standard quantity allowed
Actual price
Standard price
What was the direct material price variance for material A?orting?
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ACC 576 Week 1 Quiz (All Possible Questions)

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This Tutorial contains More than 150 Question Test Bank (we have
listed some of the Questions below)
Week 1 Quiz
Question 1
The first general standard requires that an audit of financial
statements is to be performed by a person or persons having
Question 2
Which of the following standards requires a critical review of the
work done and the judgment exercised by those assisting in an audit
at every level of supervision?
Question 3
An auditor uses the knowledge provided by the understanding of the
internal control structure and the final assessed level of control risk
primarily to determine the nature, timing, and extent of the
Question 4
An auditor's primary consideration regarding an entity's internal
control structure policies and procedures is whether the policies and
procedures
Question 5
To obtain evidential matter about control risk, an auditor selects tests
from a variety of techniques including
Question 6
Prior to commencing fieldwork, an auditor usually discusses the
general audit strategy with the client's management. Which of the
following matters does the auditor and management agree upon at this
time?
Question 7
Which of the following factors most likely would cause a CPA to
decline to accept a new audit engagement?
Question 8
Which of the following factors would least influence an auditor's
consideration of the reliability of data for purposes of analytical
procedures?
Question 9
A previously communicated significant deficiency ordinarily should
be communicated again if
Question 10
Which of the following statements concerning analytical procedures
is correct?
Question 11
Which of the following is the authoritative body designated to
promulgate attestation standards?
Question 12
As the acceptable level of detection risk decreases, an auditor may
change the
Question 13
A CPA in public practice must be independent in fact and appearance
when providing which of the following services?
Question 14
The primary objective of procedures performed to obtain an
understanding of the internal control structure is to provide an auditor
with
Question 15
Which of the following statements is correct concerning an auditor's
required communication of significant deficiencies?
Question 16
Which of the following procedures would an auditor most likely
perform in planning a financial statement audit?
Question 17
When an auditor increases the planned assessed level of control risk
because certain control procedures were determined to be ineffective,
the auditor would most likely increase the
Question 18
An auditor concludes that a client has committed an illegal act that
has not been properly accounted for or disclosed. The auditor should
withdraw from the engagement if the
Question 19
In performing an attestation engagement, a CPA typically
Question 20
Which of the following characteristics most likely would heighten an
auditor's concern about the risk of material misstatement arising from
fraudulent financial reporting?
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Week 2 Quiz
Question 1
The most likely result of ineffective internal control policies and
procedures in the revenue cycle is that
Question 2
An entity with a large volume of customer remittances by mail could
most likely reduce the risk of employee misappropriation of cash by
using
Question 3
Which of the following statements is generally correct about the
reliability ofaudit evidence?
Question 4
Which of the following audit procedures would an auditor most likely
perform to test controls relating to management's assertion concerning
the completeness of sales transactions?
Question 5
The audit working paper that reflects the major components of an
amount reported in the financial statements is the
Question 6
Which of the following most likely would indicate the existence of
related parties?
Question 7
Which of the following procedures would an auditor most likely
perform during an audit engagement's overall review stage in
formulating an opinion on an entity's financial statements?
Question 8
In auditing accounts receivable the negative form of confirmation
request most likely would be used when
Question 9
Before applying substantive tests to the details of asset accounts at an
interim date, an auditor should assess:
Question 10
"There have been no communications from regulatory agencies
concerning noncompliance with, or deficiencies in, financial reporting
practices that could have a material effect on the financial
statements." The foregoing passage is most likely from a
Question 11
"We have disclosed to you all known instances of noncompliance or
suspected noncompliance with laws and regulations whose effects
should be considered when preparing financial statements." The
foregoing passage most likely is from a(n)
Question 12
Which of the following controls would be most effective in assuring
that recorded purchases are free of material errors?
Question 13
An auditor should request that an audit client send a letter of inquiry
to those attorneys who have been consulted concerning litigation,
claims, or assessments. The primary reason for this request is to
provide
Question 14
To which of the following matters would materiality limits not apply
in obtaining written management representations?
Question 15
In which of the following circumstances is substantive testing of
accounts receivable before the balance sheet date most appropriate?
Question 16
The purpose of segregating the duties of hiring personnel and
distributing payroll checks is to separate the
Question 17
An auditor's purpose in reviewing credit ratings of customers with
delinquent accounts receivable most likely is to obtain evidence
concerning management's assertions about
Question 18
The objective of tests of details of transactions performed as
substantive tests is to
Question 19
Which of the following documentation is not required for an audit in
accordance with generally accepted auditing standards?
Question 20
An auditor should design the written audit program so that
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ACC 576 Week 3 Quiz

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Week 3 Quiz
Question 1
In designing written audit programs, an auditor should establish
specific audit objectives that relate primarily to the
Question 2
Which of the following procedures is least likely to be performed
before the balance sheet date?
Question 3
In determining whether transactions have been recorded, the direction
of the audit testing should be from the
Question 4
Which of the following combination of procedures would an auditor
most likely perform to obtain evidence about fixed asset additions?
Question 5
An auditor may achieve audit objectives related to particular
assertions by
Question 6
The sampling unit in a test of controls pertaining to the existence of
payroll transactions ordinarily is a(an)
Question 7
The risk of incorrect acceptance and the likelihood of assessing
control risk too low relate to the
Question 8
Which of the following audit procedures probably would provide the
most reliable evidence concerning the entity's assertion of rights and
obligations related to inventories?
Question 9
When an auditor tests a computerized accounting system, which of
the following is true of the test data approach?
Question 10
An auditor is determining the sample size for an inventory
observation using mean-per-unit estimation, which is a variables
sampling plan. To calculate the required sample size, the auditor
usually determines the
Question 11
Processing data through the use of simulated files provides an auditor
with information about the operating effectiveness of control policies
and procedures.
One of the techniques involved in this approach makes use of
Question 12
An auditor should trace bank transfers for the last part of the audit
period and first part of the subsequent period to detect whether
Question 13
The primary responsibility of a bank acting as registrar of capital
stock is to
Question 14
An auditor most likely would perform substantive tests of details on
payroll transactions and balances when
Question 15
Cutoff tests designed to detect credit sales made before the end of the
year that have been recorded in the subsequent year provide assurance
about management's assertion of
Question 16
In performing tests of controls over authorization of cash
disbursements, which of the following sampling methods would be
most appropriate?
Question 17
In evaluating the adequacy of the allowance for doubtful accounts, an
auditor most likely reviews the entity's aging of receivables to support
management's financial statement assertion of
Question 18
Which of the following courses of action would an auditor most likely
follow in planning a sample of cash disbursements if the auditor is
aware of several unusually large cash disbursements?
Question 19
Which of the following characteristics most likely would be an
advantage of using classical variables sampling rather than
probability-proportional-to-size (PPS) sampling?
Question 20
Which of the following statements is correct concerning statistical
sampling in tests of controls?
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Week 4 Quiz
Question 1
Comfort letters ordinarily are addressed to
Question 2
When compiling a nonpublic entity's financial statements, an
accountant would be least likely to
Question 3
Comfort letters ordinarily are signed by the entity's
Question 4
Which of the following matters is covered in a typical comfort letter?
Question 5
Green, CPA, was engaged to audit the financial statements of Essex
Co. after its fiscal year had ended. The timing of Green's appointment
as auditor and the start of field work made confirmation of accounts
receivable by direct communication with the debtors ineffective.
However, Green applied other procedures and was satisfied as to the
reasonableness of the account balances.
Green's auditor's report most likely contained a(an)
Question 6
When engaged to audit a not-for-profit organization in accordance
with Government Auditing Standards, an auditor is required to
prepare a written report on compliance with laws and regulations that
includes
Question 7
(NOTE: This is a CPAexcel simulated Exam Question, not AICPA
licensed Material)
The effects of financial leverage result when a firm finances assets
using:
Question 8
Which of the following statements is correct concerning both an
engagement to compile and an engagement to review a nonpublic
entity's financial statements?
Question 9
Which of the following representations does an accountant make
implicitly when issuing the standard report for the compilation of a
nonpublic entity's financial statements?
Question 10
Which of the following statements is correct regarding a review
engagement of a nonpublic company's financial statements performed
in accordance with the Statements on Standards for Accounting and
Review Services (SSARs)?
Question 11
In which of the following situations would an auditor ordinarily
choose between expressing an "except for" qualified opinion or an
adverse opinion?
Question 12
When engaged to compile the financial statements of a nonpublic
entity, an accountant is required to possess a level of knowledge of
the entity's accounting principles and practices.
This requirement most likely will include obtaining a general
understanding of the
Question 13
When a qualified opinion results from a limitation on the scope of the
audit, the situation should be described in an explanatory paragraph
Question 14
The standard report issued by an accountant after reviewing the
financial statements of a nonpublic entity states that
Question 15
Which of the following phrases would an auditor most likely include
in the auditor's report when expressing a qualified opinion because of
inadequate disclosure?
Question 16
A client has capitalizable leases but refuses to capitalize them in the
financial statements. Which of the following reporting options does
an auditor have if the amounts pervasively distort the financial
statements?
Question 17
Wolf is auditing an entity's compliance with requirements governing a
major federal financial assistance program in accordance with
Government Auditing Standards. Wolf detected noncompliance with
requirements that have a material effect on the program.
Wolf's report on compliance should express
Question 18
General Retailing, a nonissuer, has asked Ford, CPA, to compile its
financial statements that omit substantially all disclosures required by
GAAP. Ford may comply with General's request provided the
omission is clearly indicated in Ford's report and the
Question 19
Moore, CPA, has been asked to issue a review report on the balance
sheet of Dover Co., a nonpublic entity. Moore will not be reporting on
Dover's statements of income, retained earnings, and cash flows.
Moore may issue the review report provided the
Question 20
Reporting standards for financial audits under Government Auditing
Standards (the Yellow Book) differ from reporting under generally
accepted auditing standards in that Government Auditing Standards
require the auditor to
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Week 5 Quiz
Question 1
An accountant's compilation report on a financial forecast should
include a statement that the
Question 2
When a CPA examines a client's projected financial statements, the
CPA's report should
Question 3
At a confidential meeting, an audit client informed a CPA about the
client's illegal insider-trading actions. A year later, the CPA was
subpoenaed to appear in federal court to testify in a criminal trial
against the client. The CPA was asked to testify to the meeting
between the CPA and the client.
After receiving immunity, the CPA should do which of the following?
Question 4
licensed Material)
XYZ Corporation is having financial difficulties. Its CFO has ordered
subordinates to pump up revenues artificially and hide that fact from
the external auditor. If an internal auditor of XYZ intentionally
misleads XYZ's outsider auditor from the ABC Accounting firm, the
internal auditor has:
Question 5 (AICPA.080962REG-1B)
licensed Material)
Duncan, an accounting firm, is auditing Alchemy Inc. Regarding
commissions and referral fees, which of the following arrangements
would be permissible?
Question 6
A CPA who is not in public practice is obligated to follow which of
the following rules of conduct?
Question 7
Under the Statements on Standards for Consulting Services, which of
the following statements best reflects a CPA's responsibility when
undertaking a consulting services engagement?
The CPA must
Question 8
Under the Code of Professional Conduct of the AICPA, which of the
following is required to be independent in fact and appearance when
discharging professional responsibilities?
Question 9
Locke, CPA, was engaged to perform an audit for Vorst Co. During
the audit, Locke discovered that Vorst's inventory contained stolen
goods. Vorst was indicted and Locke was validly subpoenaed to
testify at the criminal trial. Vorst has claimed accountant-client
privilege to prevent Locke from testifying.
Locke may be compelled to testify
Question 10
licensed Material)
