Gleim Questions 2020 Cma P1 (1).pdf

Study Unit 1: External Financial Statements and Revenue Recognition 1: (195) External Financial Statements and Revenue Recognition 1: (13) Concepts of Financial Accounting 2: (27) Statement of Financial Position (Balance Sheet) 3: (24) Income Statement and Statement of Comprehensive Income 4: (25) Statement of Changes in Equity and Equity Transactions 5: (53) Statement of Cash Flows 6: (26) Revenue from Contracts with Customers 7: (27) Recognition of Revenue over Time

Subunit 1: Concepts of Financial Accounting Question: 1A primary objective of external financial reporting is A. Direct measurement of the value of a business enterprise. B. Provision of information that is useful to present and potential investors, creditors, and others in making rational financial decisions regarding the enterprise. C. Establishment of rules for accruing liabilities. D. Direct measurement of the enterprise’s stock price.

Question: 2Which of the following is true regarding the comparison of managerial and financial accounting? A. Managerial accounting is generally more precise. B. Managerial accounting has a past focus, and financial accounting has a future focus. C. The emphasis on managerial accounting is relevance, and the emphasis on financial accounting is timeliness. D. Managerial accounting need not follow generally accepted accounting principles (GAAP), while financial accounting must follow them.

Question: 3An objective of financial reporting is A. Providing information useful to investors, creditors, donors, and other users for decision making. B. Assessing the adequacy of internal control. C. Evaluating management results compared with standards.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Providing information on compliance with established procedures.

Question: 4An entity that sprays chemicals in residences to eliminate or prevent infestation of insects requires that customers prepay for 3 months’ service at the beginning of each new quarter. Select the term that appropriately describes this situation from the viewpoint of the entity. A. Deferred income. B. Earned income. C. Accrued income. D. Prepaid expense.

Question: 5The financial statements included in the annual report to the shareholders are least useful to which one of the following? A. Stockbrokers. B. Bankers preparing to lend money. C. Competing businesses. D. Managers in charge of operating activities.

Question: 6The accounting measurement that is not consistent with the going concern concept is A. Historical cost. B. Realization. C. The transaction approach. D. Liquidation value.

Question: 7Which of the following is a true statement about the objective of general-purpose financial reporting? A. Financial reporting is ordinarily focused on industries rather than individual entities. B. The objective applies only to information that is useful for investment professionals.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Financial reporting directly measures management performance. D. The information provided relates to the entity’s economic resources and claims.

Question: 8Which basis of accounting is most likely to provide the best assessment of an entity’s past and future ability to generate net cash inflows? A. Cash basis of accounting. B. Modified cash basis of accounting. C. Accrual basis of accounting. D. Tax basis of accounting.

Question: 9Which of the following is least likely to be accomplished by providing general-purpose financial information useful for making decisions about providing resources to an entity? A. To provide information about changes in an entity’s economic resources and claims to them. B. To provide information to help investors and creditors assess the amount, timing, and uncertainty of prospective net cash inflows to the entity. C. To provide sufficient information to determine the value of the entity. D. To provide information about management’s performance.

Question: 10All of the following support the objective of financial reporting except providing information that A. Is useful for making investment and credit decisions. B. Helps management evaluate alternative projects. C. Concerns enterprise resources and claims to those resources. D. Helps investors and creditors predict future cash flows.

Question: 11General purpose external financial reporting of a corporation focuses primarily on the needs of which of the following users? A. Regulatory and taxing authorities.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Investors and creditors and their advisors. C. The board of directors of the corporation. D. The management of the corporation.

Question: 12For financial reporting to be useful, it must A. Be in accordance with generally accepted accounting principles. B. Provide information useful for making business and investment decisions. C. Be understandable to those who have a limited knowledge of business activities. D. Directly measure the value of the entity being reported on.

Question: 13What is the primary objective of financial reporting? A. To provide economic information that is comprehensible to all users. B. To provide management with an accurate evaluation of their financial performance. C. To provide forecasts for future cash flows and financial performance. D. To provide information that is useful for economic decision making.

Subunit 2: Statement of Financial Position (Balance Sheet) Question: 1The primary purpose of the statement of financial position is to reflect A. The fair value of the firm’s assets at some moment in time. B. The status of the firm’s assets in case of forced liquidation of the firm. C. The success of a company’s operations for a given amount of time. D. Items of value, debt, and net worth.

Question: 2Prepaid expenses are valued on the statement of financial position at the A. Cost to acquire the asset.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Face amount collectible at maturity. C. Cost to acquire minus accumulated amortization. D. Cost less expired or used portion.

Question: 3A statement of financial position allows investors to assess all of the following except the A. Efficiency with which enterprise assets are used. B. Liquidity and financial flexibility of the enterprise. C. Capital structure of the enterprise. D. Net realizable value of enterprise assets.

Question: 4The accounting equation (assets – liabilities = equity) reflects the A. Entity point of view. B. Fund theory. C. Proprietary point of view. D. Enterprise theory.

Question: 5Long-term obligations that are or will become callable by the creditor because of the debtor’s violation of a provision of the debt agreement at the balance sheet date should be classified as A. Long-term liabilities. B. Current liabilities unless the debtor goes bankrupt. C. Current liabilities unless the creditor has waived the right to demand repayment for more than 1 year from the balance sheet date. D. Contingent liabilities until the violation is corrected.

Question: 6A statement of financial position is intended to help investors and creditors A. Assess the amount, timing, and uncertainty of prospective net cash inflows of a firm.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Evaluate economic resources and obligations of a firm. C. Evaluate economic performance of a firm. D. Evaluate changes in the ownership equity of a firm.

Question: 7The purchase of treasury stock is recorded on the statement of financial position as a(n) A. Increase in assets. B. Decrease in liabilities. C. Increase in shareholders’ equity. D. Decrease in shareholders’ equity.

Question: 8When classifying assets as current and noncurrent for reporting purposes, A. The amounts at which current assets are carried and reported must reflect realizable cash values. B. Prepayments for items such as insurance or rent are included in an “other assets” group rather than as current assets as they will ultimately be expensed. C. The time period by which current assets are distinguished from noncurrent assets is determined by the seasonal nature of the business. D. Assets are classified as current if they are reasonably expected to be realized in cash or consumed during the normal operating cycle.

Question: 9A corporation uses a calendar year for financial and tax reporting purposes and has $100 million of mortgage bonds due on January 15, Year 2. By January 10, Year 2, the corporation intends to refinance this debt with new long-term mortgage bonds and has entered into a financing agreement that clearly demonstrates its ability to consummate the refinancing. This debt is to be A. Classified as a current liability on the statement of financial position at December 31, Year 1. B. Classified as a long-term liability on the statement of financial position at December 31, Year 1. C. Retired as of December 31, Year 1. D. Considered off-balance-sheet debt.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 10A statement of financial position provides a basis for all of the following except A. Computing rates of return. B. Evaluating capital structure. C. Assessing liquidity and financial flexibility. D. Determining profitability and assessing past performance.

Question: 11A company intends to refinance a portion of its short-term debt in Year 2 and is negotiating a longterm financing agreement with a local bank. This agreement would be noncancelable and would extend for a period of 2 years. The amount of short-term debt that the company can exclude from its statement of financial position at December 31, Year 1, A. May exceed the amount available for refinancing under the agreement. B. Depends on the demonstrated ability to consummate the refinancing. C. Is reduced by the proportionate change in the working capital ratio. D. Is zero unless the refinancing has occurred by year end.

Question: 12A manufacturer receives an advance payment for special-order goods that are to be manufactured and delivered within the next year. The advance payment should be reported in the manufacturer’s current-year statement of financial position as a(n) A. Current liability. B. Noncurrent liability. C. Contra asset amount. D. Accrued revenue.

Question: 13A company has outstanding accounts payable of $30,000 and a short-term construction loan in the amount of $100,000 at year end. The loan was refinanced through issuance of long-term bonds after year end but before issuance of financial statements. How should these liabilities be recorded in the balance sheet? A. Noncurrent liabilities of $130,000. B. Current liabilities of $130,000.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Current liabilities of $30,000, noncurrent liabilities of $100,000. D. Current liabilities of $130,000, with required footnote disclosure of the refinancing of the loan.

Question: 14Noncurrent debt should be included in the current section of the statement of financial position if A. It is to be converted into common stock before maturity. B. It matures within the year and will be retired through the use of current assets. C. Management plans to refinance it within the year. D. A bond retirement fund has been set up for use in its scheduled retirement during the next year.

Question: 15A company has the following items recorded on its financial records: Available-for-sale debt securities $200,000 Prepaid expenses

400,000

Treasury stock

100,000

The total amount of the above items to be shown as assets on the statement of financial position is A. $400,000 B. $500,000 C. $600,000 D. $700,000

Question: 16A receivable classified as current on the statement of financial position is expected to be collected within A. The current operating cycle. B. 1 year. C. The current operating cycle or 1 year, whichever is longer. D. The current operating cycle or 1 year, whichever is shorter.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 17Current assets are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business. Current assets most likely include A. Intangible assets. B. Purchased goodwill. C. Organizational costs. D. Trading securities.

Question: 18A corporation was incorporated on January 1, Year 6, with $500,000 from the issuance of stock and borrowed funds of $75,000. During the first year of operations, net income was $25,000. On December 15, the corporation paid a $2,000 cash dividend. No additional activities affected equity in Year 6. At December 31, Year 6, the corporation’s liabilities had increased to $94,000. In the corporation’s December 31, Year 6 balance sheet, total assets should be reported at A. $598,000 B. $600,000 C. $617,000 D. $692,000

Question: 19An entity had the following account balances at year end. Sales

$452,000

Cash

23,400

Accounts payable

14,300

Rent expense

3,700

Accounts receivable

9,400

Cost of goods sold

214,000

Land

104,000

Unearned revenue Gain on sale

6,800 17,500

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Equipment

28,800

Inventories

2,200

Notes payable

67,000

What is the amount of total current assets reported on the balance sheet? A. $35,000 B. $39,900 C. $59,300 D. $63,800

Question: 20All of the following are limitations of the balance sheet except that A. The balance sheet is prepared using management judgments and estimates. B. Assets and liabilities are usually recorded at historical cost, which might differ significantly from current market value. C. The balance sheet provides information on the liquidity and solvency of the company. D. The balance sheet omits many items that cannot be recorded objectively but which have financial value to the company.

Question: 21Which of the following is not an example of off-balance-sheet financing? A. Use of debt covenants. B. Factoring receivables. C. Using special purpose entities. D. Joint ventures.

Question: 22Heavy use of off-balance-sheet lease financing will tend to A. Make a company appear riskier than it actually is because its stated debt ratio will appear higher. B. Make a company appear less risky than it actually is because its stated debt ratio will appear lower.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Affect a company’s cash flows but not its degree of risk. D. Have no effect on either cash flows or risk because the cash flows are already reflected in the income statement.

Question: 23Which one of the following would not be classified as a current liability? A. Security deposits received from renters for a one-year lease. B. Rent for the current year received on January 2 of the current year. C. Undistributed stock dividends. D. Ten-year bonds sold 110 months ago.

Question: 24A company received an invoice in January for the electricity used by its warehouse in December, and it recorded the expense in January. The company uses the accrual basis of accounting. What is the impact to the company’s December financial statements? A. Current liabilities were understated, and retained earnings were overstated. B. Operating expenses were overstated, and retained earnings were overstated. C. Cash and cash equivalents were overstated, and retained earnings were understated. D. Accrued expenses were overstated, and retained earnings were understated.

Question: 25When treasury stock is accounted for at cost, the cost is reported on the balance sheet as a(n) A. Asset. B. Reduction of retained earnings. C. Reduction of additional paid-in-capital. D. Unallocated reduction of equity.

Question: 26Which one of the following statements regarding treasury stock is correct? A. It is unretired but no longer outstanding, yet it has all the rights of outstanding shares.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. It is an asset representing shares that can be sold in the future or otherwise issued in stock option plans or in effectuating business combinations. C. It is unable to participate in the liquidation proceeds of the firm but able to participate in regular cash dividend distributions as well as stock dividends and stock splits. D. It is reflected in shareholders’ equity as a contra account.

Question: 27A corporation purchased 10,000 shares of its own $5 par-value common stock for $25 per share. This stock originally sold for $28 per share. The corporation used the cost method to record this transaction. If the par-value method had been used rather than the cost method, which of the following accounts would show a different dollar amount? A. Treasury stock and total shareholders’ equity. B. Additional paid-in capital and retained earnings. C. Paid-in capital from treasury stock and retained earnings. D. Additional paid-in capital and treasury stock.

Subunit 3: Income Statement and Statement of Comprehensive Income Question: 1The profit and loss statement of an entity includes the following information for the current fiscal year: Sales

$160,000

Gross profit

48,000

Year-end finished goods inventory

58,300

Opening finished goods inventory

60,190

The cost of goods manufactured by the entity for the current fiscal year is A. $46,110 B. $49,890 C. $110,110 D. $113,890

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 2In a multiple-step income statement for a retail company, all of the following are included in the operating section except A. Sales. B. Cost of goods sold. C. Dividend revenue. D. Administrative and selling expenses.

Question: 3Which one of the following would be shown on a multiple-step income statement but not on a single-step income statement? A. Loss from discontinued operations. B. Gross profit. C. Cost of goods sold. D. Net income from continuing operations.

Question: 4A retail entity maintains a markup of 25% based on cost. The entity has the following information for the current year: Purchases of merchandise $690,000 Freight-in on purchases Sales

25,000 900,000

Ending inventory

80,000

Beginning inventory was A. $40,000 B. $85,000 C. $110,000 D. $265,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 5The financial statement that provides a summary of the firm’s operations for a period of time is the A. Income statement. B. Statement of financial position. C. Statement of shareholders’ equity. D. Statement of retained earnings.

Question: 6Comprehensive income is best defined as A. Net income excluding extraordinary gains and losses. B. The change in net assets for the period including contributions by owners and distributions to owners. C. Total revenues minus total expenses. D. The change in net assets for the period excluding owner transactions.

Question: 7Which one of the following items is included in the determination of income from continuing operations? A. Discontinued operations. B. Extraordinary loss. C. Cumulative effect of a change in an accounting principle. D. Unusual loss from a write-down of inventory.

Question: 8Because of inexact estimates of the service life and the residual value of a plant asset, a fully depreciated asset was sold in the current year at a material gain. This gain most likely should be reported A. In the other revenues and gains section of the current income statement. B. As part of sales revenue on the current income statement. C. In the extraordinary item section of the current income statement. D. As an adjustment to prior periods’ depreciation on the statement of changes in equity.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 9In recording transactions, which of the following best describes the relation between expenses and losses? A. Losses are extraordinary charges to income, whereas expenses are ordinary charges to income. B. Losses are material items, whereas expenses are immaterial items. C. Losses are expenses that may or may not arise in the course of ordinary activities. D. Expenses can always be prevented, whereas losses can never be prevented.

Question: 10An entity has a 50% gross margin, general and administrative expenses of $50, interest expense of $20, and net income of $10 for the year just ended. If the corporate tax rate is 50%, the level of sales revenue for the year just ended was A. $90 B. $135 C. $150 D. $180

Question: 11Assume that employees confessed to a $500,000 inventory theft but are not able to make restitution. How should this material fraud be shown in the company’s financial statements? A. Classified as a loss and shown as a separate line item in the income statement. B. Initially classified as an accounts receivable because the employees are responsible for the goods. Because they cannot pay, the loss would be recognized as a write-off of accounts receivable. C. Included in cost of goods sold because the goods are not on hand, losses on inventory shrinkage are ordinary, and it would cause the least amount of attention. D. Recorded directly to retained earnings because it is not an income-producing item.

Question: 12An entity had the following opening and closing inventory balances during the current year: 1/1

12/31

Finished goods

$ 90,000 $260,000

Raw materials

105,000

130,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Work-in-progress

220,000

175,000

The following transactions and events occurred during the current year:  $300,000 of raw materials were purchased, of which $20,000 were returned because of defects.  $600,000 of direct labor costs were incurred.  $750,000 of production overhead costs were incurred. The cost of goods sold for the current year ended December 31 would be A. $1,480,000 B. $1,500,000 C. $1,610,000 D. $1,650,000

Question: 13If the beginning balance for May of the materials inventory account was $27,500, the ending balance for May is $28,750, and $128,900 of materials were used during the month, the materials purchased during the month cost A. $101,400 B. $127,650 C. $130,150 D. $157,650

Question: 14Given the following data for a company, what is the cost of goods sold? Beginning inventory of finished goods $100,000 Cost of goods manufactured

700,000

Ending inventory of finished goods

200,000

Beginning work-in-process inventory

300,000

Ending work-in-process inventory

50,000

A. $500,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $600,000 C. $800,000 D. $950,000

Question: 15The following information was taken from last year’s accounting records of a manufacturing company. Inventory

January 1 December 31

Raw materials

$38,000 $ 45,000

Work-in-process

21,000

10,000

Finished goods

78,000

107,000

Other information Direct labor

$236,000

Shipping costs on outgoing orders

6,500

Factory rent

59,000

Factory depreciation

18,700

Advertising expense

24,900

Net purchases of raw materials

115,000

Corporate administrative salaries

178,000

Material handling costs

35,800

On the basis of this information, the company’s cost of goods manufactured and cost of goods sold are A. $460,500 and $489,500, respectively. B. $468,500 and $439,500, respectively. C. $468,500 and $470,900, respectively. D. $646,500 and $617,500, respectively.

Question: 16The following information pertains to a corporation’s income statement for the 12 months just ended. The company has an effective income tax rate of 40%. Discontinued operations

$(70,000)

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Income from continuing operations (net of tax)

72,000

Cumulative effect of change in accounting principle

60,000

Net income for the year is A. $36,000 B. $12,000 C. $8,000 D. $30,000

Question: 17Which of the following items is not classified as other comprehensive income (OCI)? A. Extraordinary gains from extinguishment of debt. B. Foreign currency translation adjustments. C. Prior service cost adjustment resulting from amendment of a defined benefit pension plan. D. Unrealized gains for the year on available-for-sale debt securities.

Question: 18Which of the following are acceptable formats for reporting comprehensive income? I. In one continuous financial statement II. In a statement of changes in equity III. In a separate statement of net income IV. In two separate but consecutive financial statements A. I and II only. B. I, II, and III only. C. III and IV only. D. I and IV only.

Question: 19A company reports the following information as of December 31:

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Sales revenue

$800,000

Cost of goods sold

600,000

Operating expenses

90,000

Unrealized holding gain on available-for-sale debt securities, net of tax

30,000

What amount should the company report as comprehensive income as of December 31? A. $30,000 B. $110,000 C. $140,000 D. $200,000

Question: 20All of the following are defined as elements of an income statement except A. Expenses. B. Shareholders’ equity. C. Gains and losses. D. Revenues.

Question: 21According to U.S. GAAP, where on the income statement should a multinational company report the loss from the disposal sale of a major operating unit? A. Report the loss, pretax, in a separate section between income from continuing operations and net income. B. Report the loss, net of tax, in a separate section between income from continuing operations and net income. C. Report the loss, pretax, in a separate section between income from operations and income before income tax. D. Report the loss, net of tax, in a separate section between income before tax and net income.

Question: 22A company reported first quarter revenues of $10,000,000, gross profit margin of 25%, and operating income of 15%. To reduce overhead expenses, a consultant recommends that the company outsource some of its operating activities beginning with the second quarter. This recommendation is anticipated to reduce operating ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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expenses by 20% without affecting sales volume. The company has an income tax rate of 35%. Assuming cost of sales remains at 75%, what is the impact on the income statement if the company implements the recommendation? A. Gross profit will increase by 8.0%. B. Operating income will increase by 8.7%. C. Operating income will increase by $200,000. D. Operating expenses will be reduced by $300,000.

Question: 23A company incurred $200,000 of manufacturing cost during the month, with a beginning finished goods inventory of $20,000 and an ending finished goods inventory of $15,000. Assuming no work-in-process inventories, the company’s cost of goods sold was A. $220,000 B. $205,000 C. $200,000 D. $105,000

Question: 24To comply with the matching principle, the cost of labor services of an employee who participates in the manufacturing of a product normally should be charged to the income statement in the period in which the A. Work is performed. B. Employee is paid. C. Product is completed. D. Product is sold.

Subunit 4: Statement of Changes in Equity and Equity Transactions Question: 1Items reported as prior-period adjustments A. Do not include the effect of a mistake in the application of accounting principles, as this is accounted for as a change in accounting principle rather than as a prior-period adjustment. B. Do not affect the presentation of prior-period comparative financial statements.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Do not require further disclosure in the body of the financial statements. D. Are reflected as adjustments of the opening balance of the retained earnings of the earliest period presented.

Question: 2Unless the shares are specifically restricted, a holder of common stock with a preemptive right may share proportionately in all of the following except A. The vote for directors. B. Corporate assets upon liquidation. C. Cumulative dividends. D. New issues of stock of the same class.

Question: 3On December 1, a corporation’s board of directors declared a property dividend, payable in stock held in a company. The dividend was payable on January 5. The investment in the company had an original cost of $100,000 when acquired 2 years ago. The market value of this investment was $150,000 on December 1, $175,000 on December 31, and $160,000 on January 5. The amount to be shown on the corporation’s statement of financial position at December 31 as property dividends payable would be A. $100,000 B. $150,000 C. $160,000 D. $175,000

Question: 4The statement of shareholders’ equity shows a A. Reconciliation of the beginning and ending balances in shareholders’ equity accounts. B. Listing of all shareholders’ equity accounts and their corresponding dollar amounts. C. Computation of the number of shares outstanding used for earnings per share calculations. D. Reconciliation of net income to net operating cash flow.

Question: 5Which one of the following statements regarding dividends is correct? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. A stock dividend of 15% of the outstanding common shares results in a debit to retained earnings at the par value of the stock distributed. B. At the declaration date of a 30% stock dividend, the carrying value of retained earnings will be reduced by the fair market value of the stock distributed. C. The declaration of a cash dividend will have no effect on book value per share. D. The declaration and payment of a 10% stock dividend will result in a reduction of retained earnings at the fair market value of the stock.

Question: 6Which one of the following statements is correct regarding the effect preferred stock has on a company? A. The firm’s after-tax profits are shared equally by common and preferred shareholders. B. Control of the firm is now shared by the common and preferred shareholders, with preferred shareholders having greater control. C. Preferred shareholders’ claims take precedence over the claims of common shareholders in the event of liquidation. D. Nonpayment of preferred dividends places the firm in default, as does nonpayment of interest on debt.

Question: 7An adjusted trial balance at December 31, Year 6, includes the following account balances: Common stock, $3 par

$600,000

Additional paid-in capital

800,000

Treasury stock, at cost

50,000

Net unrealized holding loss on available-for-sale securities

20,000

Retained earnings: appropriated for uninsured earthquake losses

150,000

Retained earnings: unappropriated

200,000

What amount should be reported as total equity in the December 31, Year 6, balance sheet? A. $1,680,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $1,720,000 C. $1,780,000 D. $1,820,000

Question: 8A public company has declared a property dividend of one share of its investment in M corporation for every 10 shares of its common stock outstanding. The M shares were originally purchased by the company for $50 per share; on the date the dividend was declared, the market value was $75 per share. As a result of this declaration, the company should recognize A. A loss of $25 per share to be distributed. B. A gain of $25 per share to be distributed. C. No gain or loss. D. An appropriate gain or loss based on the market value on the date of distribution.

Question: 9A corporation has 10,000,000 shares of $10 par-value stock authorized, of which 2,000,000 shares are issued and outstanding. The Board of Directors declared a 2-for-1 stock split on November 30 to be issued on December 30. The stock was selling for $30 per share on the date of declaration. In addition, the Board has amended the articles of incorporation to allow for a proportional increase in the number of authorized shares. The par-value information appearing in the shareholder’s equity section of the statement of financial position at December 31 will be A. $5 B. $10 C. $15 D. $30

Question: 10A company has 1,000,000 shares of common stock authorized, of which 100,000 shares are held as treasury shares; the remainder are held by the company shareholders. On November 1, the Board of Directors declared a cash dividend of $.10 per share to be paid on January 2. At the same time, the Board declared a 5% stock dividend to be issued on December 31. On the date of the declaration, the stock was selling for $10 a share, and no fractional shares were to be issued. The total amount of these declarations to be shown as current liabilities on the statement of financial position as of December 31 is A. $90,000 B. $100,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $540,000 D. $600,000

Question: 11How would a stock split affect the par value of the stock and the company’s shareholders’ equity? Par Value Shareholders’ Equity A. Decrease Increase B. Decrease No change C. Increase Decrease D. Increase No change

Question: 12An undistributed stock dividend declared by the Board of Directors should be reported as a(n) A. Current liability. B. Long-term liability. C. Footnote to the financial statements. D. Item in the shareholders’ equity section.

Question: 13Which one of the following transactions does not affect the balance of retained earnings? A. Declaration of a stock dividend. B. A quasi-reorganization. C. Declaration of a stock split. D. Declaration of a property dividend.

Question: 14A corporation’s common stock is currently selling for $108 per share. The corporation is planning a new stock issue in the near future and would like to stimulate interest in the company. The Board, however, does not want to distribute capital at this time. Therefore, the corporation is considering whether to offer a 2-for-1 common stock split or a 100% stock dividend on its common stock. The best reason for opting for the stock split is that A. It will not decrease shareholders’ equity.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. It will not impair the company’s ability to pay dividends in the future. C. The impact on earnings per share will not be as great. D. The par value per share will remain unchanged.

Question: 15A change in the estimate for bad debts should be A. Treated as an error. B. Handled retroactively. C. Considered as an extraordinary item. D. Treated as affecting only the period of the change.

Question: 16A chain of supermarkets specializing in gourmet food, has been using the average cost method to value its inventory. During the current year, the company changed to the first-in, first-out method of inventory valuation. The president of the company reasoned that this change was appropriate since it would more closely match the flow of physical goods. This change should be reported on the financial statements as A. Cumulative-effect type accounting change. B. Affecting only future periods. C. Change in accounting estimate. D. Correction of an error.

Question: 17A publicly-traded company has 100,000 outstanding shares of common stock with a par value of $5. The company uses U.S. GAAP to prepare its financial statements. The company recently declared a 5% stock dividend. On the date the stock dividend was declared, the company’s stock was trading at $25 per share. On the date of declaration, the company’s A. Additional paid-in capital will increase. B. Retained earnings will increase. C. Total shareholders’ equity will decrease. D. Outstanding shares will decrease.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 18The major segments of the statement of retained earnings for a period are A. Dividends declared, prior period adjustments, and changes due to treasury stock transactions. B. Before-tax income or loss and dividends paid or declared. C. Prior-period adjustments, before-tax income or loss, income tax, and dividends paid. D. Net income or loss, prior-period adjustments, and dividends paid or declared.

Question: 19On December 15, a company distributed a cash dividend of $120,000 and declared a 5% stock dividend with a market value of $100,000. If the company uses U.S. GAAP, these two transactions would decrease the company’s total shareholders’ equity by A. $0 B. $100,000 C. $120,000 D. $220,000

Question: 20Preferred stock and common stock differ in that A. Preferred stock has a higher priority than common stock with regard to earnings and assets in the event of bankruptcy. B. Failure to pay dividends on common stock will not force the company into bankruptcy while failure to pay dividends on preferred stock will force the company into bankruptcy. C. Preferred shareholders generally control the management of the company while common shareholders have limited voting rights. D. Preferred stock earnings are deductible for tax purposes while common stock earnings are not.

Fact Pattern: The trial balance of Mint Corp. at December 31, Year 6, is presented below and has been adjusted except for income tax expense. Other financial data for the year ended December 31, Year 6, are as follows:  During Year 6, estimated tax payments of $450,000 were charged to prepaid taxes. Mint has not recorded income tax expense. There were no temporary or permanent differences, and Mint’s tax rate is 30%. 

Dr.

Cr.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Cash

$

600,000

Accounts receivable, net

3,500,000

Contract asset

1,600,000

Contract liability

$

Prepaid taxes

700,000

450,000

Fixed assets, net

1,480,000

Note payable -- noncurrent

1,620,000

Common stock

750,000

Additional paid-in capital

2,000,000

Retained earnings -- unappropriated

900,000

Retained earnings -- restricted for note payable

160,000

Earnings from long-term contracts Costs and expenses

6,680,000 5,180,000 $12,810,000

$12,810,000

Question: 21In Mint’s December 31, Year 6, balance sheet, what amount should be reported as total retained earnings? A. $1,950,000 B. $2,110,000 C. $2,400,000 D. $2,560,000

Question: 22A company pays more than the fair value to acquire treasury stock. The difference between the price paid to acquire the treasury stock and the fair value should be recorded as A. An asset. B. A liability. C. Shareholders’ equity.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. An expense.

Question: 23Data regarding Ball Corp.’s investment in available-for-sale debt securities follow: Cost

Fair Value

December 31, Year 3 $150,000 $130,000 December 31, Year 4

150,000

160,000

Differences between cost and fair values are considered temporary. The decline in fair value was considered temporary and was properly accounted for at December 31, Year 3. Ball’s Year 4 statement of changes in equity should report an increase of A. $30,000 B. $20,000 C. $10,000 D. $0

Question: 24United, Inc.’s unadjusted current assets section and equity section of its December 31, Year 1, balance sheet are as follows: Current Assets Cash

$ 60,000

Investments in equity securities (including $300,000 of United common stock)

400,000

Trade accounts receivable

340,000

Inventories

148,000

Total

$948,000

Equity Common stock

$2,224,000

Retained earnings (deficit) Total

(224,000) $2,000,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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The investments and inventories are reported at their costs, which approximate fair values. In its Year 1 statement of equity, United’s total amount of equity at December 31, Year 1, is A. $2,224,000 B. $2,000,000 C. $1,924,000 D. $1,700,000

Question: 25In Year 1, Company A recorded the following transactions related to the equity section of its balance sheet: 1/4/Year 1 Issued 100,000 shares of $3 par value common stock for $500,000 3/1/Year 1 Repurchased 50,000 shares of common stock for $4 per share 8/8/Year 1 Reissued 50,000 shares of common stock at $6 per share 12/1/Year 1 Declared, but did not pay, dividends of $1 per common share 12/31/Year 1 Recorded net income of $75,000 for Year 1

Assume that at the beginning of Year 1, A’s equity consisted only of $100,000 of retained earnings. Additionally, assume that A uses the cost method of accounting for treasury stock. What is A’s Year 1 ending equity balance?

A. $675,000 B. $775,000 C. $575,000 D. $600,000

Subunit 5: Statement of Cash Flows Question: 1When preparing the statement of cash flows, companies are required to report separately as operating cash flows all of the following except ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Interest received on investments in bonds. B. Interest paid on the company’s bonds. C. Cash collected from customers. D. Cash dividends paid on the company’s stock.

Question: 2A statement of cash flows is intended to help users of financial statements A. Evaluate a firm’s liquidity, solvency, and financial flexibility. B. Evaluate a firm’s economic resources and obligations. C. Determine a firm’s components of income from operations. D. Determine whether insiders have sold or purchased the firm’s stock.

Question: 3Which of the following items is specifically included in the body of a statement of cash flows? A. Operating and nonoperating cash flow information. B. Conversion of debt to equity. C. Acquiring an asset through a capital lease. D. Purchasing a building by giving a mortgage to the seller.

Question: 4With respect to the content and form of the statement of cash flows, the A. Pronouncements covering the cash flow statement encourage the use of the indirect method. B. Indirect method adjusts ending retained earnings to reconcile it to net cash flows from operations. C. Direct method of reporting cash flows from operating activities includes disclosing the major classes of gross cash receipts and gross cash payments. D. Reconciliation of the net income to net operating cash flow need not be presented when using the direct method.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 5Depreciation expense is added to net income under the indirect method of preparing a statement of cash flows in order to A. Report all assets at gross carrying amount. B. Ensure depreciation has been properly reported. C. Reverse noncash charges deducted from net income. D. Calculate net carrying amount.

Question: 6All of the following should be classified under the operating section in a statement of cash flows except a A. Decrease in inventory. B. Depreciation expense. C. Decrease in prepaid insurance. D. Purchase of land and building in exchange for a long-term note.

Question: 7Which one of the following transactions should be classified as a financing activity in a statement of cash flows? A. Purchase of equipment. B. Purchase of treasury stock. C. Sale of trademarks. D. Payment of interest on a mortgage note.

Question: 8A company entered into the following transactions during the year:  Purchased stock for $200,000  Purchased electronic equipment for use on the manufacturing floor for $300,000  Paid dividends to shareholders of the company in the amount of $800,000 The amount to be reported in the investing activities section of the company’s statement of cash flows would be A. $200,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $500,000 C. $800,000 D. $1,300,000

Question: 9Which one of the following transactions should not be classified as a financing activity in the statement of cash flows? A. Issuance of common stock. B. Purchase of treasury stock. C. Payment of dividends. D. Income tax refund.

Question: 10All of the following should be classified as investing activities in the statement of cash flows except A. Cash outflows to purchase manufacturing equipment. B. Cash inflows from the sale of bonds of other entities. C. Cash outflows to lenders for interest. D. Cash inflows from the sale of a manufacturing plant.

Question: 11All of the following should be included in the reconciliation of net income to net operating cash flow in the statement of cash flows except a(n) A. Decrease in inventory. B. Decrease in prepaid insurance. C. Purchase of land and building in exchange for a long-term note. D. Increase in income tax payable.

Question: 12In preparing a statement of cash flows, an item included in determining net cash flow from operating activities is the ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Amortization of a bond premium. B. Proceeds from the sale of equipment for cash. C. Cash dividends paid. D. Purchase of treasury stock.

Question: 13The information reported in the statement of cash flows should help investors, creditors, and others to assess all of the following except the A. Amount, timing, and uncertainty of prospective net cash inflows of a firm. B. Company’s ability to pay dividends and meet obligations. C. Company’s ability to generate future cash flows. D. Management of the firm with respect to the efficient and profitable use of its resources.

Question: 14To calculate cash flows using the indirect method, which one of the following items must be added back to net income? A. Revenue. B. Marketing expense. C. Depreciation expense. D. Interest income.

Question: 15A company acquired land by assuming a mortgage for the full acquisition cost. This transaction should be disclosed on its statement of cash flows as a(n) A. Financing activity. B. Investing activity. C. Operating activity. D. Noncash financing and investing activity.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 16Net income was $3,000,000 for the year ended December 31. Additional information is as follows: Depreciation on fixed assets

$1,500,000

Gain from cash sale of land

200,000

Increase in accounts payable

300,000

Dividends paid on preferred stock

400,000

The net cash provided by operating activities in the statement of cash flows for the year ended December 31 should be A. $4,200,000 B. $4,500,000 C. $4,600,000 D. $4,800,000

Fact Pattern: Royce Company had the following transactions during the fiscal year ended December 31, Year 2:  Accounts receivable decreased from $115,000 on December 31, Year 1, to $100,000 on December 31, Year 2.  Royce’s board of directors declared dividends on December 31, Year 2, of $.05 per share on the 2.8 million shares outstanding, payable to shareholders of record on January 31, Year 3. The company did not declare or pay dividends for fiscal Year 1.

 Sold a truck with a net carrying amount of $7,000 for $5,000 cash, reporting a loss of $2,000.  Paid interest to bondholders of $780,000.  The cash balance was $106,000 on December 31, Year 1, and $284,000 on December 31, Year 2.

Question: 17Royce Company uses the direct method to prepare its statement of cash flows at December 31, Year 2. The interest paid to bondholders is reported in the A. Financing section, as a use or outflow of cash. B. Operating section, as a use or outflow of cash. C. Investing section, as a use or outflow of cash. D. Debt section, as a use or outflow of cash.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Royce Company had the following transactions during the fiscal year ended December 31, Year 2:  Accounts receivable decreased from $115,000 on December 31, Year 1, to $100,000 on December 31, Year 2.  Royce’s board of directors declared dividends on December 31, Year 2, of $.05 per share on the 2.8 million shares outstanding, payable to shareholders of record on January 31, Year 3. The company did not declare or pay dividends for fiscal Year 1.

 Sold a truck with a net carrying amount of $7,000 for $5,000 cash, reporting a loss of $2,000.  Paid interest to bondholders of $780,000.  The cash balance was $106,000 on December 31, Year 1, and $284,000 on December 31, Year 2.

Question: 18Royce Company uses the indirect method to prepare its Year 2 statement of cash flows. It reports a(n) A. Source or inflow of funds of $5,000 from the sale of the truck in the financing section. B. Use or outflow of funds of $140,000 in the financing section, representing dividends. C. Deduction of $15,000 in the operating section, representing the decrease in year-end accounts receivable. D. Addition of $2,000 in the operating section for the $2,000 loss on the sale of the truck.

Fact Pattern: Royce Company had the following transactions during the fiscal year ended December 31, Year 2:  Accounts receivable decreased from $115,000 on December 31, Year 1, to $100,000 on December 31, Year 2.  Royce’s board of directors declared dividends on December 31, Year 2, of $.05 per share on the 2.8 million shares outstanding, payable to shareholders of record on January 31, Year 3. The company did not declare or pay dividends for fiscal Year 1.

 Sold a truck with a net carrying amount of $7,000 for $5,000 cash, reporting a loss of $2,000.  Paid interest to bondholders of $780,000.  The cash balance was $106,000 on December 31, Year 1, and $284,000 on December 31, Year 2.

Question: 19The total of cash provided (used) by operating activities plus cash provided (used) by investing activities plus cash provided (used) by financing activities is A. Cash provided of $284,000. B. Cash provided of $178,000. C. Cash used of $582,000.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. Equal to net income reported for fiscal year ended December 31, Year 2.

Question: 20The following information was taken from accounting records for the year ended December 31: Proceeds from issuance of preferred stock F $4,000,000 Dividends paid on preferred stock F 400,000 Bonds payable converted to common stock Payment for purchase of machinery Proceeds from sale of plant building 2% stock dividend on common stock Gain on sale of plant building

2,000,000 500,000 1,200,000 300,000 200,000

The net cash flows from investing and financing activities that should be presented on the statement of cash flows for the year ended December 31 are, respectively, A. $700,000 and $3,600,000. B. $700,000 and $3,900,000. C. $900,000 and $3,900,000. D. $900,000 and $3,600,000.

Question: 21When using the statement of cash flows to evaluate a company’s continuing solvency, the most important factor to consider is the cash A. Balance at the end of the period. B. Flows from (used for) operating activities. C. Flows from (used for) investing activities. D. Flows from (used for) financing activities.

Question: 22Dividends paid to shareholders are shown on the statement of cash flows as A. Operating cash inflows. B. Operating cash outflows. C. Cash flows from investing activities.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Cash flows from financing activities.

Question: 23All of the following are classifications on the statement of cash flows except A. Operating activities. B. Equity activities. C. Investing activities. D. Financing activities.

Question: 24The sale of available-for-sale securities should be accounted for on the statement of cash flows as a(n) A. Operating activity. B. Investing activity. C. Financing activity. D. Noncash investing and financing activity.

Question: 25An entity reported net income of $150,000 for the current year. Changes occurred in several balance sheet accounts during the current year as follows: Investment in stock, all of which was acquired in the previous year, carried on the equity basis $5,500 increase Premium on bonds payable 1,400 decrease Deferred income tax liability (long-term) 1,800 increase In the current year cash flow statement, the reported net cash provided by operating activities should be A. $150,400 B. $146,800 C. $144,900 D. $141,300

Question: 26A company reported net income for the year of $1,050,000. During the year, accounts receivable decreased $300,000, prepaid expenses increased $150,000, accounts payable for merchandise decreased $150,000, and liabilities for other expenses increased $100,000. Administrative expenses include depreciation expense of

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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$50,000, and the company reported a loss on the sale of obsolete equipment of $10,000. Calculate net cash flows from operating activities during the year. A. $1,790,000 B. $1,690,000 C. $1,210,000 D. $1,110,000

Question: 27A company’s year-end income statement shows the following: Revenues

$5,000,000

Selling and general expenses (including depreciation expense of $200,000)

3,800,000

Interest expense

50,000

Gain on sale of equipment

40,000

Income tax expense (including deferred tax expense of $30,000) Net income

320,000 $ 870,000

During the year, noncash current assets rose by $100,000, and current liabilities increased by $150,000. On its statement of cash flows, the company would report cash provided by operating activities of A. $1,080,000 B. $1,110,000 C. $1,160,000 D. $1,190,000

Question: 28An accountant has gathered the following information to prepare the statement of cash flows for the current year. Net income of $456,900 includes a deduction of $45,600 for depreciation expense. The company issued $300,000 of dividends this year and purchased one new building for $275,000. The balance sheets from the current period and prior period included the following balances: Prior Year Current Year Accounts receivable, net $ 56,860 Accounts payable Inventory

$ 45,300

12,900

10,745

186,700

194,320

Using the indirect method, what is the amount of cash provided by operating activities?

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $202,500 B. $405,205 C. $504,285 D. $521,405

Question: 29Which one of the following would result in a decrease in cash flow measured under the indirect method of preparing a statement of cash flows? A. Amortization expense. B. Decrease in income taxes payable. C. Proceeds from the issuance of common stock. D. Decrease in inventories.

Question: 30A statement of cash flows prepared using the indirect method would have cash activities listed in which one of the following orders? A. Financing, investing, operating. B. Investing, financing, operating. C. Operating, financing, investing. D. Operating, investing, financing.

Question: 30A statement of cash flows prepared using the indirect method would have cash activities listed in which one of the following orders? A. Financing, investing, operating. B. Investing, financing, operating. C. Operating, financing, investing. D. Operating, investing, financing.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 31Which one of the following should be classified as a cash flow from an operating activity on the statement of cash flows? A. A decrease in accounts payable during the year. B. An increase in cash resulting from the issuance of previously authorized common stock. C. The payment of cash for the purchase of additional equipment needed for current production. D. The payment of a cash dividend from money arising from current operations.

Question: 32The most commonly used method for calculating and reporting a company’s net cash flow from operating activities on its statement of cash flows is the A. Direct method. B. Indirect method. C. Single-step method. D. Multiple-step method.

Question: 33The presentation of the major classes of operating cash receipts (such as receipts from customers) minus the major classes of operating cash disbursements (such as cash paid for merchandise) is best described as the A. Direct method of calculating net cash provided or used by operating activities. B. Cash method of determining income in conformity with generally accepted accounting principles. C. Format of the statement of cash flows. D. Indirect method of calculating net cash provided or used by operating activities.

Question: 34A controller is gathering data for the statement of cash flows for the most recent year end. The controller is planning to use the direct method to prepare this statement and has made the following list of cash inflows for the period:  Collections of $100,000 for goods sold to customers  Securities purchased for investment purposes with an original cost of $100,000 sold for $125,000  Proceeds from the issuance of additional company stock totaling $10,000 The correct amount to be shown as cash inflows from operating activities is

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $100,000 B. $135,000 C. $225,000 D. $235,000

Question: 35During the year, a firm acquired a long-term productive asset for $5,000 and also borrowed $10,000 from a local bank. These transactions should be reported on the statement of cash flows as A. Outflows for investing activities, $5,000; inflows from financing activities, $10,000. B. Inflows from investing activities, $10,000; outflows for financing activities, $5,000. C. Outflows for operating activities, $5,000; inflows from financing activities, $10,000. D. Outflows for financing activities, $5,000; inflows from investing activities, $10,000.

Question: 36A company has recorded the following payments for the current period: Purchase of investment stock $300,000 Dividends paid to shareholders 200,000 Repurchase of company stock

400,000

The amount to be shown in the investing activities section of the statement of cash flows should be A. $300,000 B. $500,000 C. $700,000 D. $900,000

Question: 37A company has the following payments recorded for the current period: Dividends paid to shareholders $150,000 Interest paid on bank loan

250,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Purchase of equipment

350,000

The total amount of the above items to be shown in the operating activities section of the statement of cash flows should be A. $150,000 B. $250,000 C. $350,000 D. $750,000

Question: 38A company has recorded the following payments for the current period: Interest paid on bank loan

$300,000

Dividends paid to shareholders 200,000 Repurchase of company stock

400,000

The amount to be shown in the financing activities section of the statement of cash flows should be A. $300,000 B. $500,000 C. $600,000 D. $900,000

Fact Pattern: Selected financial information for Kristina Company for the year just ended is shown below. Net income

$2,000,000

Increase in net accounts receivable

300,000

Decrease in inventory

100,000

Increase in accounts payable

200,000

Depreciation expense

400,000

Gain on the sale of available-for-sale securities

700,000

Cash receivable from the issue of common stock

800,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Cash paid for dividends

80,000

Cash paid for the acquisition of land

1,500,000

Cash received from the sale of available-for-sale securities 2,800,000

Question: 39Kristina’s cash flow from financing activities for the year is A. $(80,000) B. $720,000 C. $800,000 D. $3,520,000

Fact Pattern: Selected financial information for Kristina Company for the year just ended is shown below. Net income

$2,000,000

Increase in net accounts receivable

300,000

Decrease in inventory

100,000

Increase in accounts payable

200,000

Depreciation expense

400,000

Gain on the sale of available-for-sale securities

700,000

Cash receivable from the issue of common stock

800,000

Cash paid for dividends

80,000

Cash paid for the acquisition of land

1,500,000

Cash received from the sale of available-for-sale securities 2,800,000

Question: 40Kristina’s cash flow from investing activities for the year is A. $(1,500,000) B. $1,220,000 C. $1,300,000 D. $2,800,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Selected financial information for Kristina Company for the year just ended is shown below. Net income

$2,000,000

Increase in net accounts receivable

300,000

Decrease in inventory

100,000

Increase in accounts payable

200,000

Depreciation expense

400,000

Gain on the sale of available-for-sale securities

700,000

Cash receivable from the issue of common stock

800,000

Cash paid for dividends

80,000

Cash paid for the acquisition of land

1,500,000

Cash received from the sale of available-for-sale securities 2,800,000

Question: 41Assuming the indirect method is used, Kristina’s cash flow from operating activities for the year is A. $1,700,000 B. $2,000,000 C. $2,400,000 D. $3,100,000

Question: 42For the fiscal year just ended, an entity had the following results: Net income

$920,000

Depreciation expense

110,000

Increase in accounts payable

45,000

Increase in net accounts receivable

73,000

Increase in deferred income tax liability

16,000

Net cash flow from operating activities is A. $928,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $986,000 C. $1,018,000 D. $1,074,000

Question: 43Three years ago, a company purchased stock at a cost of $100,000. This stock was sold for $150,000 during the current fiscal year. The result of this transaction should be shown in the investing activities section of the statement of cash flows as A. Zero. B. $50,000 C. $100,000 D. $150,000

Question: 44A controller has gathered the following information as a basis for preparing the statement of cash flows. Net income for the current year was $82,000. During the year, old equipment with a cost of $60,000 and a net carrying amount of $53,000 was sold for cash at a gain of $10,000. New equipment was purchased for $100,000. Shown below are selected closing balances for last year and the current year. Last Year

Current Year

$ 39,000

$ 85,000

Accounts receivable net

43,000

37,000

Inventories

93,000

105,000

Equipment

360,000

400,000

Cash

Accumulated depreciation -- equipment 70,000 83,000 Accounts payable 22,000 19,000 Notes payable 100,000 100,000 Common stock 250,000 250,000 Retained earnings 93,000 175,000 Net cash flow from operating activities for the current year is A. $63,000 B. $73,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $83,000 D. $93,000

Question: 45A mail order supplier of camping gear is putting together its current-year statement of cash flow. A comparison of the firm’s year-end balance sheet with the prior year’s balance sheet shows the following changes from a year ago. Assets Cash & marketable securities $ (600) Accounts receivable

200

Inventories

(100)

Gross fixed assets

4,600

Accumulated depreciation Total

(500) $3,600

Liabilities & Net Worth Accounts payable Accruals Long-term note Long-term debt Common stock Retained earnings Total

$ 250 50 (300) 1,400 0 2,200 $3,600

The firm’s payout ratio is 20%. During the current year, net cash provided by operations amounted to A. $2,900 B. $3,050 C. $3,450 D. $4,050

Question: 46For a manufacturing firm, which of the following would be included in cash outflows from financing activities on the Statement of Cash Flows? A. Payments of salaries and wages. B. Repayment of the principal portion of firm debt.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Issuance of new stock. D. Interest payments on firm debt.