Ron is a partner in the Houston office of KPMG. A partner in Ron's
office is the lead partner on the team that audits Midstream Pipeline,
which operates intrastate oil and gas pipelines, but Ron is not on the
engagement team. Which of the following scenarios represents an
independence violation of the AICPA Code of Conduct?
Question 11
licensed Material)
The CPA firm, where Joanna is currently a tax partner, is auditing
Bubbles Corp. in Austin. Her mother, Teresa, has been working as a
receptionist for Bubbles for the last 30 years. Her best friend since
grade school, Maggie, is currently serving as CFO at Bubbles. Joanna
knows that her brother, Jonathan, sank most of his savings into a
purchase of 6% of Bubbles outstanding stock, which he currently
owns. Does Joanna have an independence issue?
Question 12
An accountant may accept an engagement to apply agreed-upon
procedures to prospective financial statements provided that
Question 13
licensed Material)
In order to preserve independence, the PCAOB requires:
Question 14
According to the standards of the profession, which of the following
activities would most likely not impair a CPA's independence?
Question 15
According to the standards of the profession, which of the following
circumstances will prevent a CPA performing audit engagements
from being independent?
Question 16
Which of the following is a term for an attest engagement in which a
CPA assesses a client's commercial Internet site for predefined criteria
that are designed to measure transaction integrity, information
protection, and disclosure of business practices?
Question 17
A CPA in public practice is required to comply with the provisions of
the Statements on Standards for Attestation Engagements (SSAE)
when
Question 18
An accountant's report expressing an opinion on a nonissuer's internal
control over financial reporting should state that
Question 19
In a state jurisdiction having an accountant-client privilege statute, to
whom may a CPA turn over work papers without a client's
permission?
Question 20
Mell Corp. engaged Davis & Co., CPAs. to audit Mell's financial
statements. Mell's management informed Davis it suspected that the
accounts receivable were materially overstated. Although the
financial statements did include a materially overstated accounts
receivable balance, Davis issued an unqualified opinion.Mell relied
on the financial statements in deciding to obtain a loan from County
Bank to expand its operations. County relied on the financial
statements in making the loan to Mell. As a result of the overstated
accounts receivable balance, Mell has defaulted on the loan and has
incurred a substantial loss.
If County sues Davis for fraud, must Davis furnish County with the
audit working papers?
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ACC 576 Study Week 6
1. Which of the following did SOX NOT do to protect
whistleblowers?
2. Dan provided original information to authorities regarding a
securities fraud in his company. It led the SEC to impose penalties of
$2 million. Which of the following is most likely to be Dan's award
under Dodd-Frank?
3. Which of the following is necessary to be an audit committee
financial expert, according to the criteria specified in the Sarbanes-
Oxley Act of 2002?
4. Which of the following did Dodd-Frank do regarding a
whistleblower's right to sue for retaliation accorded by SOX?
5. A public company audit committee's "financial expert" must
have all of the following except:
6. Fang provided original information to authorities regarding a
securities fraud in his company. The information led to an imposition
of penalties of $500,000. It also led to Fang being fired in retaliation
by his public company employer. Which of the following is true?
7. Public company audit committees must contain which of the
following?
8. Under SOX, it is a crime to punish a public company
whistleblower who provides truthful information relating to which of
the following:
9. Mar has been complicit in her public company's accounting
fraud. She consults a lawyer as the time comes to file her firm's 10-K
with the SEC. She is a little uncomfortable with what she might have
to do. The lawyer will likely tell her that she will have to certify (and
be potentially criminally liable for lying about) these matters:
10. Milo Corp. maintains daily backups of its accounting system in a
fireproof vault in the file library. Weekly, monthly, and annual
backups are stored in a secure, fireproof vault at an off-site location.
11. Maintenance of the backup files is an example of
12. Review of the audit (also called transaction) log is an example of
which of the following types of security control?
13. Which of the following statements presents an example of a
general control for a computerized system?
14. Controls in the information technology area are classified into the
categories of preventive, detective, and corrective. Which of the
15. A company's new time clock process requires hourly employees
to select an identification number and then choose the clock-in or
clock-out button. A video camera captures an image of the employee
using the system. Which of the following exposures can the new
system be expected to change the least?
16. Which of the following is an example of a detective control?
17. In the COSO "cube" model, each of the following is a control
objective except
18. In the COSO "cube" model, this component of internal control
enables an organization's people to identify, process, and exchange
the information needed to manage and control operations.
19. This component of internal control concerns the policies and
procedures that ensure that actions are taken to address the risks
related to the achievement of management's objectives.
20. This fundamental component of internal control is the core or
foundation of any system of internal control.
21. This component of internal control concerns testing the system
and its data.
22. According to COSO, which of the following is a compliance
objective?
23. This is the process of identifying, analyzing, and managing the
risks involved in achieving the organization's objectives.
24. In the COSO (2011) "cube" model, each of the following are
components of internal control except
25. According to the 17 COSO control principles, risk reduction
primarily relates to which fundamental component of internal control:
26. According to the 17 COSO control principles, establishing a
whistle-blower hot line contributes to:
27. According to the 17 COSO control principles, information quality
primarily relates to which fundamental component of internal control:
28. According to the 17 COSO control principles, organizational
objectives primarily relate to which fundamental component of
internal control:
29. According to the 17 COSO control principles, addressing control
deficiencies primarily relates to which fundamental component of
internal control:
30. According to the 17 COSO control principles, change
management primarily relates to which fundamental component of
internal control:
31. According to the 17 COSO control principles, fraud primarily
relates to which fundamental component of internal control:
32. The original COSO model has _____ control components, while
the COSO ERM model has _____ control components.
33. Strategic, operations, reporting, and compliance objectives are a
part of which of the following models of internal control?
34. Which of the following items is one of the eight components of
COSO's enterprise risk management framework?
35. Which component of the COSO ERM framework is concerned
with management's decision to avoid, accept, reduce, or share risk and
to develop a set of actions to align risk with the entity's risk
preferences?
36. Activities that can be useful in monitoring control system
effectiveness include all of the following except
37. The goals of risk management include:
38. According to COSO, which of the following is the most effective
method to transmit a message of ethical behavior throughout an
organization?
39. Each of the following is a limitation of enterprise risk
management (ERM) except
40. Which of the following control activities should be taken to
reduce the risk of incorrect processing in a newly installed
computerized accounting system?
41. Recognizing potential impediments to communication between
system user and system designer can be useful in
42. A senior executive of an international organization who wishes to
demonstrate the importance of the security of company information to
all team members should
43. In which of the following organizations might segregation of
duties be easiest to achieve?
44. A manufacturing firm noted that it would have difficulty sourcing
raw materials locally, so it decided to relocate its production facilities.
According to COSO, this decision represents which of the following
responses to the risk?
45. Which of the following is most useful when risk is being
prioritized?
46. According to COSO, the two primary attributes of effective
evaluators are
47. Which of the following are reasons that internal controls need to
be monitored?
48. Which of the following is the best definition of a compensating
control?
49. Within the COSO Internal Control-Integrated Framework, which
of the following components is designed to ensure that internal
controls continue to operate effectively?
50. According to COSO, an effective approach to monitoring internal
control involves each of the following steps,except
51. According to COSO, the use of ongoing and separate evaluations
to identify and address changes in internal control effectiveness can
best be accomplished in which of the following stages of the
monitoring-for-change continuum?
52. Internal control monitoring is considered
53. Which of the following is not a major step in the COSO model of
control monitoring?
54. In a large public corporation, evaluating internal control
procedures should be the responsibility of
55. The system of internal control begins with
56. The IIA's International Professional Practices Framework
includes among its "mandatory" guidance each of the following
elements except
57. One of the Rules of Conduct in the IIA's Code of Ethics states,
"Internal auditors shall perform internal audit services in accordance
with the International Standards for the Professional Practice of
Internal Auditing." To which Principle of the Code of Ethics does this
Rule of Conduct relate?
58. The IIA's Code of Ethics identifies four "Principles" around
which the 12 Rules of Conduct are organized. Each of the following
key words or phrases is associated with these Principles except
59. What term identifies the type of internal auditing standards used
to measure the quality of the internal auditor's conduct in delivering
internal audit services?
60. What term identifies the type of internal auditing standards used
to describe the characteristics associated with organizations and
individuals who provide internal audit services?
61. The IIA's Definition of Internal Auditing specifically mentions
each of the following terms among the organizational objectives to be
improved by internal auditing except
62. What term is used in the IIA's International Standards to identify
the person responsible for managing an organization's internal audit
activity?
63. The Attribute Standards related to an internal audit activity's
Quality Assurance and Improvement Program must include periodic
external assessments. How often is an external assessment required?
64. The Attribute Standards focus on four primary themes around
which the remaining Attribute Standards are organized. Each of the
following key words or phrases is associated with those four primary
themes except
65. Standard 1300, "Quality Assurance and Improvement Program,"
states, "The chief audit executive must develop and maintain a quality
assurance and improvement program that covers all aspects of the
internal audit activity." Six additional Attribute Standards provide
further requirements on that topic. Which of the following is an
accurate statement regarding the standards applicable to the required
Quality Assurance Improvement Program?
66. The Performance Standards focus on seven primary themes
around which the remaining Performance Standards are organized.
Each of the following key words or phrases is associated with these
seven primary themes except
67. The Performance Standards focus on seven primary themes
around which the remaining Performance Standards are organized.
Each of the following key words or phrases is associated with these
seven primary themes except
68. What term identifies the guidance in the International Standards
for the Professional Practice of Internal Auditing that distinguishes
between requirements for "assurance" services and "consulting"
services?
69. There are seven additional Performance Standards that relate to
Standard 2000, "Managing the Internal Audit Activity." The general
theme of these standards associated with Managing the Internal Audit
Activity is best characterized by which of the following statements?
Quiz 6
Controls in the information technology area are classified into the
preventive, detective, and corrective categories. Which of the
An organization relied heavily on e-commerce for its transactions.
Evidence of the organization's security awareness manual would be an
example of which of the following types of controls?
Which of the following types of control plans is particular to a
specific process or subsystem, rather than related to the timing of its
occurrence?
Which of the following is true about the Sarbanes-Oxley requirements
regarding the audit committee financial expert?
Which of the following is not a component of COSO's enterprise risk
management framework?
Which of the following is not required by the Sarbanes-Oxley Act of
2002?
Which of the following is not an advantage of the employment of an
enterprise risk management (ERM) system?
A financial statement audit performed under the requirements of the
Sarbanes-Oxley Act of 2002 must include an examination and report
upon
An important benefit of an enterprise risk management system is
Which of the following bodies has developed a framework for
enterprise risk management?
Which of the following executives of an issuer corporation must
certify to the accuracy and truthfulness of financial reports filed with
the SEC?
Which of the following is not a responsibility that should be assigned
to the audit committee of the board of directors?
Which of the following components of internal control are
characterized by ongoing activities and separate evaluations?
Which of the following can be the most effective monitoring device
for effective corporate governance?
From a corporate governance standpoint which of the following best
describes the main goal of a form of executive compensation?
Which of the following components of internal control encompass
policies and procedures that ensure that management's directives are
carried out?
Which of the following forms of compensation is more likely to result
in shirking by management?
In the COSO framework, individuals within the company that monitor
internal controls are referred to as
The COSO definition of internal control considers control activities
a(n):
If internal control is properly designed, the same employee should not
be permitted to
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ACC 576 Week 7 Assignment 1 Economic and Monetary