Question: 47Below are the balances for the following accounts on the balance sheet of a company as of the end of Year 20X2 and Year 20X1. Year 20X2 Year 20X1 Cash

$1,000

$ 800

?

7,200

500

500

Wages and salaries payable

2,000

2,500

Accounts payable

1,300

1,000

Accounts receivable

5,000

6,000

Prepayments

1,200

500

Marketable securities Inventory

The company has net income for Year 20X2 of $1,900, has no fixed assets, and has no investing or financing activities. Using the indirect method for preparing the cash flow statement, what is the balance in the marketable securities account as of the end of Year 20X2? A. $7,000 B. $8,800 C. $9,000 D. $9,900

Question: 48An accountant is preparing the statement of cash flows using the indirect method. She found on the balance sheet that the prior year’s net balance of equipment (equipment less accumulated depreciation) was $295,700, and the current year’s balance of equipment is $304,000. Depreciation expense during the current year was $22,400. During the year, the company sold equipment for $40,000, resulting in a gain of $21,600. On the statement of cash flows, what is the cash outflow for the purchase of equipment this year? A. $4,300 B. $49,100

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $52,300 D. $70,700

Question: 49A company had a balance of $100,000 in retained earnings at the beginning of the year and of $125,000 at the end of the year. Net income for this time period was $40,000. The statement of financial position indicated that the dividends payable account had decreased by $5,000 throughout the year, despite the fact that both cash dividends and a stock dividend were declared. The amount of the stock dividend was $8,000. When preparing its statement of cash flows for the year, the company should show cash paid for dividends as A. $20,000 B. $15,000 C. $12,000 D. $5,000

Question: 50The management of an entity is analyzing the financial statements of a corporation because the entity is strongly considering purchasing a block of the corporation’s ordinary shares that would give the entity significant influence over the corporation. Which financial statement should the entity primarily use to assess the amounts, timing, and certainty of future cash flows of the corporation? A. Income statement. B. Statement of changes in equity. C. Statement of cash flows. D. Statement of financial position.

Question: 51Cash flows from transactions in which of the following securities are most likely to be considered cash flows from operating activities? A. Held-to-maturity securities. B. Trading debt securities. C. Available-for-sale debt securities. D. Noncurrent debt securities.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 52In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for A. Operating activities. B. Borrowing activities. C. Lending activities. D. Financing activities.

Question: 53Consider the following financial data for a company that is preparing its cash flow statement: Amortization expense

$ 150,000

Cash dividends paid to common shareholders Net income

75,000 1,500,000

Work-in-process inventory increase over the prior year Gain on sale of equipment

300,000 50,000

Using the indirect method, cash flow from operating activities would be A. $1,225,000 B. $1,300,000 C. $1,350,000 D. $1,375,000

Subunit 6: Revenue from Contracts with Customers Question: 1ABC operates a catering service that specializes in business luncheons for large corporations. ABC requires customers to place their orders 2 weeks in advance of the scheduled events. ABC bills its customers on the 10th day of the month following the date of service and requires that payment be made within 30 days of the billing date. Conceptually, ABC should recognize revenue from its catering services at the date when a A. Customer places an order. B. Luncheon is served. C. Billing is mailed.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Customer’s payment is received.

Question: 2A company provides fertilization, insect control, and disease control services for a variety of trees, plants, and shrubs on a contract basis. For $50 per month, the company will visit the subscriber’s premises and apply appropriate mixtures. If the subscriber has any problems between the regularly scheduled application dates, the company’s personnel will promptly make additional service calls to correct the situation. Some subscribers elect to pay for an entire year because the company offers an annual price of $540 if paid in advance. For a subscriber who pays the annual fee in advance, the company should recognize the related revenue A. When the cash is collected. B. Evenly over the year as the services are performed. C. At the end of the contract year after all of the services have been performed. D. At the end of the fiscal year.

Question: 3On February 1, Year 1, a computer software firm agrees to program a software package. Twelve payments of $10,000 on the first of each month are to be made, with the first payment March 1, Year 1. The software is accepted by the client June 1, Year 2. How much Year 1 revenue should be recognized? A. $0 B. $100,000 C. $110,000 D. $120,000

Question: 4An airline should recognize revenue from airline tickets in the period when A. Passenger reservations are booked. B. Passenger reservations are confirmed. C. Tickets are issued. D. Related flights occur.

Question: 5A department store sells gift certificates that may be redeemed for merchandise. Each certificate expires 3 years after issuance. The revenue from the gift certificates should be recognized ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Evenly over 3 years from the date of issuance. B. In the period the certificates are sold. C. In the period the certificates expire. D. In the period the certificates are redeemed or in the period they expire if they are allowed to lapse.

Question: 6An individual who recently founded a company that produces baseball bats and balls wants to determine their policy for revenue recognition. According to the revenue recognition principle, the most appropriate time to recognize revenue would be when A. The sale occurs. B. Cash is received. C. Production is completed. D. Quarterly financial statements are prepared.

Question: 7A software developer enters into a contract with a new customer to sell a software license and perform installation services. The entity sometimes sells the license and installation services separately. The installation service is routinely performed by other entities and does not significantly modify the software. The entity historically provided to new customers technical support for a 5-year period for no additional consideration. The contract does not specify the terms or conditions for the technical support services. According to the revenue recognition principle governing contracts with customers, which of the following represents the performance obligations identified by the entity in this contract? A. One performance obligation: (1) Software license plus installation services. B. Two performance obligations: (1) Software license and (2) installation services. C. Three performance obligations: (1) Software license, (2) installation services, and (3) technical support services. D. Two performance obligations: (1) Software license plus installation services and (2) technical support services.

Question: 8According to the revenue recognition principle governing contracts with customers, which of the following, if any, determines the transaction price of a contract with a significant financing component? Undiscounted Cash Flows Variable Consideration A. Yes Yes

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Yes No C. No Yes D. No No

Question: 9Under the revenue recognition principle governing contracts with customers, adjustment of the transaction price to reflect the time value of money results in A. Revenue from contracts with customers in the income statement. B. An item of other comprehensive income. C. Interest income or expense that is presented in the income statement separately from revenue. D. An unusual item in the income statement.

Question: 10The transaction price from contracts with customers generally should not be adjusted for the effect of the time value of money when A. The transfer of goods is at the discretion of the seller. B. A substantial amount of the consideration is contingent on a future event that is not within the control of the seller. C. The time between the payment and the delivery of the promised goods in the contract to the customer is 18 months. D. The selling price of the product and the consideration promised in the contract differ significantly.

Question: 11The best evidence of a standalone selling price of a promised good or service to a customer is A. Expected cost. B. Expected cost plus an appropriate margin. C. An observable price. D. Competitor’s selling price.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 12The standalone selling price of a performance obligation in a contract with customers may not be directly observable. Alternatives for estimating the standalone selling price include Estimation of the Price in the Seller’s Market Residual Approach A. No Yes B. No No C. Yes No D. Yes Yes

Question: 13A promised asset is transferred in full satisfaction of a performance obligation in a contract when the customer A. Obtains control of the asset. B. Can direct use of the product. C. Has physical possession of the asset. D. Pays for the asset in full.

Question: 14A hotel enters into a contract with a customer to provide 10 rooms for 10 nights for $200 per room per night. In addition to the room price per night, the hotel collects a city occupancy tax of $7 per room per night. According to the hotel’s promotion, each customer that purchases in total more than 50 room nights is entitled to a credit of $3,000 on the entire purchase. What is the total transaction price of the contract? A. $20,000 B. $17,700 C. $17,000 D. $20,700

Question: 15On January 1, Year 1, an entity sold a product to a customer for $64,751 payable 36 months after delivery. The customer obtains control of the product at contract inception. The cash selling price of the product is $50,000. This price is the amount that the customer would pay upon delivery at contract inception assuming the same product is sold under otherwise identical terms and conditions. The contract includes an implicit interest rate of 9%. What amounts of revenue and interest income from this contract, if any, were recognized by the entity in Year 1? Revenue from ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Customers

Interest Income

A. $64,751 $0 B. $50,000 $4,500 C. $50,000 $14,751 D. $54,500 $0

Question: 16On January 1, Year 1, Sam Co. entered into a contract with a customer to sell a machine for two annual payments of $144,049 starting at the end of Year 1. The customer obtains control of the machine at contract inception. The cash selling price of the machine is $250,000. Sam determined that (1) the contract includes a significant financing component and (2) the contract includes an implicit interest rate of 10%. What amounts of revenue and interest income from this contract, if any, were recognized by Sam in Year 2? Revenue from Customers Interest Income A. $0 $13,095 B. $144,049 $0 C. $125,000 $19,049 D. $250,000 $25,000

Question: 17An entity enters into a contract with a customer to sell products X, Y, and Z in exchange for $250,000. Control over the products will be transferred to the customer at different points in time. The entity determines that the delivery of each product is a distinct performance obligation. Products X and Y are regularly sold separately and their standalone selling prices of $40,000 and $120,000, respectively, are directly observable. The standalone selling price of product Z of $160,000 was estimated using the adjusted market assessment approach. The entity determined that the discount provided to the customer does not relate to one or more specific products in the contract. What revenue will be recognized by the entity on the sale of product X? A. $40,000 B. $22,500 C. $31,250 D. $62,500

Question: 18For contracts with customers, a contract modification is accounted for as a separate contract if the additional promised goods are and the price for these additional goods is . ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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List A

List B

A. Distinct Based on the price of the original contract B. Not distinct Their incremental selling price C. Distinct Their standalone selling price D. Not distinct Cumulative catch-up adjustment to revenue

Question: 19Which of the following is not a criterion that must be met for a contract with a customer to be accounted for under the revenue recognition standard? A. The contract must have commercial substance. B. The payment terms can be identified. C. The costs to fulfill the contract are expected to be recovered. D. Each party’s rights regarding goods or services to be transferred can be identified.

Question: 20On October 1, Year 1, Company A sold 100,000 gallons of Product X to Company B at $3 per gallon. Fifty thousand gallons were delivered to Company B on December 21, Year 1, and the remaining quantity was delivered to Company B on January 8, Year 2. Payment terms are 50% due on October 1, Year 1, 25% due on first delivery, and 25% on second delivery. What amount should Company A accrue as revenue related to this transaction on December 31, Year 1? A. $75,000 B. $150,000 C. $225,000 D. $300,000

Question: 21A cable television entity receives deposits from customers that are refunded when service is terminated. The average customer stays with the entity 8 years. How should these deposits be shown on the financial statements? A. Operating revenue. B. Other revenue.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Paid-in capital. D. Contract liability.

Question: 22On January 1, Year 1, an entity receives a payment of $20,000 for delivering a product to a customer at the end of Year 3. Based on the contract’s terms, the performance obligation will be satisfied at a point in time (upon delivery of the product). The entity determined that (1) the contract includes a significant financing component and (2) a financing rate of 6% is an appropriate discount rate. What amount of interest expense and contract liability will be recognized in the entity’s December 31, Year 2, financial statements? Year 2 Interest Expense Contract Liability on December 31, Year 2 A. $1,200 $21,200 B. $2,400 $22,400 C. $1,272 $22,472 D. $1,348 $0

Question: 23A company provides the following information: Cash Receipts from Customers: From Year 1 sales From Year 2 sales

Year 1

Year 2

Year 3

$95,000 $120,000 200,000 $ 75,000

From Year 3 sales

50,000

225,000

What is the accrual-based revenue for Year 2? A. $200,000 B. $275,000 C. $320,000 D. $370,000

Question: 24An entity that owns a new professional basketball team sells season tickets to its team’s games. The first season lasts from November Year 1 through April Year 2, with 10 games played each month. In Year 1, the entity collected US $3 million from advance season-ticket sales. Its fiscal year-end is December 31. Based on this information, the entity should ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Report income of US $3 million on its Year 1 income statement. B. Report income of US $2 million on its Year 1 income statement. C. Report income of US $1 million on its Year 1 income statement. D. Report no income from season-ticket sales.

Question: 25On December 31, Year 2, a company prepaid the $72,000 rental fee for a parking lot it leases. The rental fee covered a 3-year period beginning January 1, Year 3. What is the effect of this transaction on the December 31, Year 3, financial statements for each of the following? Current Prepaid Expenses Expenses A. $0

$72,000

B. $22,000 $50,000 C. $24,000 $48,000 D. $72,000 $0

Question: 26An entity had cash receipts from sales of US $175,000 during Year 2. At the end of Year 1, the company had US $40,000 of deferred revenue, all of which was earned in Year 2. The company’s sales revenue for Year 2 would be A. US $40,000 B. US $135,000 C. US $175,000 D. US $215,000

Subunit 7: Recognition of Revenue over Time Question: 1An entity is calculating the income recognized in the third year of a 5-year construction contract. It uses the input method based on costs incurred to measure the progress toward completion. The ratio used in calculating income is A. Costs incurred in Year 3 to total billings.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Costs incurred in Year 3 to total estimated costs. C. Total costs incurred to date to total billings. D. Total costs incurred to date to total estimated costs.

Question: 2Haft Construction Co. has consistently used the input method based on costs incurred to measure progress toward completion of the project. On January 10, Year 3, Haft began work on a $3 million construction contract. At the inception date, the estimated cost of construction was $2,250,000. The following data relate to the progress of the contract: Gross profit recognized at 12/31/Yr 3

$ 300,000

Costs incurred 1/10/Yr 3 through 12/31/Yr 4 1,800,000 Estimated cost to complete at 12/31/Yr 4 600,000 In its income statement for the year ended December 31, Year 4, what amount of gross profit should Haft report? A. $450,000 B. $300,000 C. $262,500 D. $150,000

Question: 3Which of the following is used in calculating the gross profit recognized in the fourth and final year of a contract accounted for under the input method based on costs incurred to measure progress toward completion of the contract? Actual Gross Profit Total Costs Previously Recognized A. Yes Yes B. Yes No C. No Yes D. No No

Question: 4Gow Constructors, Inc., has consistently used the input method based on costs incurred to measure the progress toward completion of a long-term construction contract. In Year 1, Gow started work on an $18 million construction contract that was completed in Year 2. The following information was taken from Gow’s Year 1 accounting records: ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Costs incurred

$ 5,400,000

Collections

4,200,000

Estimated costs to complete 10,800,000 What amount of gross profit should Gow have recognized in Year 1 on this contract? A. $1,400,000 B. $1,200,000 C. $900,000 D. $600,000

Question: 5Kechara Corp. started a long-term construction project on a customer’s land in Year 1. The following data relate to this project: Contract price

$4,200,000

Costs incurred in Year 1

1,750,000

Estimated costs to complete

1,750,000

Amounts billed

900,000

Collections on amounts billed

800,000

The project is accounted for using the input method based on costs incurred to measure progress toward completion of the contract. In Kechara’s Year 1 income statement, what amount of gross profit should be reported for this project? A. $350,000 B. $150,000 C. $133,333 D. $100,000

Question: 6Hansen Construction, Inc., has consistently used the input method based on costs incurred to recognize revenue over time. During Year 1, Hansen started work on a $3 million fixed-price construction contract. The accounting records disclosed the following data for the year ended December 31, Year 1: Costs incurred

$ 930,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Estimated costs to complete 2,170,000 Amounts billed

1,100,000

Collections

700,000

How much loss should Hansen have recognized in Year 1? A. $230,000 B. $100,000 C. $30,000 D. $0

Fact Pattern: Data pertaining to Pell Co.’s long-term construction jobs, which commenced during Year 1, are as follows: Project 1 Project 2 Contract price

$420,000 $300,000

Costs incurred during Year 1

240,000 280,000

Estimated costs to complete

120,000

Billed to customers during Year 1

40,000

150,000 270,000

Received from customers during Year 1 90,000 250,000 Question: 7If Pell used the input method based on costs incurred to measure its progress toward completion of the contract, what amount of gross profit/loss would Pell report in its Year 1 income statement? A. $(20,000) B. $20,000 C. $22,500 D. $40,000

Question: 8A construction company recognizes revenue from construction contracts over time using the input method based on costs incurred. It reports the following: Year 1 Year 2

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Construction costs Estimated cost to complete at year-end

$100

$200

300

0

The contract price is $1,000. What is the profit recognized in Year 2? A. $150 B. $400 C. $550 D. $800

Question: 9Paulson Company uses the input method based on costs incurred to measure progress toward completion of long-term construction contracts. The following information relates to a contract that was awarded at a price of $700,000. The estimated costs were $500,000, and the contract duration was 3 years.

Cumulative cost to date

Year 1

Year 2

Year 3

$300,000

$390,000

$530,000

Costs to complete at year end 250,000 130,000 0 Progress billings 325,000 220,000 155,000 Collections on account 300,000 200,000 200,000 Assuming that $65,000 was recognized as gross profit in Year 1, the amount of gross profit Paulson recognized in Year 2 was A. $35,000 B. $70,000 C. $135,000 D. $170,000

Question: 10Frame Construction Company’s contract requires the construction of a bridge on a customer’s land in 3 years. The expected total cost of the bridge is $2,000,000, and Frame will receive $2,500,000 for the project. The actual costs incurred to complete the project were $500,000, $900,000, and $600,000, respectively, during each of the 3 years. Progress payments received by Frame were $600,000, $1,200,000, and $700,000, respectively. Assuming that the input method based on costs incurred to measure progress toward completion of the contract is used, what amount of gross profit would Frame report during the last year of the project? A. $120,000 B. $125,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $140,000 D. $150,000

Question: 11Howard Co. had the following first-year amounts for a $7,000,000 construction contract: Actual costs

$2,000,000

Estimated costs to complete 6,000,000 Progress billings

1,800,000

Cash collected

1,500,000

What gross profit (loss) is recognized using the input method based on costs incurred to measure progress toward completion of the contract? A. $(1,000,000) B. $(200,000) C. $800,000 D. $1,750,000

Question: 12When revenue from contracts with customers is recognized over time, the progress toward complete satisfaction of a performance obligation may be measured using the A. Point-in-time method. B. Zero-profit-margin method. C. Estimated gross profit method. D. Input method.

Question: 13An entity entered into a contract to construct a building. Based on the contract’s terms, the entity appropriately determined that the performance obligation in the contract will be satisfied over time. At an early stage of the contract, the entity cannot reasonably measure the outcome of the contract, but it expects to recover the costs incurred in the construction of the building. The revenue from the contract should be recognized A. Only to the extent of the costs incurred.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Only upon completion of the construction. C. Evenly over the contract period on a straight-line basis. D. Based on the progress toward completion of the project.

Question: 14An entity recognizes revenue from a long-term contract over time. However, early in the performance of the contract, it cannot reasonably measure the outcome, but it expects to recover the costs incurred. Revenue should be recognized based on A. The output method. B. A straight-line calculation. C. A zero profit margin. D. The completed-contract method.

Question: 15On January 1, Year 1, an entity enters into a contract with a customer to build a robot. The construction of the robot is expected to be completed at the end of Year 2. The entity also determines that  It has no alternative use for the robot.  It has an enforceable right to payment for the performance completed to date.  The progress toward complete construction of the robot is reasonably measurable using the input method based on costs incurred. The contract price is $800,000, and expected total costs are $500,000. The following additional information relates to the actual and expected costs incurred: Year 1

Year 2

Costs incurred during each year $250,000 $350,000 Costs expected in future

$250,000 $

0

What amounts of revenue, cost of goods sold, and gross profit are recognized by the entity for Year 2? Revenue Cost of Goods Sold Gross Profit A. $400,000 $350,000 $50,000 B. $400,000 $250,000 $150,000 C. $800,000 $350,000 $450,000 D. $800,000 $600,000 $200,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 16A building contractor has a fixed-price contract to construct a building on the customer’s land. The building is expected to be completed in 2 years. Progress billings will be sent to the customer at quarterly intervals. Which of the following describes the preferable point for revenue recognition for this contract if its outcome can be reasonably measured? A. After the contract is signed. B. As progress is made toward completion of the contract. C. As cash is received. D. As and only to the extent of costs incurred.

Question: 17Cinnabar Construction Company has consistently used the input method based on costs incurred to recognize revenue from a performance obligation satisfied over time. During Year 1, Cinnabar entered into a fixedprice contract to construct an office building for $10 million. Information relating to the contract is as follows: December 31

Progress to completion

Year 1

Year 2

20%

60%

Estimated total costs at completion

$7,500,000

$8,000,000

500,000

1,200,000

Gross profit recognized (cumulative)

Contract costs incurred during Year 2 were A. $3,200,000 B. $3,300,000 C. $3,500,000 D. $4,800,000

Question: 18A company began work on a long-term construction contract in Year 1. The contract price was $3,000,000. Year-end information related to the contract is as follows: ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Year 1 Estimated total cost

Year 2

Year 3

$2,000,000

$2,000,000

$2,000,000

Cost incurred

700,000

900,000

400,000

Billings

800,000

1,200,000

1,000,000

Collections

600,000

1,200,000

1,200,000

Under the input method based on costs incurred, the gross profit to be recognized in Year 1 is A. $(100,000) B. $100,000 C. $200,000 D. $350,000

Fact Pattern: On January 1, Year 1, Big Co. enters into a contract with a customer to build a bridge on the customer’s land for $2,500,000. The construction of the bridge is expected to be completed at the end of Year 3. Big determines that the progress toward completion of the bridge is reasonably measurable using the input method based on costs incurred. At contract inception, Big estimates that the expected total cost of construction will be $1,700,000. Below are the (1) actual costs incurred during each year, (2) expected costs to complete the construction, and (3) amounts billed to the customer: Year 1 Year 2 Year 3 Costs incurred each year $ 700,000 $500,000 $800,000 Costs expected in the following years 1,300,000 675,000 0 Amounts billed to (and paid by) the customer each year 700,000 950,000 850,000 Question: 19What amount of revenue on this contract is recognized by Big in its Year 1 income statement? A. $875,000 B. $650,000 C. $700,000 D. $175,000

Fact Pattern: On January 1, Year 1, Big Co. enters into a contract with a customer to build a bridge on the customer’s land for $2,500,000. The construction of the bridge is expected to be completed at the end of Year 3. Big determines that the progress toward completion of the bridge is reasonably measurable using the input method based on costs incurred. At contract inception, ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Big estimates that the expected total cost of construction will be $1,700,000. Below are the (1) actual costs incurred during each year, (2) expected costs to complete the construction, and (3) amounts billed to the customer: Year 1 Year 2 Year 3 Costs incurred each year $ 700,000 $500,000 $800,000 Costs expected in the following years 1,300,000 675,000 0 Amounts billed to (and paid by) the customer each year 700,000 950,000 850,000 Question: 20What amount of gross profit on this contract is recognized by Big in its Year 2 income statement? A. $400,000 B. $225,000 C. $450,000 D. $0

Fact Pattern: On January 1, Year 1, Big Co. enters into a contract with a customer to build a bridge on the customer’s land for $2,500,000. The construction of the bridge is expected to be completed at the end of Year 3. Big determines that the progress toward completion of the bridge is reasonably measurable using the input method based on costs incurred. At contract inception, Big estimates that the expected total cost of construction will be $1,700,000. Below are the (1) actual costs incurred during each year, (2) expected costs to complete the construction, and (3) amounts billed to the customer: Year 1 Year 2 Year 3 Costs incurred each year $ 700,000 $500,000 $800,000 Costs expected in the following years 1,300,000 675,000 0 Amounts billed to (and paid by) the customer each year 700,000 950,000 850,000 Question: 21What amount of gross profit on this contract is recognized by Big in its Year 3 income statement? A. $500,000 B. $50,000 C. $100,000 D. $166,667

Fact Pattern: On January 1, Year 1, Big Co. enters into a contract with a customer to build a bridge on the customer’s land for $2,500,000. The construction of the bridge is expected to be completed at the end of Year 3. Big determines that the progress toward completion of the bridge is reasonably measurable using the input method based on costs incurred. At contract inception, Big estimates that the expected total cost of construction will be $1,700,000. Below are the (1) ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

actual costs incurred during each year, (2) expected costs to complete the construction, and (3) amounts billed to the customer: Year 1 Year 2 Year 3 Costs incurred each year $ 700,000 $500,000 $800,000 Costs expected in the following years 1,300,000 675,000 0 Amounts billed to (and paid by) the customer each year 700,000 950,000 850,000 Question: 22What amount of revenue on this contract is recognized by Big in its Year 3 income statement? A. $900,000 B. $850,000 C. $2,500,000 D. $833,333

Question: 23On October 1, Year 1, Little Co. enters into a contract with a customer to build a factory on the customer’s land for $1,000,000. The construction of the factory is expected to be completed at the end of Year 5. Based on Little’s accounting policies, the progress toward completion of the factory is measured using the input method based on costs incurred. During Year 1, Little incurred $450,000 in costs in respect to this contract and billed the customer for $600,000. At the end of Year 1, Little cannot reasonably estimate the total expected costs of the construction and cannot reasonably estimate the progress toward completion of the factory. However, Little expects to recover the costs incurred in the construction. What amount of revenue from this contract will be recognized in Little’s Year 1 income statement? A. $150,000 B. $600,000 C. $450,000 D. $0

Question: 24A building contractor has a contract to construct a large building. It is estimated that the building will take 2 years to complete. Progress billings will be sent to the customer at quarterly intervals. Which of the following describes the preferable point for revenue and gross profit recognition for this contract? A. After the contract is signed. B. As progress is made toward completion of the contract. C. As cash is received. D. When the contract is completed.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 25Saskia Company’s construction projects extend over several years, and collection of receivables is reasonably certain. Each project has a firm contract price, reliable estimates of the extent of progress and cost to finish, and a contract that is specific as to the rights and obligations of all parties. The contractor and the buyer are expected to fulfill their contractual obligations on each project. Saskia should recognize revenue from the projects A. As cash is collected from customers. B. Based on the progress toward complete satisfaction of the performance obligation for each project. C. Only to the extent of the costs incurred. D. At a point in time.

Question: 26A company used the input method based on costs incurred to measure the progress toward completion of a 4-year construction contract. Which of the following items should be used to calculate the gross profit recognized in the second year? Gross Profit Previously Amounts Billed Recognized to Date A. Yes Yes B. No Yes C. Yes No D. No No

Question: 27How should the balances of progress billings and construction in progress be shown at reporting dates prior to the completion of a long-term contract? A. Progress billings as deferred income, construction in progress as a deferred expense. B. Progress billings as income, construction in progress as inventory. C. Net, as a current asset if debit balance and current liability if credit balance. D. Net, as gross profit from construction if credit balance, and loss from construction if debit balance.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Study Unit 2: Measurement, Valuation, and Disclosure: Investments and Short-Term Items 2: (139) Measurement, Valuation, and Disclosure: Investments and Short-Term Items 1: (17) Accounts Receivable 2: (13) Inventory – Fundamentals 3: (21) Inventory -- Cost Flow Methods 4: (14) Measurement of Inventory Subsequent to Initial Recognition 5: (10) Investments in Equity Securities 6: (10) Equity Method 7: (30) Investments in Debt Securities 8: (12) Business Combinations and Consolidated Financial Statements 9: (12) Different Types of Expenses and Liabilities

Subunit 1: Accounts Receivable Question: 1Statements of financial position on December 31, Year 1, and December 31, Year 2, are presented below: Dec. 31, Year 1

Dec. 31, Year 2

Assets: Cash

$ 50,000

$ 60,000

95,000

89,000

Allowance for uncollectible accounts Inventory

(4,000) 120,000

(3,000) 140,000

Property, plant, and equipment

295,000 (102,000)

340,000 (119,000)

Accounts receivable

Accumulated depreciation Total Assets

$ 454,000

$ 507,000

$ 62,000 8,000 200,000

$ 49,000 11,000 200,000

Liabilities and equity: Trade accounts payable Interest payable Bonds payable Unamortized bond discount Equity

(15,000) 199,000

Total liabilities and equity

$ 454,000

(10,000) 257,000 $ 507,000

Additional information for Year 2: 1.

Sales revenue was $338,000.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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2.

$3,000 of accounts receivable was written off.

Cash collections from customers in Year 2 were

A. $341,000 B. $338,000 C. $344,000 D. $335,000

Question: 2An analysis of an entity’s $150,000 accounts receivable at year end resulted in a $5,000 ending balance for its allowance for uncollectible accounts and a bad debt expense of $2,000. During the past year, recoveries on bad debts previously written off were correctly recorded at $500. If the beginning balance in the allowance for uncollectible accounts was $4,700, what was the amount of accounts receivable written off as uncollectible during the year? A. $1,200 B. $1,800 C. $2,200 D. $2,800

Question: 3The following information applies to a manufacturing company, which has a 6-month operating cycle: Cash sales

$100,000

Credit sales during the sixth month with net 30 days terms

150,000

Credit sale during the fifth month with special terms of net 9 months

10,000

Interest earned and accrued on an investment that matures during month 3 of the next cycle

2,000

The total of the company’s trade accounts receivable at the end of the current cycle is A. $152,000 B. $160,000 C. $260,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $262,000

Question: 4A company uses the allowance method to account for uncollectible accounts receivable. After recording the estimate of uncollectible accounts expense for the current year, the company decided to write off in the current year the $10,000 account of a customer who had filed for bankruptcy. What effect does this write-off have on the company’s current net income and total current assets, respectively? Net Income Total Current Assets A. Decrease Decrease B. No effect Decrease C. Decrease No effect D. No effect No effect

Question: 5Based on the industry average, a corporation estimates that its bad debts should average 3% of credit sales. The balance in the allowance for uncollectible accounts at the beginning of Year 3 was $140,000. During Year 3, credit sales totaled $10,000,000, accounts of $100,000 were deemed to be uncollectible, and payment was received on a $20,000 account that had previously been written off as uncollectible. The entry to record bad debt expense at the end of Year 3 would include a credit to the allowance for uncollectible accounts of A. $300,000 B. $260,000 C. $240,000 D. $160,000

Question: 6The following information has been compiled by a manufacturing company:  Sale of company products for the period to customers with net 30-day terms amounting to $150,000.  Sale of company products for the period to a customer, supported by a note for $25,000, with special terms of net 180 days.  Balance of trade receivables at the end of the last period was $300,000.  Collections of open trade receivables during the period was $200,000.  Rental income for the period, both earned and accrued but not yet collected, from the manufacturing company’s credit union for use of company facilities was $2,000. The open trade receivables balance to be shown on the statement of financial position for the period is

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $250,000 B. $252,000 C. $275,000 D. $277,000

Question: 7The following information relates to accounts receivable for the year just ended: Accounts receivable, 1/1

$ 650,000

Credit sales for the year

2,700,000

Sales returns for the year

75,000

Accounts written off during the year

40,000

Collections from customers during the year Estimated future sales returns at 12/31 Estimated uncollectible accounts at 12/31

2,150,000 50,000 110,000

What amount should be reported for accounts receivable, before allowances for sales returns and uncollectible accounts, at December 31? A. $1,200,000 B. $1,125,000 C. $1,085,000 D. $925,000

Question: 8A shoe retailer allows customers to return shoes within 90 days of purchase. The company estimates that 5% of sales will be returned within the 90-day period. During the month, the company has sales of $200,000 and returns of sales made in prior months of $5,000. What amount should the company record as net sales revenue for new sales made during the month? A. $185,000 B. $190,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $195,000 D. $200,000

Question: 9An internal auditor is deriving cash flow data based on an incomplete set of facts. Bad debt expense was $2,000. Additional data for this period follows: Credit sales

$100,000

Gross accounts receivable -- beginning balance

5,000

Allowance for bad debts -- beginning balance

(500)

Accounts receivable written off

1,000

Increase in net accounts receivable (after subtraction of allowance for bad debts)

30,000

How much cash was collected this period on credit sales? A. $64,000 B. $68,000 C. $68,500 D. $70,000

Question: 10An entity had the following sales and accounts receivable balances, prior to any adjustments at year end: Credit sales

$10,000,000

Accounts receivable

3,000,000

Allowance for uncollectible accounts

50,000

The entity uses 3% of accounts receivable to determine its allowance for uncollectible accounts at year end. By what amount should the entity adjust its allowance for uncollectible accounts at year end? A. $0 B. $40,000 C. $90,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $140,000

Question: 11When the allowance method of recognizing uncollectible accounts is used, the entry to record the write-off of a specific account A. Decreases both accounts receivable and the allowance for uncollectible accounts. B. Decreases accounts receivable and increases the allowance for uncollectible accounts. C. Increases the allowance for uncollectible accounts and decreases net income. D. Decreases both accounts receivable and net income.

Question: 12A company had the following account balances at December 31: Accounts receivable

$ 900,000

Allowance for uncollectible accounts (before any provision for the year uncollectible accounts expense)

16,000

Credit sales for the year

1,750,000

The company is considering the following methods of estimating uncollectible accounts expense for the year:  Based on credit sales at 2%  Based on accounts receivable at 5% What amount should the company charge to uncollectible accounts expense under each method? Percentage of Percentage of Credit Sales Accounts Receivable A. $51,000 $45,000 B. $51,000 $29,000 C. $35,000 $45,000 D. $35,000 $29,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 13On March 31, there was an unadjusted credit balance of $1,000 in the allowance for uncollectible accounts. An analysis of trade accounts receivable at that date revealed the following: Estimated Age

Amount

Uncollectible

0-30 days $60,000

5%

31-60 days

4,000

10%

Over 60 days

2,000

70%

What amount should be reported as allowance for uncollectible accounts in the March 31 balance sheet? A. $4,800 B. $4,000 C. $3,800 D. $3,000

Question: 14Which method of recording uncollectible accounts expense is consistent with accrual accounting? Allowance Direct Write-Off A. Yes Yes B. Yes No C. No Yes D. No No

Question: 15Under the allowance method of recognizing uncollectible accounts, the entry to write-off an uncollectible account A. Increases the allowance for uncollectible accounts. B. Has no effect on the allowance for uncollectible accounts. C. Has no effect on net income. D. Decreases net income.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 16The following accounts were abstracted from an unadjusted trial balance at December 31: Debit Accounts receivable

Credit

$1,000,000

Allowance for uncollectible accounts

8,000

Net credit sales

$3,000,000

It is estimated that 3% of the gross accounts receivable will become uncollectible. After adjustment at December 31, the allowance for uncollectible accounts should have a credit balance of A. $90,000 B. $82,000 C. $38,000 D. $30,000

Question: 17An entity’s allowance for uncollectible accounts was $100,000 at the end of Year 2 and $90,000 at the end of Year 1. For the year ended December 31, Year 2, the entity reported bad debt expense of $16,000 in its income statement. What amount did the entity debit to the appropriate account in Year 2 to write off actual bad debts? A. $6,000 B. $10,000 C. $16,000 D. $26,000

Subunit 2: Inventory – Fundamentals Question: 1DEF is the consignee for 1,000 units of product X for ABC Company. ABC should recognize the revenue from these 1,000 units when A. The agreement between DEF and ABC is signed.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. ABC ships the goods to DEF. C. DEF receives the goods from ABC. D. DEF sells the goods and informs ABC of the sale.

Question: 2An entity had the following account balances in the pre-closing trial balance: Opening inventory $100,000 Closing inventory

150,000

Purchases

400,000

Transportation-in

6,000

Purchase discounts

40,000

Purchase allowances

15,000

Returned purchases

5,000

The entity had net purchases for the period of A. $340,000 B. $346,000 C. $370,000 D. $376,000

Question: 3A physical inventory count showed an entity had inventory costing $1,000,000 on hand at December 31, Year 1. Excluded from this amount were the following:  Goods costing $82,000, shipped to a customer free on board (FOB) shipping point on December 28, Year 1. They were expected to be received by the customer on January 4, Year 2.  Goods costing $122,000, shipped to a customer free on board (FOB) destination December 30, Year 1. They were expected to be received by the customer on January 5, Year 2. Compute the correct ending inventory to be reported on the shipper’s statement of financial position at December 31, Year 1.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $1,000,000 B. $1,082,000 C. $1,122,000 D. $1,204,000

Question: 4The following selected data from statements of financial position on December 31, Year 1, and December 31, Year 2, are presented below: 12/31/Year 1 12/31/Year 2 Inventory Trade accounts payable

$120,000

$140,000

62,000

49,000

Additional information for Year 2: 1.

Cash payments to suppliers of merchandise were $180,000.

Cost of goods sold in Year 2 was

A. $147,000 B. $160,000 C. $167,000 D. $180,000

Question: 5 An entity with a December 31 year end purchased $2,000 of inventory on account. The seller was responsible for delivery to the shipping point, with freight of $50 paid at destination by the buyer. The invoice date was December 27, Year 1, and the goods arrived on January 3, Year 2. Now assume the terms required the seller to deliver to the destination instead of the shipping point. What is the correct amount of inventory and freight-in relating to this purchase on the Year 1 financial statements? Inventory Freight-In A. $0

$0

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $2,050 $0 C. $0

$50

D. $2,000 $50

Fact Pattern: An entity had the following opening and closing inventory balances during the current year: 1/1 Finished goods

12/31

$ 90,000 $260,000

Raw materials

105,000

130,000

Work-in-progress

220,000

175,000

The following transactions and events occurred during the current year:  $300,000 of raw materials were purchased, of which $20,000 were returned because of defects.  $600,000 of direct labor costs were incurred.  $750,000 of production overhead costs were incurred.

Question: 6If the entity’s raw materials inventory as of December 31 of the current year (ending inventory) was miscounted and the true figure was higher than $130,000, one effect on the year-end financial statements would be that A. Profit is overstated. B. Cost of goods sold is overstated. C. Working capital is overstated. D. Cost of goods produced is understated.

Question: 7The following information is available for an entity for the quarter ended March 31, of the current year: Merchandise inventory, as of January 1 of the current year $ 30,000 Sales

200,000

Purchases

190,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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The gross profit margin is normally 20% of sales. What is the estimated cost of the merchandise inventory at March 31, of the current year? A. $20,000 B. $40,000 C. $60,000 D. $180,000

Question: 8An internal auditor performs an analytical procedure to compare the gross margins of various divisional operations with those of other divisions and with the individual division’s performance in previous years. The internal auditor notes a significant increase in the gross margin at one division. The internal auditor does some preliminary investigation and also notes that there were no changes in products, production methods, or divisional management during the year. The most likely cause of the increase in gross margin is A. An increase in the number of competitors selling similar products. B. A decrease in the number of suppliers of the material used in manufacturing the product. C. An overstatement of year-end inventory. D. An understatement of year-end accounts receivable.

Question: 9If certain goods owned by an entity were not recorded as a purchase and were not counted in ending inventory, in error, then A. Cost of goods sold for the period will be understated. B. Cost of goods sold for the period will be overstated. C. Net income for the period will be understated. D. There will be no effect on cost of goods sold or profit for the period.

Question: 10What is the cost of ending inventory given the following factors? Beginning inventory $ 5,000 Total production costs 60,000 Cost of goods sold

55,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Direct labor

40,000

A. $5,000 B. $10,000 C. $45,000 D. $50,000

Question: 11A company’s inventory is overstated at December 31 of this year. The result will be A. Understated income this year. B. Understated retained earnings this year. C. Understated retained earnings next year. D. Understated income next year.

Question: 12Which one of the following errors will result in the overstatement of net income? A. Overstatement of beginning inventory. B. Overstatement of ending inventory. C. Overstatement of goodwill amortization. D. Overstatement of bad debt expense.

Question: 13The following information applies to the income statement of a company: Gross sales

$1,000,000

Net sales

900,000

Freight-in

10,000

Ending inventory Gross profit margin

200,000 40%

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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The company’s cost of goods available for sale is A. $550,000 B. $560,000 C. $740,000 D. $800,000

Subunit 3: Inventory -- Cost Flow Methods Question: 1The inventory method yielding the same inventory measurement and cost of goods sold whether a perpetual or periodic system is used is A. Average cost. B. First-in, first-out. C. Last-in, first-out. D. Either first-in, first-out or last-in, first-out.

Question: 2An entity started in Year 1 with 200 scented candles on hand at a cost of $3.50 each. These candles sell for $7.00 each. The following schedule represents the purchases and sales of candles during Year 1: Transaction

Quantity

Unit Quantity

Number

Purchased

Cost

Sold

1

---

---

150

2

250

$3.30

---

3

---

---

100

4

200

3.10

---

5

---

---

200

6

350

3.00

---

7

---

---

300

If the entity uses periodic FIFO inventory pricing, the gross profit for Year 1 would be

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $2,755 B. $2,805 C. $2,854 D. $2,920

Question: 3The cost of materials has risen steadily over the year. Which of the following methods of estimating the ending balance of the materials inventory account will result in the highest profit, assuming all other variables remain constant? A. Last-in, first-out (LIFO). B. First-in, first-out (FIFO). C. Weighted average. D. Specific identification.

Question: 4When a right of return exists, an entity may recognize revenue from a sale of goods at the time of sale only if A. The amount of future returns can be reliably estimated. B. The seller retains the risks and rewards of ownership. C. The buyer resells the goods. D. The seller believes returns will not be material.

Fact Pattern: Illustrated below is a perpetual inventory card for the current year. Date

Units Purchased Units Sold Units Balance

January 1 January 12

0 300

March 15 May 5

1,000

1,000 @ $2.00 500 @ $2.20

July 8

700 1,200

500

November 24 1,000 @ $1.65

700 1,700

Additional information: ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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 The entity had no opening inventory.  The items sold on March 15 were purchased on January 12.  The items sold on July 8 were purchased on May 5.

Question: 5The ending inventory balance under the first-in, first-out (FIFO) method of inventory valuation is A. $3,050 B. $3,150 C. $3,230 D. $3,430

Fact Pattern: Illustrated below is a perpetual inventory card for the current year. Date

Units Purchased Units Sold Units Balance

January 1 January 12

0 1,000

1,000 @ $2.00 300

March 15 May 5

500 @ $2.20

July 8

700 1,200

500

November 24 1,000 @ $1.65

700 1,700

Additional information:  The entity had no opening inventory.  The items sold on March 15 were purchased on January 12.  The items sold on July 8 were purchased on May 5.

Question: 6The cost of goods sold under the specific identification method of inventory valuation is A. $1,320 B. $1,520 C. $1,600 D. $1,700

Question: 7A merchandising company had the following inventory related transactions in its first year of operations: Purchases

Sales in

Balance

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Date

in Units

Jan. 1

Units

in Units

10,000 @ $5

10,000

March 1 6,000 @ $6

16,000

May 1 July 1

3,000 8,000 @ $6.25

21,000 12,000

Sept. 1 Nov. 1

13,000

5,000 @ $7

9,000 14,000

2,000

Dec. 1

12,000

If the company uses the first-in-first-out (FIFO) method of inventory valuation, its ending inventory balance (rounded) will be A. $62,000 B. $70,759 C. $78,750 D. $84,000

Question: 8An entity has 8,000 units in inventory on January 1, valued at $10 per unit. During the year, the entity sold 25,000 units and purchased inventory as follows: Quantity Date

Purchased Unit Price

April 1

15,000 units

$8

July 1

10,000 units

9

October 1 12,500 units

10

If the entity uses the weighted-average method of inventory valuation, cost of goods sold for the period will be A. $186,978 B. $197,000 C. $228,023

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $235,000

Question: 9Which inventory pricing method generally approximates current cost for each of the following? Ending Cost of Inventory Goods Sold A. FIFO FIFO B. LIFO FIFO C. FIFO LIFO D. LIFO LIFO

Question: 10Which of the following changes in accounting policies resulting from a significant change in the expected pattern of economic benefit will increase profit? A. A change from FIFO to LIFO inventory valuation when costs are rising. B. A change from FIFO to weighted-average inventory valuation when costs are falling. C. A change from accelerated to straight-line depreciation in the later years of the depreciable lives of the assets. D. A change from straight-line to accelerated depreciation in the early years of the depreciable lives of the assets.

Question: 11On January 1, a company has no opening inventory balance. The following purchases are made during the year: Units

Unit

Purchased

Cost

January 1

5,000

$10.00

April 1

5,000

9.00

July 1

5,000

8.00

October 1

5,000

7.50

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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There are 10,000 units in inventory on December 31. If the company uses the last-in, first-out (LIFO) method of inventory valuation, cost of goods sold for the year will be: A. $77,500 B. $86,250 C. $87,500 D. $95,000

Question: 12The advantage of the last-in, first-out inventory method is based on the assumption that A. The most recently incurred costs should be allocated to the cost of goods sold. B. Costs should be charged to revenue in the order in which they are incurred. C. Costs should be charged to cost of goods sold at average cost. D. Current costs should be based on representative or normal conditions of efficiency and volume of operations.

Question: 13Which inventory cost flow method is prohibited according to IFRS? A. First-in, first-out (FIFO) method. B. Specific identification method. C. Weighted average cost method. D. Last-in, first-out (LIFO) method.

Question: 14In a period of rising prices, which one of the following inventory methods usually provides the best matching of expenses against revenues? A. Weighted average. B. First-in, first-out. C. Last-in, first-out.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Specific identification.

Question: 15Which one of the following actions would result in a decrease in income? A. Liquidating last-in, first-out layers of inventory when prices have been increasing. B. Changing from first-in, first-out to last-in, first-out inventory method when prices are decreasing. C. Accelerating purchases at the end of the year when using last-in, first-out inventory method in times of rising prices. D. Changing the number of last-in, first-out pools.

Question: 16In periods of rising costs, which one of the following inventory cost flow assumptions will result in higher cost of sales? A. First-in, first-out. B. Last-in, first-out. C. Weighted average. D. Moving average.

Fact Pattern: During January, Metro Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory: Units Unit Total

On

Units Cost Cost Hand Balance on 1/1

1,000 $1 $1,000 1,000

Purchased on 1/7

600

Sold on 1/20

900

Purchased on 1/25 400

3

1,800 1,600 700

5

2,000 1,100

Question: 17Under the moving-average method, what amount should Metro report as inventory at January 31? A. $2,640

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $3,225 C. $3,300 D. $3,900

Question: 18The weighted average for the year inventory cost flow method is applicable to which of the following inventory systems? Periodic Perpetual A. Yes Yes B. Yes No C. No Yes D. No No

Question: 19A retailer sells antique replica trunks to customers all over the world. The retailer’s inventory records show the following: Quantity (units) Cost (each) Beginning inventory

200

$1,055

June 3

170

1,062

September 18

190

1,070

December 10

160

1,076

Purchases:

The retailer sells 470 units this year. Management is researching whether the company should use last in, first out (LIFO) or first in, first out (FIFO). If the retailer’s management wants to lower the company’s income taxes, which inventory cost flow assumption should it select? A. FIFO, because the cost of goods sold will be $9,870 higher than LIFO. B. FIFO, because the operating income will be $840 lower than LIFO. C. LIFO, because the operating income will be $4,360 lower than FIFO. D. LIFO, because the cost of goods sold will be $5,250 higher than FIFO.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 20On December 1, a company had 1,000 units in inventory valued at $787,500. On December 12, the company purchased 2,000 units for $1,562,400. Sales of 2,400 units were made on December 23, and on December 30, the company purchased another 2,000 units for $1,537,200. If the company uses a periodic system and the weighted-average inventory valuation method, the company’s December 31 balance sheet would report inventory of A. $2,025,660 B. $2,021,292 C. $2,014,740 D. $2,007,180

Question: 21Flex Co. uses a periodic inventory system. The following are inventory transactions for the month of January: 1/1 Beginning inventory 10,000 units at $3 1/5 Purchase

5,000 units at $4

1/15 Purchase

5,000 units at $5

1/20 Sales at $10 per unit 10,000 units Flex uses the average pricing method to determine the value of its inventory. What amount should Flex report as cost of goods sold on its income statement for the month of January? A. $30,000 B. $37,500 C. $40,000 D. $100,000

Subunit 4: Measurement of Inventory Subsequent to Initial Recognition Question: 1In accounting for inventories, generally accepted accounting principles require departure from the historical cost principle when the utility of inventory has fallen below cost. Under the “lower-of-cost-or-market” rule, the term “market” means A. Original cost minus allowance for obsolescence.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Original cost plus normal profit margin. C. Replacement cost of the inventory. D. Original cost minus cost to dispose.

Fact Pattern: Stockholm Co. accounts for its inventory using the first in, first out (FIFO) method. The data below concern items in Stockholm Co.’s inventory. Per Unit

Gear

Historical cost

$190.00 $106.00 $53.00

Selling price Cost to complete and sell Current replacement cost Normal profit margin

Stuff

217.00 145.00 19.00

Wickets

73.75

8.00

2.50

203.00 105.00

51.00

32.00

29.00

21.25

Question: 2Under IFRS, what amount should Stockholm Co. compare with historical cost to measure the amount at which the wickets should be measured? A. $51.00 B. $50.00 C. $71.25 D. $73.75

Question: 3An entity that prepares its financial statements using IFRS reported the following selected per-unit data relating to work-in-process: Selling price

$100

Completion costs

10

Historical cost

91

Replacement cost Normal gross profit Selling cost

108 20 5

In comparison with historical cost, what will be the per-unit effect on gross profit of measuring ending inventory?

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. No effect. B. Reduction of $6. C. Reduction of $26. D. Increase of $5.

Question: 4The following data apply to a unit of inventory: Selling price

$22

Selling cost

2

Normal profit margin

5

Replacement cost

10

Using the lower-of-cost-or-market (LCM) method of measuring inventory, what is the market amount for this unit of inventory? A. $10.00 B. $15.00 C. $17.50 D. $20.00

Question: 5Based on a physical inventory taken on December 31, a company determined its chocolate inventory on a LIFO basis at $26,000 with a replacement cost of $20,000. The company estimated that, after further processing costs of $12,000, the chocolate could be sold as finished candy bars for $40,000. The company’s normal profit margin is 10% of sales. Under the lower-of-cost-or-market rule, what amount should the company report as chocolate inventory in its December 31 balance sheet? A. $28,000 B. $26,000 C. $24,000 D. $20,000

Question: 6The lower-of-cost-or-market rule for inventories may be applied to total inventory, to groups of similar items, or to each item. Which application generally results in the lowest inventory amount? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. All applications result in the same amount. B. Total inventory. C. Groups of similar items. D. Separately to each item.

Question: 7Under the lower-of-cost-or-market method, the replacement cost of an inventory item would be used as the designated market value A. When it is below the net realizable value less the normal profit margin. B. When it is below the net realizable value and above the net realizable value less the normal profit margin. C. When it is above the net realizable value. D. Regardless of net realizable value.

Question: 8A distribution company has determined its December 31 inventory on a LIFO basis at $200,000. Information pertaining to that inventory follows: Estimated selling price

$204,000

Estimated cost of disposal

10,000

Normal profit margin

30,000

Current replacement cost

180,000

The company records losses that result from applying the lower-of-cost-or-market rule. At December 31, the loss that the company should recognize is A. $0 B. $6,000 C. $14,000 D. $20,000

Question: 9The replacement cost of an inventory item is below the net realizable value and above the net realizable value less the normal profit margin. The original cost of the inventory item is below the net realizable value less the normal profit margin. Under the lower-of-cost-or-market (LCM) method, the inventory item should be valued at ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Net realizable value. B. Net realizable value less the normal profit margin. C. Original cost. D. Replacement cost.

Question: 10A firm has determined its fiscal year-end inventory on a LIFO basis to be $400,000. Information pertaining to that inventory follows: Estimated selling price

$408,000

Estimated cost of disposal

20,000

Normal profit margin

60,000

Current replacement cost

360,000

The firm records losses that result from applying the lower-of-cost-or-market (LCM) rule. At its year end, what should be the net carrying value of the firm’s inventory? A. $400,000 B. $388,000 C. $360,000 D. $328,000

Question: 11Which of the following is true regarding inventory adjustments under IFRS? A. IFRS do not require inventory adjustments. B. Reversals of adjustments are allowed in a subsequent period. C. A reversal of a previous write-down may be higher than the previous write-down. D. Adjustments may not be reversed in a subsequent period.

Question: 12A company determined the following information for its FIFO basis inventory at the end of an interim period on June 30, Year 2: Historical cost

$80,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Net realizable value (NRV) 77,000 Current replacement cost Normal profit margin

76,000 2,000

The company expects that on December 31, Year 2, the inventory’s NRV will be at least $81,000. What amount of inventory should the company report in its interim financial statements under IFRS and under U.S. GAAP on June 30, Year 2? IFRS U.S. GAAP A. $77,000 $80,000 B. $77,000 $77,000 C. $80,000 $80,000 D. $80,000 $81,000

Question: 13A multinational company maintains its financial records under both IFRS and U.S. GAAP. Last year, the company determined its inventory was impaired because demand for its product collapsed when a competitor launched a new product with innovative features. As a result, the company wrote down its inventory to $0 with a carrying amount of $500,000. This year, however, government authorities unexpectedly announced that the competitor’s product was defective and the product was removed from the market. As a result, the company’s products were again in demand and the company estimated their net realizable value to be $750,000 at the end of the current quarter. How should the company record this new development in the current quarter? A. Under IFRS, $0 write-up of the inventory; under U.S. GAAP, $0 write-up of the inventory. B. Under IFRS, $500,000 write-up of the inventory; under U.S. GAAP, $0 write-up of the inventory. C. Under IFRS, $750,000 write-up of the inventory; under U.S. GAAP, $0 write-up of the inventory. D. Under IFRS, $750,000 write-up of the inventory; under U.S. GAAP, $750,000 write-up of the inventory.

Question: 14A company uses IFRS to value its inventory of frozen foods. The company applies IFRS on a total inventory basis, not directly to each item of frozen food. Information on the frozen food inventory at December 31 of the year just ended is provided below. Replacement cost

$ 80,000

Net realizable value less profit margin

85,000

Weighted-average cost

90,000

Net realizable value

100,000

The company should value its inventory at

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $80,000 B. $85,000 C. $90,000 D. $100,000

Subunit 5: Investments in Equity Securities Question: 1On December 31, Ott Co. had investments in equity securities as follows: Fair Cost Man Co.

Value

$10,000 $ 8,000

Kemo, Inc.

9,000

11,000

Fenn Corp.

11,000

9,000

$30,000 $28,000 Ott’s December 31 balance sheet should report the equity securities as A. $26,000 B. $28,000 C. $29,000 D. $30,000

Question: 2An entity should report an investment in marketable equity securities that does not result in significant influence or control over the investee at A. Lower of cost or market, with holding gains and losses included in earnings. B. Lower of cost or market, with holding gains included in earnings only to the extent of previously recognized holding losses. C. Fair value, with holding gains included in earnings only to the extent of previously recognized holding losses.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Fair value, with holding gains and losses included in earnings.

Question: 3Plack Co. purchased 10,000 shares (2% owner ship) of Ty Corp. on February 14 and did not elect the fair value option. Plack received a stock dividend of 2,000 shares on April 30, when the market value per share was $35. Ty paid a cash dividend of $2 per share on December 15. In its income statement for the year, what amount should Plack report as dividend income? A. $20,000 B. $24,000 C. $90,000 D. $94,000

Question: 4During Year 6, Wall Co. purchased 2,000 shares of Hemp Corp. common stock, properly classified as trading securities, for $31,500. They represent 2% of ownership in Hemp Corp. The fair value of this investment was $29,500 at December 31, Year 6. Wall sold all of the Hemp common stock for $14 per share on December 15, Year 7, incurring $1,400 in brokerage commissions and taxes. In its income statement for the year ended December 31, Year 7, Wall should report a recognized loss of A. $4,900 B. $3,500 C. $2,900 D. $1,500

Question: 5At the end of Year 1, Lane Co. held an investment in equity securities that cost $86,000 and had a year-end market value of $92,000. During Year 2, all of these securities were sold for $104,500. At the end of Year 2, Lane had acquired additional equity securities that cost $73,000 and had a year-end market value of $71,000. What is the impact of these stock activities on Lane’s Year 2 income statement? A. Loss of $2,000. B. Gain of $10,500. C. Gain of $16,500. D. Gain of $18,500.

Question: 6Janson traded stock in Flax Co. marketable equity securities during Year 1 as follows:

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Number of shares purchased (sold)

Price per share

February 3, Year 1

1,100

$11

April 15, Year 1

2,500

9

May 28, Year 1

(750)

13

July 5, Year 1

1,400

12

September 30, Year 1

(4,000)

15

No other transactions took place for Flax during the remainder of the year. At December 31, Year 1, Flax is trading at $10 per share. Janson trades securities on a last in, first out basis. What amount is the net value of the investment in Flax at year end? A. $(250) B. $2,500 C. $2,750 D. $3,750

Question: 7Company A acquired 30% of Company B’s voting rights on January 1, Year 1, and accounts for its investment using the equity method. On January 1, Year 2, Company A sold 60% of its investment in Company B for $150,000. The carrying amount of the investment on January 1, Year 2, before the sale was $210,000. The fair value of the retained investment after the sale was $100,000. What gain or loss, if any, on the disposal of the investment was recognized in the Year 2 income statement prepared under IFRS? A. $0 B. Gain on disposal of $40,000. C. Gain on disposal of $24,000. D. Loss on disposal of $60,000.

Question: 8Which of the following is a false statement about the measurement alternative for an investment in equity securities that does not result in control or significant influence over the investee? A. The investment is measured at fair value through net income. B. If the measurement alternative is selected, it must be applied until the investment has a readily determinable fair value.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. The measurement alternative cannot be elected when the fair value of the investment is readily determinable. D. Under the measurement alternative, an impairment loss is recognized for the excess of the carrying amount of the investment over its fair value.

Question: 9Under the measurement alternative for an investment in equity securities, the investment is measured at A. Cost minus subsequent impairment, plus or minus changes resulting from observable price changes for the identical or a similar investment of the same issuer. B. Fair value minus subsequent impairment. C. Lower of cost or net realizable value. D. Amortized cost.

Question: 10A measurement alternative may be elected for an investment in equity securities if the A. Fair value of the investment is not readily determinable and the investment does not result in control or significant influence over the investee. B. Investment allows significant influence over the investee. C. Listed prices of the investment are not available and the investment allows control over the investee. D. Listed prices of the investment are available and the investment does not result in control or significant influence over the investee.

Subunit 6: Equity Method Question: 1A company owns 10,000 shares of a corporation’s stock; the corporation currently has 40,000 shares outstanding. During the year, the corporation had net income of $200,000 and paid $160,000 in dividends. At the beginning of the year, there was a balance of $150,000 in the company’s equity method investment in the corporation account. At the end of the year, the balance in this account should be A. $110,000 B. $150,000 C. $160,000 D. $240,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 2A corporation acquires a 30% voting interest in another corporation. In this situation, the long-term investment is generally accounted for on the investor corporation’s books using which of the following reporting methods? A. Lower-of-cost-or-market. B. Cost. C. Consolidated. D. Equity.

Question: 3An investor uses the equity method to account for an investment in common stock. The investor’s equity in the earnings of the investee is affected by A Change in Fair Cash Dividends Value of the Investee’s from Investee Common Stock A. No Yes B. No No C. Yes No D. Yes Yes

Question: 4An investor uses the equity method to account for an investment in common stock. After the date of acquisition, the investment account of the investor is A. Not affected by its share of the earnings or losses of the investee. B. Not affected by its share of the earnings of the investee, but is decreased by its share of the losses of the investee. C. Increased by its share of the earnings of the investee, but is not affected by its share of the losses of the investee. D. Increased by its share of the earnings of the investee, and is decreased by its share of the losses of the investee.

Question: 5On January 1, a company acquired as a long-term investment a 20% common stock interest in E Co. The company paid $700,000 for this investment when the fair value and carrying amount of E’s net assets was $3.5 million. The company can exercise significant influence over E’s operating and financial policies. For the year ended December 31, E reported net income of $400,000 and declared and paid cash dividends of $160,000. How much revenue from this investment should the company report for the year?

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

A. $32,000 B. $48,000 C. $80,000 D. $112,000

Question: 6A corporation received a cash dividend from a common stock investment. Should the corporation report an increase in the investment account if it uses the fair value method or the equity method of accounting? Fair Value Equity A. No No B. Yes Yes C. Yes No D. No Yes

Question: 7When an investor uses the equity method to account for investments in common stock, the investment account will be increased when the investor recognizes A. A proportionate interest in the net income of the investee. B. A cash dividend received from the investee. C. Periodic amortization of the goodwill related to the purchase. D. Depreciation related to the excess of fair value over the carrying amount of the investee’s depreciable assets at the date of purchase by the investor.

Question: 8A company owns 30% of the outstanding common stock and 100% of the outstanding noncumulative nonvoting preferred stock of A Corp. In Year 1, A declared dividends of $100,000 on its common stock and $60,000 on its preferred stock. The company exercises significant influence over A’s operations and uses the equity method to account for the investment in the common stock. What amount of dividend revenue should the company report in its income statement for the year ended December 31, Year 1? A. $0 B. $30,000 C. $60,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $90,000

Question: 9On July 1, Year 1, a corporation purchased 3,000 shares of E Co.’s 10,000 outstanding shares of common stock for $20 per share but did not elect the fair value option. On December 15, Year 1, E paid $40,000 in dividends to its common shareholders. E’s net income for the year ended December 31, Year 1, was $120,000, earned evenly throughout the year. In its Year 1 income statement, what amount of income from this investment should the corporation report? A. $36,000 B. $18,000 C. $12,000 D. $6,000

Question: 10A company has an equity investment with a historical cost of $500,000 that is traded in an active market. On December 31, Year 1, the quoted price for an identical investment was $400,000, and the quoted price for a similar investment was $430,000. Using the company’s internal present value of cash flows model, the company arrived at a value of $410,000. What amount is the value of the investment on December 31, Year 1? A. $400,000 B. $410,000 C. $430,000 D. $500,000

Subunit 7: Investments in Debt Securities Question: 1Which one of the following statements with regard to marketable securities is incorrect? A. In the trading portfolio of marketable equity securities, unrealized gains and losses are recorded on the income statement. B. In the available-for-sale portfolio of marketable debt securities, unrealized gains and losses are recorded on the income statement. C. The held-to-maturity portfolio consists only of debt securities. D. Debt securities may be transferred from the held-to-maturity to the available-for-sale portfolio.

Question: 2The following information was extracted from a company’s December 31 balance sheet: ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Debit Balance Noncurrent assets: Available-for-sale debt securities (carried at fair value) Equity:

$96,450

Accumulated other comprehensive income (OCI) Unrealized gains and losses on available-for-sale debt securities Historical cost of the available-for-sale debt securities was

19,800

A. $63,595 B. $76,650 C. $96,450 D. $116,250

Question: 3Investments classified as held-to-maturity are measured at A. Fair value, with unrealized gains and losses reported in net income. B. Fair value, with unrealized gains and losses reported in other comprehensive income (OCI). C. Replacement cost, with no unrealized gains or losses reported. D. Amortized cost, with no unrealized gains or losses reported.

Question: 4The following pertains to Smoke, Inc.’s investment in debt securities:  On December 31, Year 3, Smoke reclassified a security acquired during the year for $70,000. It had a $50,000 fair value when it was reclassified from trading to available-for-sale.  An available-for-sale security costing $75,000, written down to $30,000 in Year 2 because of an otherthan-temporary impairment of fair value, had a $60,000 fair value on December 31, Year 3. What is the net effect of the above items on Smoke’s net income for the year ended December 31, Year 3? A. No effect. B. $10,000 increase. C. $20,000 decrease. D. $30,000 increase.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 5Kale Co. purchased bonds at a discount on the open market as an investment and has the intent and ability to hold these bonds to maturity. Absent an election of the fair value option, Kale should account for these bonds at A. Cost. B. Amortized cost. C. Fair value. D. Lower of cost or market.

Question: 6On July 2, Year 4, Wynn, Inc., purchased as a short-term investment a $1 million face-value Kean Co. 8% bond for $910,000 plus accrued interest to yield 10%. The bonds mature on January 1, Year 11, and pay interest annually on January 1. On December 31, Year 4, the bonds had a fair value of $945,000. On February 13, Year 5, Wynn sold the bonds for $920,000. In its December 31, Year 4, balance sheet, what amount should Wynn report for the bond if it is classified as an available-for-sale security? A. $910,000 B. $920,000 C. $945,000 D. $950,000

Question: 7The following information pertains to Lark Corp.’s available-for-sale debt securities: December 31 Year 2 Cost

Year 3

$100,000 $100,000

Fair value

90,000

120,000

Differences between cost and fair values are considered to be temporary. The decline in fair value was properly accounted for at December 31, Year 2. Ignoring tax effects, by what amount should other comprehensive income (OCI) be credited at December 31, Year 3? A. $0 B. $10,000 C. $20,000 D. $30,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 8For available-for-sale debt securities included in noncurrent assets, which of the following amounts should be included in the period’s net income? I. Unrealized holding losses during the period II. Realized gains during the period III. Changes in fair value during the period A. III only. B. II only. C. I and II only. D. I, II, and III.

Question: 9A reclassification of available-for-sale debt securities to the held-to-maturity category results in A. The amortization of an unrealized gain or loss existing at the transfer date. B. The recognition in earnings on the transfer date of an unrealized gain or loss. C. The reversal of any unrealized gain or loss previously recognized in earnings. D. The reversal of any unrealized gain or loss previously recognized in other comprehensive income.

Question: 10Jay Company acquired a wholly owned foreign subsidiary on January 1. The equity section of the December 31 consolidated balance sheet follows: Common stock

$ 500,000

Additional paid-in capital

200,000

Retained earnings

900,000

Accumulated other comprehensive income

(600,000)

Total equity

$1,000,000

The balance in accumulated OCI appropriately represents adjustments in translating the foreign subsidiary’s financial statements into U.S. dollars. The consolidated income statement included the excess of cost of investments in certain debt and equity securities over their fair values, which is considered temporary, as follows:

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Available-for-sale debt securities $200,000 Equity securities

100,000

Ignoring tax effects, the amounts for retained earnings and accumulated OCI in the consolidated statement of financial position for the year ended December 31 are Retained Earnings Accumulated OCI A. $900,000

$(600,000)

B. $1,000,000 $(700,000) C. $1,100,000 $(800,000) D. $1,200,000 $(900,000)

Question: 11When the fair value of an investment in debt securities exceeds its amortized cost, how should each of the following debt securities be reported at the end of the year, given no election of the fair value option? Debt Securities Classified As Held-to-Maturity

Available-for-Sale

A. Amortized cost

Amortized cost

B. Amortized cost

Fair value

C. Fair value

Fair value

D. Fair value

Amortized cost

Question: 12An available-for-sale debt security was purchased on September 1, Year 4, between interest dates. The next interest payment date was February 1, Year 5. Because of a permanent decline in fair value, the cost of the debt security substantially exceeded its fair value at December 31, Year 4. On the balance sheet at December 31, Year 4, the debt security should be carried at A. Fair value plus the accrued interest paid. B. Fair value. C. Cost plus the accrued interest paid. D. Cost.

Question: 13The amount by which the fair value of a debt security exceeds its cost should be accounted for in the financial statements when the security is classified as Trading Available-for-Sale ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

A. No No B. No Yes C. Yes Yes D. Yes No

Fact Pattern: Sun Corp. had investments in trading debt securities costing $650,000. On June 30, Year 2, Sun decided to hold the investments indefinitely and accordingly reclassified them as available-for-sale debt securities on that date. The investments’ fair value was $575,000 at December 31, Year 1, $530,000 at June 30, Year 2, and $490,000 at December 31, Year 2. Question: 14What amount of loss should Sun report in its Year 2 earnings? A. $45,000 B. $85,000 C. $120,000 D. $160,000

Fact Pattern: Sun Corp. had investments in trading debt securities costing $650,000. On June 30, Year 2, Sun decided to hold the investments indefinitely and accordingly reclassified them as available-for-sale debt securities on that date. The investments’ fair value was $575,000 at December 31, Year 1, $530,000 at June 30, Year 2, and $490,000 at December 31, Year 2. Question: 15What amount should Sun report as net unrealized loss on available-for-sale securities in its Year 2 other comprehensive income? A. $40,000 B. $45,000 C. $85,000 D. $160,000

Question: 16On December 1, Wall Company purchased trading debt securities. Pertinent data are as follows:

Debt Security Cost

Fair Value at 12/31

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A

$39,000

$36,000

B

50,000

55,000

C

96,000

85,000

On December 31, Wall reclassified its investment in security C from trading to available-for-sale because Wall intends to retain security C. What net loss on its securities should be included in Wall’s income statement for the year ended December 31? A. $0 B. $9,000 C. $11,000 D. $14,000

Question: 17When the fair value of an investment in securities exceeds its carrying amount, how should each of the following assets be reported at the end of the year? Held-to-Maturity Available-for-Sale Securities Securities A. Fair value Carrying amount B. Carrying amount Fair value C. Carrying amount Carrying amount D. Fair value Fair value

Question: 18On both December 31, Year 1, and December 31, Year 2, Kopp Co.’s only available-for-sale debt security had the same fair value, which was below amortized cost. Kopp considered the decline in value to be temporary in Year 1 but other than temporary in Year 2. At the end of both years the security was classified as a noncurrent asset. What should be the effects of the determination that the decline was other than temporary on Kopp’s Year 2 net noncurrent assets and net income? A. No effect on both net noncurrent assets and net income. B. No effect on net noncurrent assets and decrease in net income. C. Decrease in net noncurrent assets and no effect on net income. D. Decrease in both net noncurrent assets and net income.

Question: 19At December 31, Hull Corp. had the following debt securities that were purchased during the year, its first year of operations: ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fair Cost

Unrealized

value

gain (loss)

In Current Assets: Security A $ 90,000 $ 60,000 Security B Totals

15,000

$(30,000)

20,000

$105,000 $ 80,000

5,000 $(25,000)

In Noncurrent Assets: Security Y $ 70,000 $ 80,000 $ 10,000 Security Z Totals

90,000

45,000

(45,000)

$160,000 $125,000

$(35,000)

All changes in fair value are considered temporary. Security A is a trading security, and the other securities are available-for-sale securities. What amounts should be charged to earnings and other comprehensive income at December 31? Other Comprehensive Earnings Income A. $(60,000) $0 B. $(30,000) $(30,000) C. $(25,000) $(30,000) D. $(25,000) $0

Question: 20Reed, Inc., began operations on January 1. The following information pertains to Reed’s December 31 investments in debt securities:

Cost Fair value

Trading

Available-for-Sale

$360,000

$550,000

320,000

450,000

Lower of cost or fair value

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

applied to each security

304,000

420,000

If the declines are judged to be temporary, what amounts should Reed report for its trading and available-for-sale debt securities in the assets section of its December 31 balance sheet? Trading Available-for-Sale A. $360,000 $550,000 B. $360,000 $450,000 C. $320,000 $450,000 D. $304,000 $420,000

Question: 21Beach Co. determined that the decline in the fair value (FV) of an investment in debt securities was below the amortized cost and permanent in nature. The investment was classified as available-for-sale on Beach’s books. The controller would properly record the decrease in FV by including it in which of the following? A. Other comprehensive income section of the income statement only. B. Earnings section of the income statement and writing down the cost basis to FV. C. Discontinued operations section of the income statement, net of tax, and writing down the cost basis to FV. D. Other comprehensive income section of the income statement, and writing down the cost basis to FV.

Question: 22Debt securities held primarily for sale in the near term to generate income on short-term price differences are known as A. Available-for-sale securities. B. Discontinued operations. C. Held-to-maturity securities. D. Trading securities.

Question: 23Unrealized gains and losses on trading debt securities should be presented in the A. Statement of financial position. B. Income statement. C. Notes to the financial statements.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Statement of retained earnings.

Question: 24Vanity Corporation holds investments in debt securities. These investments were acquired last year and have been properly classified as available-for-sale (AFS) securities. During the current year, the company sold some of the AFS securities at a loss. At year end, the remaining portfolio of AFS securities had appreciated in total value compared with the value at the end of last year. Based on these facts, which one of the following should Vanity report in its financial statements at the end of the current year? Income Statement Balance sheet A. Unrealized loss on sale of AFS securities B. Realized loss on sale of AFS securities

Unrealized holding gain on appreciation of AFS securities Unrealized holding gain on appreciation of AFS securities

C. Unrealized holding gain on appreciation of AFS securities

Unrealized loss on sale of AFS securities.

D. Realized loss on sale of AFS securities and unrealized holding gain on appreciation of AFS securities

Unrealized holding gains/losses not reported here on AFS securities

Question: 25In Year 1, a company reported in other comprehensive income an unrealized holding loss on an investment in available-for-sale debt securities. During Year 2, these securities were sold at a loss equal to the unrealized loss previously recognized. The reclassification adjustment should include which of the following? A. The unrealized loss should be credited to the investment account. B. The unrealized loss should be credited to the other comprehensive income account. C. The unrealized loss should be debited to the other comprehensive income account. D. The unrealized loss should be credited to beginning retained earnings.

Question: 26On January 1 of the current year, Barton Co. paid $900,000 to purchase two-year, 8%, $1,000,000 face value bonds that were issued by another publicly-traded corporation. Barton plans to sell the bonds in the first quarter of the following year. The fair value of the bonds at the end of the current year was $1,020,000. At what amount should Barton report the bonds in its balance sheet at the end of the current year? A. $900,000 B. $950,000 C. $1,000,000 D. $1,020,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 27At the beginning of Year 2, a company invested $40,000 in a debt security. At that time the security was appropriately classified as an available-for-sale security. At the end of Year 2, the security had a fair value of $28,500. The change in fair value is deemed temporary. How should this change in fair value be reported in the financial statements? A. As a realized loss of $11,500 as part of net income. B. As a realized loss of $11,500 as part of other comprehensive income. C. As an unrealized loss of $11,500 as part of net income. D. As an unrealized loss of $11,500 as part of other comprehensive income.

Question: 28Long Co. invested in marketable securities. At year-end, fair-value changes in this investment were included in Long’s other comprehensive income. How would Long classify this investment? A. Held-to-maturity securities. B. Trading securities. C. Equity securities. D. Available-for-sale debt securities.

Question: 29An investment in trading securities is measured on the statement of financial position at the A. Cost to acquire the asset. B. Accumulated income minus accumulated dividends since acquisition. C. Lower of cost or market. D. Fair value.

Question: 30An investment in available-for-sale securities is measured on the statement of financial position at the A. Cost to acquire the asset. B. Accumulated income less accumulated dividends since acquisition. C. Fair value. D. Par or stated value of the securities.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Subunit 8: Business Combinations and Consolidated Financial Statements Question: 1Entity A acquires all of the voting shares of Entity B for $1,000,000. At the time of the acquisition, the net fair value of the identifiable assets acquired and liabilities assumed had a carrying amount of $900,000 and a fair value of $800,000. The amount of goodwill Entity A will record on the acquisition date is A. $0 B. $100,000 C. $200,000 D. $300,000

Question: 2A conglomerate entity acquired 100% of the net assets of a target entity for $900 cash. The target entity’s statement of financial position just prior to the acquisition is presented below. Target Entity (as of acquisition date)

Cash

Carrying

Fair

Amount

Value

$ 100

$100

Receivables

200

200

Inventory

150

200

600

400

Total assets

$1,050

$900

Current liabilities

$ 200

$200

Property, plant, and equipment (net)

Share capital

200

Retained earnings

650

Total liabilities and equity

$1,050

The amount of goodwill to be recorded by the conglomerate entity related to its purchase of the target entity is A. $(200) B. $50

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $200 D. None of the answers are correct.

Question: 3Costs incurred in completing a business combination are listed below. General administrative costs

$240,000

Consulting fees

120,000

Direct cost to register and issue equity securities

80,000

The amount charged to the expenses of the business combination is A. $80,000 B. $120,000 C. $240,000 D. $360,000

Question: 4A corporation purchased 100% of the shares of J Corporation for $600,000. Financial information for J Corporation is provided below. J Corporation ($000) Carrying Amount Cash

Fair Value

$ 50

$ 50

Accounts receivable

100

100

Inventory

150

100

300

250

500

600

$800

$850

$150

$150

200

200

Total current assets Property, plant, and equipment (net) Total assets Current liabilities Long-term debt

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Total liabilities

350

350

Common stock

150

150

Paid-in capital

80

80

Retained earnings

220

Total shareholders’ equity

450

Total liabilities and shareholders’ equity

$800

The amount of goodwill resulting from this purchase, if any, would be A. $200,000 B. $150,000 C. $100,000 D. $0

Question: 5Entity X owns 90% of Entity Y. Early in the year, X lent Y $1,000,000. No payments have been made on the debt by year end. Proper accounting at year end in the consolidated financial statements would A. Eliminate 100% of the receivable, the payable, and the related interest. B. Eliminate 100% of the receivable and the payable but not any related interest. C. Eliminate 90% of the receivable, the payable, and the related interest. D. Eliminate 90% of the receivable and the payable but not any related interest.

Question: 6How should the acquirer recognize a bargain purchase in a business acquisition? A. As negative goodwill in the statement of financial position. B. As goodwill in the statement of financial position. C. As a gain in earnings at the acquisition date. D. As a deferred gain that is amortized into earnings over the estimated future periods benefited.

Question: 7A corporation owns 60% of S Corp.’s outstanding capital stock. On May 1, the corporation advanced S $70,000 in cash, which was still outstanding at December 31. What portion of this advance should be eliminated in the preparation of the December 31 consolidated balance sheet? A. $70,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $42,000 C. $28,000 D. $0

Question: 8A subsidiary has a receivable from its parent. Should this receivable be separately reported in the subsidiary’s balance sheet and in the parent’s consolidated balance sheet? Subsidiary’s Parent’s Consolidated Balance Sheet Balance Sheet A. Yes No B. Yes Yes C. No No D. No Yes

Question: 9A company owns 80% of the outstanding common stock of F Co. On December 31, Year 3, F sold equipment to the company at a price in excess of F’s carrying amount but less than its original cost. On a consolidated balance sheet at December 31, Year 3, the carrying amount of the equipment should be reported at A. The company’s original cost. B. F’s original cost. C. The company’s original cost minus F’s recorded gain. D. The company’s original cost minus 80% of F’s recorded gain.

Question: 10In a business combination, the valuation of goodwill is a calculation A. To offset the bargain purchase cost. B. Of all of the unlimited life intangible assets. C. Of the residual paid above the fair value of the identifiable net assets. D. Of all of the increases in market valuation of the intangible assets acquired.

Question: 11For the past several years, Company S has invested in the ordinary shares of Company A. Company S currently owns approximately 13% of the total of Company A’s outstanding voting ordinary shares. Recently, ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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managements of the two companies have discussed a possible combination of the two entities. If they decide to combine, how should the resulting combination be accounted for? A. Uniting of interests. B. Acquisition. C. Part purchase, part uniting of interests. D. Joint venture.

Question: 12In a business combination, the sum of the amounts assigned by the acquiring entity to assets acquired and liabilities incurred and assumed exceeds the consideration paid for the acquired entity. The excess should be reported as a A. Deferred credit. B. Reduction of the amounts assigned to current assets and a deferred credit for any unallocated portion. C. Gain immediately in the income statement. D. Pro rata reduction of the amounts assigned to all acquired assets and a gain for any unallocated portion.

Subunit 9: Different Types of Expenses and Liabilities Question: 1An entity sells appliances that include a 3-year assurance-type warranty. Service calls under the warranty are performed by an independent mechanic under a contract with the entity. Based on experience, warranty costs are estimated at $30 for each machine sold. When should the entity recognize these warranty costs? A. Evenly over the life of the warranty. B. When the service calls are performed. C. When payments are made to the mechanic. D. When the machines are sold.

Question: 2A company manufactures stereo systems that carry a 2-year assurance-type warranty against defects. Based on past experience, warranty costs are estimated at 4% of sales for the warranty period. During the year, stereo system sales totaled $3 million, and warranty costs of $67,500 were incurred. In its income statement for the year ended December 31, the company should report warranty expense of A. $52,500 B. $60,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $67,500 D. $120,000

Question: 3During Year 3, a new product carrying a 2-year assurance-type warranty against defects was introduced. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, Year 3 and Year 4, are as follows: Actual Warranty Sales

Expenditures

Year 3 $ 600,000

$ 9,000

Year 4 1,000,000

30,000

$1,600,000

$39,000

At December 31, Year 4, what amount of estimated warranty liability should be reported? A. $0 B. $39,000 C. $57,000 D. $96,000

Question: 4On April 1, a corporation began offering a new product for sale under a standard 1-year assurancetype warranty. Of the 5,000 units in inventory at April 1, 3,000 had been sold by June 30. Based on its experience with similar products, the corporation estimated that the average warranty cost per unit sold would be $8. Actual warranty costs incurred from April 1 through June 30 were $7,000. At June 30, what amount should the corporation report as estimated warranty liability? A. $9,000 B. $16,000 C. $17,000 D. $33,000

Question: 5A corporation entered into a purchase commitment to buy inventory. At the end of the accounting period, the current market value of the inventory was less than the fixed purchase price by a material amount. Which of the following accounting treatments is most appropriate? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Describe the nature of the contract in a note to the financial statements, recognize a loss in the income statement, and recognize a liability for the accrued loss. B. Describe the nature of the contract and the estimated amount of the loss in a note to the financial statements, but do not recognize a loss in the income statement. C. Describe the nature of the contract in a note to the financial statements, recognize a loss in the income statement, and recognize a reduction in inventory equal to the amount of the loss by use of a valuation account. D. Neither describe the purchase obligation nor recognize a loss on the income statement or balance sheet.

Question: 6A liability arising from a loss contingency should be recorded if the A. Amount of the loss can be reasonably estimated. B. Contingent future events have a reasonably possible chance of occurring. C. Contingent future events have a reasonably possible chance of occurring and the amount of the loss can be reasonably estimated. D. Contingent future events will probably occur and the amount of the loss can be reasonably estimated.

Question: 7Net losses on firm purchase commitments to acquire goods for inventory result from a contract price that exceeds the current market price. If a firm expects that losses will occur when the purchase occurs, expected losses, if material, A. Should be recognized in the accounts and separately disclosed as losses on the income statement of the period during which the decline in price takes place. B. Should be recognized in the accounts and separately disclosed as net unrealized losses on the balance sheet at the end of the period during which the decline in price takes place. C. Should be recognized in the accounts and separately disclosed as net unrealized losses on the balance sheet at the end of the period during which the contract is executed. D. Should not be recognized in the accounts until the contract is executed and need not be separately disclosed in the financial statements.

Question: 8Which one of the following loss contingencies would be accrued as a liability rather than disclosed in the notes to the financial statement? A. A guarantee of the indebtedness of another. B. A dispute over additional income taxes assessed for prior years (now in litigation).

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. A pending lawsuit with an uncertain outcome. D. Liabilities for service or product warranties made as a regular part of business.

Question: 9Linden Corporation is a defendant in a lawsuit where the plaintiff is seeking $1,000,000 in damages. The company had terminated the plaintiff, George Russell, from his position with Linden after Russell allegedly sold specifications for one of Linden’s new products to a competitor. Linden’s attorney believes that it is quite possible Linden will lose the case and that, if so, damages could range from $100,000 to $200,000. Regardless of the outcome of the case, Linden’s accountants estimate the company will incur an additional $5,000 in unemployment costs because of Russell’s termination. The amount that Linden should accrue because of the contingency in this situation is A. $200,000 B. $100,000 C. $5,000 D. $0

Question: 10A company is the plaintiff in two lawsuits. The first suit involves a competitor who has made an exact copy of one of the company’s products, and the company is suing for patent infringement. The attorneys estimate a $5,000,000 award for the company; however, it is anticipated that the case will be in litigation for 2 to 3 years before final resolution. The second case also involves patent infringement; however, in this instance, the attorneys do not believe the company has a strong case. It is estimated that the company has a 50% chance of winning and the award, if any, would be in the $250,000 to $1,000,000 range. The most appropriate amount to be recorded as a gain contingency is A. $0 B. $5,000,000 C. $5,125,000 D. $5,250,000

Question: 11A company is being sued in a wrongful discharge suit for $500,000. The company attorney has advised that the probability of the plaintiff prevailing and receiving the full amount is about 80%. The attorney also indicated that the case would likely be tied up in the courts for 2 to 3 years. The most appropriate financial statement presentation for this loss contingency would be to A. Record $500,000 as a loss contingency. B. Record $400,000 as a loss contingency.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Disclose the loss contingency in the footnotes. D. Not record or footnote the loss contingency.

Question: 12In May Year 1, Caso Co. filed suit against Wayne, Inc., seeking $1.9 million in damages for patent infringement. A court verdict in November Year 4 awarded Caso $1.5 million in damages, but Wayne’s appeal is not expected to be decided before Year 6. Caso’s counsel believes it is probable that Caso will be successful against Wayne for an estimated amount in the range between $800,000 and $1.1 million, with $1 million considered the most likely amount. What amount should Caso record as income from the lawsuit in the year ended December 31, Year 4? A. $0 B. $800,000 C. $1,000,000 D. $1,500,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Study Unit 3: Measurement, Valuation, and Disclosure: Long-Term Items 3: (112) Measurement, Valuation, and Disclosure: Long-Term Items 1: (28) Property, Plant, and Equipment 2: (15) Impairment and Disposal of Long-Lived Assets 3: (17) Intangible Assets 4: (27) Leases 5: (12) Income Taxes 6: (13) Accounting for Bonds and Noncurrent Notes Payable

Subunit 1: Property, Plant, and Equipment Question: 1Which of the following is not an appropriate basis for measuring the cost of property, plant, and equipment? A. The purchase price, freight costs, and installation costs of a productive asset should be included in the asset’s cost. B. Proceeds obtained in the process of readying land for its intended purpose, such as from the sale of cleared timber, should be recognized immediately as income. C. The costs of improvements to equipment incurred after its acquisition should be added to the asset’s cost if they increase future service potential. D. All costs incurred in the construction of a plant building, from excavation to completion, should be considered as part of the asset’s cost.

Question: 2The selected data from statements of financial position on December 31, Year 1, and December 31, Year 2, is presented below:

Property, plant, and equipment Accumulated depreciation

12/31/Year 1

12/31/Year 2

$295,000

$340,000

(102,000)

(119,000)

Additional information for Year 2: 1.

Equipment was acquired for $65,000.

2.

Depreciation expense was $30,000.

The carrying amount (cost minus accumulated depreciation) of property, plant, and equipment disposed of in Year 2 was A. $7,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $17,000 C. $20,000 D. $32,000

Question: 3The board of directors of a corporation authorized the president of the corporation to pay as much as $90,000 to purchase a tract of land adjacent to the main factory. The president negotiated a price of $75,800 for the land, and legal fees for closing costs amounted to $820. A contractor cleared, filled, and graded the land for $6,800, and dug the foundation for a new building for $4,300. A prefabricated building was erected at a cost of $181,000. The building has an estimated useful life of 20 years with no residual value. The contractor’s bill indicated that the cost of the parking lot and driveways was $7,060. The parking lot and the driveways will need to be replaced in 15 years. The proper amount to be recorded in the corporation’s land account is A. $76,620 B. $83,420 C. $87,720 D. $90,480

Question: 4A corporation purchased manufacturing equipment for $100,000, with an estimated useful life of 10 years and a salvage value of $15,000. The second year’s depreciation for this equipment using the double-declining balance method is A. $8,500 B. $13,600 C. $16,000 D. $20,000

Question: 5When a fixed plant asset with a 5-year estimated useful life is sold during the second year, how would the use of an accelerated depreciation method instead of the straight-line method affect the gain or loss on the sale of the fixed plant asset? Gain Loss A. Increase Increase B. Increase Decrease C. Decrease Increase

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Decrease Decrease

Question: 6Which one of the following characteristics is not required for an asset to be properly described as property, plant, and equipment? A. Held for use and not for investment. B. Newly purchased. C. Expected life of more than 1 year. D. Tangible.

Question: 7Equipment bought by a company 3 years ago was charged to equipment expense in error. The cost of the equipment was $100,000, with no expected salvage value and a 10-year estimated life. The company uses the straight-line depreciation method on similar equipment. The error was discovered at the end of Year 3 prior to the issuance of the company’s financial statements. After correction of the error, the correct carrying value of the equipment will be A. $30,000 B. $70,000 C. $80,000 D. $100,000

Question: 8A company uses the sum-of-the-years’-digits (SYD) method of depreciation. On January 1, the company purchased a machine for $50,000. It had an estimated life of 5 years and no residual value. Depreciation for the first year would be A. $10,000 B. $15,000 C. $16,667 D. $20,000

Question: 9An entity has owned its present facilities since 1981, and the CEO has authorized various expenditures to repair and improve the building during the current year. The building was beginning to sag, and without repair, the building would only last another 8 years. To correct the problem, the foundation was reinforced and several columns were added in the basement area at a cost of $47,200. As a result, engineers estimate that the building will have a remaining useful life of 20 years. To install a new computer local area network (LAN) and be ready for the next generation of computers, the phone lines and electrical systems were updated at a cost of $81,300. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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The entity’s engineers estimate that these improvements should last 25 years. The offices and open work spaces were rearranged to reduce exposure to electronic emissions at a materials cost of $31,000. The purchase and installation of the computers and software for the LAN cost $102,700. The LAN hardware and software will have to be replaced in 6 years, but further rearrangement of the offices and work spaces will not be necessary. After the above improvements were completed, the entire building was painted inside and outside at a cost of $9,450. As controller of the entity, which one of the following actions would you recommend to be in conformity with generally accepted accounting principles?

A. Treat all expenditures as expenses in the current year except the cost of rearrangement ($31,000), which should be amortized over a period not to exceed 20 years. B. Capitalize all expenditures because they represent additions, improvements, and rearrangements. C. Capitalize all costs with the exception of the upgrade to the phone and electrical systems and the painting because they represent maintenance expenses. D. Capitalize all costs with the exception of the painting because it represents maintenance expense.

Question: 10The types of assets that qualify for interest capitalization are A. Assets that are being used in the earning activities of the reporting entity. B. Assets that are ready for their intended use in the activities of the reporting entity. C. Assets that are constructed for the reporting entity’s own use. D. Inventories that are manufactured in large quantities on a continuing basis.

Question: 11An entity installed an assembly line in Year 1. Four years later, $100,000 was invested to automate the line. The automation increased the market value and productive capacity of the assembly line but did not affect its useful life. Proper accounting for the cost of the automation should be to A. Report it as an expense in Year 5. B. Establish a separate account for the $100,000. C. Allocate the cost of automation between the asset and accumulated depreciation accounts. D. Debit the cost to the property, plant, and equipment account.

Question: 12A theme park purchased a new, exciting ride and financed it through the manufacturer. The following facts pertain:

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Purchase price

$800,000

Delivery cost

50,000

Installation cost

70,000

Cost of trial runs

40,000

Interest charges for first year

60,000

The straight-line method is to be used. Compute the depreciation on the equipment for the first year assuming an estimated service life of 5 years. A. $160,000 B. $184,000 C. $192,000 D. $204,000

Question: 13Which of the following is not an appropriate basis for measuring the historical cost of property, plant, and equipment? A. Delivery and handling costs and installation costs of a productive asset should be included in the asset’s cost. B. The cost should include the purchase price without a deduction for trade discounts. C. The costs of improvements to equipment incurred after its acquisition should be added to the asset’s cost if they provide future economic benefits exceeding the originally assessed standard of performance. D. All costs incurred in the construction of a plant building, from excavation to completion, should be considered as part of the asset’s cost.

Question: 14On January 1, Year 1, an entity purchased an abandoned quarry for $1,200,000 to be used as a landfill to service its trash collection contracts with nearby cities for the next 20 years. The entity depletes the quarry using the units-of-production method based on a surveyor’s measurements of volume of the quarry’s pit. This amount was 500,000 cubic yards when purchased and 350,000 cubic yards at year-end Year 5. What is the net amount that should be shown on the entity’s December 31, Year 5, statement of financial position for the quarry? A. $1,200,000 B. $900,000 C. $840,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $360,000

Question: 15A new machine has an initial cost of $300,000, an estimated useful life of 2,000 hours of use over a 3-year period, and an estimated residual value of $70,000. Usage rates are estimated as 500 hours in the first year, 700 hours in the second year, and 800 hours in the third year. Depreciation expense in Year 2 under the units-ofproduction method of depreciation will be A. $57,500 B. $75,000 C. $80,500 D. $105,000

Question: 16In making a cash flow analysis of property, plant, and equipment (PPE), the internal auditor discovered that depreciation expense for the period was $10,000. PPE with a cost of $50,000 and related accumulated depreciation of $30,000 was sold for a gain of $1,000. If the carrying amount of PPE increased by $80,000 during the period, how much PPE was purchased this period? A. $91,000 B. $100,000 C. $110,000 D. $119,000

Question: 17A company uses straight-line depreciation for financial reporting purposes, but uses accelerated depreciation for tax purposes. Which of the following account balances would be lower in the financial statements used for tax purposes than it would be in the general purpose financial statements? A. Accumulated depreciation. B. Cash. C. Retained earnings. D. Gross property, plant, and equipment.

Question: 18All of the following would be included as part of the cost of a depreciable asset except the A. Costs to level land to make it usable for the company’s purposes.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Freight costs to ship new equipment to the company’s facility. C. Actual interest costs incurred during the construction of a new building. D. Costs to construct a driveway on the company’s property.