Policy
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ACC 576 Week 7 Assignment 1
Assignment 1: Economic and Monetary Policy
Using the Internet and Library, research the economies and
monetary policies of two (2) countries.
Write a four to five (4-5) page paper in which you:
Choose one (1) of the two (2) countries that you have researched, and
give your opinion on the degree to which the chosen country manages
its economy and monetary policy well. Provide support for your
opinion.
Compare and contrast the economies and monetary policies of the two
(2) countries that you have researched. Make at least two (2)
recommendations as to the primary manner in which both countries
could improve their economy and / or monetary policies.
Analyze the impact that economic and monetary policies of one (1) of
the chosen countries currently exerts upon its trade with other
countries. Make at least two (2) recommendations as to changes that
the chosen country should make to its policies to benefit its foreign
trade.
Propose one (1) alternative economic and monetary policy that would
make one (1) of the chosen countries stronger over the longer term.
Support your proposal with anticipated outcomes related to the
selected alternative policy.
Use at least three (3) quality academic resources in this assignment.
Note: Wikipedia and other Websites do not quality as academic
resources.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12),
with one-inch margins on all sides; citations and references must
follow APA or school-specific format. Check with your professor for
any additional instructions.
Include a cover page containing the title of the assignment, your
name, the professors name, the course title, and the date. The cover
page and the reference page are not included in the required
assignment page length.
The specific course learning outcomes associated with this
assignment are:
Analyze domestic microeconomic and macroeconomic principles that
impact businesses.
Analyze international economics and its impact on businesses,
globalization, and business strategy.
Use technology and information resources to research issues in
business law and tax.
Write clearly and concisely about business law and tax using proper
writing mechanics.
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www.acc576help.com
listed all Questions below)
ACC 576 Week 7 Study
1. A management accountant performed a linear regression of
maintenance cost vs. production using a computer spreadsheet. The
regression output shows an "intercept" value of $322,897. How
should the accountant interpret this information?
2. The equation for the graphic plot of a linear economic variable
is D = b + m(a). Which of the following represents the value of the
"intercept"?
3. Which of the following statements regarding the use of graphs
to depict economic relationships is not correct?
4. Graphs are a means of depicting the relationship between two
variables. These variables are usually identified as
5. The equation for the graphic plot of a linear economic variable
is D = b + m(a), where m > 0. Which of the following is the slope of
the economic "curve" represented by this equation?
6. Measures of the economic activity of an entire nation would be
included in the study of
7. The free-market economy flow model depicts four major
interrelated flows:I . Individuals provide economic resources to
business firms.II. Firms provide payment to individuals for economic
resources.III. Firms provide goods and services to individuals.IV.
Individuals provide payment to firms for goods and services.
8. If the cost of imported oil declined suddenly and significantly,
which one of the above flows would be most likely to be the first
impacted?
9. The free-market economy flow model depicts four major
interrelated flows:I . Individuals provide economic resources to
business firms.II. Firms provide payment to individuals for economic
resources.III. Firms provide goods and services to individuals.IV.
Individuals provide payment to firms for goods and services.
10. If financial institutions and businesses suddenly and severely
restrict the availability of consumer credit, which one of the above
flows would be most likely to be the first to be impacted adversely?
11. Which of the following are considered economic resources?
12. In a free-market economy, which of the following should be the
least significant factor in determining resource allocation and use?
13. Which of the following is not a characteristic of a free-market
economy?
14. The demand for a commodity would increase when the price of a
15. When a demand schedule is plotted on a graph, the resulting
demand curve will be
16. In the statement "quantity demanded is a function of price," are
the variables quantity and price dependent or independent variables?
17. The demand curve for a product reflects which of the following?
18. If there is an increase in the income of market participants, which
of the following is most likely to happen to the demand for normal
goods?
19. Which one of the following would not cause an increase in
demand for a commodity?
20. Concurrent with a significant downturn in the economy, the sale
of Scope's high-end electronics decreased dramatically. Which of the
following is the most likely direct cause of the decline in demand for
Scope's products?
21. Which one of the following factors would not cause an increase
in the supply curve of a commodity?
22. A supply schedule (or supply curve) shows the relationship
between the quantity of a commodity that will be supplied during a
period of time and
23. If a change in market variables causes a supply curve to shift
inward, which one of the following will occur?
24. When the cost of input factors to the production process
increases, which one of the following will occur?
25. In the statement "quantity supplied is a function of price," are the
variables quantity and price dependent or independent variables?
26. An increase in taxes on cigarette production would cause which
one of the following to occur?
27. What is the effect on the quantity of a commodity supplied
relative to demand as a result of a government-mandated price ceiling
or price floor?
28. A city ordinance that establishes a price ceiling on rent may cause
29. If both demand and supply have traditional curves, a higher
equilibrium price may be caused by which one of the following?
30. If the price for a good is fixed by government fiat below market
equilibrium price, which one of the following will occur?
31. A price ceiling that is below the market equilibrium price would
be expected to result in which one of the following sets of effects on
demand and supply?
32. Which of the following characteristics would indicate that an
item sold would have a high price elasticity of demand?
33. An increase in the price of Commodity Y from $50 to $60
resulted in an increase in the quantity supplied, from 80 units to 88
units. Which one of the following is the price elasticity of supply?
34. A company has a policy of frequently cutting prices to increase
sales. Product demand is significantly elastic. What impact would this
have on the company's situation?
35. If demand for a product is elastic, what would be the effect of a
price increase and a price decrease on total revenue (TR) generated?
36. In which of the following situations would there be inelastic
demand?
37. The elasticity of demand is measured by
38. A 4% increase in the market price of Commodity X resulted in an
8% increase in the quantity of Commodity X supplied. Which one of
the following statements is correct?
39. As an individual acquires (or consumes) more units of a
commodity over a given time period, what is the effect on the
individual's total utility and marginal utility?
40. The following graph shows four curves: A-A, B-B, C-C, and D-
D. Which one of these curves could depict a total utility curve?
41. Allen buys only beer and pizza. When the price of beer is $2.00
per bottle and the price of pizza is $10.00, Allen maximizes his total
utility (satisfaction) by buying 5 beers and 4 pizzas. If the marginal
utility of the 5th beer is 100 utils, which one of the following would
be the marginal utility of the 4th pizza?
42. The following graph shows four curves: A-A, B-B, C-C, and D-
D. Which of these curves depict variables that are not interdependent?
43. Allen has the following schedule of marginal utility for slices of
pizza and bottles of beer: If Allen maximizes his total utility by
consuming 3 slices of pizza and 3 bottles of beer, which one of the
following is the ratio of the price of a slice of pizza to the price of a
bottle of beer?
44. Which one of the following cost curves does not have a general
"U-shape"?
45. In the long run, if all input factors to a production process are
increased by 100%, but total output increases by only 75%, this
indicates
46. Which one of the following statements regarding periods of
analysis is correct?
47. According to the law of diminishing returns, which one of the
following is correct?
48. In a macroeconomic free-market flow model, which of the
following would be considered leakages?
49. Which of the following forms of economic activity is considered
in macroeconomics, but not in microeconomics?
50. In a macroeconomic free-market flow model, which one of the
following would not be considered an "injection?"
51. Which of the following issues is least likely to be relevant to the
study of macroeconomics?
52. The foreign sector plays a role in a macroeconomic free-market
flow model because of
53. Which of the following sectors is most likely to be relevant in
both microeconomic and macroeconomic models of free-market
flows?
54. Potential GDP is a measure of an economy's ability to produce
goods and services. Which of the following is assumed in estimating
potential GDP?
55. Which of the following graphs shows the maximum combination
of goods and services that can be produced at a given time, if all
available resources are used efficiently?
56. A positive gross domestic product (GDP) gap exists when
57. Gross domestic product (GDP) is a measure of
58. Adjustment from gross national product (GNP) to net national
product (NNP) would require which one of the following?
59. A good produced in 2008 that was in the finished goods
inventory on December 31, 2008, and was sold in January 2009
would be included in whole or in part in the GDP of which year(s)?
60. The following information is available for economic activity for
year 1: What amount is the gross domestic product for year 1?
61. Which of the following indicates that the economy is in a
recessionary phase?
62. If the U.S. economy is experiencing a 9% total unemployment
rate and the natural rate of unemployment is 5.5%, which of the
following is the cyclical rate of unemployment?
63. Jason, 14 years old, has been working delivering newspapers for
the past two years. Because he just entered high school, he has had to
give up his newspaper delivery job. Although he has been seeking a
new job, he has not been able to find one. Jason would be considered
64. There can be official full employment when there is which of the
following kinds of unemployment? I. Structural unemployment.II.
Frictional unemployment.III. Seasonal unemployment.
65. As a result of the recession in 2009 and the related decline in
tourism, several thousand hospitality industry workers in Florida
became unemployed. These workers were
66. Which of the following changes in unemployment is most likely
to be associated with a period of economic contraction?
67. Which of the following types of unemployment typically results
from technological advances?
68. Which of the following is not included in what is considered the
natural rate of unemployment?
69. Which of the following is most likely to decrease aggregate
demand?
70. In macroeconomics, which one of the following would not be
considered investment spending?
71. During 2008, Roy's disposable income was $100,000 and he
spent $90,000 on consumable goods. During 2009, Roy's disposable
income increased to $200,000 and he spent $150,000 on consumable
goods. For 2009, when compared to 2008, what is Roy's marginal
propensity to consume?
72. An increase in spending on imported goods would most likely
cause which one of the following?
73. Which of the following is most likely to result in an increase in
aggregate demand in the U.S. economy?
74. Which of the following is most likely to increase aggregate
demand?
75. During 2008, Roy's disposable income was $100,000 and he
spent $90,000 on consumable goods. During 2009, Roy's disposable
income increased to $200,000 and he spent $150,000 on consumable
goods. During 2009, what is Roy's average propensity to consume?
76. The full-employment gross domestic product is $1.3 trillion, and
the actual gross domestic product is $1.2 trillion. The marginal
propensity to consume is 0.8. When inflation is ignored, what increase
in government expenditures is necessary to produce full employment?
77. Which of the following theoretical aggregate supply curves has a
"kink" at the level of output at which there is full employment?
78. The war in Iraq substantially reduced the working population, as
well as other economic resources, of that country. Which one of the
following most likely occurred in the Iraqi economy as a result of the
reduced working population?
79. Which of the following effects is most likely to accompany an
unexpected reduction in aggregate supply, assuming a conventional
supply curve?
80. An increase in the minimum wage rate would likely result in
which one of the following?
81. Assuming a conventional supply curve, which one of the
following factors will not cause a shift in the aggregate supply curve
for a good?
82. An increase in the value of the Chinese currency (the RMB)
relative to the U.S. dollar would most likely cause which of the
following?
83. Assume increased capital investment results in higher levels of
output of goods, but demand remains unchanged. What will be the
likely effect on aggregate equilibrium quantity and price if a
conventional supply curve is assumed?
84. A rise in a country's exports would most likely cause which one
of the following shifts?
likely effect on aggregate equilibrium quantity and price if a classical
supply curve is assumed?
likely effect on aggregate equilibrium quantity and price if a
Keynesian supply curve is assumed and the level of aggregate
demand is at greater than full employment?
87. The aggregate demand and aggregate supply curves intersect at a
price and quantity that are
88. Which one of the following statements concerning the business
cycle is correct?
89. The business cycle in the U.S. is measured in terms of changes in
90. Which of the following measures is most likely to indicate a
forthcoming recessionary period?
91. Which of the following segments of the economy will be least
affected by the business cycle?
92. Which of the following statements concerning the business cycle,
if any, is correct? I. Business cycles recur with a consistent pattern of
length and magnitude. II. Business cycles impact individual industries
at different times and with different degrees of severity.
93. Variations between business cycles are most likely attributable to
which of the following factors?
94. Which of the following changes is most likely to be a lagging
indicator of a change in the business cycle?
95. Which of the following typically is not a reason for international
economic activity by a U.S. entity?
96. Which of the following typically is not a reason for international
economic activity by a U.S. entity?
97. Which one of the following concepts underlies the benefits of
international economic activity (i.e., international trade)?
98. The concept of comparative advantage in international business
activity is based on which one of the following?
99. Which one of the following would not be an argument made by
U.S. unions in favor of trade protectionism?
100. In the long run, the imposition of an import quota
on a commodity is likely to provide the greatest direct benefit to
101. Which of the following is not an account used by
the U.S. to account for transactions and balances with other nations
(i.e., those not in the U.S. balance of payments statement)?
102. What is the effect when a foreign competitor's
currency becomes weaker compared to the U.S. dollar?
103. A statement expressed in the form of "1 euro =
$1.20" expresses a/an
104. A company manufactures goods in Esland for sale
to consumers in Woostland. Currently, the economy of Esland is
booming and imports are rising rapidly. Woostland is experiencing an
economic recession and its imports are declining. How will the Esland
currency, $E, react with respect to the Woostland currency, $W?
105. A country's currency conversion value has recently
changed from 1.5 to the U.S. dollar to 1.7 to the U.S. dollar. Which
one of the following statements about the country is correct?
106. Freely fluctuating exchange rates perform which of
the following functions?
107. Platinum Co. has a receivable due in 30 days for
30,000 euros. The treasurer is concerned that the value of the euro
relative to the dollar will drop before the payment is received. What
should Platinum do to reduce this risk?
108. Assume a U.S. company purchases shares of a
French company for 1,000,000 euros on March 1, 2003, when the
exchange rate was 1 E = $1.10. The investment is classified as
available-for-sale by the U.S. company. After holding the shares for
eight months, it sold the entire investment in the foreign market for
1,200,000 euros when the exchange rate was 1 E = $1.23.What dollar
amount of total investment gain or loss would the U.S. company
recognize?
109. Assume a U.S. company purchases shares of a
French company for 1,000,000 euros on March 1, 2003, when the
exchange rate was 1 E = $1.10. The investment is classified as
available-for-sale by the U.S. company. After holding the shares for
eight months, it sold the entire investment in the foreign market for
1,200,000 euros when the exchange rate was 1 E = $1.23.Which of
the following type(s) of gain or loss would be recognized as a result
of this investment in and subsequent sale of shares in the French
company?
110. A put is an option that gives its owner the right to
do which of the following?
111. A domestic entity may be exposed to foreign
currency exchange rate risk if it engages in which, if any, of the
following kinds of transactions that are denominated in a foreign
currency?
112. Which of the following types of exchange risk
derives from changes in currency exchange rates that alter the value
of future transactions?
113. CompCo., a U.S. computer maker, imported a
supply of computer chips from ChipCo., a Japanese supplier, and
agreed to pay ChipCo. in yen, with terms of net 90. CompCo. is
concerned that the dollar will weaken against the yen during the next
three months and decides to hedge its liability. Which one of the
following contract transactions would CompCo. initiate to hedge its
exchange rate risk?
114. Which of the following is not a common basis for
establishing a transfer price between affiliated entities?
115. Which of the following examples involves transfer
pricing?
116. Globalco, a U.S. parent, has subsidiaries in
Germany (Gerco) and in England (Engco). Gerco produces products
that are sent to Engco for final assembly and packaging. Engo then
sends the goods to Globalco for retail sales in the U.S. The effective
income tax rates faced by each of the companies is: If the objective of
transfer prices is to minimize income taxes, which of the following
policies, within legally acceptable ranges, should Globalco adopt with
respect to the transfer prices?
117. Which of the following statements regarding
international transfer pricing is/are correct? I. Firms with operations
in multiple nations can manipulate earnings through transfer
pricing.II. The transfer price preferred by a foreign subsidiary
manager may be different than the transfer price that maximizes
consolidated profits.
118. Which of the following best describes "transfer
pricing?"
119. Which of the following is not a kind of economic
crisis that could be addressed by the International Monetary Fund?
120. Foreign direct investment occurs when a domestic
entity invests in
121. If a country with a developed economy faces a debt
crisis that makes it unable to satisfy its foreign debt obligations,
which of the following international organizations is most likely to be
called upon to help resolve the debt crisis?
122. Which one of the following would not be a purpose
of the General Agreement on Tariffs and Trade (GATT)?
123. Which one of the following international
organizations has the promotion of economic development through
loans to developing countries as a primary purpose?
124. Which of the following enters into the
determination of gross domestic product of a country?
125. Which of the following countries is the world's
largest exporter of goods/services?
126. The long-term trend in the dollar value of U.S.
exports and imports reflects
international trade is/are correct? I. International trade has been
facilitated by regional trade agreements.II. International trade benefits
both exporters and importers.
128. Over the past 50 years, how has the share of total
U.S. purchases and output represented by imports and exports,