Question: 19An entity purchased a truck for $38,600 to transport equipment to various job sites. For this purpose, storage bins were welded to the truck bed at a cost of $1,700. The controller of the entity estimates the useful life of the truck to be 5 years and the residual value to be $1,000. Using the double-declining balance method, the depreciation expense on the truck for its second year of use is A. $9,024 B. $9,264 C. $9,432 D. $9,672

Question: 20Which one of the following methods of depreciation will result in the lowest reported net income in the early life of a depreciable asset? A. Composite depreciation method. B. Group depreciation method. C. Straight-line depreciation method. D. Sum-of-the-years’-digits depreciation method.

Question: 21A distributor of silk goods is in its first year of operation. The company has purchased ten computers at $3,500 each with an estimated life of 6 years; five desks at $500 each with an estimated life of 10 years; and two word processors at $300 each, with an estimated life of 4 years. No residual value is anticipated for any of these assets. The distributor wants to adopt a depreciation method that will be easy to use and reflect an appropriate depreciation expense for the business each accounting period. The most appropriate method would be A. Composite depreciation. B. Group depreciation. C. Inventory method. D. Replacement method.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 22In which of the following situations is the units-of-production method of depreciation most appropriate? A. An asset’s service potential declines with use. B. An asset’s service potential declines with the passage of time. C. An asset is subject to rapid obsolescence. D. An asset incurs increasing repairs and maintenance with use.

Question: 23Under IFRS, according to the revaluation model, an item of property, plant, and equipment must be carried at A. Cost minus any accumulated depreciation. B. Cost minus residual value. C. Fair value minus any subsequent accumulated depreciation and impairment losses. D. The lower of cost or net realizable value.

Question: 24A company purchased a machine costing $125,000 for its manufacturing operations and paid shipping costs of $20,000. The company spent an additional $10,000 testing and preparing the machine for use. What amount should the company record as the cost of the machine? A. $155,000 B. $145,000 C. $135,000 D. $125,000

Question: 25According to IFRS, which accounting policy may an entity apply to measure investment property in periods subsequent to initial recognition? A. Cost model or revaluation model. B. Cost model or fair value model. C. Fair value model only. D. Fair value model or revaluation model.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 26An expenditure to install an improved electrical system is a Capital Expenditure Revenue Expenditure A. No Yes B. No No C. Yes No D. Yes Yes

Question: 27A firm began operating January 1 and spent $900,000 in the first month of operations on the following items: January advertising campaign $ 40,000 Computer equipment

280,000

12-month insurance policy

120,000

January building rent

60,000

January salaries

340,000

Office supplies

10,000

Automobile

30,000

January utilities

20,000

Total

$ 900,000

The total cash expenditures that should be capitalized as property, plant, and equipment is A. $80,000 B. $310,000 C. $370,000 D. $440,000

Question: 28Majesty Amusement Park recently installed a new thrill ride. Although this attraction has an average life of 40 years, Majesty estimates that the ride will be popular for 15 years, at which point it will be disassembled and replaced with a different ride. Park attendance is based upon the local economy, which is difficult to predict. The method Majesty should use to depreciate this ride is A. Declining balance. B. Straight-line with a 15-year life.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Straight-line with a 40-year life. D. Units-of-output.

Subunit 2: Impairment and Disposal of Long-Lived Assets Question: 1An entity purchased a machine on January 1, Year 1, for $1,000,000. The machine had an estimated useful life of 9 years and a residual value of $100,000. The entity uses straight-line depreciation. On December 31, Year 4, the machine was sold for $535,000. The gain or loss that should be recorded on the disposal of this machine is A. $35,000 gain. B. $65,000 loss. C. $365,000 loss. D. $465,000 loss.

Fact Pattern: Blake Corporation has determined that one of its machines has experienced an impairment in value. However, the company expects to continue to use the asset for another 3 full years because no active market exists for this machine. Selected information on the impaired asset (on the date that impairment was determined to exist) is provided below. Original cost of the machine

$22,000

Carrying amount of the machine

20,000

Undiscounted future cash flows expected to be generated by the machine

15,000

Fair value of the machine (determined by calculating the present value of the future cash flows expected to be generated by the machine) 12,000

Question: 2After recognition of the impairment loss, Blake’s carrying amount of the impaired asset will be A. $0 B. $12,000 C. $14,000 D. $15,000

Fact Pattern: Blake Corporation has determined that one of its machines has experienced an impairment in value. However, the company expects to continue to use the asset for another 3 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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full years because no active market exists for this machine. Selected information on the impaired asset (on the date that impairment was determined to exist) is provided below. Original cost of the machine

$22,000

Carrying amount of the machine

20,000

Undiscounted future cash flows expected to be generated by the machine

15,000

Fair value of the machine (determined by calculating the present value of the future cash flows expected to be generated by the machine) 12,000

Question: 3What is the amount of the impairment loss to be recorded by Blake? A. $3,000 B. $5,000 C. $7,000 D. $8,000

Question: 4An entity sells a piece of machinery, for cash, prior to the end of its estimated useful life. The sale price is less than the carrying amount of the asset on the date of sale. The entry that the entity uses to record the sale is A.

Cash Accumulated depreciation -- machinery Loss on disposal of machinery Machinery

B.

Cash Accumulated depreciation -- machinery Gain on disposal of machinery Machinery

C.

Cash Expense -- disposal of machinery Accumulated depreciation -- machinery Machinery

D.

Cash Machinery Accumulated depreciation -- machinery Gain on disposal of machinery

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 5An entity purchased a machine for $700,000. The machine was depreciated using the straight-line method and had a residual value of $40,000. The machine was sold on December 31, Year 1. The accumulated depreciation related to the machine was $495,000 on that date. The entity reported a gain on the sale of the machine of $75,000 in its income statement for the fiscal year ending December 31, Year 1. The selling price of the machine was A. $280,000 B. $240,000 C. $205,000 D. $115,000

Question: 6What is the journal entry recorded upon the sale of an item of property, plant, and equipment (PPE) that was sold for cash in excess of its carrying amount? A. No journal entry is required. B. Debit cash Debit accumulated depreciation Debit income on disposal of PPE Credit PPE C. Debit cash Debit PPE Credit accumulated depreciation Credit income on disposal of PPE D. Debit cash Debit accumulated depreciation Credit PPE Credit income on disposal of PPE

Question: 7An entity sold a depreciable asset in the middle of the fifth year of its estimated 10-year useful life. The original cost of the asset was $100,000, and it was being depreciated on the straight-line basis. If the asset was sold for $80,000, the gain on the sale will be A. $20,000 B. $25,000 C. $30,000 D. $35,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 8To determine whether to recognize the impairment of a depreciable fixed asset, a company must compare the A. Carrying amount of the asset and the present value of the future cash flows expected to be generated by the asset. B. Original cost of the asset and the fair value of the asset. C. Carrying amount of the asset and the undiscounted future cash flows expected to be generated by the asset. D. Original cost of the asset and the carrying amount of the asset.

Question: 9Which of the following statements is true regarding impairment of long-lived assets? A. U.S. GAAP requires a one-step impairment test, and IFRS requires a two-step impairment test. B. Both IFRS and U.S. GAAP permit reversal of an impairment loss in subsequent periods. C. Both IFRS and U.S. GAAP prohibit reversal of an impairment loss in subsequent periods. D. Under U.S. GAAP, but not IFRS, reversal of an impairment loss in subsequent periods is prohibited.

Question: 10An entity applies IFRS. On December 31, Year 1, it estimates the following information regarding its headquarters building: Fair value

$100,000

Cost to sell

$15,000

Value in use

$90,000

Residual value

$17,000

Net realizable value $82,000 According to the information above, what is the recoverable amount of the headquarters building on December 31, Year 1? A. $85,000 B. $90,000 C. $100,000 D. $82,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 11Testing for possible impairment of a long-lived asset (asset group) that an entity expects to hold and use is required A. At each interim and annual balance sheet date. B. At annual balance sheet dates only. C. Periodically. D. Whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

Question: 12A company has a long-lived asset with a carrying value of $120,000, expected future cash flows of $130,000, present value of expected future cash flows of $100,000, and a market value of $105,000. What amount of impairment loss should be reported? A. $0 B. $5,000 C. $15,000 D. $20,000

Question: 13An impairment loss on a long-lived asset (asset group) to be held and used is reported by a business enterprise in A. Discontinued operations. B. Extraordinary items. C. Other comprehensive income. D. Income from continuing operations.

Question: 14Last year, a firm reduced the carrying amount of its long-lived assets used in operations from $120,000 to $100,000, in connection with its annual impairment review. During the current year, the firm determined that the fair value of the same assets had increased to $130,000. Under U.S. GAAP, what amount should the firm record as restoration of previously recognized impairment loss in the current year’s financial statements? A. $0 B. $10,000 C. $20,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $30,000

Question: 15Under IFRS, an asset is impaired when its carrying amount exceeds its recoverable amount. The recoverable amount of an asset is A. The lower of its fair value plus cost to sell or value in use. B. The greater of its fair value plus cost to sell or value in use. C. The lower of its fair value minus cost to sell or value in use. D. The greater of its fair value minus cost to sell or value in use.

Subunit 3: Intangible Assets Question: 1A recognized intangible asset is amortized over its useful life A. Unless the pattern of consumption of the economic benefits of the asset is not reliably determinable. B. If that life is determined to be finite. C. Unless the precise length of that life is not known. D. If that life is indefinite but not infinite.

Question: 2A corporation purchased a patent at the beginning of Year 1 for $22,100 that was to be amortized over 17 years. On July 1 of Year 8, the corporation incurred legal costs of $11,400 to successfully defend the patent. The amount of amortization expense that the corporation should record for Year 8 is A. $2,500 B. $1,971 C. $1,900 D. $1,300

Question: 3Which of the following costs associated with an internally developed patent should be capitalized? Research and Patent Development Registration A. No Yes

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. No No C. Yes No D. Yes Yes

Question: 4On July 1, a company acquired a patent on its new manufacturing process, which streamlines its production operation. The cost of the patent was $17,000, and the company expects that the useful life of the new process will be 10 years, although the legal life of the patent is 17 years. The company is a calendar-year corporation and is preparing its December 31 Statement of Financial Position. At which amount should the patent be reported at December 31 of the year of acquisition? A. $15,300 B. $16,000 C. $16,150 D. $16,500

Question: 5Which of the following is not considered to be an intangible asset? A. Goods on consignment. B. Patents. C. Copyrights. D. Trademarks.

Question: 6Which of the following expenditures qualifies for asset capitalization? A. Cost of materials used in prototype testing. B. Costs of testing a prototype and modifying its design. C. Salaries of engineering staff developing a new product. D. Legal costs associated with obtaining a patent on a new product.

Question: 7During the year just ended, a company incurred research and development costs of $136,000 in its laboratories relating to a patent that was granted on July 1. Costs of registering the patent equaled $34,000. The patent’s legal life is 20 years, and its estimated economic life is 10 years. In its December 31 balance sheet, what amount should the company report for the patent, net of accumulated amortization? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $32,300 B. $33,150 C. $161,500 D. $165,000

Question: 8A purchased patent has a remaining legal life of 15 years. It should be A. Expensed in the year of acquisition. B. Amortized over 15 years regardless of its useful life. C. Amortized over its useful life if less than 15 years. D. Amortized over 40 years.

Question: 9Under IFRS, an entity that acquires an intangible asset may use the revaluation model for subsequent measurement only if A. The useful life of the intangible asset can be reliably determined. B. An active market exists for the intangible asset. C. The cost of the intangible asset can be measured reliably. D. The intangible asset is a monetary asset.

Question: 10Legal fees incurred by a company in defending its patent rights should be capitalized when the outcome of litigation is Successful Unsuccessful A. Yes Yes B. Yes No C. No No D. No Yes

Question: 11Gray Co. was granted a patent on January 2, Year 5, and appropriately capitalized $45,000 of related costs. Gray was amortizing the patent over its estimated useful life of 15 years. During Year 8, Gray paid ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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$15,000 in legal costs in successfully defending an attempted infringement of the patent. After the legal action was completed, Gray sold the patent to the plaintiff for $75,000. Gray’s policy is to take no amortization in the year of disposal. In its Year 8 income statement, what amount should Gray report as gain from sale of patent? A. $15,000 B. $24,000 C. $27,000 D. $39,000

Question: 12Which of the following assets, if any, acquired this year in an exchange transaction is(are) potentially amortizable for public companies? Goodwill Trademarks A. No No B. No Yes C. Yes Yes D. Yes No

Question: 13Goodwill should be tested for value impairment at which of the following levels? A. Each identifiable long-term asset. B. Each reporting unit. C. Each acquisition unit. D. Entire business as a whole.

Question: 14A company should recognize goodwill in its balance sheet at which of the following points? A. Costs have been incurred in the development of goodwill. B. Goodwill has been created in the purchase of a business. C. The company expects a future benefit from the creation of goodwill. D. The fair market value of the company’s assets exceeds the book value of the company’s assets.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 15Which one of the following statements is correct about the reconciliation of U.S. GAAP and International Financial Reporting Standards (IFRS)? A. The costs of development generally are expensed under U.S. GAAP, but are capitalized under IFRS if they meet specific criteria. B. The costs of research must be expensed under U.S. GAAP, but are capitalized under IFRS if they meet specific criteria. C. All costs of research and development must be expensed under both U.S. GAAP and IFRS. D. Internally generated goodwill may not be capitalized under U.S. GAAP, but it may be capitalized under IFRS.

Question: 16How does IFRS differ from U.S. GAAP with respect to accounting for development costs? A. U.S. GAAP does not allow capitalization of development costs, even after technically feasible, whereas IFRS does. B. U.S. GAAP requires capitalization of development costs, whereas IFRS makes capitalization of these costs optional. C. U.S. GAAP treats development costs as part of goodwill, whereas IFRS treats these costs as an intangible asset. D. U.S. GAAP requires expensing of all development costs and IFRS requires capitalizing all development costs.

Question: 17Which one of the following statements correctly describes the accounting treatment of research and development costs (R&D) under U.S. GAAP and IFRS? A. Both U.S. GAAP and IFRS allow for costs of R&D to be capitalized. B. Neither U.S. GAAP nor IFRS allow for costs of R&D to be capitalized. C. U.S. GAAP allow for the capitalization of the costs of R&D, and IFRS require R&D costs to be expensed. D. U.S. GAAP require R&D to be expensed, and IFRS require research costs to be expensed but allow for the capitalization of the development costs.

Subunit 4: Leases Question: 1If the lease term is less than 12 months, when may a lessee elect not to recognize the right-of-use asset and lease liability?

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. The lease transfers ownership of the leased asset to the lessee by the end of the lease term. B. The present value of the sum of (1) the lease payments and (2) any residual value guaranteed by the lessee is 90% or more of the fair value of the leased asset. C. The lease does not include a purchase option that the lessee is reasonably certain to exercise. D. The term of the lease is for the major part of the remaining economic life of the leased asset.

Question: 2On January 1, Year 1, Lessee entered into a 4-year lease that does not transfer ownership at the end of the lease term. It also includes a purchase option not reasonably expected to be exercised. The leased asset has (1) a 6-year economic life, (2) no residual value, and (3) a present value of the annual lease payments equal to 75% of the leased asset’s fair value. If the leased asset has no alternative use to the lessor at the end of the lease term, how should Lessee classify the lease? A. Operating. B. Sales-type. C. Short-term. D. Finance.

Question: 3The amount recorded initially by the lessee as a lease liability should normally A. Exceed the total of the lease payments. B. Exceed the present value of the lease payments at the beginning of the lease. C. Equal the total of the lease payments. D. Equal the present value of the lease payments at the beginning of the lease.

Question: 4In a lease that is recorded as a sales-type lease by the lessor, interest revenue A. Should be recognized in full as revenue at the lease’s inception. B. Should be recognized over the period of the lease using the straight-line method. C. Should be recognized over the period of the lease using the effective-interest method. D. Does not arise.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 5Glade Co. leases computer equipment to customers under sales-type leases. The equipment has no residual value at the end of the lease, and the leases do not contain purchase options. At lease inception, the fair value of the leased computer equipment equals its carrying amount. Glade wishes to earn 8% interest on a 5-year lease of equipment with a fair value of $323,400. The present value of an annuity due of $1 at 8% for 5 years is 4.312. What is the total amount of interest revenue that Glade will earn over the life of the lease? A. $51,600 B. $75,000 C. $129,360 D. $139,450

Question: 6Wall Co. leased office premises to Fox, Inc., for a 5-year term beginning January 2, Year 4. Under the terms of the operating lease, rent for the first year is $8,000 and rent for Years 2 through 5 is $12,500 per annum. However, as an inducement to enter the lease, Wall granted Fox the first 6 months of the lease rent-free. In its December 31, Year 4, income statement, what amount should Wall report as rental income? A. $12,000 B. $11,600 C. $10,800 D. $8,000

Question: 7On January 1, Year 1, Frost Co. entered into a 2-year lease agreement with Ananz Co. to lease a new computer. The lease term begins on January 1, Year 1, and ends on December 31, Year 2. The lease agreement requires Frost to pay Ananz two annual lease payments of $8,000. The present value of the minimum lease payments is $13,000. Which of the following circumstances would require Frost to classify and account for the arrangement as a finance lease? A. The economic life of the computer is 3 years. B. The fair value of the computer on January 1, Year 1, is $14,000. C. Frost does not have the option of purchasing the computer at the end of the lease term. D. Ownership of the computer remains with Ananz throughout the lease term and after the lease ends.

Question: 8Star Company has entered into a 3-year lease agreement with Bell Corp. (lessor) for the use of 10 new commercial copy machines. The present value (PV) of the sum of the lease payments is $72,000. The total fair value of the machines on the lease commencement date is $120,000. An option to purchase the machines is not part of the lease agreement, and the copy machines will be returned to Bell at the end of the lease period. The machines are not specialized, and Bell will be able to lease or sell the leased machines after they are returned. The estimated ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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useful life is 7 years. The residual value of $6,500 per machine is not guaranteed by Star or by a third party. It is probable that all lease payments will be collected. How should the lease be classified by the lessor? A. Operating lease. B. Sales-type lease. C. Finance lease. D. Direct financing lease.

Question: 9On January 1, Emerald Co. entered into a 10-year noncancelable lease requiring year-end payments of $90,000. Emerald’s incremental borrowing rate is 12%, while the lessor’s implicit interest rate, known to Emerald, is 10%. Present value factors for an ordinary annuity for 10 periods are 6.145 at 10% and 5.650 at 12%. Ownership of the property remains with the lessor at expiration of the lease. There is no option to purchase the leased property. The leased property has an estimated economic life of 15 years. The fair value of the leased property is $1.2 million. What amount should Emerald recognize for the right-of-use asset on January 1? A. $900,000 B. $553,050 C. $508,500 D. $0

Question: 10Cott, Inc., prepared an interest amortization table for a 5-year lease payable with a purchase option having an exercise price of $2,000, effective at the end of the lease. At the end of the 5 years, the balance in the leases payable column of the spreadsheet was zero. Cott has asked Grant, CPA, to review the spreadsheet to determine the error. Only one error was made on the spreadsheet. Which of the following statements represents the best explanation for this error? A. The beginning present value of the lease did not include the present value of the payment called for by the purchase option. B. Cott subtracted the annual interest amount from the lease payable balance instead of adding it. C. The present value of the payment called for by the purchase option was subtracted from the present value of the annual payments. D. Cott discounted the annual payments as an ordinary annuity, when the payments actually occurred at the beginning of each period.

Question: 11On December 29, Year 1, Action Corp. signed a 7-year lease for an airplane to transport its professional sports team around the country. The airplane’s fair value was $841,500. Action made the first annual lease payment of $153,000 on December 31, Year 1. Action’s incremental borrowing rate was 12%, and the interest ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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rate implicit in the lease, which was known by Action, was 9%. The following are the rounded present value factors for an annuity due: 9% for 7 years 5.5 12% for 7 years 5.1 What amount should Action report as a lease liability in its December 31, Year 1, balance sheet? A. $841,500 B. $780,300 C. $688,500 D. $627,300

Question: 12Quick Company’s lease payments are made at the end of each period. Quick’s liability for a finance lease will be reduced periodically by the A. Lease payment minus the portion of the lease payment allocable to interest. B. Lease payment plus the amortization of the related asset. C. Lease payment minus the amortization of the related asset. D. Lease payment.

Question: 13On January 1, Year 4, Babson, Inc., leased two automobiles for executive use. The lease requires Babson to make 5 annual payments of $13,000 beginning January 1, Year 4. At the end of the lease term, December 31, Year 8, Babson guarantees the residual value of the automobiles will total $30,000. Babson estimates that it will probably owe only $10,000 at the end of the lease term under the residual value guarantee. The interest rate implicit in the lease is 9%. Present value factors for the 9% rate implicit in the lease are as follows: For an annuity due with 5 payments

4.240

For an ordinary annuity with 5 payments 3.890 Present value of $1 for 5 periods

0.650

Babson’s recorded lease liability immediately after the first required payment should be A. $48,620 B. $44,070 C. $35,620

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $61,620

Question: 14On January 2, Cole Co. signed an 8-year noncancelable lease for a new machine, requiring $15,000 annual payments at the beginning of each year. The machine has a useful life of 12 years with no salvage value. Title passes to Cole at the lease expiration date. Cole uses straight-line amortization for all of its plant assets. Aggregate lease payments have a present value on January 2 of $108,000, based on an appropriate rate of interest. For the current year, Cole should record amortization expense for the right-of-use asset at A. $0 B. $9,000 C. $13,500 D. $15,000

Question: 15On January 1, Year 4, Mollat Co. signed a 6-year lease for equipment having a 10-year economic life. The present value of the monthly equal lease payments equaled 80% of the equipment’s fair value. The lease agreement provides for neither a transfer of title to Mollat nor a purchase option. In its Year 4 income statement, Mollat should report A. Lease expense equal to the Year 4 lease payments. B. Lease expense equal to the Year 4 lease payments less interest expense. C. Amortization expense equal to one-tenth of the equipment’s fair value. D. Amortization expense equal to one-seventh of 80% of the equipment’s fair value.

Question: 16Manning Co. (lessee) has the following current lease liabilities at the end of Year 7: Lease A – finance lease, 5 years, lease liability $125,000 Lease B – operating lease, 3 years, lease liability $65,000 How should Manning present the lease liabilities on its balance sheet? A. Finance and operating lease liabilities may be presented together in the same line item on the balance sheet. B. Finance and operating lease liabilities may be presented with other liabilities on the balance sheet. C. Finance and operating lease liabilities must be presented separately from each other and other liabilities on the balance sheet. D. The finance lease liability, not the operating lease liability, must be presented separately from other liabilities on the balance sheet.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 17On January 1, Year 1, JCK Co. signed a contract for an 8-year lease of its equipment with a 10-year life. The present value of the 16 equal semiannual payments in advance equaled 85% of the equipment’s fair value. The contract had no provision for JCK, the lessor, to give up legal ownership of the equipment. Should JCK recognize rent or interest revenue in Year 3, and should the revenue recognized in Year 3 be the same or smaller than the revenue recognized in Year 2? Year 3 Revenues Year 3 Amount Recognized Recognized Compared with Year 2 A. Rent The same B. Rent Smaller C. Interest The same D. Interest Smaller

Question: 18Able Co. leased equipment to Baker under a noncancelable lease with a transfer of title. After recognition of the lease, will Able record any depreciation expense on the leased asset and interest revenue related to the lease? Depreciation Interest Expense Revenue A. Yes Yes B. Yes No C. No No D. No Yes

Question: 19On the first day of its fiscal year, Lessor, Inc., leased certain property at an annual rental of $100,000 receivable at the beginning of each year for 10 years. The first payment was received immediately. The leased property is new, had cost $650,000, and has an estimated useful life of 13 years with no salvage value. The rate implicit in the lease is 8%. The present value of an annuity of $1 payable at the beginning of the period at 8% for 10 years is 7.247. Lessor had no other costs associated with this lease. Lessor should have accounted for this lease as a sales-type lease but mistakenly treated the lease as an operating lease. Lessor depreciates all of its properties using the straight-line depreciation method. Ignoring tax effects, what was the effect on net earnings during the first year of treating this lease as an operating lease rather than as a sale? A. Overstatement of $25,300. B. Understatement of $74,676. C. Understatement of $24,676.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Understatement of $24,700.

Question: 20Rent should be reported by the lessor as revenue over the lease term as it becomes receivable according to the provisions of the lease for a(n) Direct-Financing Operating Sales-Type Lease Lease Lease A. Yes Yes Yes B. Yes No No C. No Yes No D. No No Yes

Fact Pattern: Neary Company has entered into a contract to lease computers from Baldwin Company starting on January 1, Year 1. Relevant information pertaining to the lease is provided below. Lease term

4 Years

Useful life of computers

5 Years

Present value of future lease payments

$100,000

Fair value of leased asset on date of lease 105,000 Baldwin’s implicit rate (known to Neary)

10%

At the end of the lease term, ownership of the asset transfers from Baldwin to Neary. Neary has properly classified this lease as a capital lease on its financial statements and uses straight-line depreciation on comparable assets. Question: 21At January 1, Year 1, the lease would be reported on Neary’s books as a(n) A. Asset only. B. Asset and a liability. C. Liability only. D. Expense and a liability.

Fact Pattern: Neary Company has entered into a contract to lease computers from Baldwin Company starting on January 1, Year 1. Relevant information pertaining to the lease is provided below. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Lease term

4 Years

Useful life of computers

5 Years

Present value of future lease payments

$100,000

Fair value of leased asset on date of lease 105,000 Baldwin’s implicit rate (known to Neary)

10%

At the end of the lease term, ownership of the asset transfers from Baldwin to Neary. Neary has properly classified this lease as a capital lease on its financial statements and uses straight-line depreciation on comparable assets. Question: 22What is the annual amortization expense that Neary will record on the leased computers? A. $20,000 B. $21,000 C. $25,000 D. $26,250

Question: 23If a lessee uses off-balance-sheet financing, assets have been acquired A. For cash. B. With short-term leases. C. With finance leases. D. With a line of credit.

Question: 24Which of the following meets a criterion for a lessee to account for a lease as a finance lease? A. The lease is for unspecialized equipment. B. A third party has guaranteed the residual value of the leased asset. C. The present value of the lease payments is 75% of the fair value of the leased asset. D. The lessee is reasonably certain to exercise the option to purchase the leased asset.

Question: 25Which of the following is a criterion for a lease to be classified as a finance lease in the books of a lessee?

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. The lease contains a purchase option that the lessee is reasonably certain to exercise. B. The lease does not transfer ownership of the property to the lessee. C. The lease term is equal to 65% or more of the estimated useful life of the leased property. D. The present value of the minimum lease payments is 70% or more of the fair market value of the leased property.

Question: 26Which of the following statements about a lease is false if a lease classification criterion is met? A. The lessor capitalizes the net investment in the lease. B. The lessor records a leased asset. C. The lessee amortizes right-of-use asset. D. A sales-type lease is a form of financing.

Question: 27A corporation signed a 3-year lease for an automobile on December 1. The automobile had a list price of $17,000 and an estimated useful life of 8 years. The lease called for payments of $500 per month for 36 months. The present value of the $500 payments was $15,054 at the corporation’s incremental borrowing rate and $15,496 at the lessor’s implicit rate, which is known to the lessee. Based on the above information, the corporation should record the lease as a(n) A. Finance lease. B. Operating lease. C. Sale-leaseback. D. Sales-type lease.

Subunit 5: Income Taxes Question: 1Income-tax-basis financial statements differ from those prepared under GAAP because they A. Do not include nontaxable revenues and nondeductible expenses in determining income. B. Include detailed information about current and deferred income tax liabilities. C. Contain no disclosures about capital and operating lease transactions. D. Recognize certain revenues and expenses in different reporting periods.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 2Temporary differences arise when expenses are deductible for tax purposes After They Are Before They Are Recognized in Recognized in Financial Income Financial Income A. No No B. No Yes C. Yes Yes D. Yes No

Fact Pattern: Lucas Company computed the following deferred tax balances for the 2 most recent years. Deferred tax assets are considered fully realizable. Year 1 Deferred tax asset

Year 2

$ 9,000 $17,000

Deferred tax liability 13,000 23,000

Question: 3If Lucas calculates taxable income of $1,000,000 for Year 2 and is taxed at an effective income tax rate of 40%, how much income tax expense will be reported on Lucas’s income statement for Year 2? A. $400,000 B. $402,000 C. $404,000 D. $406,000

Question: 4A liability that represents the accumulated difference between the income tax expense reported on the firm’s books and the income tax actually paid is A. Capital gains tax. B. Deferred taxes. C. Taxes payable. D. Value-added taxes.

Question: 5Which one of the following temporary differences will result in a deferred tax asset? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Use of the straight-line depreciation method for financial statement purposes and the Modified Accelerated Cost Recovery System (MACRS) for income tax purposes. B. Installment sale profits accounted for on the accrual basis for financial statement purposes and on a cash basis for income tax purposes. C. Advance rental receipts accounted for on the accrual basis for financial statement purposes and on a cash basis for tax purposes. D. Investment gains accounted for under the equity method for financial statement purposes and under the cost method for income tax purposes.

Fact Pattern: Bearings Manufacturing Company, Inc. purchased a new machine on January 1, Year 1, for $100,000. The company uses the straight-line depreciation method with an estimated equipment life of 5 years and a zero salvage value for financial statement purposes, and uses the 3year, Modified Accelerated Cost Recovery System (MACRS) with an estimated equipment life of 3 years for income tax reporting purposes. Bearings is subject to a 35% marginal income tax rate.

Question:

Assume that the deferred tax liability at the beginning of the year is zero and that Bearings has a positive earnings tax position. The MACRS depreciation rates for 3-year equipment are shown below. Year Rate

1 33.33% 2 44.45 3 14.81 4 7.41 6What is the deferred tax liability at December 31, Year 1 (rounded to the nearest whole dollar)?

A. $7,000 B. $33,330 C. $11,666 D. $4,666

Question: 7A corporation entered into a 3-year contract, using the input method for financial income and the point-in-time method for taxable income. The corporation expected the project to be profitable throughout the construction period. The effect on the corporation’s financial statements for the third year of this contract would be a(n) A. Decrease in the deferred tax asset account. B. Decrease in the deferred tax liability account. C. Increase in the deferred tax asset account.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Increase in the deferred tax liability account.

Question: 8A tax rate other than the current tax rate may be used to calculate the deferred income tax amount on the statement of financial position if a(n) A. Future tax rate has been enacted into law. B. Future tax rate change is considered more likely than not to occur. C. Election has been made to apply past tax rates. D. Net operating loss carryback exists.

Question: 9Selected financial information for the year just ended is shown below. Pretax income

$5,000,000

Interest received on municipal bonds

600,000

Gain on the sale of land reported this year but not taxable until next year Tax rate for all years

1,000,000 40%

Beginning balances: Income taxes payable

0

Deferred tax liability

$50,000

The total income tax expense reported on the income statement for the year just ended should be A. $960,000 B. $1,360,000 C. $1,760,000 D. $2,640,000

Question: 10Intraperiod income tax allocation arises because A. Items included in the determination of taxable income may be presented in different sections of the financial statements. B. Income taxes must be allocated between current and future periods.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Certain revenues and expenses appear in the financial statements either before or after they are included in taxable income. D. Certain revenues and expenses appear in the financial statements but are excluded from taxable income.

Question: 11When accounting for income taxes, a temporary difference occurs in which of the following scenarios? A. An item is included in the calculation of net income but is neither taxable nor deductible. B. An item is included in the calculation of net income in one year and in taxable income in a different year. C. An item is no longer taxable due to a change in the tax law. D. The accrual method of accounting is used.

Question: 12The purpose of interperiod income tax allocation is to A. Reconcile the tax consequences of permanent and temporary differences that appear on the company’s current financial statements. B. Recognize a tax asset or liability for the tax consequences of temporary differences that exist at the date of the balance sheet. C. Adjust the income tax expense on the income statement to be consistent with the income tax liability shown on the balance sheet. D. Provide proper disclosure of a distribution of earnings to a taxing authority.

Subunit 6: Accounting for Bonds and Noncurrent Notes Payable Fact Pattern: On January 1, Evangel Company issued 9% bonds in the face amount of $100,000, which mature in 5 years. The bonds were issued for $96,207 to yield 10%, resulting in a bond discount of $3,793. Evangel uses the effective interest method of amortizing bond discount. Interest is payable annually on December 31. Question: 1What is the amount of interest expense that should be reported on Evangel’s income statement for the second year? A. $8,779 B. $9,000 C. $9,559 D. $9,683

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern: On January 1, Evangel Company issued 9% bonds in the face amount of $100,000, which mature in 5 years. The bonds were issued for $96,207 to yield 10%, resulting in a bond discount of $3,793. Evangel uses the effective interest method of amortizing bond discount. Interest is payable annually on December 31. Question: 2What is the amount of Evangel’s unamortized bond discount at the end of the first year? A. $621 B. $2,452 C. $3,172 D. $3,793

Fact Pattern: On January 1, Evangel Company issued 9% bonds in the face amount of $100,000, which mature in 5 years. The bonds were issued for $96,207 to yield 10%, resulting in a bond discount of $3,793. Evangel uses the effective interest method of amortizing bond discount. Interest is payable annually on December 31. Question: 3The net carrying amount of Evangel’s bonds payable at the end of the first year is A. $94,866 B. $95,586 C. $96,828 D. $97,548

Fact Pattern: On January 1, Evangel Company issued 9% bonds in the face amount of $100,000, which mature in 5 years. The bonds were issued for $96,207 to yield 10%, resulting in a bond discount of $3,793. Evangel uses the effective interest method of amortizing bond discount. Interest is payable annually on December 31. Question: 4What is the amount of interest expense that should be reported on Evangel’s income statement at the end of the first year? A. $8,659 B. $9,000 C. $9,621 D. $10,000

Question: 5The best advantage of a zero-coupon bond to the issuer is that the ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Bond requires a low issuance cost. B. Bond requires no interest income calculation to the holder or issuer until maturity. C. Interest can be amortized annually by the APR method and need not be shown as an interest expense to the issuer. D. Interest can be amortized annually on a straight-line basis but is a noncash outlay.

Fact Pattern: On January 1, Evangel Company issued 9% bonds in the face amount of $100,000, which mature in 5 years. The bonds were issued for $96,207 to yield 10%, resulting in a bond discount of $3,793. Evangel uses the effective interest method of amortizing bond discount. Interest is payable annually on December 31. Question: 6What is the amount of interest Evangel will pay at the end of the first year? A. $8,659 B. $9,000 C. $9,621 D. $10,000

Question: 7A premium on bonds payable arises when A. The semiannual bond interest becomes due. B. The prevailing interest rate after the bond issuance falls below the nominal rate of the bonds. C. The amount received from sale of the bonds at issuance exceeds the face value of the bonds. D. The cost of issuing the bonds is capitalized.

Question: 8On January 1, bonds with a face amount of $200,000, an 8% annual effective yield, and a 7% annual coupon rate were sold by Thomas Dynamics, Inc., for $180,000. The bonds pay interest on January 1 and July 1. Using the effective interest method, the company’s interest expense for the first 6 months ended July 1 will be A. $7,000 B. $7,200 C. $14,000 D. $14,400

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 9Debentures are A. Income bonds that require interest payments only when earnings permit. B. Subordinated debt and rank behind convertible bonds. C. Bonds secured by the full faith and credit of the issuing firm. D. A form of lease financing similar to equipment trust certificates.

Question: 10Which one of the following characteristics distinguishes income bonds from other bonds? A. The bondholder is guaranteed an income over the life of the security. B. By promising a return to the bondholder, an income bond is junior to preferred and common stock. C. Income bonds are junior to subordinated debt but senior to preferred and common stock. D. Income bonds pay interest only if the issuing company has earned the interest.

Question: 11Serial bonds are attractive to investors because A. All bonds in the issue mature on the same date. B. The yield to maturity is the same for all bonds in the issue. C. Investors can choose the maturity that suits their financial needs. D. The coupon rate on these bonds is adjusted to the maturity date.

Question: 12The measurement basis most often used to report a long-term payable representing a commitment to pay money at a determinable future date is A. Historical cost. B. Current cost. C. Net realizable value. D. Present value of future cash flows.

Question: 13When using fair value accounting, it would be to a firm’s benefit to report the liability at fair value when it has

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $32 million in outstanding bonds trading at 101. B. $50 million in variable-rate preferred shares outstanding. C. $28 million in outstanding bonds trading at 98. D. $25 million in put-able bonds trading at 102.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Study Unit 4: Integrated Reporting 4: (74) Integrated Reporting 1: (20) Integrated Reporting, Integrated Thinking, and the Integrated Report 2: (21) Fundamental Concepts of Integrated Reporting 3: (19) Guiding Principles and Content Elements of the Integrated Report 4: (14) Adoption of Integrated Reporting

Subunit 1: Integrated Reporting, Integrated Thinking, and the Integrated Report Question: 1The primary purpose of integrated reporting (IR) is to A. Explain to providers of financial capital how value is created by the company over time. B. Give customers holistic information about the company and its values. C. Report about nonfinancial aspects of the company. D. Meet the requirements of regulators.

Question: 2The primary purpose of integrated reporting is to A. Be able to tell customers holistically about the organization and its values. B. Report about mainly nonfinancial aspects of the organization. C. Explain to providers of financial capital how value is created by the organization over time. D. Fulfill the requirements of regulatory institutions.

Question: 3Integrated thinking is not A. The final step in the integrated reporting process. B. The basis for integrated reporting and the integrated report. C. A means of providing insight into the interdependencies between financial and nonfinancial aspects of the organization. D. A process of decision making, management, and reporting.

Question: 4Integrated reporting is best defined as ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. A concise communication about how strategy, governance, performance, and prospects lead to value creation over time. B. The process of defining and measuring nonfinancial aspects of a company. C. Combining the annual report with the sustainability or corporate sustainability reports from a company. D. A process founded on integrated thinking, resulting in a periodic integrated report by an organization about value creation and preservation.

Question: 5Integrated reports A. Must be prepared in conformity with accounting principles that are generally accepted in the United States (U.S. GAAP). B. Are the foundation for integrated thinking. C. Depict how costs and customer value accumulate along a chain of activities that lead to a product or service. D. Include financial and nonfinancial information.

Question: 6Integrated thinking is A. The final step in the integrated reporting process. B. The basis for integrated reporting and the integrated report. C. Most often undertaken by a specialized department. D. Primarily a management and governance process.

Question: 7Which statement about integrated reporting is true? A. Integrated reporting communicates a company’s strategy throughout the organization and connects critical success factors with performance measures. B. A principles-based framework for integrated reporting has been issued by the International Integrated Reporting Council (IIRC). C. The ultimate goal of the proponents of integrated reporting is for it to become the reporting standard for public companies in the U.S. D. Integrated reporting is the basis for the externally communicated integrated report.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 8Integrated reporting is a process founded on , which results in about value creation and preservation in the . List A List B List C A. Integrated reports Integrated thinking Long term B. Integrated thinking Integrated reports Short, medium, and long term C. Corporate social responsibility Integrated reports Short, medium, and long term D. Integrated thinking Integrated reports Short term

Question: 9The most important factor in the introduction of integrated reporting is A. Issuance by regulators of new standards requiring companies to report more nonfinancial information. B. The loss of trust in financial reporting after the 2008 financial crisis. C. The increased recognition of intangible assets in corporate balance sheets. D. The dissatisfaction of stakeholders with the content of the traditional sustainability reports, requiring an update on the nonfinancial reporting parts.

Question: 10Integrated reporting, integrated thinking, and the integrated report are A. Sequential phases of the Framework. B. Used interchangeably. C. Distinct but interconnected. D. Distinct and static.

Question: 11Which of the following is the main goal of the integrated report? A. Compliance with the framework issued by the International Integrated Reporting Council. B. Communication to customers of the financial and nonfinancial aspects of the company. C. Disclosure of more information about how the entity creates value over time to providers of financial capital.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Full disclosure of information about financial matters in the interests of improving transparency and accountability.

Question: 12Integrated thinking is A. The final step in the integrated reporting process. B. A process that communicates how various factors lead to value creation. C. Focused on determining how an annual report is combined with a sustainability report. D. A process of decision making, management, and reporting.

Question: 13Integrated thinking is A. Done in stand-alone departments. B. A prerequisite to integrated reporting about performance. C. The basis for financial statements and separately published corporate social responsibility reports. D. A concise communication about how strategy, governance, performance, and prospects lead to value creation.

Question: 14Through integrated reporting, a company A. May disclose the effects of externalities on capitals owned by the company. B. Is limited to including only material value created for itself. C. Communicates implementation of strategies, corporate governance, performance, and prospects leading to value creation. D. Combines the sustainability report with the corporate social responsibility report.

Question: 15Integrated reporting is a new reporting concept. Integrated reporting was introduced because A. Traditional financial reporting increasingly did not provide adequate nonfinancial information about value creation. B. Regulators issued new standards that required reporting of nonfinancial as well as financial information. C. The financial crisis of 2008 resulted in a lack of trust in companies.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Stakeholders were critical of traditional sustainability reports.

Question: 16Which of the following statements about the background of the Integrated Reporting Framework is true? A. The objective is to achieve financial well being and sustainable expansion through integrated thinking. B. The Institute of Management Accountants (IMA) issued the Framework in 2013. C. Integrated reporting primarily is intended to guide disclosures by public companies. D. Integrated reporting includes financial information in the same document as the sustainability or corporate social responsibility report.

Question: 17The integrated report A. Must be prepared in conformity with accounting principles generally accepted in the United States (GAAP). B. Is a sustainability report for certain stakeholders. C. Benefits parties, including employees, customers, suppliers, and regulators, interested in value creation. D. Is issued only by private companies in the U.S.

Question: 18How are integrated reporting, integrated thinking, and the integrated report most likely related? A. Integrated reporting is a process that continuously improves integrated thinking. B. Integrated reporting is a prerequisite to integrated thinking. C. Integrated reporting and thinking emphasize how performance leads to value creation. D. Integrated reporting is necessarily static because it must comply with the Framework.

Question: 19The framework promulgated by the International Integrated Reporting Council A. Must be adopted by private companies. B. Is principles-based. C. Primarily addresses the needs of providers of financial capital in the public sector.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. May be used as guidance for external reporting of financial statements.

Question: 20Which of the following is a true statement about value creation for integrated reporting (IR) purposes? A. Value creation is a process based on integrated thinking resulting in an integrated report. B. Understanding how financial and nonfinancial factors interact affects decisions about value creation. C. An integrated report explains how the interdependent financial aspects of a company interact in the valuecreation process. D. The main goal of IR is to disclose financial information to improve accountability.

Subunit 2: Fundamental Concepts of Integrated Reporting Question: 1The fundamental concepts defined by the International Integrated Reporting Council (IIRC) are A. Value creation, the value-creation process, and the six capitals. B. Business activities, the value-creation process, and materiality. C. The six capitals, the business model, and the external environment. D. External environment, the business model, and materiality.

Question: 2The fundamental concepts of integrated reporting, as defined by the IIRC, are A. The six capitals, the value-creation process, and materiality. B. Value creation, the value-creation process, and the six capitals. C. The six capitals, the value-creation process, and the business model. D. External environment, the business model, and materiality.

Question: 3Which statement about value creation is false? A. Value creation is one of the three fundamental concepts of integrated reporting. B. Because externalities of value creation do not affect the organization, they should not be included in the integrated report. C. Value created for others that is considered material should be included in the integrated report.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Value is created both for the organization as well as for its external environment.

Question: 4What is not one of the six capitals defined in the Framework? A. Environmental capital. B. Manufactured capital. C. Social and relationship capital. D. Intellectual capital.

Question: 5Which statement about the capitals is false? A. The capitals can decrease, increase, or be transformed due to the regular course of business. B. Value can be created in any of the six capitals and is not necessarily measured in financial capital. C. An integrated report does not have to be structured along the six capitals. D. Every organization should address the six capitals in its integrated report.

Question: 6In an integrated report, what is the difference between outputs of business activities and outcomes? A. Outputs are results in the form of physical products, by-products, and waste. Outcomes are the intangible results. B. Outputs are results in the form of products and services. Outcomes are these results measured in financial capital terms. C. Outputs are results in the form of all products created. Outcomes are unwanted externalities such as byproducts and waste. D. Outputs are results in the form of products, services, by-products, and waste. Outcomes are the effects of outputs on capitals.

Question: 7A company’s social license to operate is the result of the A. Outcome of interactions with customers. B. Financial returns to the providers. C. Six elements of capital.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Company’s outlook.

Question: 8Which of the following is included in the integrated report? A. Social and relationship capital but not negative externalities. B. Only financial, manufactured, and intellectual capital. C. Material value created for others and externalities. D. Value created for the company but not for the external environment.

Question: 9The six capitals defined in the Framework include A. Environmental capital and political capital. B. Manufactured capital and environmental capital. C. Financial capital and nonfinancial capital. D. Intellectual capital and human capital.

Question: 10According to the Framework, value creation depends on sources known as capitals. Which of the following is a true statement about the capitals? A. Every company should address the six capitals in its integrated report. B. The capitals are affected by the regular course of business. C. Value is necessarily measured in financial capital. D. Value creation occurs only when the total of the capitals increases.

Question: 11According to the International Integrated Reporting Council (IIRC), manufactured capital is a source of value creation for a company. Manufactured capital A. Consists of the environmental resources used. B. Is obtained through financing. C. Need not be owned. D. Must be presented in an integrated report.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 12An economic condition may affect a company’s ability to create value. It is an example of which influencing factor? A. Governance. B. External environment. C. Strategy and resource allocation. D. Performance.

Question: 13The fundamental concepts defined by the International Integrated Reporting Council (IIRC) include A. Governance. B. Value creation. C. Guiding principles. D. Content elements.

Question: 14Value creation A. Is unaffected by externalities because they are not included in the integrated report. B. Is always measured in financial terms. C. For others is not included in the integrated report. D. Depends on sources affected by the regular course of business.

Question: 15One of the six capitals defined in the Integrated Reporting Framework is A. Product capital. B. Natural capital. C. Owned capital. D. Equity capital.

Question: 16Which statement about the capitals in an integrated report is true? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. The change in value of the capitals must be disclosed in a supplement to the integrated report. B. The capitals are not affected by the regular course of business. C. Value can be created in any of the six capitals and is always measured in dollars. D. An integrated report does not have to be structured based on the six capitals.

Question: 17Outcomes are an element of the value-creation process. They are A. The results of business activities. B. Controlled by the organization. C. The effects of outputs on the six capitals. D. Products or services.

Question: 18According to the Integrated Reporting Framework, the six capitals are affected by the A. Outcomes of interactions with customers. B. Financial returns to the providers. C. Regular course of business. D. Relations with stakeholders.

Question: 19According to the IIRC, natural capital is a source of value creation. Natural capital A. Is nonrenewable. B. Is obtained through financing. C. Consists of the environmental resources used. D. Must be present in an integrated report.

Question: 20A proper oversight structure may affect a company’s ability to create value. Which of the following is the relevant Content Element? A. External environment.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Governance. C. Strategy and resource allocation. D. Performance.

Question: 21A leading manufacturer of electric vehicles has accumulated customer driving interaction data through its unique pilot driver-assist program. This data will be used to further develop more advanced autonomous features that the company plans to implement in the near future on its most popular model. In integrated reporting, the system used to accumulate and analyze the driving data is best categorized as A. Human capital. B. Intellectual capital. C. Natural capital. D. Manufactured capital.

Subunit 3: Guiding Principles and Content Elements of the Integrated Report Question: 1Which of the following is not an element of the value-creation process? A. Governance. B. The integrated report. C. Strategy and resource allocation. D. Future outlook.

Question: 2Preparing an integrated report involves certain challenges. What part of the Framework provides information on how to present the content of the integrated report? A. The Content Elements. B. The capitals. C. The Guiding Principles. D. The fundamental concepts.

Question: 3Must an organization address all the Content Elements defined in the Framework? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. No; the professional judgment of the preparers determines which Content Elements should be addressed in the integrated report. B. No, but if a Content Element is excluded, the organization should explain why it did not address that element. C. Yes, all Content Elements should be addressed in the integrated report. D. No; the Content Elements are guidelines that can be ignored by the preparers of the integrated report.

Question: 4What issue is most likely to result from strict interpretation of the guiding principle of reliability and completeness? A. Reliability and completeness might conflict with the guiding principle of conciseness. B. External assurance may be difficult, especially regarding nonfinancial information. C. Reliability and completeness is not one of the guiding principles. D. It is impossible to measure the nonfinancial aspects of an integrated report. It can therefore never be reliable.

Question: 5Connectivity of information A. Means that the Content Elements should be presented in the fixed order prescribed in the Framework. B. Is connection of all six capitals to each other and a demonstration of how they are related. C. Is the principle that the integrated report should present a holistic view of different aspects of the company. D. Requires companies to provide a digital platform in which its customers can search to find relevant, interrelated, and linked information.

Question: 6Which of the following is a Guiding Principle for integrated reporting? A. Stakeholder relationships. B. Performance. C. Strategy and resource allocation. D. Basis of preparation and presentation.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 7An integrated report must include A. Nine Content Elements. B. Seven Guiding Principles. C. Six capitals. D. Three fundamental concepts.

Question: 8The question posed for the Content Element, Basis of Preparation and Presentation, in the Framework is A. To what extent has the organization achieved its strategic objectives for the period, and what are its outcomes in terms of effects on the capitals? B. Where does the organization want to go, and how does it intend to get there? C. What does the organization do, and what are the circumstances under which it operates? D. How does the organization determine what matters to include in the integrated report, and how are such matters quantified or evaluated?

Question: 9When applying the Guiding Principles for an integrated report, A. Tension may exist between principles. B. Judgment is not needed. C. The guidelines must be strictly applied. D. Challenges should not be encountered.

Question: 10Questions that should be answered in the integrated report are posed in the A. Content Elements. B. Capitals as defined by the IIRC. C. External environment of integrated reporting. D. Stakeholder needs and interest as part of the IIRC Guiding Principles.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 11According to the Framework, “An integrated report must include all material matters . . . ” The relevant Guiding Principle is A. Consistency and comparability. B. Reliability and completeness. C. Materiality. D. Conciseness.

Question: 12Of the Content Element questions posed in the Framework, which relates to Outlook? A. Where does the organization want to go and how does it intend to get there? B. What challenges and uncertainties is the organization likely to encounter in pursuing its strategy? C. To what extent has the organization achieved its strategic objectives for the period? D. How does the organization determine what matters to include in the integrated report?

Question: 13The Framework includes Content Elements. The organization’s business model is one such element. A description of the business model in the integrated report includes A. Identification of dependencies. B. Outputs such as brand loyalty. C. Sources of specific risks. D. Measurement of achievements.

Question: 14Which of the following is a Content Element defined in the Integrated Reporting Framework? A. The integrated report. B. Governance. C. The six capitals. D. Integrated thinking.

Question: 15Preparing an integrated report presents challenges. What part of the Integrated Reporting Framework addresses presentation of information in the integrated report? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Guiding Principles. B. Content Elements. C. Capitals. D. Fundamental concepts.

Question: 16Is a company required to address all the Content Elements defined in the Framework? A. Preparers are expected to use professional judgment to decide which elements should be addressed in the integrated report. B. A Content Element may be omitted if the company explains the omission. C. Content Elements are guidelines that cannot always be applied strictly. D. All Content Elements should be addressed in the integrated report.

Question: 17“Changes and improvements can be made but should be explained.” This Guiding Principle is A. Materiality. B. Conciseness. C. Consistency and comparability. D. Reliability and completeness.

Question: 18Which question posed in the Framework relates to strategy and resource allocation? A. What challenges and uncertainties is the organization likely to encounter in pursuing its strategy? B. To what extent has the organization achieved its strategic objectives for the period? C. How does the organization determine what matters to include in the integrated report? D. Where does the organization want to go and how does it intend to get there?

Question: 19One of the questions posed in the Integrated Reporting Framework is, “What does the organization do, and what are the circumstances under which it operates?” An aspect of the related Content Element includes A. Leadership structure.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Mission and vision. C. Business model. D. Risks and opportunities.

Subunit 4: Adoption of Integrated Reporting Question: 1Which of the following is not a challenge for an organization that adopts integrated reporting (IR)? A. Materiality definitions. B. The unwillingness of stakeholders to accept the new reporting form. C. Support from senior management. D. Data quality of nonfinancial information.

Question: 2What benefits are attributable to integrated reporting (IR)? A. Better stakeholder relations, lower reputational risk, and better decision making. B. Better stakeholder relations, more providers of financial capital, and better decision making. C. Better stakeholder relations, more providers of financial capital, and higher assurance for the integrated report. D. Lower reputational risk, better decision making, and higher assurance for the integrated report.

Question: 3Which of the following is a potential advantage of integrated reporting (IR)? A. Reduction of costs by establishing new control systems. B. Better control systems for financial information. C. Less emphasis on the materiality of nonfinancial information. D. Providing assurances on nonfinancial information.

Question: 4Which of the following is a benefit to an entity that adopts integrated reporting (IR)? A. Better measurement of financial information.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Providing greater assurance on financial information. C. Breaking down silos within the organization. D. Separating financial and nonfinancial information.

Question: 5The challenges of adopting integrated reporting (IR) include A. Defining materiality when using a multi-capital approach. B. The resulting linkage of financial and nonfinancial information. C. More employee engagement. D. Forcing departments to work together.

Question: 6The business case for adoption of integrated reporting (IR) most likely includes A. Universally accepted standards for value creation. B. Linkage of financial and nonfinancial information. C. Use of a single-capital approach. D. Less emphasis on the importance of the tone at the top.

Question: 7The greatest challenge for an organization that adopts integrated reporting (IR) is A. Defining materiality for providers of financial capital. B. The unwillingness of stakeholders to accept the new reporting form. C. Full involvement of the CEO and the board. D. Data quality of financial information.

Question: 8The business case for integrated reporting (IR) most likely includes A. More reliable assurance on decision making and financial and nonfinancial information. B. Better stakeholder relations, better resource allocation, and greater assurance provided by the integrated report.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. More committed customers and more engaged employees. D. Lower costs, more providers of financial capital, and better decision making.

Question: 9The challenge for adopters of integrated reporting (IR) is A. Less emphasis on the materiality of nonfinancial information. B. Enhancing the quality of integrated reports by providing assurance on nonfinancial information. C. Reduction of costs by establishing new control systems and data sets. D. Better control systems for financial information and nonfinancial information.

Question: 10What is the most likely benefit of adopting integrated reporting (IR)? A. Better measurement of financial and nonfinancial information. B. Greater departmentation to better define silos in the organization. C. Disconnecting financial and nonfinancial information. D. Lower long-term costs.

Question: 11Which of the following is a challenge of adopting integrated reporting (IR)? A. Connectivity of financial and nonfinancial information. B. Better resource allocation. C. Lower reputational risk. D. Filtering the increased information available to users.

Question: 12Which of the following most likely helps to build the business case for adoption of integrated reporting (IR)? A. Support from the directors. B. Use of a single-capital approach. C. Separation of financial and nonfinancial information.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Generally accepted standards for measuring value creation.

Question: 13The most persuasive argument for adoption of integrated reporting (IR) is that A. Disclosure of accurate but sometimes negative information will have negligible costs. B. Investments in systems, data collection, and analysis will yield positive long-term results. C. Worldwide adoption is likely because the percentage of companies using integrated reporting is already high. D. A global institute exists that issues universally accepted standards for integrated reporting.

Question: 14Worldwide adoption of integrated reporting (IR) is most likely if A. Regulators do not become involved in standard setting. B. Accounting firms defer to other parties for developing metrics. C. Institutional investors pressure companies to report nonfinancial information. D. Legislators repeal laws requiring reports based only on financial capital.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Study Unit 5: Cost Management Concepts 5: (129) Cost Management Concepts 1: (34) Cost Management Terminology 2: (45) Cost Behavior and Relevant Range 3: (24) Cost Classification 4: (26) Costing Techniques

Subunit 1: Cost Management Terminology Question: 1Inventoriable costs A. Include only the prime costs of manufacturing a product. B. Include only the conversion costs of manufacturing a product. C. Are expensed when products become part of finished goods inventory. D. Are regarded as assets before the products are sold.

Question: 2Which one of the following best describes direct labor? A. A prime cost. B. A period cost. C. A product cost. D. Both a product cost and a prime cost.

Question: 3Which of the following is a period cost rather than a product cost of a manufacturer? A. Direct materials. B. Variable overhead. C. Fixed overhead. D. Abnormal spoilage.

Question: 4Cost drivers are A. Activities that cause costs to increase as the activity increases.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Accounting techniques used to control costs. C. Accounting measurements used to evaluate whether or not performance is proceeding according to plan. D. A mechanical basis, such as machine hours, computer time, size of equipment, or square footage of factory, used to assign costs to activities.

Question: 5In cost terminology, conversion costs consist of A. Direct and indirect labor. B. Direct labor and direct materials. C. Direct labor and factory overhead. D. Indirect labor and variable factory overhead.

Question: 6Conversion costs do not include A. Depreciation. B. Direct materials. C. Indirect labor. D. Indirect materials.

Question: 7Conversion cost pricing A. Places minimal emphasis on the cost of materials used in manufacturing a product. B. Could be used when the customer furnishes the material used in manufacturing a product. C. Places heavy emphasis on indirect costs and disregards consideration of direct costs. D. Places heavy emphasis on direct costs and disregards consideration of indirect costs.

Question: 8The term “prime costs” refers to A. Manufacturing costs incurred to produce units of output. B. All costs associated with manufacturing other than direct labor costs and raw material costs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. The sum of direct labor costs and all factory overhead costs. D. The sum of raw material costs and direct labor costs.

Question: 9The terms direct cost and indirect cost are commonly used in accounting. A particular cost might be considered a direct cost of a manufacturing department but an indirect cost of the product produced in the manufacturing department. Classifying a cost as either direct or indirect depends upon A. The behavior of the cost in response to volume changes. B. Whether the cost is expensed in the period in which it is incurred. C. The cost object to which the cost is being related. D. Whether an expenditure is unavoidable because it cannot be changed regardless of any action taken.

Question: 10Costs are allocated to cost objects in many ways and for many reasons. Which one of the following is a purpose of cost allocation? A. Evaluating revenue center performance. B. Measuring income and assets for external reporting. C. Budgeting cash and controlling expenditures. D. Aiding in variable costing for internal reporting.

Question: 11Direct labor costs are wages paid to Machine Factory Corporate Operators Supervisors Vice-President A. Yes Yes Yes B. Yes No No C. No Yes Yes D. No No Yes

Question: 12A firm manufactures light bulbs. The following salaries were included in the firm’s manufacturing costs for the year: Machine operators

$145,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Factory supervisors

60,000

Machinery mechanics

25,000

What is the amount of direct labor for the year? A. $230,000 B. $205,000 C. $170,000 D. $145,000

Question: 13Production costs for July are Direct materials $120,000 Direct labor

108,000

Factory overhead

6,000

What is the amount of costs traceable to specific products? A. $234,000 B. $228,000 C. $120,000 D. $108,000

Question: 14A company used $200,000 of direct materials during June. At June 30, direct materials inventory was $30,000 more than it was at June 1. What were direct materials purchases during June? A. $30,000 B. $170,000 C. $200,000 D. $230,000

Question: 15An example of an operating cost at a hotel that is both direct and fixed is A. Manager salary.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Water. C. Toilet tissue. D. Advertising for the hotel chain.

Question: 16A company produces 200,000 units of a good that has the following costs: Direct material costs

$2,000,000

Direct manufacturing labor costs Indirect manufacturing labor costs

1,000,000 600,000

The company’s per unit prime costs and conversion costs, respectively, are A. $8 and $15. B. $8 and $18. C. $10 and $8. D. $15 and $8.

Question: 17Management accounting differs from financial accounting in that financial accounting is A. More oriented toward the future. B. Primarily concerned with external financial reporting. C. Primarily concerned with nonquantitative information. D. Heavily involved with decision analysis and implementation of decisions.

Question: 18Using absorption costing, fixed manufacturing overhead costs are best described as A. Direct period costs. B. Indirect period costs. C. Direct product costs. D. Indirect product costs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 19The allocation of costs to particular cost objects allows a firm to analyze all of the following except A. Whether a particular department should be expanded. B. Why the sales of a particular product have increased. C. Whether a product line should be discontinued. D. Why a particular product should be purchased rather than manufactured in-house.

Question: 20Many companies recognize three major categories of costs of manufacturing a product. These are direct materials, direct labor, and overhead. Which of the following is an overhead cost in the production of an automobile? A. The cost of small tools used in mounting tires on each automobile. B. The cost of the tires on each automobile. C. The cost of the laborers who place tires on each automobile. D. The delivery costs for the tires on each automobile.

Question: 21A company experienced a machinery breakdown on one of its production lines. As a consequence of the breakdown, manufacturing fell behind schedule, and a decision was made to schedule overtime to return manufacturing to schedule. Which one of the following methods is the proper way to account for the overtime paid to the direct laborers? A. The overtime hours times the sum of the straight-time wages and overtime premium would be charged entirely to manufacturing overhead. B. The overtime hours times the sum of the straight-time wages and overtime premium would be treated as direct labor. C. The overtime hours times the overtime premium would be charged to repair and maintenance expense, and the overtime hours times the straight-time wages would be treated as direct labor. D. The overtime hours times the overtime premium would be charged to manufacturing overhead, and the overtime hours times the straight-time wages would be treated as direct labor.

Question: 22A cost incurred for the benefit of more than one cost objective is A. A variable cost. B. A conversion cost. C. A prime cost.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. A common cost.

Question: 23A cost that always can be directly traced to a cost object is A. A variable cost. B. An indirect cost. C. A conversion cost. D. A prime cost.

Question: 24Conversion costs are A. Manufacturing costs incurred to produce units of output. B. All costs associated with manufacturing other than direct labor costs and raw material costs. C. The sum of direct labor costs and all factory overhead costs. D. The sum of raw materials costs and direct labor costs.

Question: 25The allocation of general overhead costs to operating departments can be least justified in determining A. Income of a product or functional unit. B. Costs for making management’s decisions. C. Costs for the federal government’s cost-plus contracts. D. Income tax payable.

Question: 26A computer company charges indirect manufacturing costs to a project at a fixed percentage of a cost pool. This project is covered by a cost-plus government contract. Which of the following is an appropriate guideline for determining how costs are assigned to the pool? A. Establish separate pools for variable and fixed costs. B. Assign prime costs and variable administrative costs to the same pool. C. Establish a separate pool for each assembly line worker to account for wages.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Assign all manufacturing costs related to the project to the same pool.

Question: 27In a traditional manufacturing operation, direct costs would normally include A. Machine repairs in an automobile factory. B. Electricity in an electronics plant. C. Wood in a furniture factory. D. Commissions paid to sales personnel.

Question: 28In practice, items such as wood screws and glue used in the production of school desks and chairs would most likely be classified as A. Direct labor. B. Factory overhead. C. Direct materials. D. Period costs.

Question: 29A review of accounting records for last year disclosed the following selected information: Variable costs: Direct materials used $ 56,000 Direct labor 179,100 Manufacturing overhead 154,000 Selling costs 108,400 Fixed costs: Manufacturing overhead 267,000 Selling costs 121,000 Administrative costs 235,900 In addition, the company suffered a $27,700 uninsured factory fire loss during the year. Under absorption costing, what were the product costs and period costs for last year? Product

Period

A. $235,100 $914,000 B. $497,500 $651,600

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $656,100 $493,000 D. $683,800 $465,300

Question: 30Which one of the following items would not be considered a manufacturing cost? A. Cream for an ice cream maker. B. Sales commissions for a car manufacturer. C. Plant property taxes for an ice cream maker. D. Tires for an automobile manufacturer.

Question: 31A painting contractor maintains a job-order cost system. Job costs are accumulated by tracking the actual cost of paint and other materials used on each job, as well as the actual cost of wages earned by the painters on each job. In addition, overhead is applied to each job by using a predetermined rate based on the actual painters’ wages. A painter earned $168 today by working on Job 08-45. In computing prime cost and conversion cost for Job 08-45, how would the wages earned today by the painter be classified? A. As a component of both prime and conversion cost. B. As a component of prime cost but not as a component of conversion cost. C. As a component of conversion cost but not as a component of prime cost. D. As a component of neither prime cost nor conversion cost.

Question: 32All of the following would be considered manufacturing overhead costs by a book publisher except A. Depreciation on the printing equipment. B. Wages paid to the production supervisor. C. Rent on the warehouse containing the finished books inventory. D. Fire insurance on the printing facilities.

Question: 33Indirect and common costs often make up a significant portion of the cost of a product. All of the following are reasons for indirect cost allocation to cost objects except to A. Reduce total costs identified with products. B. Measure income and assets for external reporting purposes.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Justify costs for reimbursement purposes. D. Provide information for economic decision making.

Question: 34Fixed manufacturing overhead costs totaled $150,000 and variable selling costs totaled $75,000. How should these costs be classified under variable costing? A. $0 period costs; $225,000 product costs. B. $75,000 period costs; $150,000 product costs. C. $150,000 period costs; $75,000 product costs. D. $225,000 period costs; $0 product costs.

Subunit 2: Cost Behavior and Relevant Range Question: 1An assembly plant accumulates its variable and fixed manufacturing overhead costs in a single cost pool, which is then applied to work in process using a single application base. The assembly plant management wants to estimate the magnitude of the total manufacturing overhead costs for different volume levels of the application activity base using a flexible budget formula. If there is an increase in the application activity base that is within the relevant range of activity for the assembly plant, which one of the following relationships regarding variable and fixed costs is true? A. The variable cost per unit is constant, and the total fixed costs decrease. B. The variable cost per unit is constant, and the total fixed costs increase. C. The variable cost per unit and the total fixed costs remain constant. D. The variable cost per unit increases, and the total fixed costs remain constant.

Question: 2The controller of a company has requested a quick estimate of the manufacturing supplies needed for the month of July when production is expected to be 470,000 units to meet the ending inventory requirements and sales of 475,000 units. The company’s budget analyst has the following actual data for the last 3 months: Production

Manufacturing

Month

in Units

Supplies

March

450,000 $723,060

April

540,000

853,560

May

480,000

766,560

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Using these data and the high-low method to develop a cost estimating equation, the estimate of needed manufacturing supplies for July would be A. $652,500 B. $681,500 C. $749,180 D. $752,060

Question: 3Which of the following is the best example of a variable cost? A. The corporate president’s salary. B. Cost of raw material. C. Interest charges. D. Property taxes.

Question: 4Which one of the following is correct regarding a relevant range? A. Total variable costs will not change. B. Total fixed costs will not change. C. Actual fixed costs usually fall outside the relevant range. D. The relevant range cannot be changed after being established.

Question: 5Which one of the following categories of cost is most likely not considered a component of fixed factory overhead? A. Rent. B. Property taxes. C. Depreciation. D. Power.

Question: 6An entity has the following cost components for 100,000 units of product for the year:

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Direct materials

$200,000

Direct labor

100,000

Manufacturing overhead

200,000

Selling and administrative expense

150,000

All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling and administrative expenses. The total costs to produce and sell 110,000 units for the year are A. $650,000 B. $715,000 C. $695,000 D. $540,000

Fact Pattern: A company wants to determine its marketing costs for budgeting purposes. Activity measures and costs incurred for 4 months of the current year are presented in the table below. Advertising is considered to be a discretionary cost. Salespersons are paid monthly salaries plus commissions. The sales force was increased from 20 to 21 individuals during the month of May. March

April

May

June

Activity measures: Sales orders Units sold

2,000

1,800

2,400

2,300

55,000

60,000

70,000

65,000

Dollar sales Marketing costs: Advertising Sales salaries Commissions Shipping costs

$1,150,000 $1,200,000 $1,330,000 $1,275,000

Total costs

$ 326,000 $ 344,000 $ 351,600 $ 343,500

$ 190,000 $ 200,000 $ 190,000 $ 190,000 20,000 20,000 21,000 21,000 23,000 24,000 26,600 25,500 93,000 100,000 114,000 107,000

Question: 7Which of the following most appropriately describes the classification and behavior of shipping costs? Classification

Behavior

A. Variable cost $1.66 per unit sold B. Mixed cost $16,000 per month plus $1.40 per unit sold C. Mixed cost $30,000 per month plus $35.00 per sales order

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Mixed cost $58,000 per month plus $23.33 per sales order

Fact Pattern: A company wants to determine its marketing costs for budgeting purposes. Activity measures and costs incurred for 4 months of the current year are presented in the table below. Advertising is considered to be a discretionary cost. Salespersons are paid monthly salaries plus commissions. The sales force was increased from 20 to 21 individuals during the month of May. March

April

May

June

Activity measures: Sales orders Units sold

2,000

1,800

2,400

2,300

55,000

60,000

70,000

65,000

Dollar sales Marketing costs: Advertising Sales salaries Commissions Shipping costs

$1,150,000 $1,200,000 $1,330,000 $1,275,000

Total costs

$ 326,000 $ 344,000 $ 351,600 $ 343,500

$ 190,000 $ 200,000 $ 190,000 $ 190,000 20,000 20,000 21,000 21,000 23,000 24,000 26,600 25,500 93,000 100,000 114,000 107,000

Question: 8In relation to the dollar amount of sales, which of the following cost classifications is appropriate for advertising and sales salaries costs? Advertising Sales Salaries A. Variable cost Fixed cost B. Fixed cost Variable cost C. Mixed cost Mixed cost D. Fixed cost Fixed cost

Question: 9The difference between variable costs and fixed costs is A. Variable costs per unit fluctuate and fixed costs per unit remain constant. B. Variable costs per unit are fixed over the relevant range and fixed costs per unit are variable. C. Total variable costs are variable over the relevant range and fixed in the long term, while fixed costs never change. D. Variable costs per unit change in varying increments, while fixed costs per unit change in equal increments.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 10A corporation has the following information for the first quarter of its year: Machine Hours

Cleaning Expense

January

2,100

$ 900

February

2,600

1,200

March

1,600

800

April

2,000

1,000

Using the high-low method, what is the corporation’s fixed cost? A. $160 B. $320 C. $640 D. $1,040

Question: 11A company has the following budget formula for annual electricity expense in its shop: Expense = $7,200 + (Units produced × $0.60) If management expects to produce 20,000 units during February, for the purpose of performance evaluation, what amount of expenses should the company expect to incur in February?

A. $7,200 B. $12,000 C. $12,600 D. $19,200

Question: 12The sum of the costs necessary to effect a one-unit increase in the activity level is a(n) A. Differential cost. B. Opportunity cost. C. Marginal cost.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Incremental cost.

Question: 13A company uses the following formula for annual maintenance costs: Total cost = $6,000 + $0.70 per machine hour The current month’s budget is based on planned machine time of 30,000 hours. Monthly maintenance cost included in this budget is A. $20,500 B. $21,000 C. $21,500 D. $27,000

Question: 14A corporation wishes to determine the fixed portion of its maintenance expense (a semivariable expense), as measured against direct labor hours, for the first 3 months of the year. The inspection costs are fixed; the adjustments necessitated by errors found during inspection account for the variable portion of the maintenance costs. Information for the first quarter is as follows: Direct Labor Hours

Maintenance Expense

January

34,000

$610

February

31,000

$585

March

34,000

$610

What is the fixed portion of maintenance expense, rounded to the nearest dollar? A. $283 B. $327 C. $258 D. $541

Question: 15Management has prepared a graph showing the total costs of operating branch warehouses throughout the country. The cost line crosses the vertical axis at $200,000. The total cost of operating one branch is $350,000. The total cost of operating ten branches is $1,700,000. For purposes of preparing a flexible budget based on the number of branch warehouses in operation, what formula should be used to determine budgeted costs at various levels of activity? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

A. Y = $200,000 + $150,000X B. Y = $200,000 + $170,000X C. Y = $350,000 + $200,000X D. Y = $350,000 + $150,000X

Question: 16A company pays each member of its sales staff a salary as well as a commission on each unit sold. For the coming year, the company plans to increase all salaries by 5% and to keep unchanged the commission paid on each unit sold. Because of increased demand, the company expects the volume of sales to increase by 10%. How will the total cost of sales salaries and commissions change for the coming year? A. Increase by 5% or less. B. Increase by more than 5% but less than 10%. C. Increase by 10%. D. Increase by more than 10%.

Question: 17An entity estimates its total materials handling costs at two production levels as follows: Cost

Gallons

$160,000 80,000 $132,000 60,000 What is the estimated total cost for handling 75,000 gallons? A. $146,000 B. $150,000 C. $153,000 D. $165,000

Question: 18Production levels are expected to increase within the relevant range. What are the anticipated effects on the following? Fixed Costs Variable Costs per Unit per Unit

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Increase Increase B. Increase No change C. Decrease Decrease D. Decrease No change

Question: 19A fixed cost that would be considered a direct cost is A. A cost accountant’s salary when the cost objective is a unit of product. B. The rental cost of a warehouse to store inventory when the cost objective is the Purchasing Department. C. A production supervisor’s salary when the cost objective is the Production Department. D. Board of directors’ fees when the cost objective is the Marketing Department.

Question: 20A company is determining the cost behavior of several items in order to budget for the upcoming year. Past trends have indicated the following dollars were spent at three different levels of output: Unit Levels 10,000

12,000

15,000

Cost A $25,000

$29,000

$35,000

Cost B

10,000

15,000

15,000

Cost C

15,000

18,000

22,500

In establishing a budget for 14,000 units, the company should treat Costs A, B, and C, respectively, as A. Semivariable, fixed, and variable. B. Variable, fixed, and variable. C. Semivariable, semivariable, and semivariable. D. Variable, semivariable, and semivariable.

Question: 21Which one of the following refers to a cost that remains the same as the volume of activity decreases within the relevant range?

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Average cost per unit. B. Variable cost per unit. C. Unit fixed cost. D. Total variable cost.

Question: 22An entity provides the following summary of its total budgeted production costs at three production levels: Volume in Units 1,000

1,500

2,000

Cost A $1,420 $2,130 $2,840 Cost B 1,550 2,200 2,900 Cost C 1,000 1,000 1,000 Cost D 1,630 2,445 3,260 The cost behavior of each of the Costs A through D, respectively, is A. Semivariable, variable, fixed, and variable. B. Variable, semivariable, fixed, and semivariable. C. Variable, fixed, fixed, and variable. D. Variable, semivariable, fixed, and variable.

Question: 23The relevant range refers to the activity levels over which A. Cost relationships hold constant. B. Costs fluctuate. C. Production varies. D. Relevant costs are incurred.

Question: 24A company has discovered that the cost of processing customer invoices is strictly variable within the relevant range. Which one of the following statements concerning the cost of processing customer invoices is incorrect? A. The total cost of processing customer invoices will increase as the volume of customer invoices increases.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. The cost per unit for processing customer invoices will decline as the volume of customer invoices increases. C. The cost of processing the 100th customer invoice will be the same as the cost of processing the first customer invoice. D. The average cost per unit for processing a customer invoice will equal the incremental cost of processing one more customer invoice.

Question: 25When identifying fixed and variable costs, which one of the following is a typical assumption concerning cost behavior? A. General and administrative costs are assumed to be variable costs. B. Cost behavior is assumed to be realistic for all levels of activity from zero to maximum capacity. C. Total costs are assumed to be linear when plotted on a graph. D. The relevant time period is assumed to be 5 years.

Question: 26A management accountant is about to prepare graphs of total variable cost and per-unit variable cost for use in a short-term planning model. Dollars will be depicted on the vertical axis; activity will be shown on the horizontal axis. How will these graphs appear under completion? Total Variable Cost Per-Unit Variable Cost A. Straight line, sloping upward to the right. B.

Curvilinear, sloping upward to the right.

Straight line, parallel to the horizontal axis.

A line that basically parallels the horizontal axis, first decreasing and then increasing.

C. Straight line, sloping upward to the right. D. Straight line, parallel to the horizontal axis.

Straight line, sloping upward to the right. Straight line, sloping upward to the right.

Question: 27A company has found that its total electricity cost has both a fixed component and a variable component within the relevant range. The variable component seems to vary directly with the number of units produced. Which one of the following statements concerning electricity cost is incorrect? A. The total electricity cost will increase as production volume increases. B. The total electricity cost per unit of production will increase as production volume increases. C. The variable electricity cost per unit of production will remain constant as production volume increases.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. The fixed electricity cost per unit of production will decline as production volume increases.

Fact Pattern: Jackson Co. has the following information for the first 4 months of this year:

January

Machine

Cleaning

Hours

Expense

2,100 $ 900

February 2,600

1,200

March

1,600

800

April

2,000

1,000

Question: 28Using the high-low method, what is Jackson’s variable cost of cleaning per machine hour? A. $.40 B. $.48 C. $2.00 D. $2.50

Fact Pattern: Jackson Co. has the following information for the first 4 months of this year:

January

Machine

Cleaning

Hours

Expense

2,100 $ 900

February 2,600

1,200

March

1,600

800

April

2,000

1,000

Question: 29Jackson’s management expects machine hours for the month of May to be 1,400 hours. Given a variable portion of $.40 per machine hour and a fixed portion of $160 per month, what is their expected total cost for the month of May? A. $560 B. $650 C. $720 D. $760

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Hours of Maintenance In preparing the annual profit plan for the coming year, Wilkens Company Activity Costs wants to determine the cost behavior pattern of the maintenance costs. Wilkens has decided to use linear regression by employing the equation y = January 480 $ 4,200 a + bx for maintenance costs. The prior year’s data regarding maintenance February 320 3,000 hours and costs, and the results of the regression analysis, are given below March 400 3,600 and in the opposite column. April 300 2,820 May 500 4,350 Average cost per hour $9.00 June 310 2,960 a 684.65 July 320 3,030 August 520 4,470 b 7.2884 September 490 4,260 Standard error of a 49.515 October 470 4,050 November 350 3,300 Standard error of b .12126 December 340 3,160 Standard error of the estimate 34.469 Sum 4,800 $43,200 r2 .99724 Average 400 $ 3,600 Question: 30If Wilkens Company uses the high/low method of analysis, the equation for the relationship between hours of activity and maintenance cost would be A. y = 400 + 9.0x B. y = 570 + 7.5x C. y = 3,600 + 400x D. y = 570 + 9.0x

Question: 31The least exact method for separating fixed and variable costs is A. The least squares method. B. Computer simulation. C. The high-low method. D. Matrix algebra.

Question: 32A company prepares a budget each month for manufacturing costs. Formulas have been developed for all costs within a relevant range of 5,000 to 15,000 units per month. The budget for electricity (a semivariable cost) is $19,800 at 9,000 units per month, and $21,000 at 10,000 units per month. How much should be budgeted for electricity for the coming month if 12,000 units are to be produced? A. $26,400

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $25,200 C. $23,400 D. $22,200

Question: 33A company budgets its total production costs at $220,000 for 75,000 units of output and $275,000 for 100,000 units of output. Since additional facilities are needed to produce 100,000 units, fixed costs are budgeted at 20% more than for 75,000 units. What is the budgeted variable cost per unit of output? A. $1.10 B. $1.20 C. $2.20 D. $2.75

Question: 34A firm operated four sales offices last year. The firm’s costs were $400,000, of which $60,000 were fixed. The firm’s total costs are significantly influenced by the number of sales offices it operates. Using last year’s costs as the basis for predicting annual costs, what would the budgeted costs be if the firm operated six sales offices? A. $600,000 B. $570,000 C. $510,000 D. $485,000

Question: 35Over the past several years, an entity has experienced the following regarding shipping expenses: Fixed costs

$16,000

Average shipment 15 pounds Cost per pound

$.50

Shown below are the budget data for the coming year. Number of units shipped

8,000

Number of sales orders

800

Number of shipments

800

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Total sales

$1,200,000

Total pounds shipped

9,600

Expected shipping costs for the coming year are A. $4,800 B. $16,000 C. $20,000 D. $20,800

Question: 36A manufacturing company estimates semi-variable costs by using the high-low method with machine hours as the cost driver. Recent data are shown below. Period Semi-Variable Costs Machine Hours 1

€ 100,000

22,000

2

120,000

30,000

3

96,000

23,600

If 29,000 machine hours were budgeted for the next period, estimated semi-variable costs would total A. €116,250 B. €117,000 C. €117,500 D. €121,220

Question: 37A company recorded the following production costs during the previous two-week period: Week 1 Direct labor costs

$17,000 Direct labor costs

Other manufacturing costs Units produced

Week 2

25,000 Other manufacturing costs 5,000 Units produced

$19,500 28,000 6,000

Assuming both weeks fall in the same relevant range, what was the total fixed cost during Week 1? A. $5,500

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $14,500 C. $25,000 D. $26,500

Question: 38A company produces a product that contains 9 ounces of materials in each unit of finished goods. During the production process, 4% of the materials evaporate. The company pays its suppliers $2 per ounce; the cost to ship the material to the company averages $0.20 per ounce. The standard dollar amount of raw materials contained in one unit of finished goods is A. $18.75 B. $19.80 C. $20.59 D. $20.63

Question: 39A conglomerate outsources the cleaning of its theaters. The cleaning vendor’s charges are based upon the total hours needed to clean the facilities, and more cleaning time is needed as more people attend the theater. The conglomerate has accumulated the following historical data.

Month

Cleaning Cost

Number of Theater Tickets Sold

April $11,000

19,700

9,000

17,000

June 15,600

28,000

July

29,000

May

15,000

The conglomerate anticipates selling 25,000 theater tickets in August. If the conglomerate uses the high-low method of separating costs into their fixed and variable components, the conglomerate’s budget for August cleaning costs would be A. $13,000 B. $13,400 C. $13,500 D. $13,800

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 40Within the relevant range, fixed cost per unit will A. Increase as the activity level increases. B. Decrease as the activity level decreases. C. Remain the same as the activity level decreases. D. Decrease as the activity level increases.

Question: 41A company reported the following cost information for the last fiscal year when it produced 100,000 units. Direct labor

$200,000

Direct materials

100,000

Manufacturing overhead

200,000

Selling and administrative expenses 150,000 All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling and administrative expenses. Using flexible budgeting, what are the total costs associated with producing and selling 110,000 units? A. $450,000 B. $650,000 C. $695,000 D. $715,000

Question: 42A company’s master budget for the year planned that the company would manufacture and sell 2,000 units for €500,000 in sales, €350,000 in variable expenses, and €45,000 in fixed expenses. If the company only manufactured and sold 1,750 units during the year, how much is the company’s flexible budget operating income? A. €42,500 B. €86,250 C. €91,875 D. €105,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 43The controller of an online retailer has negotiated a five-year contract with a shipping company to pay the following amounts annually for the delivery of its goods, regardless of the amount: Year 1 €1,000,000 Year 2 1,000,000 Year 3 1,500,000 Year 4 1,500,000 Year 5 2,000,000 What type of costs are these shipping expenditures? A. Mixed. B. Fixed. C. Variable. D. By-product.

Question: 44A manufacturing company is in the process of preparing its flexible budget for next month’s manufacturing costs. The company estimates costs within a relevant range of 10,000 to 30,000 units per month. During the last 2 months, electricity costs (a semivariable cost) were $39,600 for 18,000 units and $42,000 for 20,000 units. How much should be budgeted for electricity costs to produce 24,000 units? A. $44,400 B. $46,800 C. $50,400 D. $52,800

Fact Pattern: Huron Industries has recently developed two new products, a cleaning unit for video discs and a disc duplicator for reproducing movies taken with a video camera. However, Huron has only enough plant capacity to introduce one of these products during the current year. The company controller has gathered the following data to assist management in deciding which product should be selected for production.

Disc Duplicator Raw materials Machining at $12 per hr. Assembly at $10 per hr. Variable overhead at $8 per hr.

$

44.00 18.00

$

36.00 15.00

30.00

10.00

36.00

18.00

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

Cleaning Unit

https://t.me/CMA_part2

Huron’s fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to products.

Question:

Fixed overhead at $4 per hr. Total cost

Suggested selling price Actual research and development costs Proposed advertising and promotion costs 45The total overhead cost of $27.00 for Huron’s video disc cleaning unit is a

18.00

9.00

$ 146.00

$

88.00

$ 169.95

$

99.98

$240,000

$175,000

$500,000

$350,000

A. Carrying cost. B. Discretionary cost. C. Sunk cost. D. Mixed cost.

Subunit 3: Cost Classification Question: 1Discretionary costs are costs that A. Management decides to incur in the current period to enable the company to achieve objectives other than the filling of orders placed by customers. B. Are likely to respond to the amount of attention devoted to them by a specified manager. C. Are governed mainly by past decisions that established the present levels of operating and organizational capacity and that only change slowly in response to small changes in capacity. D. Will be unaffected by current managerial decisions.

Question: 2An imputed cost is A. The difference in total costs that results from selecting one alternative instead of another. B. A cost that cannot be avoided because it has already been incurred. C. A cost that does not entail any dollar outlay but is relevant to the decision-making process.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. A cost that continues to be incurred even though there is no activity.

Question: 3The amount of raw materials left over from a production process or production cycle for which there is no further use is A. Scrap. B. Abnormal spoilage. C. Waste. D. Normal spoilage.

Question: 4The cost associated with abnormal spoilage ordinarily is charged to A. Inventory. B. A material variance account. C. Manufacturing overhead. D. A special loss account.

Question: 5Controllable costs are costs that A. Management decides to incur in the current period to enable the company to achieve objectives other than the filling of orders placed by customers. B. Are likely to respond to the amount of attention devoted to them by a specified manager. C. Fluctuate in total in response to small changes in the rate of utilization of capacity. D. Will be unaffected by current managerial decisions.

Question: 6Committed costs are A. Costs that management decides to incur in the current period to enable the company to achieve objectives other than the filling of orders placed by customers. B. Costs that are likely to respond to the amount of attention devoted to them by a specified manager. C. Costs that are governed mainly by past decisions that established the present levels of operating and organizational capacity and that only change slowly in response to small changes in capacity.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. Amortization of costs that were capitalized in previous periods.

Question: 7When compared with normal spoilage, abnormal spoilage A. Arises more frequently from factors that are inherent in the manufacturing process. B. Is given the same accounting treatment as normal spoilage. C. Is generally thought to be more controllable by production management than normal spoilage. D. Is not typically influenced by the “tightness” of production standards.

Question: 8A controllable expense A. Is an expected future expense that will be different under various alternatives. B. Is an expense whose actual amount will not normally differ from the standard (budget) amount. C. Is one that is directly influenced at a given level of managerial authority within a given time period. D. Is an expense that will remain semivariable in total over the relevant range in a given time period.

Question: 9A cost that bears an observable and known relationship to a quantifiable activity base is a(n) A. Engineered cost. B. Indirect cost. C. Sunk cost. D. Target cost.

Question: 10Committed costs are costs that A. Were capitalized and amortized in prior periods. B. Management decides to incur in the current period that do not have a clear cause and effect relationship between inputs and outputs. C. Result from a clear measurable relationship between inputs and outputs. D. Establish the current level of operating capacity and cannot be altered in the short run.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 11Costs that arise from periodic budgeting decisions that have no strong input-output relationship are commonly called A. Committed costs. B. Discretionary costs. C. Opportunity costs. D. Differential costs.

Fact Pattern: Huron Industries has recently developed two new products, a cleaning unit for video discs and a disc duplicator for reproducing movies taken with a video camera. However, Huron has only enough plant capacity to introduce one of these products during the current year. The company controller has gathered the following data to assist management in deciding which product should be selected for production. Huron’s fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to products.

Question:

Disc Duplicator Raw materials Machining at $12 per hr. Assembly at $10 per hr. Variable overhead at $8 per hr. Fixed overhead at $4 per hr.

$

44.00 18.00

Total cost

$ 146.00

Cleaning Unit $

36.00 15.00

30.00

10.00

36.00

18.00

18.00

9.00 $

88.00

Suggested $ 169.95 $ 99.98 selling price Actual research and development $240,000 $175,000 costs Proposed advertising and promotion $500,000 $350,000 costs 12For Huron’s disc duplicator, the unit costs for raw materials, machining, and assembly represent

A. Conversion costs. B. Separable costs. C. Committed costs. D. Prime costs.

Fact Pattern: ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Huron Industries has recently developed two new products, a cleaning unit for video discs and a disc duplicator for reproducing movies taken with a video camera. However, Huron has only enough plant capacity to introduce one of these products during the current year. The company controller has gathered the following data to assist management in deciding which product should be selected for production. Huron’s fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to products.

Question:

Disc Duplicator Raw materials Machining at $12 per hr. Assembly at $10 per hr. Variable overhead at $8 per hr. Fixed overhead at $4 per hr.

$

Total cost

$ 146.00

$

88.00

$ 169.95

$

99.98

$240,000

$175,000

$500,000

$350,000

Disc Duplicator

Cleaning Unit

Suggested selling price Actual research and development costs Proposed advertising and promotion costs 13Research and development costs for Huron’s two new products are

44.00 18.00

Cleaning Unit $

36.00 15.00

30.00

10.00

36.00

18.00

18.00

9.00

A. Conversion costs. B. Sunk costs. C. Relevant costs. D. Avoidable costs.

Fact Pattern: Huron Industries has recently developed two new products, a cleaning unit for video discs and a disc duplicator for reproducing movies taken with a video camera. However, Huron has only enough plant capacity to introduce one of these products during the current year. The company controller has gathered the following data to assist management in deciding which product should be selected for production. Huron’s fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to products.

Raw materials Machining at $12 per hr. Assembly at $10 per hr. Variable overhead at $8 per hr. Fixed overhead at $4 per hr.

$

44.00 18.00

Total cost

$ 146.00

36.00 15.00

30.00

10.00

36.00

18.00

18.00

9.00

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

$

https://t.me/CMA_part2

$

88.00

Question:

Suggested $ 169.95 selling price Actual research and development $240,000 costs Proposed advertising and promotion $500,000 costs 14The advertising and promotion costs for the product selected by Huron will be

$

99.98

$175,000

$350,000

A. Discretionary costs. B. Opportunity costs. C. Committed costs. D. Incremental costs.

Fact Pattern: Huron Industries has recently developed two new products, a cleaning unit for video discs and a disc duplicator for reproducing movies taken with a video camera. However, Huron has only enough plant capacity to introduce one of these products during the current year. The company controller has gathered the following data to assist management in deciding which product should be selected for production. Huron’s fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to products.

Disc Duplicator 44.00 18.00

Raw materials Machining at $12 per hr. Assembly at $10 per hr. Variable overhead at $8 per hr. Fixed overhead at $4 per hr.

$

$

36.00 15.00

Total cost

$ 146.00

$

88.00

Suggested selling price Actual research and development costs Proposed advertising and promotion costs

$ 169.95

$

99.98

$240,000

$175,000

$500,000

$350,000

30.00

10.00

36.00

18.00

18.00

9.00

Question: 15The costs included in Huron’s fixed overhead are A. Joint costs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

Cleaning Unit

https://t.me/CMA_part2

B. Committed costs. C. Opportunity costs. D. Prime costs.

Question: 16A cost that may be eliminated by performing an activity more efficiently is a(n) A. Opportunity cost. B. Avoidable cost. C. Cost driver. D. Indirect cost.

Question: 17Spoilage that is not expected to occur under normal, efficient operating conditions is considered A. Abnormal spoilage. B. Actual spoilage. C. Normal spoilage. D. Residual spoilage.

Question: 18Products of relatively small total value that are produced simultaneously from a common manufacturing process with products of greater value and quantity are A. Scrap. B. By-products. C. Waste. D. Abnormal spoilage.

Question: 19A company produces stereo speakers for automobile manufacturers. The automobile manufacturers reject approximately 3% of the stereo speakers received as being of unacceptable quality. The company inspects the rejected speakers to determine which ones should be reworked and which ones should be discarded. The discarded speakers are classified as A. Waste.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. Scrap. C. Spoilage. D. Rework costs.

Question: 20A joint process is a manufacturing operation yielding two or more identifiable products from the resources employed in the process. The two characteristics that identify a product generated from this type of process as a joint product are that it A. Is identifiable as an individual product only upon reaching the split-off point, and it has relatively minor sales value when compared to the other products. B. Is identifiable as an individual product before the production process, and it has relatively significant physical volume when compared with the other products. C. Is identifiable as an individual product only upon reaching the split-off point, and it has relatively significant sales value when compared with the other products. D. Has relatively significant physical volume when compared with the other products, and it can be sold immediately without any additional processing.

Question: 21Abnormal spoilage A. Cannot occur when perfection standards are used. B. Is not usually controllable by the production supervisor. C. Results from unrealistic production standards. D. Is not expected to occur under efficient operating conditions.

Fact Pattern: Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for introduction. However, plant capacity is limited, and only one product can be introduced at present. Therefore, Gleason has conducted a market study at a cost of $26,000, to determine which product will be more profitable. The results of the study follow. Sales of Desserts at $1.80/unit Volume

Probability

Sales of Rolls at $1.20/unit Volume

Probability

250,000

.30

200,000

.20

300,000

.40

250,000

.50

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

350,000

.20

300,000

.20

400,000

.10

350,000

.10

The costs associated with the two products have been estimated by Gleason’s cost accounting department and are as follows: Dessert Rolls Ingredients per unit

$

.40 $

.25

Direct labor per unit

.35

.30

Variable overhead per unit

.40

.20

Production tooling*

48,000 25,000

Advertising

30,000 20,000

*Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed asset. Question: 22The advertising expense estimated by Gleason for the introduction of the new products is an example of a(n) A. Conversion cost. B. Discretionary cost. C. Committed cost. D. Opportunity cost.

Question: 23A 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 as a Percent of Standard Dollar Value of Output Produced

Month

Standard Dollar Value of Output

Percent Scrap (%)

Nov Year 7 Dec Year 7 Jan Year 8 Feb Year 8 Mar Year 8 Apr Year 8 May Year 8 Jun Year 8

$1,500,000 $1,650,000 $1,600,000 $1,550,000 $1,650,000 $1,500,000 $1,400,000 $1,300,000

4.5 2.5 3.0 2.5 1.5 4.0 2.5 3.5

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Jul Year 8 $1,650,000 5.5 Aug Year 8 $1,000,000 4.5 Sep Year 8 $1,400,000 3.5 Oct Year 8 $1,600,000 2.5 The company’s scrap value in relation to the standard dollar value of output produced appears to be A. A variable cost. B. A fixed cost. C. A semi-fixed cost. D. Unrelated to the standard dollar value of output.