respectively, changed?
129. Which of the following goods, if any, does the U.S.
export more of than it imports (i.e., has net exports)? I. Manufactured
goods. II. Industrial materials. III. Agricultural goods.
international trade over the last 50 years is/are correct? I. International
trade accounts for an increasing share of worldwide economic
activity.II. International trade accounts for an increasing share of U.S.
economic activity.
131. International trade is measured by a country's
132. Which of the following is least likely to be a risk
encountered when goods are outsourced to a foreign supplier and
payment is denominated in the foreign supplier's currency?
133. Outsourcing may involve the acquisition of
134. Which of the following, if either, would serve to
mitigate risks associated with outsourcing? I. Negotiate for payment
to the foreign supplier be made in the foreign currency.II. Include an
arbitration clause in the contract with the foreign supplier.
135. Outco, Inc., a U.S. firm, has a contract to acquire
spare parts from a foreign supplier. The contract provides that the
parts are to be manufactured to Outco's specifications and Outco is to
pay in U.S. dollars. Which of the following risks will Outco encounter
as a direct result of the contract?
136. Outsourcing of goods may involve acquisition of
137. Which of the following, if either, may be a reason a
firm elects to outsource production of a subassembly used in its final
product? I. To Improve quality of subassembly.II. To reduce the time
needed to have the subassembly available.
138. Which of the following statements regarding the
Eurodollar market, if either, is/are correct? I. Eurodollars can be either
EEU Euros or U.S. dollars.II. The Eurodollar market provides long-
term loans.
139. The currency or currencies of the Eurodollar market
(Euromarket) include(s):
140. Bigo, Inc., a U.S. entity, decided to build a
production facility in Mexico. To finance construction, it borrows one
million pesos from Banco Uno, a Mexican bank. Which of the parties
is exposed to currency exchange risk?
141. Capital markets facilitate the trading of
142. In which of the following circumstances, as the
dollar changes against the foreign currency, would an investment in a
foreign currency result in fewer dollars and a borrowing in a foreign
currency cost more dollars?
globalization of capital markets, if either, is/are correct? I.
Globalization permits reduced investment portfolio risk.II.
Globalization permits a lower cost of capital.
144. Parco, Inc., a U.S. entity, has a 100% owned
subsidiary, Subco, Inc., located in the country of Eastlaco. In which
one of the following arrangements would there be no foreign currency
exchange risk associated with borrowing by either Parco or its
subsidiary, Subco, prior to consolidation?
145. Which one of the following sets identifies the two
countries that are most likely the world's largest export countries?
146. In which of the following geographical areas has
the greatest decline in share of worldwide output occurred over the
past 40 years?
147. Which one of the following is most likely the U.S.
share of worldwide exports?
148. Which of the following most closely represents the
U.S. share of worldwide GDP (output)?
149. Which one of the following countries is not one of
the world's largest exporters of goods and services?
150. In which of the following geographical areas has
the greatest increase in share of worldwide output occurred over the
past 30 years?
151. Which of the following is the most elementary form
of international business?
152. Which one of the following is least likely an
advantage associated with the acquisition of a pre-existing foreign
entity?
foreign licensing and foreign franchising, if any, is/are correct? I.
Licensors typically remain more involved with a licensee than a
franchisor remains involved with a franchisee.II. Franchising typically
provides greater quality control than does simple licensing.
154. Which one of the following is least likely an
advantage associated with a wholly owned foreign subsidiary?
155. Government-imposed trade barriers may restrict
importing and exporting, if any, is/are correct? I. Goods with a low
value-to-weight ratio are less likely to be suitable for importing than
goods with a high value-to-weight ratio.II. In the exporting of goods,
one may encounter import restrictions imposed by the country of
destination.
157. Which one of the following forms of international
business is most likely to give an entity the greatest control over an
international business activity?
158. The measurement of post-performance
characteristics is most likely to be associated with which one of the
following activities of the strategic planning process?
159. Which of the following activities is most likely to
be the first step in the strategic planning process?
160. Which of the following is not a generic strategy
identified by Michael Porter?
161. Which of the following identifies a framework for
gauging the attractiveness of the competitive environment of an
industry?
162. Which of the following factors is explicitly
included in PESTEL analysis but is not explicitly in PEST analysis?
163. PEST is an acronym for
164. In the context of PEST analysis, the analysis of
labor law would be most likely to fall under which of the PEST
categories?
165. Macro-environmental analysis is concerned with
analysis of
166. Which of the following describes a form of analysis
that is useful in evaluating the characteristics of a macro-
environment?
167. PEST analysis can be used when considering
168. Which one of the following sets of characteristics
should have the highest intensity of rivalry within an industry?
169. In which one of the following circumstances are
customers most likely to have the greatest ability to affect product
prices?
170. Vico, Inc., is considering a horizontal expansion of
its business into a new industry. Vico is concerned that other
businesses may be considering moving into the same industry in the
near future. Which one of the following forms of analysis would Vico
most likely use to assess whether the industry is likely to be highly
competitive in the near future?
171. Which one of the following features would not
create a higher level of competitive threat posed by substitute goods
or services in an industry?
172. In which of the following independent
circumstances would entry of new competitors be most likely?
173. Which of the following is not a five forces factor
used in determining the operating attractiveness of an industry?
174. Which one of the following would not be an entity's
strength in a competitive environment?
175. A regulatory agency has been considering the
imposition of stricter regulations on an industry. Under SWOT
analysis, the possibility of this new regulation would be considered
176. Is SWOT analysis concerned with external
environment, internal characteristics, or both?
177. Which one of the following would be least likely to
be a possible threat to an entity?
178. Which of the following types of analysis is directly
concerned with the relationship between an entity and its
environment?
179. Which of the following SWOT matrix relationship
categories (intersections) poses the greatest risk to an entity?
180. Targeting a niche market always involves which of
the following strategies, if either?
181. Which of the following is a characteristic of a cost
leadership entity?
182. Under which of the following strategies, if either,
would the strength and dedication of an entity's marketing function be
critical?
183. Entities that adopt a differentiation strategy will
provide goods or services that
184. Which one of the following is not a generic strategy
identified by Porter?
185. When an entity adopts a cost leadership strategy,
which one of the following might it use to help carry out this strategy?
186. Which of the following forms of analysis, if either,
is concerned only with analysis of the external environment of an
entity?
187. Which one of the following is least likely to be
useful in deciding in which country an entity should operate?
188. Goals established in the strategic planning process
should be
189. PEST analysis and SWOT analysis are assessment
techniques used in the strategic planning process. Are these forms of
analysis primarily concerned with "where" an entity should be located
or with "how" an entity should operate?
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1. Regarding financial resources, financial management is
concerned with the efficiency and effectiveness of which of the
following?
2. Which of the following financial management-related areas are
considered long-term issues?
3. Which one of the following would be considered a long-term
financial management activity or concern?
4. Financial management involves decisions and activities that deal
with
5. Which of the following "tools" are likely to be used in financial
management?
6. A company has the following target capital structure and
costs:The company's marginal tax rate is 30%. What is the company's
weighted-average cost of capital?
7. A company has the following financial information: To
maximize shareholder wealth, the company should accept projects
with returns greater than what percent?
8. The measurement of the benefit lost by using resources for one
purpose and not another is
9. Which of the following statements is correct regarding the
weighted-average cost of capital (WACC)?
10. Carter Co. paid $1,000,000 for land three years ago. Carter
estimates it can sell the land for $1,200,000, net of selling costs. If the
land is not sold, Carter plans to develop the land at a cost of
$1,500,000. Carter estimates net cash flow from the development in
the first year of operations would be $500,000. What is Carter's
opportunity cost of the development?
11. A company with a combined federal and state tax rate of 30% has
the following capital structure:What is the weighted-average after-tax
cost of capital for this company?
12. Which of the following is assigned to goods that were either
13. Management at MDK Corp. is deciding whether to replace a
delivery van. A new delivery van costing $40,000 can be purchased to
replace the existing delivery van, which cost the company $30,000
and has accumulated depreciation of $20,000. An employee of MDK
has offered $12,000 for the old delivery van. Ignoring income taxes,
which of the following correctly states relevant costs when making
the decision whether to replace the delivery vehicle?
14. Alpha Corporation has the following capital structure and related
cost of capital for each source: Which one of the following is Alpha's
weighted average cost of capital?
15. A company uses its company-wide cost of capital to evaluate new
capital investments. What is the implication of this policy when the
company has multiple operating divisions, each having unique risk
attributes and capital costs?
16. Which one of the following costs, if any, is relevant in making
financial decisions?
17. Buff Co. is considering replacing an old machine with a new
machine. Which of the following items is economically relevant to
Buff's decision? (Ignore income tax considerations.)
18. The ABC Company is trying to decide between keeping an
existing machine and replacing it with a new machine. The old
machine was purchased just two years ago for $50,000 and had an
expected life of 10 years. It now costs $1,000 a month for
maintenance and repairs, due to a mechanical problem. A new
replacement machine is being considered, with a cost of $60,000. The
new machine is more efficient and it will only cost $200 a month for
maintenance and repairs. The new machine has an expected life of 10
years. In deciding to replace the old machine, which of the following
factors, ignoring income taxes, should ABC not consider?
19. Egan Co. owns land that could be developed in the future. Egan
estimates it can sell the land for $1,200,000, net of all selling costs. If
it is not sold, Egan will continue with its plans to develop the land. As
Egan evaluates it options for development or sale of the property,
what type of cost would the potential selling price represent in Egan's
decision?
20. Which of the following statements is true regarding opportunity
cost?
21. For the year ended December 31, 2004, Abel Co. incurred direct
costs of $500,000 based on a particular course of action during the
year. If a different course of action had been taken, direct costs would
have been $400,000. In addition, Abel's 2004 fixed costs were
$90,000. The incremental cost was
22. Pole Co. is investing in a machine with a 3-year life. The machine
is expected to reduce annual cash operating costs by $30,000 in each
of the first 2 years and by $20,000 in year 3. Present values of an
annuity of $1 at 14% are:Using a 14% cost of capital, what is the
present value of these future savings?
23. Which one of the following kinds of tables most likely would be
used to determine the current worth of five equal amounts to be
received at the end of each of the next five years.
24. Which of the following changes would result in the highest
present value?
25. On August 31, 2004, Ashe Corp. adopted a plan to accumulate
$1,000,000 by September 1, 2008. Ashe plans to make four equal
annual deposits to a fund that will earn interest at 10% compounded
annually. Ashe will make the first deposit on September 1, 2004.
Future value and future amount factors are as follows: Which one of
the following would be the amount of annual deposits Ashe should
make (rounded)?
26. Which one of the following sets of interest (or discount) rates will
give the greater present value of $1.00 and greater future value of
$1.00?
27. On November 1, 2005, a company purchased a new machine that
it does not have to pay for until November 1, 2007. The total payment
on November 1, 2007 will include both principal and interest.
Assuming interest at a 10% rate, the cost of the machine would be the
total payment multiplied by what time value of money concept?
28. A corporation obtains a loan of $200,000 at an annual rate of
12%. The corporation must keep a compensating balance of 20% of
any amount borrowed on deposit at the bank, but it normally does not
have a cash balance account with the bank. What is the effective cost
of the loan?
29. A company has an outstanding one-year bank loan of $500,000 at
a stated interest rate of 8%. The company is required to maintain a
20% compensating balance in its checking account. The company
would maintain a zero balance in this account if the requirement did
not exist. What is the effective interest rate of the loan?
30. Josey maintained a $10,000 balance in his savings account
throughout 2008, the first year of the account. The savings account
paid 2% interest compounded annually. For 2008, the inflation rate
was 3%. For 2008, what is Josey's real interest rate on the savings
account?
31. Which one of the following is interest earned on both an initial
principal and the unpaid accrued interest that accumulated on that
principal from prior periods?
32. Beta Company has arranged to borrow $10,000 for 180 days.
Beta will repay the principal amount plus $600 in interest at the
maturity of the note.Which one of the following is the annual
percentage rate (APR) of interest that Beta is paying on the loan?
33. Which one of the following is the annual rate of interest
applicable when not taking trade credit terms of "2/10, net 30?"
34. The following information is available on market interest rates:
What is the market rate of interest on a one-year U.S. Treasury bill?
35. Which one of the following U.S. GAAP approaches to
determining fair value converts future amounts to current amounts?
36. Which of the following U.S. GAAP levels of inputs for valuation
purposes is/are based on observable inputs?
37. Conceptually, which one of the following U.S. GAAP approaches
for determining value is most likely to provide the best evidence of
fair value?
38. Which of the following characteristics, if any, should be taken
into account in valuing a specific item?
39. Under U.S. GAAP requirements, valuation may be based on an
40. Which of the following level(s) of input in the U.S. GAAP
hierarchy of inputs for fair value determination is/are likely to be most
appropriate for valuing basic agricultural commodities?
41. Assuming they are traded in an active market, which of the
following types of investments, if any, could be valued using level 1
inputs of the U.S. GAAP hierarchy of inputs for determining fair
value?
42. Quoted prices in which of the following types of markets could
be level 2 inputs in determining fair value under the U.S. GAAP
hierarchy of inputs for fair value determination?
43. Which of the following levels of the U.S. GAAP hierarchy of
inputs used for determining fair value can be based on inputs not
directly observable for the item being valued?
44. Which of the following types of active markets, if any, would be
considered as providing level 1 inputs under the U.S. GAAP
hierarchy of inputs for fair value determination?
45. Which one of the following beta values indicates the least
volatility?
46. Which one of the following is not a limitation of the capital asset
pricing model?
47. Assume the following rates exist in the U.S.: Prime interest rate
= 6%
48. Fed discount rate = 4% U.S. Treasury Bond rate = 2%
Inflation rate = 1% which one of the following is most likely the
nominal risk-free rate of return in the U.S.?
49. Assume the following values for an investment: Risk-free rate of
return = 2% Expected rate of return = 9% Beta = 1.4 which one of the
following is the required rate of return for the investment?
50. Which one of the following is not an element in the capital asset
pricing model formula?
51. A graph that plots beta would show the relationship between
52. Which one of the following is not a factor routinely considered in
valuing a stock option?
53. Charles Allen was granted options to buy 100 shares of Dean
Company stock. The options expire in one year and have an exercise
price of $60.00 per share. An analysis determines that the stock has an
80% probability of selling for $72.50 at the end of the one-year option
period and a 20% probability of selling for $65.00 at the end of the
year. Dean Company's cost of funds is 10%. Which one of the
following is most likely the current value of the 100 stock options?
54. Which one of the following is not a limitation of the basic Black-
Scholes option pricing model?
55. Which one of the following characteristics is not an advantage of
the Black-Scholes option pricing model?
56. Which one of the following options, A through D, is most likely
to have the greatest value (all other things being equal)?
57. Assume the following abbreviated Income Statement: In a
common-size income statement, which one of the following
percentages would be shown for Finance Expense?
58. Which one of the following approaches to valuing a business is
most likely to be appropriate when the business has been losing
money and is going to be sold in a distressed sale?
59. Which one of the following is least likely to be the reason an
entity would seek a valuation of the entity as a going concern?
60. Assume the following abbreviated Balance Sheet: In a common-
sized balance sheet, which one of the following percentages would be
shown for current liabilities?
61. A business with a net book value of $150,000 has an appropriate
fair value of $120,000. Charles Harvey, one of three owners, has
decided to sell his 10% interest in the business. Which one of the
following is most likely the amount at which Harvey can sell his
interest?
62. Which one of the following is not a major approach for assigning
a value to an entire going business?
63. Which one of the following shows the basic approach used to
capitalize earnings to determine the value of a business?
64. Common-size financial statements are useful in making
comparisons
65. Which of the following statements, if any, concerning the
valuation of business enterprises is/are correct? I. Nonpublic entities
are likely to be more difficult to value than publicly traded entities. II.
The conditions in the macroeconomic environment should be
considered in valuing an entity. III. The status of the industry in
which a business operates should be considered in valuing the entity.
66. The P/E ratio for a share of common stock is computed as:
67. Which one of the following is not an income approach to the
valuation of a business?
68. The land and building that constitute a strip shopping mall were
valued using the recent sales price of a comparable strip shopping
mall located across the street. The method of valuation would be an
example of the
69. Which one of the following is not a qualitative forecasting
method?
70. Business forecasting can use
71. Which one of the following sets shows each type of business
forecasting in the correct method classification?
72. Which one of the following sets best reflects the relationship
between the method of forecasting and the nature of forecasting?
73. Which one of the following forecasting methods is based on
extrapolation of past data?
74. Which one of the following sets shows the most likely method
appropriate for short-term and long-term forecasting?
75. Which one of the following statements describes a difference