Question: 24A firm calculates that its annual cost to hold excess goods in order to avoid any chance of running out of inventory is $50,000. This $50,000 is an example of a A. Prime cost. B. Quality cost. C. Carrying cost. D. Stockout cost.

Subunit 4: Costing Techniques Question: 1Which one of the following alternatives correctly classifies the business application to the appropriate costing system? Job Process Costing System Costing System A. Wallpaper manufacturer Oil refinery B. Aircraft assembly Public accounting firm C. Paint manufacturer Retail banking D. Print shop Beverage manufacturer

Question: 2Which one of the following is least likely to be involved in establishing standard costs for evaluation purposes? A. Budgetary accountants.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. Industrial engineers. C. Top management. D. Quality control personnel.

Question: 3In target costing, A. The market price of the product is taken as a given. B. Only raw materials, labor, and variable overhead cannot exceed a threshold target. C. Only raw materials cannot exceed a threshold target. D. Raw materials are recorded directly to cost of goods sold.

Question: 4Which one of the following considers the impact of fixed overhead costs? A. Full absorption costing. B. Marginal costing. C. Direct costing. D. Variable costing.

Question: 5An accounting system that collects financial and operating data on the basis of the underlying nature and extent of the cost drivers is A. Direct costing. B. Activity-based costing. C. Cycle-time costing. D. Variable costing.

Fact Pattern: Huron Industries has recently developed two new products, a cleaning unit for video discs and a disc duplicator for reproducing movies taken with a video camera. However, Huron has only enough plant capacity Raw materials Machining at to introduce one of these products during the current year. The $12 per hr. company controller has gathered the following data to assist

Disc Duplicator $

44.00 18.00

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Cleaning Unit $

36.00 15.00

management in deciding which product should be selected for production. Huron’s fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to products.

Assembly at $10 per hr. Variable overhead at $8 per hr. Fixed overhead at $4 per hr. Total cost

30.00

10.00

36.00

18.00

18.00

9.00

$ 146.00

$

88.00

Suggested $ 169.95 $ 99.98 selling price Actual research and development $240,000 $175,000 costs Proposed advertising and promotion $500,000 $350,000 costs Question: 6The difference between the $99.98 suggested selling price for Huron’s video disc cleaning unit and its total unit cost of $88.00 represents the unit’s A. Contribution margin ratio. B. Gross profit. C. Contribution. D. Gross profit margin ratio.

Question: 7A standard costing system is most often used by a firm in conjunction with A. Management by objectives. B. Target (hurdle) rates of return. C. Participative management programs. D. Flexible budgets.

Question: 8Which of the following statements is true for a firm that uses variable costing? A. The cost of a unit of product changes because of changes in number of units manufactured. B. Profits fluctuate with sales. C. An idle facility variation is calculated.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. Product costs include variable administrative costs.

Question: 9The difference between the sales price and total variable costs is A. Gross operating profit. B. Net profit. C. The breakeven point. D. The contribution margin.

Question: 10A difference between standard costs used for cost control and budgeted costs A. Can exist because standard costs must be determined after the budget is completed. B. Can exist because standard costs represent what costs should be, whereas budgeted costs represent expected actual costs. C. Can exist because budgeted costs are historical costs, whereas standard costs are based on engineering studies. D. Cannot exist because they should be the same amounts.

Question: 11In a product’s life cycle, the first symptom of the decline stage is a decline in the A. Firm’s inventory levels. B. Product’s sales. C. Product’s production cost. D. Product’s prices.

Question: 12The term “gross margin” for a manufacturing firm refers to excess of sales over A. Cost of goods sold, excluding fixed indirect manufacturing costs. B. All variable costs, including variable selling and administrative expenses. C. Cost of goods sold, including fixed indirect manufacturing costs. D. Manufacturing costs, excluding fixed manufacturing costs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 13Companies characterized by the production of basically homogeneous products will most likely use which of the following methods for the purpose of averaging costs and providing management with unit-cost data? A. Job-order costing. B. Direct costing. C. Absorption costing. D. Process costing.

Question: 14A standard-cost system may be used in Process Costing

Job-Order Costing

Activity-Based Costing

A. Yes Yes Yes B. Yes No Yes C. No Yes No D. No No No

Question: 15Consider the following information for Richardson Company for the prior year:  The company produced 1,000 units and sold 900 units, both as budgeted.  There were no beginning or ending work-in-process inventories and no beginning finished goods inventory.  Budgeted and actual fixed costs were equal, all variable manufacturing costs were affected by production volume only, and all variable selling costs were affected by sales volume only.  Budgeted per unit revenues and costs were as follows: Per unit

 Sales price

$100

Direct materials

30

Direct labor

20

Other variable manufacturing costs

10

Fixed selling costs

5

Variable selling costs

12

Fixed manufacturing costs ($3,600 total)

4

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fixed administrative costs ($1,800 total)

2

The contribution margin earned by Richardson for the prior year was A. $25,200 B. $28,000 C. $31,500 D. $35,000

Question: 16Consider the cost of goods sold calculation shown below. Beginning inventory

$ 100,000

Plus cost of goods manufactured

2,500,000

Less ending inventory

(125,000)

Plus variable overhead efficiency variance Cost of goods sold

10,000 $2,485,000

This is an example of which cost measurement technique? A. Normal costing. B. Standard costing. C. Either actual costing or normal costing. D. Either normal costing or standard costing.

Question: 17The budget for a product is as follows. Sales

$10,000,000

Materials and labor

4,000,000

Fixed manufacturing overhead

1,500,000

Sales commissions

500,000

Advertising (fixed)

200,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Other marketing costs (fixed)

800,000

Allocated administrative costs

2,000,000

Income

$ 1,000,000

The budgeted contribution margin for this product is A. $5,500,000 B. $5,300,000 C. $4,500,000 D. $3,000,000

Question: 18A company manufactures clocks and sells each clock for $30. Variable manufacturing expense for each clock is $18. The company plans to sell 400 clocks this month and anticipates incurring $2,600 of fixed expenses. What will be the company’s total contribution margin this month? A. $2,200 B. $4,800 C. $7,200 D. $12,000

Question: 19Which one of the following is least likely to be a reason to adopt a standard cost system? A. Setting standards at an ideal level can motivate employees. B. A standard cost system identifies what the level of costs should be and who should be responsible for the costs. C. Utilizing standard costs tends to simplify recordkeeping. D. Costs of using standard costing are low relative to costs of using actual costing.

Question: 20Consider the following situation for a company for the prior year.  The company produced 1,000 units and sold 900 units, both as budgeted.  There were no beginning or ending work-in-process inventories and no beginning finished goods inventory.  Budgeted and actual fixed costs were equal, all variable manufacturing costs are affected by volume of production only, and all variable selling costs are affected by sales volume only.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

 Budgeted per unit revenues and costs were as follows: 

Per Unit

Sales price

$100

Direct materials

30

Direct labor

20

Variable manufacturing costs

10

Fixed manufacturing costs

5

Variable selling costs

12

Fixed selling costs ($3,600 total)

4

Fixed administrative costs ($1,800 total)

2

Assuming that the company uses variable costing, the operating income for the prior year was A. $13,600 B. $14,200 C. $14,800 D. $15,300

Question: 21A company uses a standard cost accounting system. Data for the last fiscal year are as follows. Units Beginning inventory of finished goods 100 Production during the year

700

Sales

750

Ending inventory of finished goods

50 Per Unit

Product selling price

$200

Standard variable manufacturing cost

90

Standard fixed manufacturing cost

20*

Budgeted selling and administrative costs (all fixed) $45,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

*Denominator level of activity is 750 units for the year. There were no price, efficiency, or spending variances for the year, and actual selling and administrative expenses equaled the budget amount. Any volume variance is written off to cost of goods sold in the year incurred. There are no work-in-progress inventories. The amount of operating income earned for the last fiscal year using variable costing was A. $21,500 B. $22,500 C. $28,000 D. $31,000

Question: 22Using management by exception allows managers to focus their attention on A. Areas that have deviated most from expectations. B. Non-administrative costs and revenues. C. Unfavorable variances. D. Variable costs and revenues.

Question: 23A steel company manufactures heavy-duty brackets for the shelving industry. The company has budgeted for the production and sale of 1,000,000 brackets and has no beginning or ending inventory. Relevant operational, revenue, and cost data is as follows: Unit selling price of a bracket

$22.50

Direct material required per unit Direct labor required per unit

4 pounds 0.15 hours

Cost of material per pound

$1.75

Direct labor cost per hour

$9.00

Total variable selling costs

$2,250,000

Total fixed costs

$1,500,000

Based on the data provided, what is the unit contribution margin per bracket? A. $14.15

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. $11.90 C. $10.60 D. $10.40

Question: 24Contribution margin focuses on which one of the following? A. The amount of revenue available to cover fixed costs. B. The total variable manufacturing costs. C. How competitive a company is compared to other companies. D. The total revenue expected during the year.

Question: 25Operating income under variable costing is contribution margin minus A. Cost of goods sold and administrative expenses. B. Fixed manufacturing overhead and fixed selling and administrative expenses. C. Fixed manufacturing overhead and variable manufacturing overhead. D. Variable selling and administrative expenses and fixed selling and administrative expenses.

Question: 26During the growth stage of a product’s life cycle, A. The quality of products is poor. B. New product models and features are introduced. C. There is little difference between competing products. D. The quality of the products becomes more variable and products are less differentiated.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ ‫‪https://t.me/CMA_part2‬‬

‫‪https://t.me/CMA_part1‬‬

Study Unit 6: Cost Accumulation Systems 6: (131) Cost Accumulation Systems 1: (15) Job-Order Costing 2: (60) Process Costing 3: (41) Activity-Based Costing 4: (15) Life-Cycle Costing

Subunit 1: Job-Order Costing Question: 1A company manufactures a specialty line of T-shirts using a job-order costing system. During March, the following costs were incurred in completing job ICU2: direct materials, $13,700; direct labor, $4,800; administrative, $1,400; and selling, $5,600. Overhead was applied at the rate of $25 per machine hour, and job ICU2 required 800 machine hours. If job ICU2 resulted in 7,000 good shirts, the cost of goods sold per unit would be A. $6.50 B. $6.30 C. $5.70 D. $5.50

Question: 2What is the journal entry to record the purchase of materials on account? A.

Raw materials inventory $XXX Accounts payable

B.

Accounts payable

$XXX

$XXX

Raw materials inventory

C.

Accounts receivable $XXX Accounts payable

D.

$XXX

$XXX

Raw materials inventory $XXX Cash

$XXX

Question: 3A corporation manufactures a specialty line of dresses using a job-order costing system. During January, the following costs were incurred in completing job J-1: Direct materials

$27,400

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Direct labor

9,600

Administrative costs

2,800

Selling costs

11,200

Factory overhead was applied at the rate of $50 per direct labor hour, and job J-1 required 400 direct labor hours. If job J-1 resulted in 4,000 good dresses, the cost of goods sold per unit is A. $9.25 B. $14.25 C. $14.95 D. $17.75

Question: 4Job-order costs are most useful for A. Determining inventory valuation using LIFO. B. Estimating the overhead costs included in transfer prices. C. Controlling indirect costs of future production. D. Determining the cost of a specific project.

Question: 5A metal fabricating company uses a job-order cost system. The company expects to have small residual pieces of metal cuttings and shavings from all of its jobs. Although the metal pieces and shavings cannot be reused, they can be sold for scrap. The scrap metal is sold when a ton of scrap has been accumulated. During the current month, 100,000 pounds of aluminum was requisitioned at $1.50 per pound. Aluminum scrap recovery totaled 800 pounds. This amount of scrap is within normal allowances for the company’s operations. The market price for scrap aluminum fluctuates greatly and has ranged from $.25 to $.40 per pound during the last 12 months. The accumulated scrap aluminum was sold last month for $.35 per pound. The appropriate accounting treatment for the scrap aluminum recovered during the current month is to A. Debit direct materials quantity variance for $1,200 (800 lbs. at $1.50/lb.) and credit work-in-process inventory control for $1,200, with postings to each job from which the scrap metal was recovered. B. Debit scrap inventory for $280 (800 lbs. at $.35/lb.) and credit factory overhead control for $280. C. For materiality reasons, no entry is made until the scrap metal is sold. At that time, debit cash and credit factory overhead control for the quantity sold at the current market price. D. Debit direct materials quantity variance for $1,200 (800 lbs. at $1.50/lb.) and credit factory overhead control for $1,200 at the time of recovery, and when the scrap is sold, debit cash and credit direct materials quantity variance for the quantity sold at the current market price.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 6A company uses a job-order cost system in accounting for its manufacturing operations. Because its processes are labor oriented, it applies manufacturing overhead on the basis of direct labor hours (DLH). Normal spoilage is defined as 4% of the units passing inspection. The company includes a provision for normal spoilage cost in its budgeted manufacturing overhead and manufacturing overhead rate. Data regarding a job consisting of 30,000 units are presented below: Volume Data: Good units passing inspection

28,500

Units failing inspection (spoiled) Total units in job

1,500 30,000

Cost Data:

Per Unit

Total Cost

$ 18.00

$ 540,000

Direct labor (2 DLH at $16.00/DLH)

32.00

960,000

Manufacturing overhead (2 DLH at $30.00/DLH)

60.00

1,800,000

$110.00

$3,300,000

Direct materials

Total

The 1,500 units that failed inspection required .25 direct labor hours per unit to rework the units into good units. What is the proper charge to the loss from abnormal spoilage account? A. $1,440 B. $4,140 C. $3,450 D. Zero.

Question: 7A company makes lenses for telescopes. Because the company will only sell lenses of the highest quality, the normal spoilage during a reporting period is 1,000 units. At the beginning of the current reporting period, the company had 2,200 units in inventory, and during the period, production was started and completed on 4,000 units. Units in inventory at the end of the current reporting period were 1,500, and the units transferred out were 3,000. During this period, the abnormal spoilage for the company’s lens production was A. 700 units. B. 1,000 units. C. 1,700 units. D. 3,200 units.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 8A calendar-year corporation had $17,000 of spoilage during April that production management characterized as abnormal. The spoilage was incurred on Job No. 532, which was sold 3 months later for $459,000. Which of the following correctly describes the impact of the spoilage on the corporation’s unit manufacturing cost for Job No. 532 and on the year’s operating income? Unit Manufacturing Operating Cost Income A. Increase No effect B. Increase Decrease C. No effect Decrease D. No effect Not enough information to judge

Question: 9A specialty instrument manufacturer is in the process of establishing a cost system. The company produces machines that are unique and distinctive. These machines are produced when purchase requests are received from customers. Although some common parts and sub-assemblies are to be held in inventory, no finished goods inventory is maintained since each purchase request is for a customized specialty instrument. The type of cost accumulation system that would be best suited for this type of environment would be A. Backflush costing. B. Batch-level costing. C. Job-order costing. D. Process costing.

Question: 10During the production of its single product, a company discovers that an unusual overnight power failure ruined an entire day’s in-process production. How should the cost of these spoiled units be charged? A. Added to the cost of future good units produced. B. Written off as a loss. C. Added to the cost of the next day’s production. D. Added to general factory overhead.

Question: 11A company manufactures a single product. During the manufacturing process, a small number of units do not pass final inspection and are destroyed. What is the appropriate accounting treatment for the cost of these units? The cost should be ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

A. Added to the cost of good units produced. B. Ignored as immaterial. C. Expensed as incurred. D. Added to the cost of warranties.

Question: 12A company uses a job order cost system and applies overhead using a plant-wide rate of $5.75 per direct labor hour. The company is considering changing to two departmental overhead rates with annual information shown below. Machining Department Assembly Department Allocation base

Machine hours

Departmental overhead costs Machine hours used Direct labor hours used

Direct labor hours

$850,000

$300,000

250,000

30,000

75,000

125,000

The company tested its new system by comparing the plant-wide and departmental overhead assigned to two different jobs. The first job’s allocated overhead using the plant-wide rate totaled $23,000 and was $23,750 using the two departmental rates. The second job took 5,000 machine hours in the Machining Department and a total of 3,000 labor hours, 1,700 of which were used in the Assembly Department. The company should A. Change to two departmental overhead rates because of the significant (more than 10%) difference between methods for the second job. B. Change to two departmental overhead rates regardless of the differences between methods for better cause-and-effect relationships. C. Continue to use the plant-wide rate because of the insignificant (less than 10%) difference between methods for the first job. D. Search for cost drivers that would present more consistent results when the two methods are compared.

Question: 13A manufacturer produces unique tapestries and bedding for hotel chains and uses a job order costing system. During the current month, the manufacturer purchased $50,000 of direct materials and incurred $22,000 in direct labor. Overhead is applied on the basis of direct labor hours at a rate of 60%. Overapplied or underapplied overhead is closed to cost of goods sold at the end of the period. The actual overhead incurred this month was $10,000. Balances in the manufacturer’s inventory accounts are presented below. Beginning of month

End of month

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Direct materials

$2,000

$3,500

Work-in-process

5,000

9,000

Finished goods

2,500

1,700

What is the cost of goods manufactured this month? A. $76,500 B. $79,700 C. $80,500 D. $83,700

Question: 14A company using job-order costing had the following transactions during a calendar year for Job 101: Date January 1

Transaction

Amount

Direct materials purchased

£500

February 1 Direct materials used

450

March 1

Direct labor incurred

350

June 1

Overhead applied

50

The company’s beginning finished goods inventory on January 1 for Job 101 was £1,500. The company completed and shipped Job 101 on August 1. If the customer paid the company £5,000 for Job 101 on September 1, how much should the company report as cost of goods sold for Job 101 for the year? A. £1,350 B. £2,350 C. £2,400 D. £2,850

Question: 15A manufacturing process normally produces defective units equal to 1% of production. Defective units are subsequently reworked and sold. The cost of reworking these defective units should be charged to A. Manufacturing overhead control. B. fWork-in-process control.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. Finished goods control. D. Cost of goods sold.

Subunit 2: Process Costing Fact Pattern: Work-in-process November 1

Levittown Company employs a process cost system for its manufacturing operations. All direct materials are added at the beginning of the process and conversion costs are added proportionately. Levittown’s production quantity schedule for November is reproduced in the next column.

(60% complete as to conversion costs)

1,000

Units started during November

5,000

Total units to account for

6,000

Units completed and transferred out from beginning inventory Units started and completed during November Work-in-process on November 30 (20% complete as to conversion costs) Total units accounted for

1,000

3,000

2,000 6,000

Question: 1Using the FIFO method, Levittown’s equivalent units for conversion costs for November are A. 3,400 units. B. 3,800 units. C. 4,000 units. D. 4,400 units.

Fact Pattern: Levittown Company employs a process cost system for its manufacturing operations. All direct materials are added at the beginning of the process and conversion costs are added proportionately. Levittown’s production quantity schedule for November is reproduced in the next column.

Work-in-process November 1 (60% complete as to conversion costs)

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

1,000

Units started during November

5,000

Total units to account for

6,000

Units completed and transferred out from beginning inventory Units started and completed during November Work-in-process on November 30 (20% complete as to conversion costs) Total units accounted for

1,000

3,000

2,000 6,000

Question: 2Using the FIFO method, Levittown’s equivalent units for direct materials for November are A. 5,000 units. B. 6,000 units. C. 4,400 units. D. 3,800 units.

Fact Pattern: Work-in-process November 1

Levittown Company employs a process cost system for its manufacturing operations. All direct materials are added at the beginning of the process and conversion costs are added proportionately. Levittown’s production quantity schedule for November is reproduced in the next column.

(60% complete as to conversion costs)

1,000

Units started during November

5,000

Total units to account for

6,000

Units completed and transferred out from beginning inventory

1,000

Units started and completed during November

3,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Work-in-process on November 30 (20% complete as to conversion costs) Total units accounted for

2,000 6,000

Question: 3Using the weighted-average method, Levittown’s equivalent units for direct materials for November are A. 3,400 units. B. 4,400 units. C. 5,000 units. D. 6,000 units.

Fact Pattern: Work-in-process November 1

Levittown Company employs a process cost system for its manufacturing operations. All direct materials are added at the beginning of the process and conversion costs are added proportionately. Levittown’s production quantity schedule for November is reproduced in the next column.

(60% complete as to conversion costs)

1,000

Units started during November

5,000

Total units to account for

6,000

Units completed and transferred out from beginning inventory Units started and completed during November Work-in-process on November 30 (20% complete as to conversion costs) Total units accounted for

1,000

3,000

2,000 6,000

Question: 4Using the weighted-average method, Levittown’s equivalent units for conversion costs for November are A. 3,400 units.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. 3,800 units. C. 4,000 units. D. 4,400 units.

Fact Pattern: Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May. Units Beginning work-in-process inventory, May 1 16,000 Started in production during May 100,000 Completed production during May 92,000 Ending work-in-process inventory, May 31 24,000

Question:

The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are as follows: • Beginning inventory costs are materials, $54,560; direct labor, $20,320; and overhead, $15,240.

• Costs incurred during May are materials used, $468,000; direct labor, $182,880; and overhead, $391,160. 5Using the weighted-average method, Kimbeth’s equivalent unit cost of materials for May is

A. $4.12 B. $4.50 C. $4.60 D. $5.02

Fact Pattern: Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May. Units Beginning work-in-process inventory, May 1 16,000 Started in production during May 100,000 Completed production during May 92,000 Ending work-in-process inventory, May 31 24,000

Question:

The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are as follows: • Beginning inventory costs are materials, $54,560; direct labor, $20,320; and overhead, $15,240.

• Costs incurred during May are materials used, $468,000; direct labor, $182,880; and overhead, $391,160. 6Using the FIFO method, Kimbeth’s total cost of units in the ending work-in-process inventory at

May 31 is A. $153,168

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. $154,800 C. $155,328 D. $156,960

Fact Pattern: Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May. Units Beginning work-in-process inventory, May 1 16,000 Started in production during May 100,000 Completed production during May 92,000 Ending work-in-process inventory, May 31 24,000

Question:

The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are as follows: • Beginning inventory costs are materials, $54,560; direct labor, $20,320; and overhead, $15,240.

• Costs incurred during May are materials used, $468,000; direct labor, $182,880; and overhead, $391,160. 7Using the first-in, first-out (FIFO) method, Kimbeth’s equivalent units of production (EUP) for

materials are A. 97,600 units. B. 104,000 units. C. 107,200 units. D. 108,000 units.

Fact Pattern: Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May. Units Beginning work-in-process inventory, May 1 16,000 Started in production during May 100,000 Completed production during May 92,000 Ending work-in-process inventory, May 31 24,000

Question:

The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are as follows: • Beginning inventory costs are materials, $54,560; direct labor, $20,320; and overhead, $15,240.

• Costs incurred during May are materials used, $468,000; direct labor, $182,880; and overhead, $391,160. 8Using the FIFO method, Kimbeth’s equivalent units of production for conversion costs are

A. 85,600 units.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. 88,800 units. C. 95,200 units. D. 98,400 units.

Fact Pattern: Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May. Units Beginning work-in-process inventory, May 1 16,000 Started in production during May 100,000 Completed production during May 92,000 Ending work-in-process inventory, May 31 24,000

Question:

The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are as follows: • Beginning inventory costs are materials, $54,560; direct labor, $20,320; and overhead, $15,240.

• Costs incurred during May are materials used, $468,000; direct labor, $182,880; and overhead, $391,160. 9Using the FIFO method, Kimbeth’s equivalent unit cost of materials for May is

A. $4.12 B. $4.50 C. $4.60 D. $4.80

Fact Pattern: Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May. Units Beginning work-in-process inventory, May 1 16,000 Started in production during May 100,000 Completed production during May 92,000 Ending work-in-process inventory, May 31 24,000

Question:

The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are as follows: • Beginning inventory costs are materials, $54,560; direct labor, $20,320; and overhead, $15,240.

• Costs incurred during May are materials used, $468,000; direct labor, $182,880; and overhead, $391,160. 10Using the FIFO method, Kimbeth’s equivalent unit conversion cost for May is

A. $5.65 B. $5.83

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. $6.00 D. $6.20

Fact Pattern: Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May. Units Beginning work-in-process inventory, May 1 16,000 Started in production during May 100,000 Completed production during May 92,000 Ending work-in-process inventory, May 31 24,000

Question:

The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are as follows: • Beginning inventory costs are materials, $54,560; direct labor, $20,320; and overhead, $15,240.

• Costs incurred during May are materials used, $468,000; direct labor, $182,880; and overhead, $391,160. 11Using the weighted-average method, Kimbeth’s equivalent unit conversion cost for May is

A. $5.65 B. $5.83 C. $6.00 D. $6.20

Fact Pattern: Goggle-Eyed Old Snapping Turtle, a sporting goods manufacturer, buys wood as a direct material for baseball bats. The Forming Department processes the baseball bats, and the bats are then transferred to the Finishing Department where a sealant is applied. The Forming Department began manufacturing 10,000 “Casey Sluggers” during the month of May. There was no beginning inventory.

Question:

Costs for the Forming Department for the month of May were as follows: Direct materials $33,000 Conversion costs 17,000 Total

$50,000

A total of 8,000 bats were completed and transferred to the Finishing Department; the remaining 2,000 bats were still in the forming process at the end of the month. All of the Forming Department’s direct materials were placed in process, but, on average, only 25% of the conversion cost was applied to the ending work-in-process inventory. 12The cost of the units transferred to Snapping Turtle’s Finishing Department is

A. $50,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. $40,000 C. $53,000 D. $42,400

Fact Pattern: Goggle-Eyed Old Snapping Turtle, a sporting goods manufacturer, buys wood as a direct material for baseball bats. The Forming Department processes the baseball bats, and the bats are then transferred to the Finishing Department where a sealant is applied. The Forming Department began manufacturing 10,000 “Casey Sluggers” during the month of May. There was no beginning inventory.

Question:

Costs for the Forming Department for the month of May were as follows: Direct materials $33,000 Conversion costs 17,000 Total

$50,000

A total of 8,000 bats were completed and transferred to the Finishing Department; the remaining 2,000 bats were still in the forming process at the end of the month. All of the Forming Department’s direct materials were placed in process, but, on average, only 25% of the conversion cost was applied to the ending work-in-process inventory. 13The cost of the work-in-process inventory in Snapping Turtle’s Forming Department at the end of

May is A. $10,000 B. $2,500 C. $20,000 D. $7,600

Fact Pattern: Marlan Manufacturing produces a product that passes through two departments. The units from the molding department are completed in the assembly department. The units are completed in assembly by adding the remaining direct materials when the units are 60% complete with respect to conversion costs. Conversion costs are added proportionately in assembly. The production activity in the assembly department for the current month is presented as follows. Marlan uses the FIFO (first-in, first-out) inventory method in its process cost system. Beginning inventory units (25% complete with respect to conversion costs)

8,000

Units transferred in from the molding department during the month

42,000

Units to account for

50,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Units completed and transferred to finished goods inventory

38,000

Ending inventory units (40% complete with respect to conversion costs)

12,000

Units accounted for

50,000

Question: 14The equivalent units transferred from Marlan’s molding department to the assembly department for the current month are A. 30,000 units. B. 38,000 units. C. 40,800 units. D. 42,000 units.

Fact Pattern: Marlan Manufacturing produces a product that passes through two departments. The units from the molding department are completed in the assembly department. The units are completed in assembly by adding the remaining direct materials when the units are 60% complete with respect to conversion costs. Conversion costs are added proportionately in assembly. The production activity in the assembly department for the current month is presented as follows. Marlan uses the FIFO (first-in, first-out) inventory method in its process cost system. Beginning inventory units (25% complete with respect to conversion costs)

8,000

Units transferred in from the molding department during the month

42,000

Units to account for

50,000

Units completed and transferred to finished goods inventory

38,000

Ending inventory units (40% complete with respect to conversion costs)

12,000

Units accounted for

50,000

Question: 15The equivalent units in Marlan’s assembly department for conversion costs for the current month are A. 34,800 units. B. 40,800 units. C. 42,800 units. D. 43,200 units.

Fact Pattern: Marlan Manufacturing produces a product that passes through two departments. The units from the molding department are completed in the assembly department. The units are completed in assembly by adding the remaining direct materials when the units are 60% ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

complete with respect to conversion costs. Conversion costs are added proportionately in assembly. The production activity in the assembly department for the current month is presented as follows. Marlan uses the FIFO (first-in, first-out) inventory method in its process cost system. Beginning inventory units (25% complete with respect to conversion costs)

8,000

Units transferred in from the molding department during the month

42,000

Units to account for

50,000

Units completed and transferred to finished goods inventory

38,000

Ending inventory units (40% complete with respect to conversion costs)

12,000

Units accounted for

50,000

Question: 16The equivalent units in Marlan’s assembly department for direct materials for the current month are A. 30,000 units. B. 38,000 units. C. 40,800 units. D. 42,000 units.

Fact Pattern: A.P. Hill Corporation uses a process-costing system. Products are manufactured in a series of three departments. The following data relate to Department Two for the month of February:

The beginning work-in-process was valued at $66,000, consisting of $20,000 of transferred-in costs, $30,000 of materials costs, and $16,000 of conversion costs. Materials are added at the beginning of the process; conversion costs are added evenly throughout the process. Costs added to production during February were

Beginning work-in-process

Transferred-in

$16,000

Materials used

88,000

(70% complete)

10,000 units

Goods started in production 80,000 units

Conversion costs 50,000

Ending work-in-process (60% complete)

5,000 units

Question: 17Under the weighted-average method, how much conversion cost did A.P. Hill transfer out of Department Two during February? A. $69,259 B. $63,750

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. $66,000 D. $64,148

Fact Pattern: A.P. Hill Corporation uses a process-costing system. Products are manufactured in a series of three departments. The following data relate to Department Two for the month of February:

The beginning work-in-process was valued at $66,000, consisting of $20,000 of transferred-in costs, $30,000 of materials costs, and $16,000 of conversion costs. Materials are added at the beginning of the process; conversion costs are added evenly throughout the process. Costs added to production during February were

Beginning work-in-process

Transferred-in

$16,000

Materials used

88,000

(70% complete)

10,000 units

Goods started in production 80,000 units

Conversion costs 50,000

Ending work-in-process (60% complete)

5,000 units

Question: 18Under the weighted-average method, how much materials cost did A.P. Hill transfer out of Department Two during February? A. $88,000 B. $93,500 C. $111,350 D. $112,500

Fact Pattern: A.P. Hill Corporation uses a process-costing system. Products are manufactured in a series of three departments. The following data relate to Department Two for the month of February:

The beginning work-in-process was valued at $66,000, consisting of $20,000 of transferred-in costs, $30,000 of materials costs, and $16,000 of conversion costs. Materials are added at the beginning of the process; conversion costs are added evenly throughout the process. Costs added to production during February were

Beginning work-in-process

Transferred-in

$16,000

Materials used

88,000

(70% complete)

10,000 units

Goods started in production 80,000 units

Conversion costs 50,000

Ending work-in-process (60% complete)

5,000 units

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 19Under the weighted-average method, what is the total of equivalent units for A.P. Hill’s transferredin costs for the month? A. 75,000 units. B. 80,000 units. C. 81,000 units. D. 90,000 units.

Fact Pattern: A.P. Hill Corporation uses a process-costing system. Products are manufactured in a series of three departments. The following data relate to Department Two for the month of February:

The beginning work-in-process was valued at $66,000, consisting of $20,000 of transferred-in costs, $30,000 of materials costs, and $16,000 of conversion costs. Materials are added at the beginning of the process; conversion costs are added evenly throughout the process. Costs added to production during February were

Beginning work-in-process

Transferred-in

$16,000

Materials used

88,000

(70% complete)

10,000 units

Goods started in production 80,000 units

Conversion costs 50,000

Ending work-in-process (60% complete)

5,000 units

Question: 20Assume that the company uses the first-in, first-out (FIFO) method of inventory valuation. Under FIFO, how much conversion cost did A.P. Hill transfer out of Department Two during February? A. $63,750 B. $64,148.15 C. $66,000 D. $74,500

Fact Pattern: A.P. Hill Corporation uses a process-costing system. Products are manufactured in a series of three departments. The following data relate to Department Two for the month of February:

The beginning work-in-process was valued at $66,000, consisting of $20,000 of transferred-in costs, $30,000 of materials costs, and $16,000 of conversion costs. Materials are added at the beginning of the process; conversion costs are added evenly throughout the process. Costs added to production during February were

Beginning work-in-process

Transferred-in

$16,000

Materials used

88,000

(70% complete)

10,000 units

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Goods started in production 80,000 units

Conversion costs 50,000

Ending work-in-process (60% complete)

5,000 units

Question: 21Assuming the company uses the FIFO method of inventory valuation, conversion costs included in A.P. Hill’s ending work-in-process inventory equal A. $1,851.85 B. $2,250 C. $3,100 D. $5,500

Fact Pattern: A.P. Hill Corporation uses a process-costing system. Products are manufactured in a series of three departments. The following data relate to Department Two for the month of February:

The beginning work-in-process was valued at $66,000, consisting of $20,000 of transferred-in costs, $30,000 of materials costs, and $16,000 of conversion costs. Materials are added at the beginning of the process; conversion costs are added evenly throughout the process. Costs added to production during February were

Beginning work-in-process

Transferred-in

$16,000

Materials used

88,000

(70% complete)

10,000 units

Goods started in production 80,000 units

Conversion costs 50,000

Ending work-in-process (60% complete)

5,000 units

Question: 22Assume that the company uses the first-in, first-out (FIFO) method of inventory valuation. Under FIFO, how much materials cost did A.P. Hill transfer out of Department Two during February? A. $88,000 B. $111,350 C. $112,500 D. $114,615

Fact Pattern: A.P. Hill Corporation uses a process-costing The beginning work-in-process was valued at $66,000, consisting system. Products are manufactured in a of $20,000 of transferred-in costs, $30,000 of materials costs, and

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

series of three departments. The following $16,000 of conversion costs. Materials are added at the beginning data relate to Department Two for the month of the process; conversion costs are added evenly throughout the of February: process. Costs added to production during February were Beginning work-in-process (70% complete)

10,000 units

Goods started in production 80,000 units

Transferred-in

$16,000

Materials used

88,000

Conversion costs 50,000

Ending work-in-process (60% complete)

5,000 units

Question: 23Assuming the company uses the FIFO method of inventory valuation, what amount of materials cost is included in A.P. Hill’s ending work-in-process inventory? A. $1,860 B. $3,300 C. $5,500 D. $6,450

Question: 24In a process-costing system, the cost of abnormal spoilage should be A. Prorated between units transferred out and ending inventory. B. Included in the cost of units transferred out. C. Treated as a loss in the period incurred. D. Ignored.

Fact Pattern: Superb Hancock Company uses a process costing system in which all materials are added at the beginning of the first process. Conversion costs are added evenly throughout the process. During the past month, 10,000 units were started in production, and 8,000 were completed and transferred to the next department. There were no beginning inventories. The ending inventories were 70% complete at the end of the month. The company uses a weighted-average method for inventory valuation. Question: 25If Superb Hancock’s materials used in production cost $15,000 and its conversion costs incurred were $25,000, what amount of inventory (rounded) was transferred to the next department? A. $32,000 B. $33,280

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. $36,280 D. $40,000

Fact Pattern: Superb Hancock Company uses a process costing system in which all materials are added at the beginning of the first process. Conversion costs are added evenly throughout the process. During the past month, 10,000 units were started in production, and 8,000 were completed and transferred to the next department. There were no beginning inventories. The ending inventories were 70% complete at the end of the month. The company uses a weighted-average method for inventory valuation. Question: 26If Superb Hancock’s materials used in production cost $15,000 and its conversion costs incurred were $25,000, what is the value (rounded) of the ending work-in-process inventory in the first processing department? A. $6,720 B. $8,000 C. $3,720 D. $0

Fact Pattern: Superb Hancock Company uses a process costing system in which all materials are added at the beginning of the first process. Conversion costs are added evenly throughout the process. During the past month, 10,000 units were started in production, and 8,000 were completed and transferred to the next department. There were no beginning inventories. The ending inventories were 70% complete at the end of the month. The company uses a weighted-average method for inventory valuation. Question: 27Assume that Superb Hancock uses first-in, first-out (FIFO) for inventory costing instead of the weighted-average inventory valuation. If materials used in production cost $15,000 and conversion costs incurred were $25,000, what amount of inventory (rounded) was transferred to the next department under FIFO? A. $32,000 B. $33,280 C. $36,280 D. $40,000

Fact Pattern: Albany Mining Corporation uses a process costing system for its ore Costs for the month were as follows: extraction operations. The following information pertains to work-in-process BWIP Incurred in May inventories and operations for the month of May:

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Completion % Units

Materials

Conversion

BWIP on May 1 32,000 Started in production 200,000 Completed production (184,000)

60%

20%

EWIP on May 31 48,000

90%

Direct materials $54,560 Direct labor

$ 468,000

20,320

182,880

15,240

391,160

$90,120

$1,042,040

Factory 40%

overhead

Question: 28Under the FIFO method, Albany Mining’s equivalent units of materials are A. 195,200 units. B. 208,000 units. C. 214,400 units. D. 227,200 units.

Fact Pattern: Albany Mining Corporation uses a process costing system for its ore Costs for the month were as follows: extraction operations. The following information pertains to work-in-process BWIP Incurred in May inventories and operations for the month of May: Completion % Direct Units Materials Conversion materials $54,560 $ 468,000 BWIP on May 1 32,000 60% 20% Direct 20,320 182,880 Started in labor production 200,000 Completed Factory production (184,000) overhead 15,240 391,160 EWIP on May 31 48,000 90% 40% $90,120 $1,042,040

Question: 29Under the FIFO method, Albany Mining’s equivalent units of conversion cost are A. 171,200 units. B. 177,600 units. C. 184,000 units. D. 196,800 units.

Fact Pattern: ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Albany Mining Corporation uses a process costing system for its ore Costs for the month were as follows: extraction operations. The following information pertains to work-in-process BWIP Incurred in May inventories and operations for the month of May: Completion % Direct Units Materials Conversion materials $54,560 $ 468,000 BWIP on May 1 32,000 60% 20% Direct 20,320 182,880 Started in labor production 200,000 Completed Factory production (184,000) overhead 15,240 391,160 EWIP on May 31 48,000 90% 40% $90,120 $1,042,040

Question: 30Under the FIFO method, Albany Mining’s equivalent unit cost of materials for May is A. $2.06 B. $2.25 C. $2.30 D. $2.51

Fact Pattern: Albany Mining Corporation uses a process costing system for its ore Costs for the month were as follows: extraction operations. The following information pertains to work-in-process BWIP Incurred in May inventories and operations for the month of May: Completion % Direct Units Materials Conversion materials $54,560 $ 468,000 BWIP on May 1 32,000 60% 20% Direct 20,320 182,880 Started in labor production 200,000 Completed Factory production (184,000) overhead 15,240 391,160 EWIP on May 31 48,000 90% 40% $90,120 $1,042,040

Question: 31Using the FIFO method, Albany Mining’s equivalent unit conversion cost for May is A. $2.92 B. $3.00 C. $3.10 D. $3.23

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Albany Mining Corporation uses a process costing system for its ore Costs for the month were as follows: extraction operations. The following information pertains to work-in-process BWIP Incurred in May inventories and operations for the month of May: Completion % Direct Units Materials Conversion materials $54,560 $ 468,000 BWIP on May 1 32,000 60% 20% Direct 20,320 182,880 Started in labor production 200,000 Completed Factory production (184,000) overhead 15,240 391,160 EWIP on May 31 48,000 90% 40% $90,120 $1,042,040

Question: 32Under the FIFO method, Albany Mining’s total cost of units in the ending work-in-process inventory at May 31 is A. $153,264 B. $154,800 C. $155,424 D. $156,960

Fact Pattern: Albany Mining Corporation uses a process costing system for its ore Costs for the month were as follows: extraction operations. The following information pertains to work-in-process BWIP Incurred in May inventories and operations for the month of May: Completion % Direct Units Materials Conversion materials $54,560 $ 468,000 BWIP on May 1 32,000 60% 20% Direct 20,320 182,880 Started in labor production 200,000 Completed Factory production (184,000) overhead 15,240 391,160 EWIP on May 31 48,000 90% 40% $90,120 $1,042,040

Question: 33Using the weighted-average method, Albany Mining’s equivalent unit cost of materials for May is A. $2.06 B. $2.25

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. $2.30 D. $2.51

Fact Pattern: Albany Mining Corporation uses a process costing system for its ore Costs for the month were as follows: extraction operations. The following information pertains to work-in-process BWIP Incurred in May inventories and operations for the month of May: Completion % Direct Units Materials Conversion materials $54,560 $ 468,000 BWIP on May 1 32,000 60% 20% Direct 20,320 182,880 Started in labor production 200,000 Completed Factory production (184,000) overhead 15,240 391,160 EWIP on May 31 48,000 90% 40% $90,120 $1,042,040

Question: 34Under the weighted-average method, Albany Mining’s equivalent unit conversion cost for May is A. $2.92 B. $3.00 C. $3.10 D. $3.31

Fact Pattern: Ramseur Company employs a process costing system for its two-department manufacturing operation using the first-in, first-out (FIFO) inventory method. When units are completed in Department 1, they are transferred to Department 2 for completion. Inspection takes place in Department 2 immediately before the direct materials are added, when the process is 70% complete with respect to conversion. The specific identification method is used to account for lost units. The number of defective units (that is, those failing inspection) is usually below the normal tolerance limit of 4% of units inspected. Defective units have minimal value, and the company sells them without any further processing for whatever it can. Generally, the amount collected equals, or slightly exceeds, the transportation cost. A summary of the manufacturing activity for Department 2, in units for the current month, is presented below. Physical Flow (output units)

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Beginning inventory (60% complete with respect to conversion) 20,000 Units transferred in from Department 1 180,000 Total units to account for

200,000

Units completed in Department 2 during the month Units found to be defective at inspection Ending inventory (80% complete with respect to conversion) Total units accounted for

170,000 5,000 25,000 200,000

Question: 35Ramseur’s equivalent units for direct materials for the current month would be A. 175,000 units. B. 181,500 units. C. 195,000 units. D. 200,000 units.

Fact Pattern: Ramseur Company employs a process costing system for its two-department manufacturing operation using the first-in, first-out (FIFO) inventory method. When units are completed in Department 1, they are transferred to Department 2 for completion. Inspection takes place in Department 2 immediately before the direct materials are added, when the process is 70% complete with respect to conversion. The specific identification method is used to account for lost units. The number of defective units (that is, those failing inspection) is usually below the normal tolerance limit of 4% of units inspected. Defective units have minimal value, and the company sells them without any further processing for whatever it can. Generally, the amount collected equals, or slightly exceeds, the transportation cost. A summary of the manufacturing activity for Department 2, in units for the current month, is presented below. Physical Flow (output units) Beginning inventory (60% complete with respect to conversion) 20,000 Units transferred in from Department 1 180,000 Total units to account for

200,000

Units completed in Department 2 during the month Units found to be defective at inspection Ending inventory (80% complete with respect to conversion) Total units accounted for

170,000 5,000 25,000 200,000

Question: 36The units that failed inspection during the current month would be classified by Ramseur as ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

A. Abnormal spoilage. B. Normal scrap. C. Normal reworked units. D. Normal waste.

Question: 37During the month of May, a company completed 50,000 units costing $600,000, exclusive of spoilage allocation. Of these completed units, 25,000 were sold during the month. An additional 10,000 units, costing $80,000, were 50% complete at May 31. All units are inspected between the completion of manufacturing and transfer to finished goods inventory. Normal spoilage for the month was $20,000, and abnormal spoilage of $50,000 was also incurred during the month. The portion of total spoilage that should be charged against revenue in May is A. $50,000 B. $20,000 C. $70,000 D. $60,000

Question: 38FIFO requires separate costing of goods started last period and finished this period and goods started and completed this period. The weighted-average method does not. Which is the true statement about the cost of completed goods transferred under FIFO to the next production department or to finished goods inventory? A. The two amounts are kept separate but are combined by the next department. B. The two amounts are ultimately recorded in separate finished goods accounts. C. The two amounts are considered combined as the goods are transferred. D. The goods started and completed this period are transferred prior to those started last period and completed this period.

Question: 39A major advantage of the first-in, first-out (FIFO) process-costing method over the weightedaverage process-costing method is A. The simplicity of the FIFO method. B. That inventories are eliminated from consideration in the FIFO method. C. That current-period cost per unit is highlighted under the FIFO method.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. That only ending inventory costs need to be separately computed when using the FIFO method.

Question: 40A firm uses a weighted-average process costing system. Direct materials and conversion costs are incurred evenly during the production process. During the month of October, the following costs were incurred: Direct materials $39,700 Conversion costs 70,000 The work-in-process inventory as of October 1 consisted of 5,000 units, valued at $4,300, that were 20% complete. During October, 27,000 units were transferred out. Inventory as of October 31 consisted of 3,000 units that were 50% complete. The weighted-average inventory cost per unit completed in October was A. $3.51 B. $3.88 C. $3.99 D. $4.00

Fact Pattern: During December, Krause Chemical Company had the following selected data concerning the manufacture of Xyzine, an industrial cleaner: Production Flow Completed and transferred to the next department Add: Ending work-in-process inventory Total units to account for Less: Beginning work-in-process inventory Units started during December

Physical Units 100 10 (40% complete as to conversion) 110 (20) (60% complete as to conversion) 90

All material is added at the beginning of processing in this department, and conversion costs are added uniformly during the process. The beginning work-in-process inventory had $120 of raw material and $180 of conversion costs incurred. Material added during December was $540 and conversion costs of $1,484 were incurred. Krause uses the weighted-average process-costing method. Question: 41Under the weighted-average method, Krause’s total raw material costs in the ending work-inprocess inventory for December is A. $120

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. $72 C. $60 D. $36

Fact Pattern: During December, Krause Chemical Company had the following selected data concerning the manufacture of Xyzine, an industrial cleaner: Production Flow Completed and transferred to the next department Add: Ending work-in-process inventory Total units to account for Less: Beginning work-in-process inventory Units started during December

Physical Units 100 10 (40% complete as to conversion) 110 (20) (60% complete as to conversion) 90

All material is added at the beginning of processing in this department, and conversion costs are added uniformly during the process. The beginning work-in-process inventory had $120 of raw material and $180 of conversion costs incurred. Material added during December was $540 and conversion costs of $1,484 were incurred. Krause uses the weighted-average process-costing method. Question: 42Under the weighted-average method, Krause’s total conversion cost assigned to units transferred to the next department in December was A. $1,664 B. $1,600 C. $1,513 D. $1,484

Fact Pattern: During December, Krause Chemical Company had the following selected data concerning the manufacture of Xyzine, an industrial cleaner: Production Flow Completed and transferred to the next department Add: Ending work-in-process inventory

Physical Units 100 10 (40% complete as to conversion)

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Total units to account for Less: Beginning work-in-process inventory Units started during December

110 (20) (60% complete as to conversion) 90

All material is added at the beginning of processing in this department, and conversion costs are added uniformly during the process. The beginning work-in-process inventory had $120 of raw material and $180 of conversion costs incurred. Material added during December was $540 and conversion costs of $1,484 were incurred. Krause uses the weighted-average process-costing method. Question: 43Under the first-in, first-out (FIFO) method, Krause’s equivalent units of production used to calculate conversion costs for December was A. 110 units. B. 104 units. C. 100 units. D. 92 units.