between the simple moving average and the weighted moving average
times series models for forecasting?
76. Each month Fuco, Inc. forecasts its next three months sales using
the average of its actual sales for the most recent 12 months. Which
one of the following times series models is Fuco using to forecast
sales?
77. Which one of the following would be a time series model for
forecasting that reduces random fluctuations in data?
78. Data patterns that reflect an upward movement over a long period
of time would describe which one of the following patterns?
79. Which one of the following is not a causal model approach to
forecasting?
80. Which one of the following is not a time series pattern?
81. Which one of the following identifies the rate of return required
by investors to compensate them for deferring current consumption
when making an investment?
82. A graph of the relationship between financial risk and expected
financial reward would show a curve that has a:
83. The presence of risk for a portfolio of projects means:
84. Which one of the following risks is least likely to be mitigated by
project diversification?
85. As the perceived risk of an undertaking increases, what would be
the expected effect on the risk-free rate of return and the risk premium
rate of return?
86. A project has an initial outlay of $1,000. The projected cash
inflows earned evenly over each year are: Year 1 $200 Year 2
200 Year 3 400 Year 4 400 what is the investment's payback
period?
87. Which one of the following is not a technique or approach for
evaluating capital budgeting opportunities?
88. Major Corp. is considering the purchase of a new machine for
$5,000 that will have an estimated useful life of five years and no
salvage value. The machine will increase Major's after-tax cash flow
by $2,000 annually for five years. Major uses the straight-line method
of depreciation and has an incremental borrowing rate of 10%. The
present value factors for 10% are as follows: Ordinary annuity with
five payments 3.79 Annuity due for five payments 4.17 using
the payback method, how many years will it take to pay back Major's
initial investment in the machine?
89. Eval Co. is evaluating a major capital project to determine its
economic feasibility. The following data have been accumulated:
90. Eval Co. uses straight-line depreciation for capital investments of
this type.Excerpts from present value tables showed the following:
Using the information above, which one of the following is the
payback period in years for this project? (Ignore income tax.)
91. Which one of the following is a strength of the payback method
of evaluating an investment project?
92. A company invested in a new machine that will generate
revenues of $35,000 annually for seven years. The company will have
annual operating expenses of $7,000 on the new machine.
Depreciation expense, included in the operating expenses, is $4,000
per year. The expected payback period for the new machine is 5.2
years. What amount did the company pay for the new machine?
93. Which one of the following approaches to capital project
evaluation is primarily concerned with the relative economic ranking
of projects?
94. Capital budgeting is concerned with capital investments that have
which one of the following characteristics?
payback method as a capital budgeting technique?
96. The discounted payback period approach to project evaluation is
better than the payback period approach because I. It considers the
time value of money. II. It is useful in evaluating the liquidity of a
project. III. It uses expected cash flows.
97. A company purchases an item for $43,000. The salvage value of
the item is $3,000. The cost of capital is 8%. Pertinent information
related to this purchase is as follows: What is the discounted payback
period in years?
98. Which of the following statements concerning the discounted
payback period method of evaluating capital projects is/are correct? I.
It is useful in evaluating the liquidity of a project.II. It measures total
project profitability.III. It results in a longer computed payback period
than does the undiscounted payback period method.
99. Which one of the following is the capital budgeting evaluation
approach that determines the number of periods required for the
discounted cash inflows of a project to equal the discounted cash
outflows?
100. Which of the following statements concerning the
discounted payback period approach to project evaluation is/are
correct? I. It takes into account cash flows received over the entire life
of the project. II. Any project economically acceptable under the
payback period approach will be acceptable under the discounted
payback period approach. III. Any project economically acceptable
under the discounted payback period approach will be acceptable
under the payback period approach.
101. Which one of the following methods of evaluating
potential capital projects would take into account depreciation
expense that was non-deductible for tax purposes?
accounting rate of return approach to evaluating capital projects is/are
correct? I. It considers the entire life of a project. II. It considers the
time value of money. III. It assumes that the incremental net income
is the same each year.
103. Lin Co. is buying machinery it expects will increase
average annual operating income by $40,000. The initial increase in
the required investment is $60,000, and the average increase in
required investment is $30,000. To compute the accrual accounting
rate of return, what amount should be used as the numerator in the
ratio?
104. Phillips Company is considering the acquisition of a
new machine that would cost $66,000, has an expected life of 6 years,
and an expected salvage value of $16,000. The company expects the
machine to provide annual incremental income before taxes of
$7,200. Phillips has a tax rate of 30%. If Phillips uses average values
in its calculations, which one of the following will be the average
accounting rate of return on the machine?
105. Tam Co. is negotiating for the purchase of
equipment that would cost $100,000, with the expectation that
$20,000 per year could be saved in after-tax cash costs if the
equipment is acquired. The equipment's estimated useful life is 10
years, with no residual value, and it would be depreciated by the
straight-line method. Tam's predetermined minimum desired rate of
return is 12%. Present value of an annuity of 1 at 12% for 10 periods
is 5.65. Present value of 1 due in 10 periods at 12% is .322.Accrual
accounting rate of return based on initial investment is
106. Given a 10% discount rate with cash inflows of
$3,000 at the end of each year for five years and an initial investment
of $11,000, what is the net present value?
107. A company is considering two projects, which have
the following details: Which project would provide the largest after-
tax cash inflow?
108. Net present value as used in investment decision-
making is stated in terms of which of the following options?
109. Which of the following is an advantage of net
present value modeling?
110. A corporation is considering purchasing a machine
that costs $100,000 and has a $20,000 salvage value. The machine
will provide net annual cash inflows of $25,000 per year and has a
six-year life. The corporation uses a discount rate of 10%. The
discount factor for the present value of a single sum six years in the
future is 0.564. The discount factor for the present value of an annuity
for six years is 4.355. What is the net present value of the machine?
111. Salem Co. is considering a project that yields
annual net cash inflows of $420,000 for years 1 through 5, and net
cash inflow of $100,000 in year 6. The project will require an initial
investment of $1,800,000. Salem's cost of capital is 10%. Present
value information is present below: What was Salem's expected net
present value for this project?
112. Yarrow Co. is considering the purchase of a new
machine that costs $450,000. The new machine will generate net cash
flow of $150,000 per year and net income of $100,000 per year for
five years. Yarrow's desired rate of return is 6%. The present value
factor for a five-year annuity of $1, discounted at 6%, is 4.212. The
present value factor of $1, at compound interest of 6% due in five
years, is 0.7473. What is the new machine's net present value?
113. The discount rate is determined in advance for
which of the following capital budgeting techniques?
114. The following information pertains to Krel Co.'s
computation of net present value relating to a contemplated project:
Discounted expected cash inflows $1,000,000 Discounted
expected cash outflows 700,000 Net present value is:
115. Oak Company bought a machine that they will
depreciate on a straight-line basis over an estimated life of seven
years. The machine has no salvage value. They expect the machine to
generate after-tax net cash inflows from operations of $110,000 in
each of the seven years. Oak's minimum rate of return is 12%.
Information on present value factors is as follows: Assuming a
positive net present value of $12,000, what was the cost of the
machine?
116. A project's net present value, ignoring income tax
considerations, is normally affected by the
117. Smarti Co. has determined the following data in
connection with its evaluation of a capital investment project: Smarti
uses straight-line depreciation for capital investments of this type.
Excerpts from present value tables showed the following: Using the
above information, which one of the following is the present value of
total estimated future cash inflows and savings? (Ignore income
taxes.)
118. The calculation of depreciation is used in the
determination of the net present value of an investment for which of
the following reasons?
years, with no residual value, and would be depreciated by the
is 5.65. Present value of 1 due in 10 periods at 12% is .322. Net
present value is
120. An investment in a new product will require an
initial outlay of $20,000. The cash inflow from the project will be
$4,000 a year for the next six years. The payment will be received at
the end of each year. What is the net present value of the investment
at 8% using the correct factor from below?
121. A project should be accepted if the present value of
cash flows from the project is:
122. How are the following used in the calculation of the
internal rate of return of a proposed project? Ignore income tax
considerations.
123. What is an internal rate of return?
124. If income taxes are ignored, which of the following
methods of evaluating capital investment projects includes the use of
depreciation expense?
125. Which of the following statements about investment
decision models is true?
126. Which of the following metrics equates the present
value of a project's expected cash inflows to the present value of the
project's expected costs?
127. Which of the following events would decrease the
internal rate of return of a proposed asset purchase?
128. Which of the following decision-making models
equates the initial investment with the present value of the future cash
inflows?
129. Neu Co. is considering the purchase of capital
equipment that has a positive net present value based on Neu's 12%
hurdle rate. The internal rate of return would be:
130. A client wants to know how many years it will take
before the accumulated cash flows from an investment exceeds the
initial investment, without taking the time value of money into
account. Which of the following financial models should be used?
131. Which of the following phrases defines the internal
rate of return on a project?
132. Which of the following capital budgeting
techniques, if any, implicitly assumes that all cash inflows are
immediately reinvested to earn a return for the company?
133. In evaluating the economic feasibility of a capital
project, the discount rate (or hurdle rate of return) must be determined
in advance when using the:
134. Which of the following characteristics represent an
advantage of the internal rate of return technique over the accounting
rate of return technique in evaluating a project? I. Recognition of the
project's salvage value. II. Emphasis on cash flows. III. Recognition
of the time value of money.
135. Which of the following rates is most commonly
compared to the internal rate of return to evaluate whether to make an
investment?
years, with no residual value, and it would be depreciated by the
is 5.65. Present value of 1 due in 10 periods at 12% is .322. In
estimating the internal rate of return, the factors in the table of present
values of an annuity should be taken from the columns closest to
137. When estimating cash flow for use in capital
budgeting, depreciation is
138. Polo Co. requires higher rates of return for projects
with a life span greater than five years. Projects extending beyond
five years must earn a higher specified rate of return. Which of the
following capital budgeting techniques can readily accommodate this
requirement?
139. Which of the following limitations is common to
the calculations of payback period, discounted cash flow, internal rate
of return, and net present value?
140. If it is determined that a project investment is
expected to generate $1.20 in present value for each $1.00 invested,
which one of the following was most likely used to reach that
conclusion?
141. Disco is considering three capital projects that have
the following costs and net present values (NPV): Which one of the
projects, if any, is not economically feasible?
142. What is the formula for calculating the profitability
index of a project?
143. Which of the following is a limitation of the
profitability index?
144. Disco is considering three capital projects that have
the following costs and net present values (NPV): Using the
profitability index, which project, if any, would be ranked as the most
desirable?
145. Which one of the following represents the formula
used to calculate the profitability index for ranking projects?
investment projects is most likely to be used to rank projects
competing for limited capital investment funds?
147. Which of the following statements is correct
regarding financial decision making?
investment projects is most likely to be least acceptable for making
project ranking decisions?
149. Which of the following methods should be used if
capital rationing needs to be considered when comparing capital
projects?
150. The term "capital structure" refers to which one of
the following?
151. The term "financial structure" refers to which one
of the following?
152. Bonds Payable, which mature in 10 years, would be
included as part of a firm's
153. Which one of the following statements concerning
the relationship between the concepts and measurement of capital
structure and financial structure of a firm is correct?
154. Which one of the following most likely would not
be considered when computing the weighted average cost of capital?
155. Which of the following uses of accounts receivable,
if either, would be considered short-term financing?
156. Which of the following can provide short-term
financing?
157. Short-term financing is normally concerned with
financing for which one of the following lengths of time?
158. Which of the following statements concerning
short-term financing is/are correct? I. Accounts payable can provide
short-term financing. II. Accounts receivable can provide short-term
financing. III. Inventory can provide short-term financing.
159. Which one of the following generally is not an
advantage associated with the use of trade accounts payable and
accrued accounts payable for short-term financing needs?
160. On January 23, Inco Company received from one of
its suppliers a statement with terms of "2/10, n/30." Because the
statement was misfiled, it was not located for payment until February
5. On which one of the following dates should the bill be paid?
161. Alpha Company borrowed $20,000 from High
Bank, giving a one-year note. The terms of the note provided for 6%
interest and required a 10% compensating balance. Which one of the
following is the effective rate of interest on the loan?
162. Which one of the following provides a source of
spontaneous financing for a firm?
163. Which one of the following forms of short-term
financing is least likely to be considered a spontaneous source of
funding?
164. Which one of the following forms of short-term
financing is least likely to be restricted as to use of proceeds?
165. An amount that a bank requires a firm to maintain
in a demand deposit account with the bank in return for a line of
credit or loan is called:
166. Which one of the following typically is not a
characteristic of commercial paper?
167. Which one of the following is a formal legal
commitment to extend credit up to some maximum amount to a
borrower over a stated period?
168. Which one of the following would an importer of
goods from a new foreign supplier most likely use to assure the
supplier of payment?
169. Which one of the following is a form of inventory
secured loan in which the inventory is placed under the control of an
independent third party?
170. Nexco, Inc. is considering factoring its accounts
receivable. Factorco, Inc. has offered the following terms for accounts
receivable due in 30 days: If Nexco plans to factor $200,000 of
accounts receivable due in 30 days, which one of the following is the
amount it will receive from Factorco at the time the accounts are
factored?
171. Nexco, Inc. is considering factoring its accounts
receivable. Factorco, Inc. has offered the following terms for accounts
receivable due in 30 days: If Nexco factors $200,000 of its accounts
receivable due in 30 days with Factorco and, during that 30 days,
$10,000 of those accounts receivable are reversed because the related
goods were return or allowances were granted, which one of the
following is the amount that Nexco will receive from Factorco at the
end of the 30 day period?
172. Which one of the following forms of collateral is
most commonly used as security for short-term loans?
173. Po Co. plans to use its inventory as collateral for a
short-term loan. Which one of the following types of loan agreements
with its lender would provide Po Co. the most flexibility in the use of
the inventory it pledges as collateral?
174. The weighted average cost of capital for a firm is
determined by its cost of
175. Which of the following statements concerning long-
term financing is/are correct? I. Long-term financing consists of
sources that constitute capital structure. II. Long-term financing
consists of sources on which the weighted-average cost of capital is
based. III. Long-term financing consists only of equity sources of
capital.
176. Which one of the following would not be
considered a means of long-term financing?
177. Components of long-term financing would be part
of
178. Long-term financing is normally concerned with
financing for which one of the following lengths of time?
179. Which of the following long-term notes would best
facilitate financial leverage for the borrowing firm?
180. Under which of the following described lease terms
would the lessee be responsible during the term of the lease for
executory costs associated with the leased asset?
181. What would be the primary reason for a company to
agree to a debt covenant limiting the percentage of its long-term debt?
leasing of an asset is/are correct? I. If the net present value of
purchasing an asset is not positive, then leasing the asset should not
be considered as an alternative. II. In a net-net lease, the lessee is
responsible for executory costs and residual value of the leased asset.
183. Which one of the following bond issues, with
different terms and stated rates of interest, would have the highest
interest rate risk, all other things being equal?
184. The market price of a bond issued at a premium is
equal to the present value of its principal amount
185. Which one of the following is a contract that states
the terms of a bond issued by a corporation?
186. Which of the following types of bonds is most
likely to maintain a constant market value?
debenture bonds and secured bonds is/are correct? I. Debenture bonds
are likely to have a greater par value than comparable secured bonds.
II. Debenture bonds are likely to be of longer duration than
comparable secured bonds. III. Debenture bonds are more likely to
have a higher coupon rate than comparable secured bonds.
188. In which one of the following areas is preferred
stock most likely to differ from common stock?
189. A company recently issued 9% preferred stock. The
preferred stock sold for $40 a share, with a par of $20. The cost of
issuing the stock was $5 a share. What is the company's cost of
preferred stock?
190. Whipco has determined that its pre-tax cost of
preferred stock is 12%. If its tax rate is 30%, which one of the
following is its after-tax cost of preferred stock?
preferred stock is/are generally correct? I. Requires dividends be paid.
II. Grants ownership interest. III. Grants voting rights.
192. Allen issues $100 par value preferred stock that is
selling for $101 per share, on which the firm has to pay an
underwriting fee of $5 per share sold. The stock is paying an annual
dividend of $10 per share. Allen's tax rate is 40%. Which one of the
following is the cost of preferred stock financing to Allen?
193. What impact will the issuing of new preferred stock
have on the following for the issuing entity?
194. The stock of Fargo Co. is selling for $85. The next
annual dividend is expected to be $4.25 and is expected to grow at a
rate of 7%. The corporate tax rate is 30%. What percentage represents
the firm's cost of common equity?
common stock is/are generally correct? I. Requires dividends be paid.
II. Grants ownership interest. III. Grants voting rights.
196. Bander Co. is determining how to finance some
long-term projects. Bander has decided it prefers the benefits of no
fixed charges, no fixed maturity date, and an increase in the credit-
worthiness of the company. Which of the following would best meet
Bander's financing requirements?
197. Which of the following formulas should be used to
calculate the historic economic rate of return on common stock?
198. The cost of debt most frequently is measured as
199. Why would a firm generally choose to finance
temporary assets with short-term debt?
use of short-term financing by an entity is/are correct? I. Short-term
financing generally offers greater financial flexibility than long-term
financing. II. Short-term financing generally has a lower interest rate
than long-term financing. III. Short-term financing generally has a
lower risk of illiquidity than long-term financing.<
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1. Checkpoint auto leasing is a small company with six employees.
The best action that it can take to increase its internal control
effectiveness is
2. Morgan Property Management, Inc. recently switched from a
manual accounting system to a computerized accounting system. The
system supports online real-time processing in a networked
environment, and six employees have been granted access to various
parts of the system in order to perform their jobs. Relative to the
manual system, Morgan can expect to see
3. Which of the following statements is (are) true. I.A greater
level of control is necessary in automated than manual systems. II.
The uniformity of transaction processing is higher in automated than
manual systems.
4. In COBIT, the process of identifying automated solutions falls
within the ________ control process domain.
5. In COBIT, the process of reviewing system response time logs
falls within the _______ control process domain.
6. In COBIT, the process of developing tactics to realize the
strategic vision for IT falls within the _________ control process
domain.
7. In COBIT, the process of ensuring security and continuous
service falls within the _______ control process domain.
8. One important purpose of COBIT is to
9. Which of the following is true of enterprise resource planning
(ERP) systems? I. The online analytical processing system (OLAP)
provides data warehouse capabilities for the ERP system. II. The
ability of an ERP system to provide an integrated view of transactions
in all parts of the system is a function of the online transaction
processing (OLTP) system.
10. An enterprise resource planning (ERP) system has which of the
following advantages over multiple independent functional systems?
11. The fixed assets and related depreciation of a company are
currently tracked on a password-protected spreadsheet. The
information technology governance committee is designing a new
enterprise-wide system and needs to determine whether the current
fixed asset process should be included because the current system
seems to be working properly. What long-term solution should the
committee recommend?
12. What is an example of the use of the cloud to access software and
programs?
13. Credit Card International developed a management reporting
software package that enables members interactively to query a data
warehouse and drill down into transaction and trend information via
various network set-ups. What type of management reporting system
has Credit Card International developed?
14. A client would like to implement a management information
system that integrates all functional areas within an organization to
allow information exchange and collaboration among all parties
involved in business operations. Which of the following systems is
most effective for this application?
15. What is an example of the use of the cloud to create software and
programs?
16. An enterprise resource planning system is designed to
17. Which of the following risks increases the least with cloud-based
computing compared with local server storage for an organization that
implements cloud-based computing?
18. What is an example of the use of the cloud to access hardware?
19. An information technology director collected the names and
locations of key vendors, current hardware configuration, names of
team members, and an alternative processing location. What is the
director most likely preparing?
20. Bacchus, Inc. is a large multinational corporation with various
business units around the world. After a fire destroyed the corporate
headquarters and largest manufacturing site, plans for which of the
following would help Bacchus ensure a timely recovery?
21. In an e-commerce environment that requires that the information
technology (IT) system be available on a continuous basis, more
emphasis will be placed on which of the following aspects of the
planning than in a traditional organization?
22. A controller is developing a disaster recovery plan for a
corporation's computer systems. In the event of a disaster that makes
the company's facilities unusable, the controller has arranged for the
use of an alternate location and the delivery of duplicate computer
hardware to this alternate location. Which of the following recovery
plans would best describe this arrangement?
23. The performance audit report of an information technology
department indicated that the department lacked a disaster recovery
plan. Which of the following steps should management take first to
correct this condition?
24. Which of the following tasks comes first in business continuity
management (BCM)?
25. In DRP, the lowest priority is given to which activities?
26. Which of the following terms refers to a site that has been
identified and maintained by the organization as a data processing
disaster recovery site, but has not been stocked with equipment?
27. In DRP, top priority is given to which activities?
28. To maintain effective segregation of duties within the information
technology function, an application programmer should have which of
the following responsibilities?
29. In business information systems, the term "stakeholder" refers to
which of the following parties?
30. In a large multinational organization, which of the following job
responsibilities should be assigned to the network administrator?
31. IT people controls are mostly
32. What is the role of the systems analyst in an IT environment?
33. The position responsible for managing the flow of documents and
reports in and out of the computer operations department is the
34. Which of the following information technology (IT) departmental
responsibilities should be delegated to separate individuals?
35. Who is responsible for granting users access to specific data
resources?
36. When a client's accounts payable computer system was relocated,
the administrator provided support through a dial-up connection to a
server. Subsequently, the administrator left the company. No changes
were made to the accounts payable system at that time. Which of the
following situations represents the greatest security risk?
37. In a large firm, the custody of an entity's data is most
appropriately maintained by which of the following personnel?
38. In which of the following stages of computer system
development would training occur?
39. Which of the following roles is responsible for prioritizing
systems development proposals?
40. At this stage, we purchase hardware:
41. Which of the following is responsible for overall program logic
and functionality?
42. Data conversion occurs at this stage:
43. Which of the following implementation approaches has been
described as "sink or swim?"
44. Which of the following is responsible for identifying problems
and proposing initial solutions?
45. Which of the following is responsible for designing, creating, and
testing programs?
46. In which of the following implementation approaches is the
system divided into modules for implementation?
47. In which of the following implementation approaches do the new
and old systems run concurrently until it is clear that the new system
is working properly?
48. In which of the following implementation approaches are users
divided into smaller groups and trained on the new system, one group
at a time?
49. The requirements definition document is signed at this stage:
50. In a small business with only microcomputers, which
documentation would be most useful to an untrained user to learn how
to correct data errors in a database application?
51. Rose and McMullin, a regional public accounting firm, has
recently accepted a contract to audit On-the-Spot, Inc., a mobile
vending service that provides vending machines for large events. On-
the-Spot uses a computerized accounting system, portions of which
were developed internally to integrate with a standard financial
reporting system that was purchased from a consultant. What type of
documentation will be most useful to Rose and McMullin in
determining how the system as a whole is constructed?
52. Which of the following types of documentation would a
computer operator use to determine how to set up and run a specific
computer application.
53. Management of a company has a lack of segregation of duties
within the application environment, with programmers having access
to development and production. The programmers have the ability to
implement application code changes into production without
monitoring or a quality assurance function. This is considered a
deficiency in which of the following areas?
54. After changes to a source program have been made and verified,
it moves to
55. Which of the following controls in not usually found in batch
processing systems?
56. Which of the following is considered an application input
control?
57. An employee mistakenly enters April 31 in the date field. Which
of the following programmed edit checks offers the best solution for
detecting this error?
58. Which of the following input controls would prevent an incorrect
state abbreviation from being accepted as legitimate data?
59. Which of the following techniques would be used to verify that a
program was free of unauthorized changes?
60. An entity has the following sales orders in a batch: Which of the
following numbers represents the record count?
61. Mark Chen was recently hired by the Rollins Company at a
monthly salary of $1,800. When his employee information was
entered into the company's personnel system, his monthly salary
amount was entered correctly, but he was inadvertently classified as
an hourly employee. Which of the following controls would be most
likely to detect this error?
62. A poor quality connection caused extensive line noise, resulting
in faulty data transmission. Which of the following controls is most
likely to detect this condition?
63. The distribution of reports is considered what type of control?
64. An audit trail is considered what type of control?
65. An auditor was examining a client's network and discovered that
the users did not have any password protection. Which of the
following would be the best example of the type of network password
the users should have?
66. What is the primary objective of data security controls?
67. Which of the following is the strongest password?
68. Problems associated with e-commerce in general include all of
the following except
69. Which of the following is not a risk of e-commerce?
70. Which of the following is not a risk of e-commerce?
71. This is an example of B2G
72. Which of the following best defines electronic data interchange
(EDI) transactions?
73. A manufacturing company that wants to be able to place material
orders more efficiently most likely would utilize which of the
following?
74. Which of the following is not considered to be an electronic
funds transfer (EFT) transaction?
75. Communications between trading partners in an electronic data
interchange (EDI) environment are usually
76. Which of the following types of networks is often utilized to
process electronic data interchange (EDI) transactions?
77. Which of the following is not an example of an e-commerce
system?
78. Which of the following statements is correct concerning the
security of messages in an electronic data interchange (EDI) system?
79. Which of the following is the primary advantage of using a value-
added network (VAN)?
80. QuikStop, Inc., a local convenience store chain, is planning to
install point-of-sale (POS) systems in all eight of its locations by the
end of the year. In the first year or so of operation, QuikStop can
reasonably expect to experience all of the following except
81. Which of the following is not a benefit of using an electronic data
interchange (EDI) system?
82. The Board of Directors of Martin Manufacturing Enterprises, Inc.
is meeting to consider whether they should expand their
manufacturing facilities to include a product line. Although the
company's current financial position and sales potential for existing
products are part of the information the Board must consider, of even
greater importance is external information concerning economic
conditions, market projects for the new product, the cost of long-term
financing alternatives, and information about potential competitors.
The Board of Directors' decision process would be best supported by
a
83. Which of the following types of systems would you use to record
the number of hours worked during the current pay period for each of
your employees?
84. Which of the following is an example of a report that would be
produced by a management information system (MIS) as opposed to
an accounting information system (AIS)?
85. This system is most likely to include external data.
86. Which of the following systems assists with non routine
decisions, serves strategic levels of the organization, and helps answer
questions regarding what a company's competitors are doing, as well
as identifies new acquisitions that would protect the company from
cyclical business swings?
87. Which of the following terms best describes a payroll system?
88. The system that most resembles a managerial accounting,
budgeting system is:
89. This system is sometimes also called a TPS.
90. Which of the following is an example of a non-financial
transaction?
91. A data warehouse differs from a data mart because
92. Which of the following is a critical success factor in data mining
a large data store?
93. A specialized version of a data warehouse that contains data that
is pre-configured to meet the needs of specific departments is known
as
94. Which of the following statements is correct? I. An important
advantage of flat file systems is that they are program independent. II.
Flat file systems contain little data redundancy.
95. Which of the following is true in regard to data warehouses? I.
The bulk of the data found in a data warehouse comprises historical
operational data. II. Pattern recognition is one of the principal
functionalities offered by data mining software.
96. Which of the following strategies is important to managing
security over mobile systems?
97. Which of the following is less likely to occur in a small business
than in a large business?
98. Which of the following is an effective control related to personal
computing in a small business?
99. Which of the following statements is true regarding small
business computing?
100. Which of the following is not a benefit of mobile
computing?
101. If complete segregation of duties is impossible in a small
business, which two functions should be potentially combined?
102. Which of the following critical accounting function is most
likely to be absent in a small business computing environment?
103. Which of the following statements is true regarding small
business computing?
104. Database management software is considered:
105. Which of the following is not a category of computer
software?
106. Which of the following allows a database management
system to add new records, delete old records, and update existing
records?
107. Which of the following structures refers to the collection of
data for all vendors in a relational data base?
108. What is the correct ascending hierarchy of data in a
system?
109. The following customer data is stored in the sales
processing system to a regional produce distributor: Customer
Number, Customer Name, Customer Phone, Customer Contact and
Customer Credit Limit. Which of the following is true?
110. Which of the following components of a database is
responsible for maintaining the referential integrity of the data in the
system?
111. Which of the following items would be most critical to
include in a systems specification document for a financial report?
112. Vindaloo Corporation wants data storage for a large
volume of data that is unlikely to change often. They should consider
using
113. The CPU includes all of the following except
114. Which of the following is not considered a secondary
storage device?
115. Which of the following devices "burns" data onto a
surface?
116. Which of the following is not true of a computerized
environment as compared to a manual environment?
117. In an accounting information system, which of the
following types of computer files most likely would be a master file?
118. Which of the following is true of batch processing? I. In
batch processing, data is captured in a transaction file as transactions
occur. II. Periodically (once a day, once a week, etc.), the group of
transactions in the transaction file are edited, sorted, and then the
transactions are used to update the master file.
119. Which of the following sets of characteristics is most
closely associated with online real-time processing?
120. During the annual audit, it was learned from an interview
with the controller that the accounting system was programmed to use
a batch processing method and a detailed posting type. This would
mean that individual transactions were
121. Which of the following is not true of online/real-time
transaction processing systems?
122. Which of the following cycles does not have accounting
information that is recorded into the general ledger reporting system?
123. Which of the following transaction processing modes
provides the most accurate and complete information for decision-
making?
124. In a computer-based system, the equivalent of a subsidiary
ledger is a
125. Which of the following statements about processing
methodologies is true?
126. Which of the following is an advantage of a computer-
based system for transaction processing over a manual system? A
computer-based system
127. Which of the following is true about master files?
128. Which of the following is not an advantage of
decentralized/distributed systems?
129. Which of the following multi-location system structures
has the fewest problems with input and output bottlenecks?
130. The multi-location system structure that is sometimes
called the "Goldilocks" solution because it seeks to balance design
tradeoffs is
131. In walking through O'Hare airport in Chicago, you notice a
man talking into an ear piece. The communication between the ear
piece and the man's cell phone mostly likely uses which transmission
media and protocol?
132. Which of the following is a low-cost wired transmission
medium?
133. Consider the following statements: I. LANs use dedicated
lines. II. WANs use dedicated lines.
134. The data control protocol used to control transmissions on
the Internet is
135. Which of the following is not true?
136. Which of the following technologies is specifically
designed to exchange financial information over the World Wide
Web?
137. In which of the following locations should a copy of the
accounting system data backup of year-end information be stored?
138. Rollins Corporation uses batch processing for its
accounting system. During a recent monthly payroll processing run, it
experienced a power failure that corrupted the payroll database.
139. Which of the following controls will be most useful to the
company in recovering from this failure?
140. A rollback and recovery is used mostly in _____ systems.
141. Mirroring is
142. A checkpoint is used mostly in _____ systems.
143. _____ systems include redundancy of components.
144. A company has a significant e-commerce presence and
self-hosts its website. To assure continuity in the event of a natural
disaster, the firm should adopt which of the following strategies?
145. Which of the following statements about firewalls is NOT
true?
146. In an accounting system, a header can be used to
147. IT facility controls are
148. Which of the following statements best characterizes the
function of a physical access control?
149. Internal disk labels are physically read by
150. A fire suppression system in a computer facility
151. An entity doing business on the Internet most likely could
use any of the following methods to prevent unauthorized intruders
from accessing proprietary information except
152. Which of the following provides the most reliable form of