Question: 44A company that uses a process costing system inspects its goods at the 60% stage of completion. If the firm’s ending work-in-process inventory is 80% complete, how would the firm account for its normal and abnormal spoilage? A. Both normal and abnormal spoilage costs would be added to the cost of the good units completed during the period. B. Both normal and abnormal spoilage costs would be written off as an expense of the period. C. Normal spoilage costs would be added to the cost of the good units completed during the period; in contrast, abnormal spoilage costs would be written off as a loss. D. Normal spoilage costs would be allocated between the cost of good units completed during the period and the ending work-in-process inventory. In contrast, abnormal spoilage costs would be written off as a loss.

Question: 45When considering normal and abnormal spoilage, which one of the following is theoretically the best accounting method for spoilage in a process-costing system? A. Both normal and abnormal spoilage cost should be charged to a separate expense account. B. Normal spoilage cost should be charged to good units and abnormal spoilage cost should be charged to a separate expense account. C. Both normal and abnormal spoilage costs should be charged to good units.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Normal spoilage costs should be charged to a separate expense account and abnormal spoilage cost should be charged to good units.

Question: 46A firm uses a process-costing system and inspects its goods at the end of manufacturing. The inspection as of June 30 revealed the following information for the month of June: Good units completed

16,000

Normal spoilage (units)

300

Abnormal spoilage (units)

100

Unit costs were: materials, $3.50 and conversion costs, $6.00. The number of units that the firm would transfer to its finished goods inventory and the related cost of these units are Units Transferred Cost A. 16,000 $152,000 B. 16,000 $154,850 C. 16,000 $155,800 D. 16,300 $154,850

Question: 47A first-in, first-out (FIFO) process cost system is used to account for the cost of producing a chemical compound. As part of production, Material B is added when the goods are 80% complete. Beginning work-in-process inventory for the current month was 20,000 units, 90% complete. During the month, 70,000 units were started in process, and 65,000 of these units were completed. There were no lost or spoiled units. If the ending inventory was 60% complete, the total equivalent units for Material B for the month was A. 65,000 units. B. 70,000 units. C. 85,000 units. D. 90,000 units.

Question: 48A manufacturer uses a weighted-average process costing system and has the following costs and activity during October: Materials

$40,000

Conversion cost

32,500

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Total beginning work-in-process inventory Materials

$72,500 $ 700,000

Conversion cost

617,500

Total production costs -- October Production completed

$1,317,500

60,000 units

Work-in-process, October 31 20,000 units All materials are introduced at the start of the manufacturing process, and conversion cost is incurred uniformly throughout production. Conversations with plant personnel reveal that, on average, month-end in-process inventory is 25% complete. Assuming no spoilage, how should October manufacturing cost be assigned? Production Completed Work-in-Process A. $1,042,500 $347,500 B. $1,095,000 $222,500 C. $1,155,000 $235,000 D. $1,283,077 $106,923

Question: 49A company uses a weighted-average process costing system. All materials are introduced at the start of manufacturing, and conversion cost is incurred evenly throughout production. The company started 70,000 units during May and had the following work-in-process inventories at the beginning and end of the month:

May 1 30,000 units, 40% complete

May 31 24,000 units, 25% complete Assuming no spoilage or defective units, the total equivalent units used to assign costs for May are Materials Conversion Cost A. 70,000 70,000 B. 82,000 82,000 C. 100,000 70,000 D. 100,000 82,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 50A corporation uses a first-in, first-out (FIFO) process costing system and has the following unit information for the month of August: Units Beginning work-in-process inventory: 100% complete for materials, 75% complete for conversion cost

10,000

Units complete and transferred out

90,000

Ending work-in-process inventory: 100% complete for materials, 60% complete for conversion costs

8,000

The number of equivalent units of production for conversion costs for the month of August is A. 87,300 B. 88,000 C. 92,300 D. 92,700

Question: 51A firm uses a weighted-average process-costing system. Material B is added at two different points in the production of shirms, 40% is added when the units are 20% completed, and the remaining 60% of Material B is added when the units are 80% completed. At the end of the quarter, there are 22,000 shirms in process, all of which are 50% completed. With respect to Material B, the ending shirms in process represent how many equivalent units? A. 4,400 B. 8,800 C. 11,000 D. 22,000

Question: 52A company uses a process cost system in accounting for its single product. The cost of units failing final inspection, termed normal spoilage, is added to the inventory cost of the good units produced. Units spoiled during production are termed abnormal spoilage, and their cost is immediately written off to cost of goods sold. During the previous month, the entire inventory of spoiled units (both normal and abnormal spoilage) was sold at a price lower than it had cost to produce them. How would this sale affect the reported net income of the company?

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Increase net income from the sale of the abnormal spoilage and increase net income from the sale of the normal spoilage. B. Increase net income from the sale of the abnormal spoilage and decrease net income from the sale of the normal spoilage. C. Decrease net income from the sale of the abnormal spoilage and increase net income from the sale of the normal spoilage. D. Decrease net income from the sale of the abnormal spoilage and decrease net income from the sale of the normal spoilage.

Question: 53The fabrication process includes three steps: cutting, bending, and assembly. Cutting and bending processes are completed together, and then units are sent to the assembly department for completion. Direct materials and conversion costs are added proportionately throughout the process. Units are 50% complete for both direct materials and conversion costs when the units are transferred from the cutting and bending process to assembly. The fabricator uses the FIFO (first in, first out) inventory method. The activity report for the assembly department for the current month is shown below. Beginning inventory (60% complete)

240 units

Transferred in from cutting-bending department 680 units Units completed and transferred out Ending inventory (75% complete)

800 units ------

What is the assembly department’s equivalent units produced for the current month? A. 734 units. B. 746 units. C. 824 units. D. 890 units.

Question: 54A company began the month with 10,000 units in work-in-process inventory that were 60% complete. During the month, the company transferred 120,000 units to finished goods. At the end of the month, 20,000 units were in work-in-process inventory that were 20% complete. If the FIFO method is used, the equivalent units of production during the month equal A. 130,000 B. 128,000 C. 122,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. 118,000

Question: 55During the month of February, a company purchased 260,000 pounds of raw material for $5 per pound and used 250,000 of these pounds in production. This raw material is applied at the beginning of the process. On February 1, the company had 10,000 units in work-in-process inventory that were 10% complete and valued at $25,000 for materials. At the end of the month, there were 40,000 units in work-in-process inventory that were 40% complete. Assuming FIFO is used, if the company transferred out 500,000 units to finished goods during February, the direct material cost per unit that should be used to value ending work-in-process inventory is A. $2.36 B. $2.47 C. $2.50 D. $2.52

Question: 56Costs are accumulated by a responsibility center for control purposes when using Job-Order Costing Process Costing A. Yes Yes B. Yes No C. No No D. No Yes

Question: 57The completion of goods is recorded as a decrease in work-in-process control when using Job-Order Costing Process Costing A. Yes No B. Yes Yes C. No Yes D. No No

Question: 58A company uses a process costing system to record inventory costs. Data at the end of the month are as follows: Units Direct materials (% complete) Conversion cost (% complete)

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Work-in-process inventory

100

100%

80%

Finished goods inventory

900

100%

100%

The company uses the weighted-average method to compute the costs. Its total costs for the month are $10,000 for direct materials and $19,600 for conversion costs. What is the total conversion cost per equivalent unit? A. $19.60 B. $20.00 C. $24.50 D. $30.00

Question: 59The Cutting Department is the first stage of Mark Company’s production cycle. BWIP for this department was 80% complete as to conversion costs. EWIP was 50% complete. Conversion costs in the Cutting Department for the month just ended were as follows: Units Beginning WIP

CC

25,000 $ 22,000

Units started and costs incurred during the month

135,000 143,000

Units completed and transferred to next department during the month 100,000 Using the FIFO method, what was the conversion cost of ending WIP in the Cutting Department? A. $22,000 B. $33,000 C. $39,000 D. $78,000

Question: 60In a process cost system, the application of factory overhead usually is recorded as an increase in A. Cost of goods sold. B. Work-in-process inventory control. C. Factory overhead control. D. Finished goods inventory control.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Subunit 3: Activity-Based Costing Question: 1The use of activity-based costing (ABC) normally results in A. Substantially greater unit costs for low-volume products than is reported by traditional product costing. B. Substantially lower unit costs for low-volume products than is reported by traditional product costing. C. Decreased setup costs being charged to low-volume products. D. Equalizing setup costs for all product lines.

Fact Pattern: Wall Specialty Zeta Company is preparing its annual profit plan. As part Mirrors Windows of its analysis of the profitability of individual products, the controller estimates the amount of overhead that Units produced 25 25 should be allocated to the individual product lines from Material moves per product line 5 15 the information given in the next column: Direct labor hours per unit 200 200 Budgeted materials handling costs $50,000 Question: 2Under a costing system that allocates overhead on the basis of direct labor hours, Zeta’s materials handling costs allocated to one unit of wall mirrors would be A. $1,000 B. $500 C. $2,000 D. $5,000

Fact Pattern: Wall Specialty Zeta Company is preparing its annual profit plan. As part Mirrors Windows of its analysis of the profitability of individual products, the controller estimates the amount of overhead that Units produced 25 25 should be allocated to the individual product lines from Material moves per product line 5 15 the information given in the next column: Direct labor hours per unit 200 200 Budgeted materials handling costs $50,000 Question: 3Under activity-based costing (ABC), Zeta’s materials handling costs allocated to one unit of wall mirrors would be A. $1,000 B. $500

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $1,500 D. $2,500

Question: 4Because of changes that are occurring in the basic operations of many firms, all of the following represent trends in the way indirect costs are allocated except A. Treating direct labor as an indirect manufacturing cost in an automated factory. B. Using throughput time as an application base to increase awareness of the costs associated with lengthened throughput time. C. Preferring plant-wide application rates that are applied to machine hours rather than incurring the cost of detailed allocations. D. Using several machine cost pools to measure product costs on the basis of time in a machine center.

Question: 5Multiple or departmental overhead rates are considered preferable to a single or plantwide overhead rate when A. Manufacturing is limited to a single product flowing through identical departments in a fixed sequence. B. Various products are manufactured that do not pass through the same departments or use the same manufacturing techniques. C. Cost drivers, such as direct labor, are the same over all processes. D. Individual cost drivers cannot accurately be determined with respect to cause-and-effect relationships.

Question: 6A cosmetics manufacturer has used a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of 14.5% of direct labor cost. Monthly direct labor cost for makeup is $27,500. In an attempt to distribute quality control costs more equitably, the manufacturer is considering activity-based costing. The monthly data shown in the chart below have been gathered for makeup. Quantity of Activity

Cost Driver

Cost Rates

Makeup

Incoming material inspection Type of material $11.50 per type 12 types In-process inspection

Number of units $0.14 per unit

17,500 units

Product certification

Per order

25 orders

$77 per order

The monthly quality control cost assigned to makeup using activity-based costing (ABC) is A. $88.64 per order.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $525.50 lower than the cost using the traditional system. C. $8,500.50. D. $525.50 higher than the cost using the traditional system.

Question: 7A profitable company with five departments uses plantwide overhead rates for its highly diversified operation. The firm is studying a change to either allocating overhead by using departmental rates or using activitybased costing (ABC). Which one of these two methods will likely result in the use of a greater number of cost allocation bases and more accurate costing results? Greater Number of More Accurate Allocation Bases Costing Results A. Departmental Departmental B. Departmental ABC C. ABC Departmental D. ABC ABC

Question: 8A company is beginning operations and is considering three alternative ways in which to allocate manufacturing overhead to individual units produced. The company can use a plantwide rate, departmental rates, or activity-based costing. The company will produce many types of products in its single plant, and not all products will be processed through all departments. In which one of the following independent situations would reported net income for the first year be the same regardless of which overhead allocation method had been selected? A. All production costs approach those costs that were budgeted. B. The sales mix does not vary from the mix that was budgeted. C. All manufacturing overhead is a fixed cost. D. All ending inventory balances are zero.

Question: 9Cost allocation is the process of assigning indirect costs to a cost object. The indirect costs are grouped in cost pools and then allocated by a common allocation base to the cost object. The base that is employed to allocate a homogeneous cost pool should A. Have a cause-and-effect relationship with the cost items in the cost pool. B. Assign the costs in the pool uniformly to cost objects even if the cost objects use resources in a nonuniform way. C. Be a nonfinancial measure (e.g., number of setups) because a nonfinancial measure is more objective.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Have a high correlation with the cost items in the cost pool as the sole criterion for selection.

Question: 10A 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 will most likely be the best for allocating the indirect costs of the distribution function is A. Number of customer phone calls. B. Number of shipments. C. Number of sales persons. D. Dollar sales volume.

Question: 11Activities, their drivers, and their costs may be classified as unit-level, batch-level, product-level, and facility-level. If activity-based costing (ABC) information is prepared for internal purposes, which costs are most likely to be treated as period costs? A. Unit-level. B. Batch-level. C. Product-level. D. Facility-level.

Question: 12A manufacturer’s cost assignment 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 the production process is nonvalue-adding? A. Design engineering activity. B. Heat treatment activity. C. Drill press activity. D. Raw materials storage activity.

Question: 13A corporation has used a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of 15% of direct labor cost. Monthly direct labor cost for its main product is $30,000. In an attempt to distribute quality control costs more equitably, the corporation is considering activity-based costing (ABC). The monthly data shown below have been gathered for the main product. The three activities are (1) ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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incoming materials inspection, (2) in-process inspection, and (3) product certification. Costs are to be allocated to each activity on the basis of cost drivers. Quantity for Activity Cost Driver

Cost Rate

Main Product

(1)

Number of types of materials

$12 per type

12 types

(2)

Number of units

$0.14 per unit 17,500 units

(3)

Number of orders

$77 per order

30 orders

The monthly quality control cost assigned to the main product using ABC is A. $150 per order. B. $404 lower than using the traditional system. C. $4,500 D. $404 higher than using the traditional system.

Question: 14Which of the following statements about activity-based costing (ABC) is false? A. Activity-based costing is useful for allocating marketing and distribution costs. B. Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. C. In activity-based costing, cost drivers are what cause costs to be incurred. D. Activity-based costing differs from traditional costing systems in that products are not cross-subsidized.

Fact Pattern: Believing that its traditional cost system may be providing misleading information, Farragut Manufacturing is considering an activity-based costing (ABC) approach. It now employs a traditional cost system and has been applying its manufacturing overhead on the basis of machine hours. Farragut plans on using 50,000 direct labor hours and 30,000 machine hours in the coming year. The following data show the manufacturing overhead that is budgeted. Budgeted Budgeted Activity

Cost Driver

Activity

Cost

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Material handling No. of parts handled Setup costs

No. of setups

Machining costs Quality control

6,000,000 $ 720,000 750

315,000

Machine hours

30,000

540,000

No. of batches

500

225,000

Total manufacturing overhead cost:

$1,800,000

Cost, sales, and production data for one of Farragut’s products for the coming year are as follows: Prime costs: Direct material cost per unit

$4.40

Direct labor cost per unit .05 DLH @ $15.00/DLH Total prime cost

.75 $5.15

Sales and production data: Expected sales

20,000 units

Batch size

5,000 units

Setups

2 per batch

Total parts per finished unit Machine hours required

5 parts 80 MH per batch

Question: 15If Farragut uses the traditional cost system, the cost per unit for this product for the coming year would be A. $5.39 B. $5.44 C. $6.11 D. $6.95

Fact Pattern: Believing that its traditional cost system may be providing misleading information, Farragut Manufacturing is considering an activity-based costing (ABC) approach. It now employs a traditional cost system and has been applying its manufacturing overhead on the basis of machine hours. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Farragut plans on using 50,000 direct labor hours and 30,000 machine hours in the coming year. The following data show the manufacturing overhead that is budgeted. Budgeted Budgeted Activity

Cost Driver

Activity

Material handling No. of parts handled Setup costs

No. of setups

Machining costs Quality control

Cost

6,000,000 $ 720,000 750

315,000

Machine hours

30,000

540,000

No. of batches

500

225,000

Total manufacturing overhead cost:

$1,800,000

Cost, sales, and production data for one of Farragut’s products for the coming year are as follows: Prime costs: Direct material cost per unit

$4.40

Direct labor cost per unit .05 DLH @ $15.00/DLH Total prime cost

.75 $5.15

Sales and production data: Expected sales

20,000 units

Batch size

5,000 units

Setups

2 per batch

Total parts per finished unit Machine hours required

5 parts 80 MH per batch

Question: 16If Farragut employs an activity-based costing system, the cost per unit for the product described for the coming year would be A. $6.00 B. $6.08 C. $6.21 D. $6.30

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 17Factory Company makes two products, X and Z. X is being introduced this period, and Z has been in production for 2 years. For the period about to begin, 1,000 units of each product are to be manufactured. Assume that the only relevant overhead item is the cost of engineering change orders; that X and Z are expected to require eight and two change orders, respectively; that X and Z are expected to require 2 and 3 machine hours, respectively; and that the cost of a change order is $600. If Factory applies engineering change order costs on the basis of machine hours, the cross-subsidy per unit arising from this peanut-butter costing approach is A. $1.20 B. $2.40 C. $3.60 D. $4.80

Question: 18An assisted-living facility provides services in the form of residential space, meals, and other occupant assistance (OOA) to its occupants. The facility currently uses a traditional cost accounting system that charges each occupant a daily rate equal to the facility’s annual cost of providing residential space, meals, and OOA divided by total occupant days. However, an activity-based costing (ABC) analysis has revealed that occupants’ use of OOA varies substantially. This analysis determined that occupants could be grouped into three categories (low, moderate, and high usage of OOA) and that the activity driver of OOA should be nursing hours. The driver of the residential space and meals is occupant days. The following quantitative information was also provided: Annual

Annual

Occupant Category

Occupant Days

Nursing Hours

Low usage

36,000

90,000

Medium usage

18,000

90,000

6,000

120,000

60,000

300,000

High usage

The total annual cost of OOA was $7.5 million, and the total annual cost of providing residential space and meals was $7.2 million. Accordingly, the ABC analysis indicates that the daily costing rate for providing residential space, meals, and OOA should be A. $182.50 for occupants in the low-usage category. B. $145.00 for occupants in the medium-usage category. C. $245.00 for occupants in the high-usage category. D. $620.00 for all occupants.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 19A corporation utilizes an activity-based costing system for applying costs to its two products, P and Q. In the assembly department, material handling costs vary directly with the number of parts inserted into the product. Machinery is recalibrated and oiled each weekend regardless of the number of parts inserted during the previous week. Both material handling and machinery maintenance costs are charged to the product on the basis of the number of parts inserted. Due to reengineering of the production process for Product P, the number of insertion parts per finished unit has been reduced. How will the redesign of the production process for Product P affect the activity-based cost of Product Q? A. Material handling cost per Q will remain unchanged, and machinery maintenance cost per Q unit will remain unchanged. B. Material handling cost per Q unit will increase, and machinery maintenance cost per Q unit will remain unchanged. C. Material handling cost per Q will remain unchanged, and machinery maintenance cost per Q unit will increase. D. Material handling cost per Q unit will increase, and machinery maintenance cost per Q unit will increase.

Question: 20When using activity-based costing techniques, which one of the following departmental activities would be expected to use machine hours as a cost driver to allocate overhead costs to production? A. Plant cafeteria. B. Machine setups. C. Material handling. D. Robotics painting.

Question: 21A company is considering the implementation of an activity-based costing and management program. The company A. Should focus on manufacturing activities and avoid implementation with service-type functions. B. Would probably find a lack of software in the marketplace to assist with the related recordkeeping. C. Would normally gain added insights into causes of cost. D. Would likely use fewer cost pools than it did under more traditional accounting methods.

Question: 22All of the following are likely to be used as a cost allocation base in activity-based costing except the A. Number of different materials used to manufacture the product.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Units of materials used to manufacture the product. C. Number of vendors supplying the materials used to manufacture the product. D. Cost of materials used to manufacture the product.

Question: 23A manufacturer manufactures two types of engineering diagnostic equipment used in construction. The two products are based on different technologies, x-ray and ultrasound, but are manufactured in the same factory. The manufacturer has computed the manufacturing cost of the x-ray and ultrasound products by adding together direct materials, direct labor, and overhead cost applied based on the number of direct labor hours. The factory has three overhead departments that support the single production line that makes both products. Budgeted overhead spending for the departments is as follows: Department Engineering design

Material handling

Setup

Total

$6,000

$5,000

$3,000

$14,000

Budgeted manufacturing activities and costs for the period are as follows: Activity

Product X-Ray

Units produced and sold

Ultrasound

50

100

$5,000

$8,000

100

300

$4,000

$12,000

400

600

Number of engineering changes

2

1

Number of product setups

8

7

Direct materials used Direct labor hours used Direct labor cost Number of parts used

The budgeted cost to manufacture one ultrasound machine using the activity-based costing method is A. $225 B. $264 C. $293

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $305

Question: 24A firm that specializes in chocolate baked goods has long assessed the profitability of a product line by comparing revenues to the cost of goods sold. However, the firm’s new accountant wants to use an activity-based costing system that takes into consideration the cost of the delivery person. Listed below are activity and cost information relating to two of the firm’s major products. Muffins Revenue Cost of goods sold

Cheesecake

$53,000 $46,000 26,000 21,000

Delivery Activity: Number of deliveries

150

85

Average length of delivery 10 minutes 15 minutes Cost per hour for delivery $20.00

$20.00

Using activity-based costing, which one of the following statements is correct? A. The muffins are $2,000 more profitable. B. The cheesecakes are $75 more profitable. C. The muffins are $1,925 more profitable. D. The muffins have a higher profitability as a percentage of sales and therefore are more advantageous.

Fact Pattern: Atmel, Inc. manufactures and sells two products. Data with regard to these products are given below. Product A Product B

Units produced and sold

30,000

12,000

Machine hours required per unit

2

3

Receiving orders per product line

50

150

Production orders per product line

12

18

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Production runs

Inspections

8

12

20

30

Total budgeted machine hours are 100,000. The budgeted overhead costs are shown below. Receiving costs

$450,000

Engineering costs

300,000

Machine setup costs

25,000

Inspection costs

200,000

Total budgeted overhead costs $975,000

Question: 25Using activity-based costing, Atmel’s per unit overhead cost allocation of receiving costs for Product A is A. $3.75 B. $10.75 C. $19.50 D. $28.13

Fact Pattern: Atmel, Inc. manufactures and sells two products. Data with regard to these products are given below. Product A Product B

Units produced and sold

Machine hours required per unit

30,000

12,000

2

3

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Receiving orders per product line

50

150

Production orders per product line

12

18

8

12

20

30

Production runs

Inspections

Total budgeted machine hours are 100,000. The budgeted overhead costs are shown below. Receiving costs

Engineering costs

Machine setup costs

Inspection costs

$450,000

300,000

25,000

200,000

Total budgeted overhead costs $975,000

Question: 26Atmel’s cost driver for engineering costs is the number of production orders per product line. Using activity-based costing, the engineering cost per unit for Product B is A. $4.00 B. $10.00 C. $15.00 D. $29.25

Question: 27A primary reason for a company to change from traditional costing to activity-based costing (ABC) is that ABC A. Is a simpler costing method to use. B. Reduces product undercosting or overcosting.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Eliminates indirect cost application to products. D. Identifies the nonvalue-added costs of production.

Question: 28A plant has two departments, Machining and Assembly. This year’s budget for the plant contained the following information. Machining Manufacturing overhead

Assembly

$4,000,000 $2,000,000

Direct labor hours Machine hours

100,000

200,000

40,000

40,000

If the plant allocates manufacturing overhead based on machine hours, which of the following represents the allocation rates? Machining Assembly A. $40/hr. $10/hr. B. $10/hr. $40/hr. C. $100/hr. $50/hr. D. $50/hr. $100/hr.

Question: 29Which one of the following is least likely to be an objective of a cost accounting system? A. Product costing. B. Department efficiency. C. Inventory valuation. D. Sales commission determination.

Question: 30In a broad sense, cost accounting can best be defined within the accounting system as A. Internal and external reporting that may be used in making nonroutine decisions and in developing plans and policies. B. External reporting to government, various outside parties, and shareholders.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Internal reporting for use in management planning and control, and external reporting to the extent its product-costing function satisfies external reporting requirements. D. Internal reporting for use in planning and controlling routine operations.

Question: 31A manufacturing firm produces multiple families of products requiring various combinations of different types of parts. The manufacturer has identified various cost pools, one of which consists of materials handling costs. This cost pool includes the wages and employee benefits of the workers involved in receiving materials, inspecting materials, storing materials in inventory, and moving materials to the workstations; depreciation and maintenance of materials handling equipment (e.g., forklift trucks); and costs of supplies used as well as other related costs. Of the following, the most appropriate cost driver for assigning materials handling costs to the various products most likely is A. Direct labor hours. B. Number of units produced. C. Number of vendors involved. D. Number of parts used.

Question: 32Which one of the following is the focus of activity-based management? A. To improve allocation of indirect production costs. B. To reduce the number of cost pools. C. To increase the number of volume-related allocation bases. D. To improve the effectiveness of activities.

Question: 33A plant has two departments, Machining and Assembly. This year’s budget for the plant contained the following information. Machining

Assembly

Manufacturing overhead $4,000,000 $2,000,000 Direct labor hours

100,000

200,000

Machine hours

410,000

40,000

If the plant uses a plantwide overhead rate based on direct labor hours, what would the rate be? A. $10 per hour.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $20 per hour. C. $40 per hour. D. $75 per hour.

Question: 34A plant has two departments, Machining and Assembly. This year’s budget for the plant contained the following information. Machining

Assembly

Manufacturing overhead $4,000,000 $2,000,000 Direct labor hours Machine hours

100,000

200,000

40,000

40,000

Assume the plant uses machine hours as the overhead base in machining and direct labor in Assembly. If Job 2420 uses 20 direct labor hours in each department, 10 machine hours in Machining and 5 machine hours in Assembly, how much overhead would be assigned to the job? A. $1,100 B. $1,200 C. $2,100 D. $2,200

Question: 35Which one of the following is not a benefit of activity-based management? A. Improved competitive advantage by using continuous improvement methods. B. Improving the value the customer receives. C. Better allocation of resources to key value-added activities. D. Better costing information.

Question: 36A company manufactures diamond earrings and pendants. The company uses activity-based budgeting and has established diamond inspection as one of its cost pools with number of diamonds used as its cost driver. Inspection supplies for each diamond inspected are $0.35. For the upcoming year, the company originally believed it would produce and sell 10,000 pendants containing one diamond and 5,000 sets of earrings containing two diamonds, resulting in the following inspection cost per diamond.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Salary of inspector $60,000 Equipment costs

3,000

Inspection supplies

7,000

Total

$70,000

Cost per diamond $

3.50

If the company now believes it will only be able to produce and sell 8,000 pendants (in addition to the earrings), the inspection cost per set of earrings would be A. $6.30 B. $7.00 C. $7.70 D. $7.78

Question: 37A company manufactures a line of products that vary with complexity: a basic model, a standard model, and a deluxe model. The company uses 25 different activity cost drivers to assign overhead costs to its products. The deluxe model typically uses more cost drivers than the simpler models. The company encourages managers to focus on activities performed for each product and to control the cost of those activities. Which budget methodology would best meet this company’s needs? A. Traditional budgeting. B. Zero-based budgeting. C. Activity-based budgeting. D. Flexible budgeting.

Question: 38A company manufactures an increasing variety of consumer communications devices. The company has always used a traditional cost allocation system, but now the accounting staff has proposed a change to an activity-based costing system. The vice president of operations argues, “Costs are costs, rearranging them won’t save any money and those systems are complicated and expensive.” The most logical response to this argument is that activity-based costing systems A. Provide more accurate reporting of each product’s cost so that management can make more informed pricing decisions. B. Are less expensive to use than traditional cost systems. C. Eliminate the use of arbitrary cost allocations that are used in traditional cost systems.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Focus on manufacturing activities and eliminate engineering, marketing, and other non-traceable activities from costing considerations.

Question: 39A manufacturing company has two departments, Machining and Assembly, at its Shanghai plant. This year’s budget for the plant contained the following information. Machining Assembly Manufacturing overhead $4,000,000 $2,000,000 Direct labor hours Machine hours

100,000

200,000

40,000

40,000

If the Shanghai plant uses departmental allocation based on machine hours for the Machining Department and direct labor hours for the Assembly Department, what would the rates be when allocating overhead to the individual products? Machining Assembly A. $40/hr. $10/hr. B. $75/hr. $30/hr. C. $100/hr. $10/hr. D. $100/hr. $50/hr.

Question: 40A company is implementing an activity-based budgeting system. Set-up overhead is allocated based on set-up hours and manufacturing overhead is allocated based on direct manufacturing labor hours. Budget information is listed in the table below. Cost driver information Numbers of units per batch Set-up time per batch

Product A Product B 50

25

1.75 hours 1.25 hours

Direct manufacturing labor time per batch 1.00 hours 0.75 hours

The company plans to produce 1,000 units of Product A and 750 units of Product B. The activity rates are $100 per set-up hour and $150 per direct manufacturing labor hour. What is the total budgeted overhead?

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $10,063 B. $13,625 C. $15,125 D. $22,188

Question: 41The costing method that determines product cost by identifying the costs of individual tasks and then assigning these costs to products on the basis of the tasks needed to produce each product is known as A. Activity-based costing. B. Job-order costing. C. Process costing. D. Operations costing.

Subunit 4: Life-Cycle Costing Question: 1Target pricing A. Is more effective when applied to mature, long-established products. B. Considers short-term variable costs and excludes fixed costs. C. Is often used when costs are difficult to control. D. Is a pricing strategy used to create competitive advantage.

Question: 2Life-cycle costing A. Is sometimes used as a basis for cost planning and product pricing. B. Includes only manufacturing costs incurred over the life of the product. C. Includes only manufacturing cost, selling expense, and distribution expense. D. Emphasizes cost savings opportunities during the manufacturing cycle.

Question: 3A company has been asked to evaluate the profitability of a product that it manufactured and sold from Year 7 through Year 10. The product had a one-year warranty from date of sale. The following information appears in the financial records: ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Research, development, and design cost Manufacturing and distribution costs Warranty costs Warranty cost Yr 5 & Yr 6

Yr 7 - Yr 10

Yr 7 - Yr 10

Yr 11

$5,000,000

$7,000,000

$200,000

$100,000

The life-cycle cost for this product is A. $10,000,000 B. $12,000,000 C. $12,200,000 D. $12,300,000

Question: 4The series of activities in which customer usefulness is added to the product is the definition of A. A value chain. B. Process value analysis. C. Integrated manufacturing. D. Activity-based costing.

Question: 5A company’s product has an expected 4-year life cycle from research, development, and design through its withdrawal from the market. Budgeted costs are Upstream costs (R&D, design) $2,000,000 Manufacturing costs

3,000,000

Downstream costs (marketing, distribution, customer service) 1,200,000 After-purchase costs

1,000,000

The company plans to produce 200,000 units and price the product at 125% of the whole-life unit cost. Thus, the budgeted unit selling price is A. $15 B. $31 C. $36

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $45

Fact Pattern: Dixon Porter Co., which uses life cycle costing, is considering the manufacture of a product with a 5-year life cycle that will require spending $1,000,000 for R&D and $2,000,000 for design and testing. Annual fixed and unit variable costs for the product and projected average annual unit sales at three selling prices are given below: Sales Price Fixed Production costs

Variable $ 750

$1,500,000

$100

Marketing and distribution costs 1,500,000

100

Customer service costs

180,000

$ 900

$1,125

6,000

4,800

40

Unit average annual sales

8,000

At the highest price, R&D costs will increase by $500,000 and design and testing costs by $1,000,000. Additionally, at the highest price, fixed customer service costs will rise by $30,000 per year, and variable customer service costs will rise by $25 per unit. At the lowest price, fixed marketing and distribution costs will decrease by $30,000 per year. Question: 6At a unit price of $750, Dixon Porter’s life cycle costs are A. $7,620,000 B. $8,070,000 C. $27,000,000 D. $28,350,000

Fact Pattern: Dixon Porter Co., which uses life cycle costing, is considering the manufacture of a product with a 5-year life cycle that will require spending $1,000,000 for R&D and $2,000,000 for design and testing. Annual fixed and unit variable costs for the product and projected average annual unit sales at three selling prices are given below: Sales Price Fixed Production costs

Variable $ 750

$1,500,000

$100

Marketing and distribution costs 1,500,000

100

Customer service costs

180,000

$ 900

$1,125

40

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Unit average annual sales

8,000

6,000

4,800

At the highest price, R&D costs will increase by $500,000 and design and testing costs by $1,000,000. Additionally, at the highest price, fixed customer service costs will rise by $30,000 per year, and variable customer service costs will rise by $25 per unit. At the lowest price, fixed marketing and distribution costs will decrease by $30,000 per year. Question: 7At a unit price of $900, Dixon Porter’s life cycle costs are A. $18,900,000 B. $26,100,000 C. $26,910,000 D. $28,350,000

Fact Pattern: Dixon Porter Co., which uses life cycle costing, is considering the manufacture of a product with a 5-year life cycle that will require spending $1,000,000 for R&D and $2,000,000 for design and testing. Annual fixed and unit variable costs for the product and projected average annual unit sales at three selling prices are given below: Sales Price Fixed Production costs

Variable $ 750

$1,500,000

$100

Marketing and distribution costs 1,500,000

100

Customer service costs

180,000

Unit average annual sales

$ 900

$1,125

6,000

4,800

40 8,000

At the highest price, R&D costs will increase by $500,000 and design and testing costs by $1,000,000. Additionally, at the highest price, fixed customer service costs will rise by $30,000 per year, and variable customer service costs will rise by $25 per unit. At the lowest price, fixed marketing and distribution costs will decrease by $30,000 per year. Question: 8Which unit sales price should Dixon Porter select to obtain the maximum profit over the product’s 5-year life cycle? A. $750 B. $900 C. $1,125 D. No profit can be earned.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 9A company will introduce a new product in Year 1 that is expected to have a 3-year life. The company expects to sell 100,000 units each year. Estimated costs are shown below. Year 0

Year 1

Research/design $260,000 $

Year 2 0 $

Year 3 0 $

0

Production

0

900,000

900,000

900,000

Marketing

10,000

300,000

100,000

50,000

0

40,000

60,000

80,000

Customer service

If the company uses life-cycle costing to price its new product and desires a 10% mark-up over cost, the selling price for Year 3 would be A. $13.20 B. $12.21 C. $11.66 D. $9.90

Question: 10In the stage of the product life cycle, tend to be highest. List A

List B

A. Introduction Sales B. Growth Profits C. Maturity Profits D. Decline Cash flows

Question: 11At the introduction stage of an innovative product, the profit growth is normally slow due to A. Expensive sales promotion. B. High competition. C. A mass market. D. Available alternatives.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 12While auditing a marketing department, the internal auditor discovered that the product life cycle model was used to structure the marketing mix. Under such a philosophy, the opportunity for cost reductions would be greatest in which stage of the life cycle? A. Introduction stage. B. Growth stage. C. Maturity stage. D. Decline stage.

Question: 13The number of competing firms is highest at which stage in the product life cycle? A. Introduction. B. Growth. C. Maturity. D. Decline.

Question: 14An entity produced two new products last year. Sales and cost data for the two products are summarized below. BM2

SM4

Sales price per unit

$100

$120

Quantity sold

1,500

970

Costs: R&D

$20,000 $28,000

Marketing

7,000

10,000

Direct materials

46,000

42,000

Direct labor

35,500

25,000

Manufacturing overhead

12,000

9,500

4,000

5,500

Warranties

Manager A measures product performance using traditional absorption costing. Manager B uses life-cycle costing for performance measurement. Which one of the following correctly describes how the managers will evaluate the new products?

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A. Manager B finds SM4 is not profitable. B. Manager A finds SM4 to be more profitable than BM2. C. Both managers conclude that BM2 and SM4 are profitable products. D. Manager B finds both BM2 and SM4 to be unprofitable products.

Question: 15The life-cycle costing method is A. The process for examining the various aspects of a product to identify cost efficiencies. B. The process for managing all costs identified in the value chain. C. A method of costing that minimizes the selling expenses associated with a product. D. A method of costing that focuses on the customer.

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Study Unit 7: Cost Allocation Techniques 7: (186) Cost Allocation Techniques 1: (25) Absorption and Variable Costing – Theory 2: (37) Absorption and Variable Costing – Calculations 3: (42) Joint Product and By-Product Costing 4: (20) Overhead Allocation and Normal Costing – Theory 5: (25) Overhead Allocation and Normal Costing – Calculations 6: (20) Allocating Service Department Costs – Theory 7: (17) Allocating Service Department Costs -- Calculations

Subunit 1: Absorption and Variable Costing -- Theory Question: 1Which method of inventory costing treats direct manufacturing costs and manufacturing overhead costs, both variable and fixed, as inventoriable costs? A. Direct costing. B. Variable costing. C. Absorption costing. D. Conversion costing.

Question: 2Which one of the following statements is true regarding absorption costing and variable costing? A. Overhead costs are treated in the same manner under both costing methods. B. If finished goods inventory increases, absorption costing results in higher income. C. Variable manufacturing costs are lower under variable costing. D. Gross margins are the same under both costing methods.

Question: 3Absorption costing and variable costing are two different methods of assigning costs to units produced. Of the four cost items listed below, identify the one that is not correctly accounted for as a product cost. Part of Product Cost Under Absorption Costing

Variable Costing

A. Manufacturing supplies Yes Yes B. Insurance on factory Yes No

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C. Direct labor cost Yes Yes D. Packaging and shipping costs Yes Yes

Question: 4When a firm prepares financial reports by using absorption costing, A. Profits will always increase with increases in sales. B. Profits will always decrease with decreases in sales. C. Profits may decrease with increased sales even if there is no change in selling prices and costs. D. Decreased output and constant sales result in increased profits.

Question: 5The contribution margin is the excess of revenues over A. Cost of goods sold. B. Manufacturing cost. C. Direct cost. D. All variable costs.

Question: 6A company pays bonuses to its managers based on operating income. The company uses absorption costing, and overhead is applied on the basis of direct labor hours. To increase bonuses, the managers may do all of the following except A. Produce those products requiring the most direct labor. B. Defer expenses such as maintenance to a future period. C. Increase production schedules independent of customer demands. D. Decrease production of those items requiring the most direct labor.

Question: 7Which one of the following is an advantage of using variable costing? A. Variable costing complies with the U.S. Internal Revenue Code. B. Variable costing complies with generally accepted accounting principles. C. Variable costing makes cost-volume relationships more easily apparent.

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D. Variable costing is more relevant to long-run pricing strategies.

Question: 8A corporation pays bonuses to its managers based on operating income, as calculated under variable costing. It is now 2 months before year end, and earnings have been depressed for some time. Which one of the following actions should the production manager definitely implement to maximize the bonus for this year? A. Step up production so that more manufacturing costs are deferred into inventory. B. Cut $2.3 million of advertising and marketing costs. C. Postpone $1.8 million of discretionary equipment maintenance until next year. D. Implement, with the aid of the controller, an activity-based costing and activity-based management system.

Question: 9When comparing absorption costing with variable costing, which of the following statements is not true? A. Absorption costing enables managers to increase operating profits in the short run by increasing inventories. B. When sales volume is more than production volume, variable costing will result in higher operating profit. C. A manager who is evaluated based on variable costing operating profit would be tempted to increase production at the end of a period in order to get a more favorable review. D. Under absorption costing, operating profit is a function of both sales volume and production volume.

Question: 10Which one of the following is the best reason for using variable costing? A. Fixed factory overhead is more closely related to the capacity to produce than to the production of specific units. B. All costs are variable in the long term. C. Variable costing is acceptable for income tax reporting purposes. D. Variable costing usually results in higher operating income than if a company uses absorption costing.

Question: 11If a manufacturing company uses variable costing to cost inventories, which of the following costs are considered inventoriable costs? A. Only raw material, direct labor, and variable manufacturing overhead costs.

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B. Only raw material, direct labor, and variable and fixed manufacturing overhead costs. C. Only raw material, direct labor, variable manufacturing overhead, and variable selling and administrative costs. D. Only raw material and direct labor costs.

Question: 12An airline is in the process of preparing a contribution margin income statement that will allow a detailed look at its variable costs and profitability of operations. Which one of the following cost combinations should be used to evaluate the variable cost per flight of the company’s flights along a specific route? A. Flight crew salary, fuel, and engine maintenance. B. Fuel, food service, and airport landing fees. C. Airplane depreciation, baggage handling, and airline marketing. D. Communication system operation, food service, and ramp personnel.

Question: 13A firm uses direct (variable) costing for internal reporting and absorption costing for the external financial statements. A review of the firm’s internal and external disclosures will likely find A. A difference in the treatment of fixed selling and administrative costs. B. A higher inventoriable unit cost reported to management than to the shareholders. C. A contribution margin rather than gross margin in the reports released to shareholders. D. Internal income figures that vary closely with sales and external income figures that are influenced by both units sold and productive output.

Question: 14Which of the following correctly shows the treatment of (1) factory insurance, (2) direct labor, and (3) finished goods shipping costs under absorption costing and variable costing? Absorption Costing Variable Costing Product Cost

Period Cost

Product Cost

Period Cost

A. 1, 2 3 2 1, 3 B. 2 1, 3 1, 2 3 C. 1, 2 3 1 2, 3 D. 1 2, 3 2, 3 1

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Question: 15When comparing absorption costing with variable costing, the difference in operating income can be explained by the difference between the A. Units sold and the units produced, multiplied by the unit sales price. B. Ending inventory in units and the beginning inventory in units, multiplied by the budgeted fixed manufacturing cost per unit. C. Ending inventory in units and the beginning inventory in units, multiplied by the unit sales price. D. Units sold and the units produced, multiplied by the budgeted variable manufacturing cost per unit.

Question: 16A company has significant fixed overhead costs in the manufacturing of its sole product, auto mufflers. For internal reporting purposes, in which one of the following situations would ending finished goods inventory be higher under direct (variable) costing rather than under absorption costing? A. If more units were produced than were sold during a given year. B. If more units were sold than were produced during a given year. C. In all cases when ending finished goods inventory exists. D. None of these situations.

Question: 17A corporation produces and sells smart phones. The following information relates to operations for the last year: Variable cost per unit

$5.20

Total fixed manufacturing overhead cost

$260,000

Total fixed selling and administrative cost

$180,000

Units produced and sold

400,000

Using absorption costing, what was the cost per unit last year? A. $4.55 B. $5.00 C. $5.85 D. $6.30

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Question: 18The primary difference between absorption and variable costing is that variable costing treats A. Only direct materials and direct labor as product cost. B. Direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs. C. Only direct materials, direct labor, the variable portion of manufacturing overhead, and the variable portion of selling and administrative expenses as product cost. D. Only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs.

Question: 19Management would like to determine profitability of its Alpha product line. To eliminate the possibility of profit distortion due to changes in production, the managers should primarily review A. Variable (direct) costing income statements. B. Absorption costing income statements. C. Multi-step income statements. D. Cash flow statements.

Question: 20In which one of the following situations will ending inventory on the balance sheet computed under absorption costing be exactly equal to ending inventory computed under variable costing? A. When the number of units produced equals the number of units sold. B. When there is no fixed factory overhead cost. C. When the denominator variance is zero. D. When there is no variable overhead cost.

Question: 21Which of the following costs are generally included in a calculation of operating income when using absorption costing? I.

Fixed direct manufacturing costs

II.

Variable direct manufacturing costs

III.

Variable manufacturing overhead costs

IV.

Fixed manufacturing overhead costs

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A. II and III only. B. I and IV only. C. I, II, and III only. D. I, II, III, and IV.

Question: 22Which one of the following is true with respect to variable and absorption costing systems? A. Variable costing systems include fixed manufacturing overhead as period costs. B. Absorption costing systems include fixed manufacturing overhead as period costs. C. Variable costing systems include variable manufacturing overhead as period costs. D. Absorption costing systems include variable manufacturing overhead as period costs.

Question: 23The costing method that is properly classified for both external and internal reporting purposes is External Internal Reporting Reporting A. Activity-based costing No Yes B. Job-order costing No Yes C. Variable costing No Yes D. Process costing No No

Question: 24Which of the following statements is correct regarding the difference between the absorption costing and variable costing methods? A. When production equals sales, absorption costing income is greater than variable costing income. B. When production equals sales, absorption costing income is less than variable costing income. C. When production is greater than sales, absorption costing income is greater than variable costing income. D. When production is less than sales, absorption costing income is greater than variable costing income.