electronic authentication?
153. What is a major disadvantage of using a private key to
encrypt data?
154. A digital signature is used primarily to determine that a
message is
155. Which of the following can be used to authenticate
messages transmitted in a networked environment?
156. Which of the following solutions creates an encrypted
communication tunnel across the Internet for the purpose of allowing
a remote user secure access to the network?
157. Which of the following is true regarding public/private key
encryption?
158. A company's web server has been overwhelmed with a
sudden surge of false requests that caused the server to crash. The
company has most likely been the target of
159. Which of the following is a computer program that appears
to be legitimate, but performs an illicit activity when it is run?
160. A type of malware designed to let the attacker bypass the
normal user authentication process (e.g., enter username and
password) and enter the user's system is
161. Which of the following is true about denial-of-service
attacks? I. A denial-of-service attack takes advantage of a network
communications protocol to tie up the server's communication ports
so that legitimate users cannot gain access to the server. II. If the
denial-of-service attack is successful, the attacker can gain access to
unprotected resources on the server.
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1. Wages earned by machine operators in producing the firm's
product should be categorized as
2. Which of the following is assigned to goods that were either
3. In a traditional job order cost system, the issue of indirect
materials to a production department increases
4. The accountant for Champion Brake, Inc. applies overhead
based on machine hours. The budgeted overhead and machine hours
for the year are $260,000 and 16,000, respectively. The actual
overhead and machine hours incurred were $275,000 and 20,000. The
cost of goods sold and inventory data compiled for the year is as
follows: Direct Materials $ 50,000, COGS 450,000, WIP (units)
100,000, Finished Goods (units) 150,000. What is the amount of
over/under applied overhead for the year?
5. If a product required a great deal of electricity to produce, and
crude oil prices increased, which of the following costs most likely
increased?
6. Fab Co. manufactures textiles. Among Fab's 2004
manufacturing costs were the following salaries and wages: Loom
operators $120,000, Factory foremen 45,000, Machine mechanics
30,000. What was the amount of Fab's 2004 direct labor?
7. In a process cost system, the application of factory overhead
usually would be recorded as an increase in
8. Jonathan Mfg. adopted a job-costing system. For the current
year, budgeted cost driver activity levels for direct labor hours and
direct labor costs were 20,000 and $100,000, respectively. In addition,
budgeted variable and fixed factory overheads were $50,000 and
$25,000, respectively. The actual costs and hours for the year were as
follows: Direct labor hours 21,000, Direct labor costs $110,000,
Machine hours 35,000. For a particular job, 1,500 direct labor hours
were used. Using direct labor hours as the cost driver, what amount of
overhead should be applied to this job?
9. Indirect labor is a
10. Hoyt Co. manufactured the following units: Saleable 5,000,
Unsalable (normal spoilage) 200, Unsalable (abnormal spoilage)
300, the manufacturing cost totaled $99,000. What amount should
Hoyt debit to finished goods?
11. In the past, four direct labor hours were required to produce each
unit of product Y. Material costs were $200 per unit, the direct labor
rate was $20 per hour, and factory overhead was three times the direct
labor cost. In budgeting for next year, management is planning to
outsource some manufacturing activities and to further automate
others. Management estimates that these plans will reduce labor hours
by 25%, increase the factory overhead rate to 3.6 times the direct
labor costs, and increase material costs by $30 per unit. Management
plans to manufacture 10,000 units. What amount should management
budget for the cost of goods manufactured?
12. During the month of March 2005, Nale Co. used $300,000 of
direct materials. On March 31, 2005, Nale's direct materials inventory
was $50,000 more than it was on March 1, 2005. Direct material
purchases during the month of March 2005 amounted to
13. Based on the following data, what is the gross profit for the
company? Sales $1,000,000, Net purchases of raw materials 600,000,
Cost of goods manufactured 800,000, Marketing and administrative
expenses 250,000, Indirect manufacturing costs 500,000.
14. On January 1 Maples had two jobs in process: #506 with assigned
costs of $10,500 and #507 with assigned costs of $14,250. During
January three new jobs, #508 through #510, were started and three
jobs, #506, #507, and #508, were completed. Materials and labor
costs added during January were as follows: Manufacturing overhead
is assigned at the rate of 200 percent of labor. What is the January
cost of goods manufactured and transferred from work-in-process?
15. In June, Delta Co. experienced scrap, normal spoilage, and
abnormal spoilage in its manufacturing process. The cost of units
produced includes
16. In its April 2005 production, Hern Corp., which does not use a
standard cost system, incurred total production costs of $900,000, of
which Hern attributed $60,000 to normal spoilage and $30,000 to
abnormal spoilage. Hern should account for this spoilage as
17. Mat Co. estimated its material handling costs at two activity
levels as follows: What is Mat's estimated cost for handling 75,000
kilos?
18. When using a flexible budget, a decrease in production levels
within a relevant range
19. A delivery company is implementing a system to compare the
costs of purchasing and operating different vehicles in its fleet. Truck
415 is driven 125,000 miles per year at a variable cost of $0.13 per
mile. Truck 415 has a capacity of 28,000 pounds and delivers 250 full
loads per year. What amount is the truck's delivery cost per pound?
20. Sender, Inc. estimates parcel mailing costs using the data shown
on the chart below. What is Sender's estimated cost for mailing
12,000 parcels?
21. When production levels are expected to increase within a relevant
range, and a flexible budget is used, what effect would be anticipated
with respect to each of the following costs?
22. Day Mail Order Co. applied the high-low method of cost
estimation to customer order data for the first 4 months of 2005. What
is the estimated variable order filling cost component per order?
23. When production levels are expected to decline within a relevant
range, and a flexible budget is used, what effect would be anticipated
with respect to each of the following?
24. In an activity-based costing system, cost reduction is
accomplished by identifying and eliminating
25. Book Co. uses the activity-based costing approach for cost
allocation and product costing purposes. Printing, cutting, and binding
functions make up the manufacturing process. Machinery and
equipment are arranged in operating cells that produce a complete
product starting with raw materials. Which of the following are
characteristic of Book's activity-based costing approach? I. Cost
drivers are used as a basis for cost allocation. II. Costs are
accumulated by department or function for the purposes of product
costing. III. Activities that do not add value to the product are
identified and reduced to the extent possible.
26. What is the normal effect on the numbers of cost pools and
allocation bases when an activity-based cost (ABC) system replaces a
traditional cost system?
27. In an activity-based costing system, what should be used to
assign a department's manufacturing overhead costs to products
produced in varying lot sizes?
28. Gram Co. develops computer programs to meet customers'
special requirements. How should Gram categorize payments to
employees who develop these programs?
29. Where one part of an organization provides an essential business
process where previously it had been provided by multiple parts of
that same organization, this is called
30. Which of the following items often provides a significant risk
with off-shore operations?
31. A manufacturing company has several product lines.
Traditionally, it has allocated manufacturing overhead costs between
product lines based on total machine hours for each product line.
Under a new activity-based costing system, which of the following
overhead costs would be most likely to have a new cost driver
assigned to it?
32. Nile Co.'s cost allocation and product costing procedures follow
activity-based costing principles. Activities have been identified and
classified as being either value-adding or nonvalue-adding as to each
product. Which of the following activities, used in Nile's production
process, is nonvalue-adding?
33. Which of the following items is a process management approach
that involves radical change?
34. In an income statement prepared as an internal report using the
direct (variable) costing method, fixed selling and administrative
expenses would
35. The absorption costing method includes in work in process and
finished goods inventories:
36. In an income statement prepared as an internal report using the
direct (variable) costing method, fixed selling and administrative
expenses would
37. Cay Co.'s 2005 fixed manufacturing overhead costs totaled
$100,000, and variable selling costs totaled $80,000. Under direct
costing, how should these costs be classified?
38. Using the variable costing method, which of the following costs
are assigned to inventory?
39. A manufacturing company prepares income statements using
both absorption and variable costing methods. At the end of a period,
actual sales revenues, total gross profit, and total contribution margin
approximated budgeted figures, whereas income was substantially
greater than the budgeted amount. There was no beginning or ending
inventories. The most likely explanation of the income increase is
that, compared to budget, actual
difference between the absorption costing and variable costing
methods?
41. A manufacturing company prepares income statements using
both absorption and variable costing methods. At the end of a period,
actual sales revenues, total gross profit, and total contribution margin
approximated the budgeted figures, whereas income was substantially
below the budgeted amount. There was no beginning or ending
inventories. The most likely explanation for the income shortfall is
that, compared to budget, actual
42. A single-product company prepares income statements using both
absorption and variable costing methods. Manufacturing overhead
cost applied per unit produced in 2005 was the same as in 2004. The
2005 variable costing statement reported a profit, whereas the 2005
absorption costing statement reported a loss. The difference in
reported income could be explained by the units produced in 2005
being
43. At the end of Killo Co.'s first year of operations, 1,000 units of
inventory remained on hand. Variable and fixed manufacturing costs
per unit were $90 and $20, respectively. If Killo uses absorption
costing rather than direct (variable) costing, the result would be a
higher pretax income of
44. Lynn Manufacturing Co. prepares income statements using both
standard absorption and standard variable costing methods. For 2005,
unit standard costs were unchanged from 2004. In 2005, the only
beginning and ending inventories were finished goods of 5,000 units.
How would Lynn's ratios using absorption costing compare with those
using variable costing?
45. A direct labor overtime premium should be charged to a specific
job when the overtime is caused by the
46. In a job cost system, manufacturing overhead is
47. Birk Co. uses a job order cost system. The following debits
(credits) appeared in Birk's work in process account for the month of
April 2005: Birk applies overhead to production at a predetermined
rate of 80% of the direct labor cost. Job No. 5, the only job still in
process on April 30, 2005, was charged with direct labor of $2,000.
What was the amount of direct materials charged to Job No. 5?
47.
48. A job order cost system uses a predetermined factory overhead
rate based on expected volume and expected fixed cost. At the end of
the year, under applied overhead might be explained by which of the
following situations?
49. A standard cost system may be used in
50. During the current year, the following manufacturing activity
took place for a company's products: Beginning work in process:
10,000 units, 70% complete, Units started into production during the
year: 150,000 units, Units completed during the year: 140,000 units,
Ending work in process: 20,000 units, 25% complete. What was the
number of equivalent units produced using the first-in, first-out
method?
51. Yarn Co.'s inventories in process were at the following stages of
completion on April 30, 2004:
52. The forming department is the first of a two-stage production
process. Spoilage is identified when the units have completed the
forming process. The costs of spoiled units are assigned to units
completed and transferred to the second department in the period
when spoilage is identified. The following information concerns
forming's conversion costs in May 2005: Using the weighted average
method, what was forming's conversion cost transferred to the second
production department?
53. Weighted average and first in, first out (FIFO) equivalent units
would be the same in a period when which of the following occurs?
54. In computing the current period's manufacturing cost per
equivalent unit, the FIFO method of process costing considers current
period costs
55. Black, Inc. employs a weighted average method in its process
costing system. Black's work in process inventory on June 30 consists
of 40,000 units. These units are 100% complete with respect to
materials and 60% complete with respect to conversion costs. The
equivalent unit costs are $5.00 for materials and $7.00 for conversion
costs. What is the total cost of the June 30 work in process inventory?
56. A process costing system was used for a department that began
operations in January 2005. Approximately the same number of
physical units, at the same degree of completion, were in work in
process at the end of both January and February. Monthly conversion
costs are allocated between ending work in process and units
completed. Compared to the FIFO method, would the weighted
average method use the same or a greater number of equivalent units
to calculate the monthly allocations?
57. In process 2, material G is added when a batch is 60% complete.
Ending work in process units, which are 50% complete, would be
included in the computation of equivalent units for
58. The following information pertains to Lap Co.'s Palo Division for
the month of April: All materials are added at the beginning of the
process. Using the weighted average method, the cost per equivalent
unit for materials is
59. Which of the following is not a basic approach to allocating costs
for costing inventory in joint-cost situations?
60. Kode Co. manufactures a major product that gives rise to a by-
product called May. May's only separable cost is a $1 selling cost
when a unit is sold for $4. Kode accounts for May's sales by
deducting the $3 net amount from the cost of goods sold of the major
product. There are no inventories. If Kode were to change its method
of accounting for May from a by-product to a joint product, what
would be the effect on Kode's overall gross margin?
61. Mighty, Inc. processes chickens for distribution to major grocery
chains. The two major products resulting from the production process
are white breast meat and legs. Joint costs of $600,000 are incurred
during standard production runs each month, which produce a total of
100,000 pounds of white breast meat and 50,000 pounds of legs. Each
pound of white breast meat sells for $2 and each pound of legs sells
for $1. If there are no further processing costs incurred after the split-
off point, what amount of the joint costs would be allocated to the
white breast meat on a net realizable value basis?
62. Mig Co., which began operations in 2003, produces gasoline and
a gasoline by-product. The following information is available
pertaining to 2003 sales and production: Mig accounts for the by-
product at the time of production. What are Mig's 2003 cost of sales
for gasoline and the by-product?
63. LM Enterprises produces two products in a common production
process, each of which is processed further after the split-off point.
Joint costs incurred for the current month are $36,000. The following
information for the current month was. What amount would be the
joint cost allocated to product M, assuming that LM Enterprises uses
the estimated net realizable value method to allocate costs?
64. A company manufactures two products, X and Y, through a joint
process. The joint (common) costs incurred are $500,000 for a
standard production run that generates 240,000 gallons of X and
160,000 gallons of Y. X sells for $4.00 per gallon, while Y sells for
$6.50 per gallon. If there are no additional processing costs incurred
after the split-off point, what is the amount of joint cost for each
production run allocated to X on a physical-quantity basis?
65. The following information pertains to a by-product called Moy:
The inventory of Moy was recorded at net realizable value when
produced in 2004 and net proceeds from the sale were used to reduce
joint costs. No units of Moy were produced in 2005. What amount
should be recognized as profit on Moy's 2005 sales?
66. Johnson Co., distributor of candles, has reported the following
budget assumptions for year 1: No change in candles inventory level;
cash disbursement to candle manufacturer, $300,000; target accounts
payable ending balance for year 1 is 150% of accounts payable
beginning balance; and sales price is set at a markup of 20% of candle
purchase price. The candle manufacturer is Johnson's only vendor,
and all purchases are made on credit. The accounts payable has a
balance of $100,000 at the beginning of year 1. What is the budgeted
gross margin for year 1?
67. Lon Co.'s budget committee is preparing its master budget on the
basis of the following projections: What are Lon's estimated cash
disbursements for inventories?
68. When a manager is concerned with monitoring total cost, total
revenue, and net profit conditioned upon the level of productivity, an
accountant would normally recommend
69. What is the required unit production level given the following
factors?
70. Which of the following types of budgets is the last budget to be
produced during the budgeting process?
71. Cook Co.'s total costs of operating five sales offices last year
were $500,000, of which $70,000 represented fixed costs. Cook has
determined that total costs are significantly influenced by the number
of sales offices operated. Last year's costs and the number of sales
offices can be used as the bases for predicting annual costs. What
would be the budgeted costs for the coming year if Cook were to
operate seven sales offices?
72. Lanta Restaurant compares monthly operating results with a static
budget.When actual sales are less than budget, would Lanta usually
report favorable variances on variable food costs and fixed
supervisory salaries?
73. A static budget contains which of the following amounts?
74. The basic difference between a master budget and a flexible
budget is that a master budget is
75. A company forecast first quarter sales of 10,000 units, second
quarter sales of 15,000 units, third quarter sales of 12,000 units and
fourth quarter sales of 9,000 units at $2 per unit. Past experience has
shown that 60% of the sales will be in cash and 40% will be on credit.
All credit sales are collected in the following quarter, and none are
uncollectible. What amount of cash is forecasted to be collected in the
second quarter?
76. Which of the following would be most impacted by the use of the
percentage of sales forecasting method for budgeting purposes?
77. A 2005 cash budget is being prepared for the purchase of Toyi, a
merchandise item. The budgeted data are as follows: Purchases will
be made in 12 equal monthly amounts and paid for in the following
month. What is the 2005 budgeted cash payment for the purchase of
Toyi?
78. A flexible budget is appropriate for a
79. Dough Distributors has decided to increase its daily muffin
purchases by 100 boxes. A box of muffins costs $2 and sells for $3
through regular stores. Any boxes not sold through regular stores are
sold through Dough's thrift store for $1. Dough assigns the following
probabilities to selling additional boxes: What is the expected value of
Dough's decision to buy 100 additional boxes of muffins?
80. Under frost-free conditions, Cal Cultivators expects its strawberry
crop to have a $60,000 market value. An unprotected crop subject to
frost has an expected market value of $40,000. If Cal protects the
strawberries against frost, then the market value of the crop is still
expected to be $60,000 under frost-free conditions and $90,000 if
there is a frost. What must be the probability of a frost for Cal to be
indifferent to spending $10,000 for frost protection?
81. In describing the regression equation used for cost prediction, Y
= a + bx, which of the following is correct?
82. A management accountant performs a linear regression of
maintenance cost vs. production using a computer spreadsheet. The
regression output shows an "intercept" value of $322,897. How
should the accountant interpret this information?
83. The coefficient of determination, r squared, in a multiple
regression equation is the
84. Box Co. uses regression analysis to estimate the functional
relationship between an independent variable (cost driver) and
overhead cost. Assume that the following equation is being used: y =
A + Bx. What is the symbol for the independent variable?
85. In using regression analysis, which measure indicates the extent
to which a change in the independent variable explains a change in
the dependent variable?
86. The regression analysis results for ABC Co. are shown as y = 90x
+ 45. The standard error (Sb) is 30 and the coefficient of
determination (r2 ) is 0.81. The budget calls for the production of 100
units. What is ABC's estimate of total costs?
87. The sales and cost information for Gamore Company are as
follows: Gamore's breakeven point in the number of units is
88. State College is using cost-volume-profit analysis to determine
tuition rates for the upcoming school year. Projected costs for the year
are as follows: Based on these estimates, what is the approximate
break-even point in number of students?
89. In 2004, Thor Lab supplied hospitals with a comprehensive
diagnostic kit for $120. At a volume of 80,000 kits, Thor had fixed
costs of $1,000,000 and a profit before income taxes of $200,000.
Due to an adverse legal decision, Thor's 2005 liability insurance
increased by $1,200,000 over 2004. Assuming the volume and other
costs are unchanged, what should the 2005 price be if Thor is to make
the same $200,000 profit before income taxes?
90. Trendy Co. produced and sold 30,000 backpacks during the last
year at an average price of $25 per unit. Unit variable costs were the
following: Total fixed costs were $250,000. There was no year-end
work-in-process inventory. If Trendy had spent an additional $15,000
on advertising, then sales would have increased by $30,000. If Trendy
had made this investment, what change would have occurred in
Trendy's pretax profit?
91. The most likely strategy to reduce the breakeven point would be
to
92. At the breakeven point, the contribution margin equals total
93. Wren Co. manufactures and sells two products with selling prices
and variable costs as follows: Wren's total annual fixed costs are
$38,400. Wren sells four units of A for every unit of B. If the
operating income last year was $28,800, what was the number of units
Wren sold?
94. Del Co. has fixed costs of $100,000 and breakeven sales of
$800,000. What is its projected profit at $1,200,000 sales?
95. A ceramics manufacturer sold cups last year for $7.50 each.
Variable costs of manufacturing were $2.25 per unit. The company
needed to sell 20,000 cups to break even. Net income was $5,040.
This year, the company expects the following changes: sales price per
cup to be $9.00; variable manufacturing costs to increase 33.3%;
fixed costs to increase 10%; and the income tax rate to remain at 40%.
Sales in the coming year are expected to exceed last year's sales by
1,000 units. How many units does the company expect to sell this
year?
96. A ceramics manufacturer sold cups last year for $7.50 each. The
variable cost of manufacturing was $2.25 per unit. The company
needed to sell 20,000 cups to break even. Its net income was $5,040.
This year, the company expects the price per cup to be $9.00; the
variable manufacturing cost to increase by 33.3%; and the fixed costs
to increase by 10%. How many cups (rounded) does the company
need to sell this year to break even?
97. A company that produces 10,000 units has fixed costs of
$300,000, variable costs of $50 per unit, and a sales price of $85 per
unit. After learning that its variable costs will increase by 20%, the
company is considering an increase in production to 12,000 units.
Which of the following statements is correct regarding the company's
next steps?
98. Breakeven analysis assumes that over the relevant range
99. On January 1, 2005, Lake Co. increased its direct labor wage
rates. All other budgeted costs and revenues were unchanged. How
did this increase affect Lake's budgeted breakeven point and budgeted
margin of safety?
100. In the profit-volume chart below, EF and GH
represent the profit-volume graphs of a single-product company for
2004 and 2005, respectively. If the 2004 and 2005 unit sales are
identical, how did the total fixed costs and unit variable costs of 2005
change as compared to 2004?
101. Cott Company has sales of $200,000, a contribution
margin of 20%, and a margin of safety of $80,000. What is Cott's
fixed cost?
102. Central Winery manufactured two products, A and
B. The estimated demand for product A was 10,000 bottles, and for
product B, 30,000 bottles. The estimated sales price per bottle for A
was $6.00, and for B, $8.00. The actual demand for product A was
8,000 bottles, and for product B, 33,000 bottles. The actual price per
bottle for A was $6.20, and for B, $7.70. What amount would be the
total selling price variance for Central Winery?
103. The following direct labor information pertains to
the manufacture of product Glu: What is the standard direct labor cost
per unit of product Glu?
104. Selected costs associated with a product are as
follows: What amount is the total direct labor price variance?
105. Relevant information for material A follows: What
was the direct material quantity variance for material A?
106. Virgil Corp. uses a standard cost system. In May,
Virgil purchased and used 17,500 pounds of materials at a cost of
$70,000. The materials usage variance was $2,500 unfavorable, and
the standard materials allowed for May production was 17,000
pounds. What was the materials price variance for May?
107. Yola Co. manufactures one product with a standard
direct labor cost of four hours at $12.00 per hour. In June, 1,000 units
were produced using 4,100 hours at $12.20 per hour. The unfavorable
direct labor efficiency variance was
108. Smart Co. uses a static budget. When actual sales
are less than budget, Smart would report favorable variances on which
of the following expense categories?
109. Management has reviewed the standard cost
variance analysis and is trying to explain an unfavorable labor
efficiency variance of $8,000. Which of the following is the most
likely cause of the variance?
110. A manufacturing company that produces trivets has
established the following standards for the current year: During April,
the company purchased 10,000 pounds of material for $33,000 and
used 9,400 pounds to produce 4,500 trivets. Four thousand trivets
were sold during April. What amount should be reported as the
materials' quantity (usage) variance?
111. For the current period production levels, XL
Molding Co. budgeted 8,500 board feet of production and used 9,000
board feet for actual production. Material cost was budgeted at $2 per
foot. The actual cost for the period was $3 per foot. What was XL's
material efficiency variance for the period?
112. The following information pertains to Roe Co.'s
2004 manufacturing operations: Roe's 2004 unfavorable variable
overhead efficiency variance was
113. In 2005, a department's three-variance overhead
standard costing system reported unfavorable spending and volume
variances. The activity level selected for allocating overhead to the
product was based on 80% of practical capacity. If 100% of practical
capacity had been selected instead, how would the reported
unfavorable spending and volume variances have been affected?
114. Which of the following standard costing variances
would be least controllable by a production supervisor?
115. The following information is available on Crain
Co.'s two product lines: Assuming the tables line is discontinued, and
the factory space previously used to make tables is rented for $24,000
per year, operating income will increase by what amount?
116. Which of the following items is never relevant to a
sell or process further decision?
117. Which one of the following costs, if any, is relevant
when making financial decisions?
118. Allen Harvey, an accounting major, is considering a
full-time internship during the spring semester of his junior year. The
internship opportunity is located in the town where he attends school,
so he would be able to continue to live in his apartment that costs
$600 per month. The internship would pay $1,200 per month for
January through May. If he does not take the internship, he will attend
school at a cost of $4,000 for the semester. If Harvey decides to stay
in school full-time during the spring semester, which one of the
following would be the amount of his opportunity cost and the
amount of his incremental (or differential) cost?
119. A company is considering outsourcing one of the
component parts for its product. The company currently makes 10,000
parts per month. Current costs are as follows: The company decides to
purchase the part for $8 per unit from another supplier and rents its
idle capacity for $5,000/month. How will the company's monthly
costs change?
120. A company is offered a one-time special order for
its product and has the capacity to take this order without losing
current business. Variable costs per unit and fixed costs in total will
be the same. The gross profit for the special order will be 10%, which
is 15% less than the usual gross profit. What impact will this order
have on total fixed costs and operating income?
121. Which of the following would be considered a
relevant fixed cost in making a special order decision?
122. Clay Co. has considerable excess manufacturing
capacity. A special job order's cost sheet includes the following
applied manufacturing overhead costs: The fixed costs include a
normal $3,700 allocation for in-house design costs, although no in-
house design will be done. Instead the job will require the use of
external designers costing $7,750. What is the total amount to be
included in the calculation to determine the minimum acceptable price
for the job?
123. A company receives an offer to purchase a special
order of units of a product that normally sells for $10 each to regular
customers. The cost of manufacturing the units is shown here. If all
other conditions are favorable, what is the absolute lowest price that
the company would be able to feasibly accept for the order if it has
enough idle capacity to handle the order?
124. Rodder, Inc. manufactures a component in a router
assembly. The selling price and unit cost data for the component are
as follows: The company received a special one-time order for 1,000
components. Rodder has an alternative use for production capacity for
the 1,000 components that would produce a contribution margin of
$5,000. What amount is the lowest unit price Rodder should accept
for the component?
125. Tennis rackets can be purchased for $60 each from
an outside vendor. It costs the manufacturer $80 a piece to produce
them, of which 30% is unavoidable fixed overhead cost. What are the
relevant costs for this decision? Based only on these costs, which
option should the company choose?
126. In the GPK Coffee Company, the Strudel Division
has strudel that can be sold either to outside customers or to the Bean
Division that also sells coffee. Information about these divisions is
given below: Given the facts in case 2, what are the minimum and
maximum transfer prices?
given below: Given the facts in case 1, what are the minimum and
maximum transfer prices?
given below: Will the internal transfer likely take place? Answer for
Case 1 and 2 separately.
129. Spring Co. had two divisions, A and B. Division A
created Product X, which could be sold on the outside market for $25,
and used variable costs of $15. Division B could take Product X and
apply additional variable costs of $40 to create Product Y, which
could be sold for $100. Division B received a special order for a large
amount of Product Y. If Division A were operating at full capacity,
which of the following prices should Division A charge Division B
for the Product X needed to fill the special order?
130. Brent Co. has intracompany service transfers from
Division Core, a cost center, to Division Pro, a profit center. Under
stable economic conditions, which of the following transfer prices is
likely to be most conducive to evaluating whether both divisions have
met their responsibilities?
131. Which of the following techniques effectively
measures improvements in product quality as a result of internal
failure costs?
132. In a quality control program, which of the following
is (are) categorized as internal failure costs? I. Rework. II.
Responding to customer complaints. III. Statistical quality control
procedures.
133. As a consequence of finding a more dependable
supplier, Dee Co. reduced its safety stock of raw materials by 80%.
What is the effect of this safety stock reduction on Dee's economic
order quantity?
134. As part of a benchmarking process, a company's
costs of quality for the current month have been identified as follows:
What amount is the company's prevention cost for the current month?
135. The benefits of a just-in-time system for raw
materials usually include
136. Which changes in costs are most conducive to
switching from a traditional inventory ordering system to a just-in-
time ordering system?
137. The economic order quantity formula assumes that
138. Bell Co. changed from a traditional manufacturing
philosophy to a just-in-time philosophy.
139. What are the expected effects of this change on
Bell's inventory turnover and inventory as a percentage of total assets
reported on Bell's balance sheet?
140. Which quality definition can be described as
"meeting or exceeding the needs and wants of customers?"
141. Key Co. changed from a traditional manufacturing
operation with a job order costing system to a just-in-time operation
with a back-flush costing system. What is (are) the expected effect(s)
of these changes on Key's inspection costs and recording detail of
costs tracked to jobs in process?
142. Nonfinancial performance measures are important
to engineering and operations managers in assessing the quality levels
of their products. Which of the following indicators can be used to
measure product quality? I. Returns and allowances. II. Number and
types of customer complaints. III. Production cycle time.
143. To evaluate its performance, the Blankie Co. is
comparing its costs of quality from one year to the next. The relevant
costs are as follows: Which of the following conclusions can Blankie
draw about its quality program?
144. Which measures would be useful in evaluating the
performance of a manufacturing system? I. Throughput time. II. Total
setup time for machines/Total production time. III. Number of rework
units/Total number of units completed.
145. Which of the following balanced scorecard
perspectives examines a company's success in targeted market
segments?
146. Under the balanced scorecard concept developed by
Kaplan and Norton, employee satisfaction and retention are measures
used under which of the following perspectives?
147. Which of the following performance measures is
nonfinancial?
148. The management of a company would do which of
the following to compare and contrast its financial information to
published information reflecting optimal amounts?
149. A cost leadership strategy, in addition to focusing
on the company's ability to sell a large volume of low-cost products,
is often aided by all of the following characteristics except
150. Which of the following topics is the focus of
managerial accounting?
151. SWOT analysis includes considerations of what
four strategic dimensions?
152. Vince Inc. has developed and patented a new laser
disc reading device that will be marketed internationally. Which of
the following factors should Vince consider in pricing the device? I.
Quality of the new device. II. Life of the new device. III. Customers'
relative preference for quality compared to price.
153. Which of the following steps in the strategic
planning process should be completed first?
154. The target capital structure of Traggle Co. is 50%
debt, 10% preferred equity, and 40% common equity. The interest
rate on debt is 6%, the yield on the preferred is 7%, the cost of
common equity is 11.5%, and the tax rate is 40%. Traggle does not
anticipate issuing any new stock. What is Traggle's weighted average
cost of capital?
155. A company's target gross margin is 40% of the
selling price of a product that costs $89 per unit. The product's selling
price should be
156. A company has a tax rate of 40%. Information for
the company is as follows: What is the weighted average cost of
capital (WACC)?
157. A company has two divisions. Division A has an
operating income of $500 and total assets of $1,000. Division B has
an operating income of $400 and total assets of $1,600. The
company's required rate of return is 10%. Division B's residual
income would be which of the following amounts?
158. Wexford Co. has a subunit that reported the
following data for year 1: The imputed interest rate is 12%. What is
the division residual income for year 1?
159. Brewster Co. has the following financial
information: What amount of sales is required for Brewster to achieve
a 15% return on sales?
160. Related to the CFROI metric, "the required annual
cash investment needed to replace fixed assets" is the definition of
what?
161. Which of the following accurately reflects
prevailing thought processes regarding the new value based metrics?
162. The following information pertains to Quest Co.'s
Gold Division for 2004: Quest's return on investment was
163. North Bank is analyzing Belle Corp.'s financial
statements for a possible extension of credit. Belle's quick ratio is
significantly better than the industry average. Which one of the
following factors should North consider as a possible limitation of
using this ratio when evaluating Belle's creditworthiness?
164. To measure inventory management performance, a
company monitors its inventory turnover ratio. Listed below are
selected data from the company's accounting records: Beginning
finished goods inventory for the current year was 15% of the prior
year's annual sales, and ending finished goods inventory was 22% of
the current year's annual sales. What was the company's inventory
turnover at the end of the current period?
165. The DuPont method of ROI uses sales to analyze
what two elements of return separately?
166. Galax, Inc. had an operating income of $5,000,000
before interest and taxes. Galax's net book value of plant assets on
January 1 and December 31 were $22,000,000 and $18,000,000,
respectively. Galax achieved a 25% return on investment for the year,
with an investment turnover of 2.5. What were Galax's sales for the
year?
167. How is contribution margin (CM) different from
gross margin (GM)?
168. Which metric is often used as an alternative to ROI
and is generally defined as "operating Income less (the required rate
of return multiplied by invested capital)?"
169. Why is cost avoidance a faster way to increase
profits than to increase revenue?
170. Which of the following types of risk are best
addressed with insurance?
171. How is strategic risk best managed?
172. Which of the following types of risk are best
addressed with hedging?
173. Which of the following terms describe or are
consistent with systematic risk?
174. Jago Co. has two products that use the same
manufacturing facilities and cannot be subcontracted. Each product
has sufficient orders to utilize the entire manufacturing capacity. For
short-run profit maximization, Jago should manufacture the product
with the
175. What is the objective of the demand flow approach?
176. Which of the following production processes best
describes lean manufacturing?
177. Which of the following statements correctly
describes the structural differences between mass and lean
manufacturing?
178. What tools does Six Sigma commonly use to
achieve quality control?
179. When using PERT or CPM, activity slack is
calculated as
180. When using PERT, project completion times are
measured by a pessimistic, optimistic, and most probable estimate...
181. Which of the following roles is typically taken on
by a project team member?
182. The process of adding resources to shorten selected
activity times on the critical path is called
183. Which type of project risk is related to managing
people, time, cost restrictions, and the interrelationships among
activities?
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ACC 576 Final Exam Guide

FOR MORE CLASSES VISIT

Finished goods (in units)

ACC 576 Week 1 Quiz (All Possible Questions)

ACC 576 Week 2 Quiz (All Possible Questions)

ACC 576 Week 3 Quiz

ACC 576 Week 4 Quiz (All Possible Questions)

ACC 576 Week 5 Quiz (All Possible Questions)

ACC 576 Week 6 Quiz (All Possible Questions)

ACC 576 Week 7 Assignment 1 Economic and Monetary

ACC 576 Week 7 Quiz (All Possible Questions)

ACC 576 Week 8 Quiz (All Possible Questions)

ACC 576 Week 9 Quiz (All Possible Questions)

ACC 576 Week 10 Quiz (All Possible Questions)

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