Question: 25In an income statement prepared as an internal report, total fixed costs normally are shown separately under

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Absorption Costing

Variable Costing

A. No No B. No Yes C. Yes Yes D. Yes No

Subunit 2: Absorption and Variable Costing – Calculations Fact Pattern: At the end of its fiscal year, Jubal Manufacturing recorded the data below: Prime cost

$800,000

Variable manufacturing overhead

100,000

Fixed manufacturing overhead

160,000

Variable selling and other expenses

80,000

Fixed selling and other expenses

40,000

Question: 1If Jubal uses variable costing, the inventoriable costs for the fiscal year are A. $800,000 B. $900,000 C. $980,000 D. $1,060,000

Fact Pattern: At the end of its fiscal year, Jubal Manufacturing recorded the data below: Prime cost

$800,000

Variable manufacturing overhead

100,000

Fixed manufacturing overhead

160,000

Variable selling and other expenses

80,000

Fixed selling and other expenses

40,000

Question: 2Using absorption (full) costing, Jubal’s inventoriable costs are A. $800,000

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B. $900,000 C. $1,060,000 D. $1,180,000

Fact Pattern: Osawa, Inc., planned and actually manufactured 200,000 units of its single product during its first year of operations. Variable manufacturing costs were $30 per unit of product. Planned and actual fixed manufacturing costs were $600,000, and selling and administrative costs totaled $400,000. Osawa sold 120,000 units of product at a selling price of $40 per unit. Question: 3Osawa’s operating income for the year using variable costing is A. $200,000 B. $440,000 C. $800,000 D. $600,000

Fact Pattern: Osawa, Inc., planned and actually manufactured 200,000 units of its single product during its first year of operations. Variable manufacturing costs were $30 per unit of product. Planned and actual fixed manufacturing costs were $600,000, and selling and administrative costs totaled $400,000. Osawa sold 120,000 units of product at a selling price of $40 per unit. Question: 4Osawa’s operating income using absorption (full) costing is A. $200,000 B. $440,000 C. $600,000 D. $840,000

Question: 5A manufacturing company employs variable costing for internal reporting and analysis purposes. However, it converts its records to absorption costing for external reporting. The Accounting Department always reconciles the two operating income figures to assure that no errors have occurred in the conversion. The fixed manufacturing overhead cost per unit was based on the planned level of production of 480,000 units. Financial data for the year are presented below: Budget

Actual

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Sales (in units)

495,000

510,000

Production (in units)

480,000

500,000

Variable Absorption Costing Variable costs

Costing

$10.00

$10.00

0

6.00

Total unit manufacturing costs $10.00

$16.00

Fixed manufacturing overhead

The difference between the operating income calculated under the variable costing method and the operating income calculated under the absorption costing method would be A. $57,600 B. $60,000 C. $90,000 D. $120,000

Fact Pattern: The following is taken from Fortech Company’s records for the fiscal year just ended: Direct materials used

$300,000

Direct labor

100,000

Variable manufacturing overhead

50,000

Fixed manufacturing overhead

80,000

Selling and admin. costs--variable

40,000

Selling and admin. costs--fixed 20,000 Question: 6If Fortech Company uses variable costing, the inventoriable costs for the fiscal year are A. $400,000 B. $450,000 C. $490,000 D. $530,000

Fact Pattern: The following is taken from Fortech Company’s records for the fiscal year just ended: Direct materials used

$300,000

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Direct labor

100,000

Variable manufacturing overhead

50,000

Fixed manufacturing overhead

80,000

Selling and admin. costs--variable

40,000

Selling and admin. costs--fixed

20,000

Question: 7Using absorption (full) costing, Fortech Company’s inventoriable costs are A. $400,000 B. $450,000 C. $530,000 D. $590,000

Fact Pattern: Estimated unit costs for Cole Lab using full absorption costing and operating at a production level of 12,000 units per month: Cost Item

Question:

Estimated Unit Cost

Direct material $32 Direct labor 20 Variable manufacturing overhead 15 Fixed manufacturing overhead 6 Variable selling 3 Fixed selling 4 8Cole Lab’s estimated conversion costs per unit are

A. $35 B. $41 C. $44 D. $48

Fact Pattern: Estimated unit costs for Cole Lab using full absorption costing and operating at a production level of 12,000 units per month: Cost Item

Estimated Unit Cost

Direct material $32 Direct labor 20 Variable manufacturing overhead 15 Fixed manufacturing overhead 6 Variable selling 3

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Fixed selling

4

Question: 9Cole Lab’s estimated prime costs per unit are A. $73 B. $32 C. $67 D. $52

Fact Pattern: Farber Company employs a normal (nonstandard) absorption cost system. The following information is from the financial records of the company for the year. • Total manufacturing costs were $2,500,000. • Cost of goods manufactured was $2,425,000. Applied factory overhead was 30% of total manufacturing costs. Factory overhead was applied to production at a rate of 80% of direct labor cost. Work-in-process inventory at January 1 was 75% of work-in-process inventory at December 31. Question: 10Total cost of direct material used by Farber Company for the year is A. $750,000 B. $812,500 C. $937,500 D. $1,150,000

Fact Pattern: Farber Company employs a normal (nonstandard) absorption cost system. The following information is from the financial records of the company for the year. • Total manufacturing costs were $2,500,000. • Cost of goods manufactured was $2,425,000. Applied factory overhead was 30% of total manufacturing costs. Factory overhead was applied to production at a rate of 80% of direct labor cost. Work-in-process inventory at January 1 was 75% of work-in-process inventory at December 31. Question: 11The carrying value of Farber Company’s work-in-process inventory at December 31 is A. $300,000. B. $225,000.

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C. $100,000. D. $75,000.

Fact Pattern: Farber Company employs a normal (nonstandard) absorption cost system. The following information is from the financial records of the company for the year. • Total manufacturing costs were $2,500,000. • Cost of goods manufactured was $2,425,000. Applied factory overhead was 30% of total manufacturing costs. Factory overhead was applied to production at a rate of 80% of direct labor cost. Work-in-process inventory at January 1 was 75% of work-in-process inventory at December 31. Question: 12Farber Company’s total direct labor cost for the year is A. $750,000 B. $600,000 C. $909,375 D. $937,500

Fact Pattern: Planned Costs

Valyn Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Valyn’s planned and actual operations for the calendar year are presented below. Planned

Actual

Activity

Activity

Per Unit Total Direct materials Direct labor

Costs

$12.00 $1,680,000 $1,560,000 9.00

1,260,000 1,170,000

Variable manufacturing overhead

Beginning finished goods inventory in units

Incurred

4.00

560,000

520,000

5.00

700,000

715,000

Fixed manufacturing 35,000

35,000

Sales in units

140,000

125,000

Production in units

140,000

130,000

overhead Variable selling expenses

8.00

Fixed selling expenses

7.00

980,000

980,000

2.00

280,000

250,000

The planned per-unit cost figures shown in the schedule were based on the estimated production and sale of 140,000 units for the year. Valyn uses a predetermined

1,120,000 1,000,000

Variable administrative expenses

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manufacturing overhead rate for applying manufacturing overhead to its product; thus, a combined manufacturing overhead rate of $9.00 per unit was employed for absorption costing purposes. Any over- or underapplied manufacturing overhead is closed to the cost of goods sold account at the end of the reporting year.

Question:

Fixed administrative expenses Total

3.00

420,000

425,000

$50.00 $7,000,000 $6,620,000

The beginning finished goods inventory for absorption costing purposes was valued at the previous year’s planned unit manufacturing cost, which was the same as the current year’s planned unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for the current year was $70.00 per unit. 13The value of Valyn Corporation’s actual ending finished goods inventory on the absorption costing

basis was A. $900,000 B. $1,200,000 C. $1,220,000 D. $1,350,000

Fact Pattern: Planned Costs

Valyn Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Valyn’s planned and actual operations for the calendar year are presented below. Planned

Actual

Activity

Activity

Per Unit Total Direct materials Direct labor

Costs

$12.00 $1,680,000 $1,560,000 9.00

1,260,000 1,170,000

Variable manufacturing overhead

Beginning finished goods inventory in units

Incurred

4.00

560,000

520,000

5.00

700,000

715,000

Fixed manufacturing 35,000

35,000

Sales in units

140,000

125,000

Production in units

140,000

130,000

overhead Variable selling expenses

8.00

1,120,000 1,000,000

Fixed selling expenses

7.00

980,000

980,000

2.00

280,000

250,000

3.00

420,000

425,000

Variable

The planned per-unit cost figures shown in the administrative schedule were based on the estimated expenses production and sale of 140,000 units for the year. Valyn uses a predetermined Fixed administrative manufacturing overhead rate for applying manufacturing overhead to its product; thus, a expenses combined manufacturing overhead rate of $9.00

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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per unit was employed for absorption costing Total $50.00 $7,000,000 $6,620,000 purposes. Any over- or underapplied manufacturing overhead is closed to the cost of goods sold account at the end of the reporting The beginning finished goods inventory for absorption costing purposes was valued at the previous year’s planned unit year. manufacturing cost, which was the same as the current year’s planned unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for the current year was $70.00 per unit. Question: 14The value of Valyn Corporation’s actual ending finished goods inventory on the variable costing basis was A. $1,400,000 B. $1,125,000 C. $1,000,000 D. $750,000

Fact Pattern: Planned Costs

Valyn Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Valyn’s planned and actual operations for the calendar year are presented below. Planned

Actual

Activity

Activity

Per Unit Total Direct materials Direct labor

Costs

$12.00 $1,680,000 $1,560,000 9.00

1,260,000 1,170,000

Variable manufacturing overhead

Beginning finished goods inventory in units

Incurred

4.00

560,000

520,000

5.00

700,000

715,000

Fixed manufacturing 35,000

35,000

Sales in units

140,000

125,000

Production in units

140,000

130,000

overhead Variable selling expenses

8.00

1,120,000 1,000,000

Fixed selling expenses

7.00

980,000

980,000

2.00

280,000

250,000

3.00

420,000

425,000

Variable

The planned per-unit cost figures shown in the administrative schedule were based on the estimated expenses production and sale of 140,000 units for the year. Valyn uses a predetermined Fixed administrative manufacturing overhead rate for applying manufacturing overhead to its product; thus, a expenses combined manufacturing overhead rate of $9.00 per unit was employed for absorption costing Total purposes. Any over- or underapplied manufacturing overhead is closed to the cost of

$50.00 $7,000,000 $6,620,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

goods sold account at the end of the reporting year.

Question:

The beginning finished goods inventory for absorption costing purposes was valued at the previous year’s planned unit manufacturing cost, which was the same as the current year’s planned unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for the current year was $70.00 per unit. 15Valyn Corporation’s absorption costing operating income was

A. Higher than variable costing operating income because actual production exceeded actual sales. B. Lower than variable costing operating income because actual production exceeded actual sales. C. Lower than variable costing operating income because actual production was less than planned production. D. Lower than variable costing operating income because actual sales were less than planned sales.

Fact Pattern: Planned Costs

Valyn Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Valyn’s planned and actual operations for the calendar year are presented below. Planned

Actual

Activity

Activity

Per Unit Total Direct materials Direct labor

Costs

$12.00 $1,680,000 $1,560,000 9.00

1,260,000 1,170,000

Variable manufacturing overhead

Beginning finished goods inventory in units

Incurred

4.00

560,000

520,000

5.00

700,000

715,000

Fixed manufacturing 35,000

35,000

Sales in units

140,000

125,000

Production in units

140,000

130,000

The planned per-unit cost figures shown in the schedule were based on the estimated production and sale of 140,000 units for the year. Valyn uses a predetermined manufacturing overhead rate for applying manufacturing overhead to its product; thus, a combined manufacturing overhead rate of $9.00 per unit was employed for absorption costing purposes. Any over- or underapplied manufacturing overhead is closed to the cost of goods sold account at the end of the reporting year.

overhead Variable selling expenses

8.00

1,120,000 1,000,000

Fixed selling expenses

7.00

980,000

980,000

2.00

280,000

250,000

3.00

420,000

425,000

Variable administrative expenses Fixed administrative expenses Total

$50.00 $7,000,000 $6,620,000

The beginning finished goods inventory for absorption costing purposes was valued at the previous year’s planned unit manufacturing cost, which was the same as the current year’s

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question:

planned unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for the current year was $70.00 per unit. 16Valyn Corporation’s actual manufacturing contribution margin calculated on the variable costing

basis was A. $4,375,000 B. $4,935,000 C. $4,910,000 D. $5,625,000

Fact Pattern: Planned Costs

Valyn Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Valyn’s planned and actual operations for the calendar year are presented below. Planned

Actual

Activity

Activity

Per Unit Total Direct materials Direct labor

Costs

$12.00 $1,680,000 $1,560,000 9.00

1,260,000 1,170,000

Variable manufacturing overhead

Beginning finished goods inventory in units

Incurred

4.00

560,000

520,000

5.00

700,000

715,000

Fixed manufacturing 35,000

35,000

Sales in units

140,000

125,000

Production in units

140,000

130,000

The planned per-unit cost figures shown in the schedule were based on the estimated production and sale of 140,000 units for the year. Valyn uses a predetermined manufacturing overhead rate for applying manufacturing overhead to its product; thus, a combined manufacturing overhead rate of $9.00 per unit was employed for absorption costing purposes. Any over- or underapplied manufacturing overhead is closed to the cost of goods sold account at the end of the reporting year.

overhead Variable selling expenses

8.00

Fixed selling expenses

7.00

980,000

980,000

2.00

280,000

250,000

3.00

420,000

425,000

1,120,000 1,000,000

Variable administrative expenses Fixed administrative expenses Total

$50.00 $7,000,000 $6,620,000

The beginning finished goods inventory for absorption costing purposes was valued at the previous year’s planned unit manufacturing cost, which was the same as the current year’s planned unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question:

planned and actual unit selling price for the current year was $70.00 per unit. 17The total variable cost currently expensed by Valyn Corporation on the variable costing basis was

A. $4,375,000 B. $4,500,000 C. $4,325,000 D. $4,550,000

Fact Pattern: Planned Costs

Valyn Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Valyn’s planned and actual operations for the calendar year are presented below. Planned

Actual

Activity

Activity

Per Unit Total Direct materials Direct labor

Costs

$12.00 $1,680,000 $1,560,000 9.00

1,260,000 1,170,000

Variable manufacturing overhead

Beginning finished goods inventory in units

Incurred

4.00

560,000

520,000

5.00

700,000

715,000

Fixed manufacturing 35,000

35,000

Sales in units

140,000

125,000

Production in units

140,000

130,000

overhead Variable selling expenses

8.00

Fixed selling expenses

7.00

980,000

980,000

2.00

280,000

250,000

3.00

420,000

425,000

The planned per-unit cost figures shown in the schedule were based on the estimated production and sale of 140,000 units for the year. Valyn uses a predetermined manufacturing overhead rate for applying manufacturing overhead to its product; thus, a combined manufacturing overhead rate of $9.00 per unit was employed for absorption costing purposes. Any over- or underapplied manufacturing overhead is closed to the cost of goods sold account at the end of the reporting year.

1,120,000 1,000,000

Variable administrative expenses Fixed administrative expenses Total

$50.00 $7,000,000 $6,620,000

The beginning finished goods inventory for absorption costing purposes was valued at the previous year’s planned unit manufacturing cost, which was the same as the current year’s planned unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for the current year was $70.00 per unit. Question: 18The difference between Valyn Corporation’s operating income calculated on the absorption costing basis and calculated on the variable costing basis was

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

A. $65,000 B. $25,000 C. $40,000 D. $90,000

Question: 19The marketing manager has learned the following about a new product that is being introduced: Sales of this product are planned at $100,000 for the first year. Sales commission expense is budgeted at 8% of sales plus the marketing manager’s incentive budgeted at an additional 1/2%. The preparation of a product brochure will require 20 hours of marketing salaried staff time at an average rate of $100 per hour, and 10 hours at $150 per hour for an outside illustrator’s effort. The variable marketing cost for this new product will be A. $8,000 B. $8,500 C. $10,000 D. $10,500

Question: 20A cracker and cookie manufacturer has the following unit costs for the month of June: Variable

Variable

Fixed

Fixed

manufacturing

marketing

manufacturing

marketing

cost

cost

cost

cost

$5.00

$3.50

$2.00

$4.00

A total of 100,000 units were manufactured during June, 10,000 of which remain in ending inventory. The manufacturer uses the first-in, first-out (FIFO) inventory method, and the 10,000 units are the only finished goods inventory at month end. Using the full absorption costing method, the manufacturer’s finished goods inventory value would be A. $50,000 B. $70,000 C. $85,000 D. $145,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 21A company has just completed the first month of producing a new product but has not yet shipped any of this product. The product incurred variable manufacturing costs of $5,000,000, fixed manufacturing costs of $2,000,000, variable marketing costs of $1,000,000, and fixed marketing costs of $3,000,000. If the company uses the variable cost method to value inventory, the inventory value of the new product will be A. $5,000,000 B. $6,000,000 C. $8,000,000 D. $11,000,000

Fact Pattern: Consider the following situation for Weisman Corporation for the prior year:  The company

produced 1,000 units and sold 900 units, both as budgeted.  There were no beginning or ending work-in-process inventories and no beginning finished goods inventory.  Budgeted and actual fixed costs were equal, all variable manufacturing costs are affected by volume of production only, and all variable selling costs are affected by sales volume only.  Budgeted

per unit revenues and costs were as follows.  Per Unit

Sales price

$100

Direct materials

30

Direct labor

20

Variable manufacturing overhead

10

Fixed manufacturing overhead

Variable selling costs

5

12

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fixed selling costs ($3,600 total)

4

Fixed administrative costs ($1,800 total)

2

Question: 22If Weisman uses absorption costing, its operating income earned in the last fiscal year was A. $13,600 B. $14,200 C. $15,300 D. $15,840

Fact Pattern: Consider the following situation for Weisman Corporation for the prior year:  The company

produced 1,000 units and sold 900 units, both as budgeted.

 There were no

beginning or ending work-in-process inventories and no beginning finished goods inventory.  Budgeted and actual fixed costs were equal, all variable manufacturing costs are affected by volume of production only, and all variable selling costs are affected by sales volume only.  Budgeted per unit revenues and costs were as follows.  Per Unit

Sales price

$100

Direct materials

30

Direct labor

20

Variable manufacturing overhead

10

Fixed manufacturing overhead

5

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Variable selling costs

12

Fixed selling costs ($3,600 total)

4

Fixed administrative costs ($1,800 total)

2

Question: 23If Weisman uses variable costing, its operating income earned in the last fiscal year was A. $13,600 B. $14,200 C. $14,800 D. $15,300

Question: 24A corporation had the following unit costs for the recently concluded calendar year: Variable

Fixed

Manufacturing

$8.00

$3.00

Nonmanufacturing

$2.00

$5.50

Inventory for the sole product totaled 6,000 units on January 1 and 5,200 units on December 31. When compared to variable costing income, absorption costing income is A. $2,400 lower. B. $2,400 higher. C. $6,800 lower. D. $6,800 higher.

Question: 25During the month of May, a corporation sold 1,000 units. The cost per unit for May was as follows: Cost per Unit Direct materials

$ 5.50

Direct labor

3.00

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Variable manufacturing overhead

1.00

Fixed manufacturing overhead

1.50

Variable administrative costs

.50

Fixed administrative costs

3.50

Total

$15.00

May’s income using absorption costing was $9,500. The income for May, if variable costing had been used, would have been $9,125. The number of units produced during May was A. 750 B. 925 C. 1,075 D. 1,250

Question: 26The following information relates to a corporation, which produced and sold 50,000 units during a recent accounting period: Sales

$850,000

Manufacturing costs: Fixed

210,000

Variable

140,000

Selling and administrative costs: Fixed

300,000

Variable

45,000

Income tax rate

40%

For the next accounting period, if production and sales are expected to be 40,000 units, the company should anticipate a contribution margin per unit of A. $1.86 B. $3.10 C. $7.30

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. $13.30

Fact Pattern: Kator Co. is a manufacturer of industrial components. One of its products that is used as a subcomponent in auto manufacturing is KB-96. This product has the following financial structure per unit: Selling price

$150

Direct materials

$ 20

Direct labor

15

Variable manufacturing overhead

12

Fixed manufacturing overhead

30

Shipping and handling

3

Fixed selling and administrative Total costs

10 $ 90

Question: 27During the next year, KB-96 sales are expected to be 10,000 units. All of the costs will remain the same except that fixed manufacturing overhead will increase by 20% and direct materials will increase by 10%. The selling price per unit for next year will be $160. Based on this data, the contribution margin from KB-96 for next year will be A. $620,000 B. $750,000 C. $1,080,000 D. $1,110,000

Fact Pattern: Pontotoc Industries manufactures a product that is used as a subcomponent by other manufacturers. It has the following price and cost structure: Selling price

$300

Costs Direct materials Direct labor

$40 30

Variable manufacturing overhead 24 Fixed manufacturing overhead Variable shipping

60 6

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fixed selling and administrative

20 (180)

Operating margin

$120

Question: 28What will the contribution margin per unit be if the company sells 10,000 units? A. $206 B. $200 C. $140 D. $120

Fact Pattern: Pontotoc Industries manufactures a product that is used as a subcomponent by other manufacturers. It has the following price and cost structure: Selling price

$300

Costs Direct materials Direct labor

$40 30

Variable manufacturing overhead 24 Fixed manufacturing overhead Variable shipping Fixed selling and administrative Operating margin

60 6 20 (180) $120

Question: 29During the next year, sales are expected to be 10,000 units. All costs will remain the same except for fixed manufacturing overhead, which will increase 20%, and direct materials, which will increase 10%. The selling price per unit for next year will be $320. Based on this information, Pontotoc’s contribution margin for next year will be A. $1,240,000 B. $1,360,000 C. $2,160,000 D. $2,200,000

Question: 30Last year a company had sales of 75,000 units and production of 100,000 units. Other information for the year is shown below.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Direct manufacturing labor

$187,500

Variable manufacturing overhead 100,000 Direct materials

150,000

Variable selling expenses

100,000

Fixed administrative expenses

100,000

Fixed manufacturing overhead

200,000

Assuming no beginning inventory, what is the total value of ending finished goods inventory under absorption costing? A. $159,375 B. $184,375 C. $209,375 D. $279,175

Question: 31Using absorption costing, a company’s income for October was $250,000. The company began the month with 10,000 units in finished goods inventory that contained $30,000 of fixed manufacturing overhead costs. During October, the company produced 330,000 units and sold 325,000 units. The fixed manufacturing overhead for October totaled $990,000. If the company used variable costing, its income for October would be A. $265,000 B. $250,000 C. $235,000 D. $234,308

Question: 32At 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 variable (direct) costing, the result would be a higher pretax income of A. $0 B. $20,000 C. $70,000 D. $90,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 33Last year, a company had sales of 75,000 units and production of 100,000 units. Other information for the year is shown below. Direct manufacturing labor

$187,500

Variable manufacturing overhead

100,000

Direct materials

150,000

Variable selling expenses

100,000

Fixed administrative expenses

100,000

Fixed manufacturing overhead

200,000

Assuming no beginning inventory, what is the cost of goods sold under variable costing? A. $553,125 B. $478,125 C. $403,125 D. $328,125

Question: 34At the end of a company’s first year of operations, 2,000 units of inventory are on hand. Variable costs are $100 per unit, and fixed manufacturing costs are $30 per unit. The use of absorption costing, rather than variable costing, would result in a higher net income of what amount? A. $60,000 B. $140,000 C. $200,000 D. $260,000

Question: 35At the start of its fiscal year, a company anticipated producing 300,000 units throughout the year. The annual budgeted manufacturing overhead was $150,000 for variable costs and $600,000 for fixed costs. In April, when there was a beginning inventory for finished goods of 5,000 units, the company showed an income of $40,000 using absorption costing. That same month, ending inventory for finished goods was 7,000 units. What amount would the company recognize as income for April using variable costing? A. $35,000 B. $36,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. $44,000 D. $45,000

Question: 36A manufacturing company is contemplating switching from its current costing approach, variable costing, to absorption costing. Relevant data for the company in January 20X2 is as follows: Selling price

$30/unit

Units produced

40,000

Units sold

30,000

Inventory as of 1/1/X2

None

Direct materials

$6/unit

Direct labor

$3/unit

Variable overhead

$2/unit

Variable selling and administrative expense

$1/unit

Fixed selling and administrative expense Fixed manufacturing overhead

$75,000 $160,000

Based on the information above, the company’s operating income using absorption costing is A. $295,000 B. $345,000 C. $335,000 D. $305,000

Question: 37At the end of fiscal year 20X9, Monterrey Manufacturing had the following data in its records: Direct materials

$500,000

Direct labor

400,000

Variable manufacturing overhead

90,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fixed manufacturing overhead

120,000

Variable selling and other expenses

90,000

Fixed selling and other expenses

50,000

Assuming Monterrey employs absorption costing, the inventoriable costs for fiscal year 20X9 equal

A. $900,000 B. $1,080,000 C. $1,110,000 D. $1,070,000

Subunit 3: Joint Product and By-Product Costing Fact Pattern: Alfa Atlas Foods produces the following three supplemental food products simultaneously through a refining process costing $93,000.

10,000 pounds of Alfa, a popular but relatively rare grain supplement having a caloric value of 4,400 calories per pound The joint products, Alfa and Betters, have a final selling price of $4 Betters 5,000 pounds of Betters, a flavoring per pound and $10 per pound, respectively, after additional material high in carbohydrates with processing costs of $2 per pound of each product are incurred after a caloric value of 11,200 calories the split-off point. Morefeed, a by-product, is sold at the split-off per pound point for $3 per pound. Morefeed 1,000 pounds of Morefeed, used as a cattle feed supplement with a caloric value of 1,000 calories per pound Question: 1Assuming Atlas Foods inventories Morefeed, the by-product, the joint cost to be allocated to Alfa using the net realizable value method is A. $3,000 B. $30,000 C. $31,000 D. $60,000

Fact Pattern: ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Alfa Atlas Foods produces the following three supplemental food products simultaneously through a refining process costing $93,000.

10,000 pounds of Alfa, a popular but relatively rare grain supplement having a caloric value of 4,400 calories per pound The joint products, Alfa and Betters, have a final selling price of $4 Betters 5,000 pounds of Betters, a flavoring per pound and $10 per pound, respectively, after additional material high in carbohydrates with processing costs of $2 per pound of each product are incurred after a caloric value of 11,200 calories the split-off point. Morefeed, a by-product, is sold at the split-off per pound point for $3 per pound. Morefeed 1,000 pounds of Morefeed, used as a cattle feed supplement with a caloric value of 1,000 calories per pound Question: 2Assuming Atlas Foods does not inventory Morefeed, the by-product, the joint cost to be allocated to Betters using the net realizable value method is A. $30,000 B. $31,000 C. $52,080 D. $62,000

Fact Pattern: Alfa Atlas Foods produces the following three supplemental food products simultaneously through a refining process costing $93,000.

10,000 pounds of Alfa, a popular but relatively rare grain supplement having a caloric value of 4,400 calories per pound The joint products, Alfa and Betters, have a final selling price of $4 Betters 5,000 pounds of Betters, a flavoring per pound and $10 per pound, respectively, after additional material high in carbohydrates with processing costs of $2 per pound of each product are incurred after a caloric value of 11,200 calories the split-off point. Morefeed, a by-product, is sold at the split-off per pound point for $3 per pound. Morefeed 1,000 pounds of Morefeed, used as a cattle feed supplement with a caloric value of 1,000 calories per pound Question: 3Assuming Atlas Foods inventories Morefeed, the by-product, the joint cost to be allocated to Alfa, using the physical quantity method based on volume is A. $3,000 B. $30,000 C. $31,000 D. $60,000

Fact Pattern: ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Alfa Atlas Foods produces the following three supplemental food products simultaneously through a refining process costing $93,000.

10,000 pounds of Alfa, a popular but relatively rare grain supplement having a caloric value of 4,400 calories per pound The joint products, Alfa and Betters, have a final selling price of $4 Betters 5,000 pounds of Betters, a flavoring per pound and $10 per pound, respectively, after additional material high in carbohydrates with processing costs of $2 per pound of each product are incurred after a caloric value of 11,200 calories the split-off point. Morefeed, a by-product, is sold at the split-off per pound point for $3 per pound. Morefeed 1,000 pounds of Morefeed, used as a cattle feed supplement with a caloric value of 1,000 calories per pound Question: 4Assuming Atlas Foods inventories Morefeed, the by-product, the joint cost to be allocated to Betters using the physical quantity method based on caloric value per pound is A. $39,208 B. $39,600 C. $40,920 D. $50,400

Fact Pattern: Alfa Atlas Foods produces the following three supplemental food products simultaneously through a refining process costing $93,000.

10,000 pounds of Alfa, a popular but relatively rare grain supplement having a caloric value of 4,400 calories per pound The joint products, Alfa and Betters, have a final selling price of $4 Betters 5,000 pounds of Betters, a flavoring per pound and $10 per pound, respectively, after additional material high in carbohydrates with processing costs of $2 per pound of each product are incurred after a caloric value of 11,200 calories the split-off point. Morefeed, a by-product, is sold at the split-off per pound point for $3 per pound. Morefeed 1,000 pounds of Morefeed, used as a cattle feed supplement with a caloric value of 1,000 calories per pound Question: 5Assuming Atlas Foods inventories Morefeed, the by-product, and that it incurs no additional processing costs for Alfa and Betters, the joint cost to be allocated to Alfa using the gross market value method is A. $36,000 B. $40,000 C. $41,333 D. $50,000

Question: 6Joint costs are useful for ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

A. Setting the selling price of a product. B. Determining whether to continue producing an item. C. Evaluating management by means of a responsibility reporting system. D. Determining inventory cost for accounting purposes.

Question: 7In joint-product costing and analysis, which one of the following costs is relevant when deciding the point at which a product should be sold to maximize profits? A. Separable costs after the split-off point. B. Joint costs to the split-off point. C. Sales salaries for the period when the units were produced. D. Purchase costs of the materials required for the joint products.

Fact Pattern: Petro-Chem, Inc., is a small company that acquires high-grade crude oil from low-volume production wells owned by individuals and small partnerships. The crude oil is processed in a single refinery into Two Oil, Six Oil, and impure distillates. Petro-Chem does not have the technology or capacity to process these products further and sells most of its output each month to major refineries. There were no beginning inventories of finished goods or work-inprocess on November 1. The production costs and output of Petro-Chem for November are shown in the next column.

Crude oil acquired and placed in production $5,000,000 Direct labor and 2,000,000 related costs Manufacturing 3,000,000 overhead Production and sales  Two Oil, 300,000 barrels produced; 80,000 barrels sold at $20 each  Six Oil, 240,000 barrels produced; 120,000 barrels sold at $30 each  Distillates, 120,000 barrels produced and sold at $15 each

Question: 8The portion of Petro-Chem’s joint production costs assigned to Six Oil based upon physical output would be A. $3,636,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. $3,750,000 C. $1,818,000 D. $7,500,000

Fact Pattern: Petro-Chem, Inc., is a small company that acquires high-grade crude oil from low-volume production wells owned by individuals and small partnerships. The crude oil is processed in a single refinery into Two Oil, Six Oil, and impure distillates. Petro-Chem does not have the technology or capacity to process these products further and sells most of its output each month to major refineries. There were no beginning inventories of finished goods or work-inprocess on November 1. The production costs and output of Petro-Chem for November are shown in the next column.

Crude oil acquired and placed in production $5,000,000 Direct labor and 2,000,000 related costs Manufacturing 3,000,000 overhead Production and sales  Two Oil, 300,000 barrels produced; 80,000 barrels sold at $20 each  Six Oil, 240,000 barrels produced; 120,000 barrels sold at $30 each  Distillates, 120,000 barrels produced and sold at $15 each

Question: 9The portion of Petro-Chem’s joint production costs assigned to Two Oil based upon the relative sales value of output would be A. $4,800,000 B. $4,000,000 C. $2,286,000 D. $2,500,000

Question: 10The principal disadvantage of using the physical quantity method of allocating joint costs is that A. Costs assigned to inventories may have no relationship to value. B. Physical quantities may be difficult to measure. C. Additional processing costs affect the allocation base.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Joint costs, by definition, should not be separated on a unit basis.

Fact Pattern: Travis Petroleum is a small company that acquires crude oil and manufactures it into three intermediate products, differing only in grade. The products are Grade One, Grade Two, and Grade Three. No beginning inventories of finished goods or work-in-process existed on November 1. The production costs for November were as follows (assume separable costs were negligible): Crude oil acquired and put into production

$4,000,000

Direct labor and related costs 2,000,000 Manufacturing overhead

3,000,000

The output and sales for November were as follows: Grade One Barrels produced Barrels sold

Grade Two

Grade Three

300,000

240,000

120,000

80,000

120,000

120,000

$30

$40

$50

Prices per barrel sold

Question: 11The portion of Travis’ joint production costs assigned to Grade Two based upon physical output is (rounded to the nearest thousand dollars) A. $3,273,000 B. $3,375,000 C. $1,636,000 D. $3,512,000

Fact Pattern: Travis Petroleum is a small company that acquires crude oil and manufactures it into three intermediate products, differing only in grade. The products are Grade One, Grade Two, and Grade Three. No beginning inventories of finished goods or work-in-process existed on November 1. The production costs for November were as follows (assume separable costs were negligible): Crude oil acquired and put into production

$4,000,000

Direct labor and related costs 2,000,000 Manufacturing overhead

3,000,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

The output and sales for November were as follows: Grade One Barrels produced Barrels sold

Grade Two

Grade Three

300,000

240,000

120,000

80,000

120,000

120,000

Prices per barrel sold $30 $40 $50 Question: 12The portion of Travis’ joint production costs assigned to Grade One based upon the relative sales value of output is (rounded to the nearest thousand dollars) A. $3,512,000 B. $3,293,000 C. $1,636,000 D. $4,091,000

Fact Pattern: Travis Petroleum is a small company that acquires crude oil and manufactures it into three intermediate products, differing only in grade. The products are Grade One, Grade Two, and Grade Three. No beginning inventories of finished goods or work-in-process existed on November 1. The production costs for November were as follows (assume separable costs were negligible): Crude oil acquired and put into production

$4,000,000

Direct labor and related costs 2,000,000 Manufacturing overhead

3,000,000

The output and sales for November were as follows: Grade One Barrels produced Barrels sold Prices per barrel sold

Grade Two

Grade Three

300,000

240,000

120,000

80,000

120,000

120,000

$30

$40

$50

Question: 13Based on the relative sales values of output, the cost of Travis’ ending inventory of Grade Two is A. $3,512,000 B. $1,756,000 C. $1,636,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $3,375,000

Fact Pattern: Pickett Manufacturing uses a joint production process that produces three products at the split-off point. Joint production costs during April were $720,000. Product information for April was as follows: Product R

S

T

2,500 2,000

5,000 6,000

7,500 7,000

$100 $150

$80 $115

$20 $30

Costs to process after split-off $150,000

$150,000

$100,000

Units produced Units sold Sales prices: At split-off After further processing

Question: 14Assume that all three products are main products and that they can be sold at the split-off point or processed further, whichever is economically beneficial to the company. What is Pickett’s total cost of Product S in April if joint cost allocation is based on sales value at split-off? A. $375,000 B. $390,000 C. $510,000 D. $571,463

Fact Pattern: Pickett Manufacturing uses a joint production process that produces three products at the split-off point. Joint production costs during April were $720,000. Product information for April was as follows: Product Units produced Units sold Sales prices: At split-off After further processing

R

S

T

2,500 2,000

5,000 6,000

7,500 7,000

$100 $150

$80 $115

$20 $30

Costs to process after split-off $150,000 $150,000 $100,000 Question: 15Assume that Product T is treated as a by-product and that the company accounts for the by-product at net realizable value as a reduction of joint cost. Assume also that Products S and T must be processed further before they can be sold. What is Pickett’s total cost of Product R in April if joint cost allocation is based on net realizable values? A. $220,370 B. $370,370

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $374,630 D. $595,000

Question: 16The assignment of raw material costs to the major end products resulting from refining a barrel of crude oil is best described as A. Indirect costing. B. Joint costing. C. Differential costing. D. Incremental costing.

Question: 17A company produces two main products and a by-product out of a joint process. The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month. The company has employed the physical-volume method to allocate joint production costs to the two main products. The net realizable value of the by-product is used to reduce the joint production costs before the joint costs are allocated to the main products. Data regarding the company’s operations for the current month are presented in the chart below. During the month, the company incurred joint production costs of $2,520,000. The main products are not marketable at the split-off point and, thus, have to be processed further.

Monthly output in pounds Selling price per pound

First

Second

Main

Main

By-

Product Product

product

90,000

150,000

60,000

$30

$14

$2

Separable process costs $540,000 $660,000 The amount of joint production cost that the company would allocate to the Second Main Product by using the physical-volume method to allocate joint production costs would be A. $1,200,000 B. $1,260,000 C. $1,500,000 D. $1,575,000

Question: 18A company produces three products (B-40, J-60, and H-102) from a single process. The company uses the physical volume method to allocate joint costs of $22,500 per batch to the products. Based on the following ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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information, which product(s) should the company continue to process after the split-off point in order to maximize profit? B-40 J-60 H-102 Physical units produced per batch Sales value per unit at split-off

1,500 2,000 3,200 $10.00 $4.00 $7.25

Cost per unit of further processing after split-off Sales value per unit after further processing

3.05 1.00 2.50 12.25 5.70 9.75

A. B-40 only. B. J-60 only. C. H-102 only. D. B-40 and H-102.

Question: 19A company produces three main joint products and one by-product. The by-product’s relative sales value is quite low compared with that of the main products. The preferable accounting for the by-product’s net realizable value is as A. An addition to the revenues of the other products allocated on the basis of their respective net realizable values. B. Revenue in the period it is sold. C. A reduction in the common cost to be allocated to the three main products. D. A separate net realizable value upon which to allocate some of the common costs.

Question: 20The primary purpose for allocating common costs to joint products is to determine A. The selling price of a by-product. B. Whether one of the joint products should be discontinued. C. The variance between budgeted and actual common costs. D. The inventory cost of joint products for financial reporting.

Question: 21The distinction between joint products and by-products is largely dependent on A. Historical costs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Prime costs. C. Market value. D. Salvage value.

Question: 22In a production process where joint products are produced, the primary factor that will distinguish a joint product from a by-product is the A. Relative total sales value of the products. B. Relative total volume of the products. C. Relative ease of selling the products. D. Accounting method used to allocate joint costs.

Question: 23All of the following are methods of allocating joint costs to joint products except A. Physical quantities method. B. Net realizable value method. C. Separable production cost method. D. Gross market value method.

Fact Pattern: Tucariz Company processes Duo into two joint products, Big and Mini. Duo is purchased in 1,000 gallon drums for $2,000. Processing costs are $3,000 to process the 1,000 gallons of Duo into 800 gallons of Big and 200 gallons of Mini. The selling price is $9 per gallon for Big and $4 per gallon for Mini. Big can be processed further into 600 gallons of Giant if $1,000 of additional processing costs are incurred. Giant can be sold for $17 per gallon. Question: 24If Tucariz uses the net realizable value method to allocate costs to the joint products, the total cost of producing Giant is A. $5,600 B. $5,564 C. $5,520 D. $4,600

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Tucariz Company processes Duo into two joint products, Big and Mini. Duo is purchased in 1,000 gallon drums for $2,000. Processing costs are $3,000 to process the 1,000 gallons of Duo into 800 gallons of Big and 200 gallons of Mini. The selling price is $9 per gallon for Big and $4 per gallon for Mini. Big can be processed further into 600 gallons of Giant if $1,000 of additional processing costs are incurred. Giant can be sold for $17 per gallon. Question: 25If Tucariz uses the sales-value-at-split-off method to allocate joint costs to the final products, the per gallon cost (rounded to the nearest cent) of producing Big is A. $5.63 B. $5.00 C. $4.50 D. $3.38

Question: 26A company produces three products from a joint process. The three products are sold after further processing as there is no market for any of the products at the split-off point. Joint costs per batch are $315,000. Other product information is shown below. Product A

Product B

Product C

20,000

30,000

50,000

marketing cost per unit

$ .70

$3.00

$1.72

Final sales value per unit

5.00

6.00

7.00

Units produced per batch Further processing and

If the company uses the net realizable value method of allocating joint costs, how much of the joint costs will be allocated to each unit of Product C? A. $2.10 B. $2.65 C. $3.15 D. $3.78

Question: 27A company uses a joint manufacturing process in the production of two products, Gummo and Xylo. Each batch in the joint manufacturing process yields 5,000 pounds of an intermediate material, Valdene, at a cost of $20,000. Each batch of Gummo uses 60% of the Valdene and incurs $10,000 of separate costs. The resulting 3,000 pounds of Gummo sells for $10 per pound. The remaining Valdene is used in the production of Xylo, which incurs $12,000 of separable costs per batch. Each batch of Xylo yields 2,000 pounds and sells for $12 per pound. The company uses the net realizable value method to allocate the joint material costs. The company is debating ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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whether to process Xylo further into a new product, Zinten, which would incur an additional $4,000 in costs and sell for $15 per pound. If Zinten is produced, income would increase by A. $2,000 B. $5,760 C. $14,000 D. $26,000

Question: 28A company manufactures several products that originate in a joint process and are separated at a split-off point. Which one of the following methods of joint-cost allocation would allocate the same unit cost to each separable product? A. Net realizable value method. B. Sales value at split-off method. C. Physical quantity method. D. Constant gross margin percentage method.

Question: 29If all of the joint products are sold at the split-off point and an overall profit is made on all of the products, which one of the following joint costing methods will result in the same gross margin percentage on each joint product? A. Sales value at split-off method. B. Physical measures method using sales volume. C. Physical measures method using production volume. D. Physical measures method using weight.

Question: 30A company manufactures two products that incur joint costs of $60,000. It costs an additional $10,000 to produce 5,000 units of Product 1 and an additional $30,000 to produce 10,000 units of Product 2. Product 1 is sold for $8 per unit, and Product 2 is sold for $10 per unit. If the company uses the net realizable value method to allocate joint costs, the cost per unit of Product 1 is A. $3.60 B. $5.43 C. $5.60

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. $6.00

Question: 31A company produces two products that incur $50,000 of joint costs. At the split-off point, 5,000 units of Product 1 and 15,000 units of Product 2 can be sold for $5 and $3 per unit, respectively. These products are processed further. Product 1 incurs $25,000 of separable costs and is then sold for $12 per unit, and Product 2’s separable costs total $30,000 with a final selling price of $6 per unit. If the company uses the constant gross profit method to allocate joint costs, the dollar amount of joint costs allocated to Product 1 would be A. $17,000 B. $17,857 C. $18,421 D. $20,000

Question: 32A company produces products simultaneously through a refining process costing $186,000. The joint products, Alpha and Beta, have selling prices of $8 and $20 per pound, respectively, before additional processing costs of $4 per pound of each product are incurred after the split-off point. Omega, a by-product, is sold at the split-off point for $6 per pound. The number of pounds produced is shown below. Alpha

10,000 pounds

Beta

5,000 pounds

Omega

1,000 pounds

Assuming the company inventories Omega, the joint cost allocated to Alpha using the sales value at split-off method is A. $72,000 B. $80,000 C. $82,666 D. $100,000

Question: 33A company produces products simultaneously through a refining process costing $96,000. The joint products, Alpha and Beta, have selling prices of $8 and $20 per pound, respectively, after additional processing costs of $4 per pound of each product are incurred after the split-off point. Omega, a by-product, is sold at the splitoff point for $6 per pound. The number of pounds produced is shown below. Alpha Beta

10,000 pounds 5,000 pounds

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Omega

1,000 pounds

Assuming the company inventories Omega, the joint cost allocated to Alpha using the sales value at split-off method is A. $40,000 B. $30,000 C. $32,000 D. $60,000

Question: 34A dairy farm produces the following products jointly during the fiscal year for a total joint cost of €9,000,000: Product Kilograms Milk

1,170,000

Butter

570,000

Yogurt

330,000

Cheese

930,000

Based on the information, which one of the following is most accurate regarding the allocation of the joint cost under the physical measure method? A. The milk product line should be allocated €1,710,000 of the joint costs. B. The butter product line should be allocated €990,000 of the joint costs. C. The yogurt product line should be allocated €3,510,000 of the joint costs. D. The cheese product line should be allocated €2,790,000 of the joint costs.

Question: 34A dairy farm produces the following products jointly during the fiscal year for a total joint cost of €9,000,000: Product Kilograms Milk

1,170,000

Butter

570,000

Yogurt

330,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Cheese

930,000

Based on the information, which one of the following is most accurate regarding the allocation of the joint cost under the physical measure method? A. The milk product line should be allocated €1,710,000 of the joint costs. B. The butter product line should be allocated €990,000 of the joint costs. C. The yogurt product line should be allocated €3,510,000 of the joint costs. D. The cheese product line should be allocated €2,790,000 of the joint costs.

Question: 35The following information pertains to a by-product called Moy: Sales for the month 5,000 units Selling price per unit $6 Selling costs per unit $2 Processing costs

$0

Inventory of Moy was recorded at net realizable value when produced in the previous month. No units of Moy were produced in the month just ended. What amount should be recognized as profit on Moy’s sales? A. $0 B. $10,000 C. $20,000 D. $30,000

Question: 36A processing department produces joint products Ajac and Bjac, each of which incurs separable production costs after split-off. Information concerning a batch produced at a $60,000 joint cost before split-off follows: Separable Product Costs Ajac Bjac

Sales Value

$ 8,000 $ 80,000 22,000

40,000

$30,000 $120,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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What is the joint cost assigned to Ajac if costs are assigned using the relative net realizable value? A. $16,000 B. $40,000 C. $48,000 D. $52,000

Question: 37LM 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 also gathered: Product Units Produced Units Sold Separable Costs Selling Price per Unit L

10,000

9,500

$20,000

$ 8

M

5,000

4,000

40,000

20

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? A. $20,000 B. $18,000 C. $15,000 D. $12,000

Question: 38Warfield Corporation manufactures products C, D, and E from a joint process. Joint costs are allocated on the basis of relative sales value at split-off. Additional information is presented below. C Units produced

D

E

Total

4,000

2,000

12,000

$ 72,000

?

?

?

?

6,000

Joint costs Sales value at split-off Additional costs if processed further

$120,000

$30,000 $200,000

$ 14,000 $10,000 $ 6,000 $ 30,000

Sales value if processed further $140,000 $60,000 $40,000 $240,000 How much of the joint costs should Warfield allocate to product D? A. $24,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $28,800 C. $30,000 D. $32,000

Question: 39Ashwood Company manufactures three main products, F, G, and W, from a joint process. Joint costs are allocated on the basis of relative sales value at split-off. Additional information for June production activity follows: F Units produced Joint costs

50,000 ?

G 40,000 ?

W

Total

10,000 100,000 ? $450,000

Sales value at split-off

$420,000 $270,000 $60,000 $750,000

Additional costs if processed further

$ 88,000 $ 30,000 $12,000 $130,000

Sales value if processed further $538,000 $320,000 $78,000 $936,000 Assuming that the 10,000 units of W were processed further and sold for $78,000, what was Ashwood’s gross profit on this sale? A. $21,000 B. $28,500 C. $30,000 D. $36,000

Question: 40Lowe Co. manufactures products A and B from a joint process. Sales value at split-off was $700,000 for 10,000 units of A and $300,000 for 15,000 units of B. Using the sales value at split-off approach, joint costs properly allocated to A were $140,000. Total joint costs were A. $98,000 B. $200,000 C. $233,333 D. $350,000

Question: 41Mighty, 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 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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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 relative sales value basis? A. $120,000 B. $200,000 C. $400,000 D. $480,000

Question: 42A rubber factory takes raw materials and converts them into one of the following products: footballs, basketballs, soccer balls, and hockey pucks. In the current year, the plant processed 10,000 pounds of raw materials and incurred $500,000 of joint processing costs. The following table has been constructed to evaluate each product’s individual performance: Total Raw

Units

Estimated Sales

Separable Costs

Product

Materials Used

Manufactured

Price per Unit

per Unit

Basketballs

3,000 lbs

300

$12

$2

Footballs

4,000 lbs

400

15

3

Hockey pucks

1,000 lbs

100

6

1

Soccer balls

2,000 lbs

200

10

2

Using the estimated net realizable value (NRV) method, what amount of the $500,000 joint processing costs should be allocated to footballs?

A. $151,515 B. $242,424 C. $200,000 D. $245,902

Subunit 4: Overhead Allocation and Normal Costing – Theory Question: 1The two most appropriate factors for budgeting manufacturing overhead expenses are A. Machine hours and production volume.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Management judgment and contribution margin. C. Management judgment and production volume. D. Management judgment and sales dollars.

Question: 2Units of production is an appropriate overhead allocation base when A. Several well-differentiated products are manufactured. B. Direct labor costs are low. C. Direct material costs are large relative to direct labor costs incurred. D. Only one product is manufactured.

Question: 3The appropriate method for the disposition of underapplied or overapplied overhead of a manufacturer A. Is to cost of goods sold only. B. Is to finished goods inventory only. C. Is apportioned to cost of goods sold and finished goods inventory. D. Depends on the significance of the amount.

Question: 4In determining next year’s overhead application rates, a company desires to focus on manufacturing capacity rather than output demand for its products. To derive a realistic application rate, the denominator activity level should be based on A. Practical capacity. B. Maximum capacity. C. Normal capacity. D. Master-budget (expected annual) capacity.

Question: 5Generally, individual departmental rates rather than a plantwide rate for applying manufacturing overhead are used if A. A company wants to adopt a standard cost system.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. A company’s manufacturing operations are all highly automated. C. Manufacturing overhead is the largest cost component of its product cost. D. The manufactured products differ in the resources consumed from the individual departments in the plant.

Question: 6When the amount of overapplied factory overhead is significant, the entry to close overapplied factory overhead will most likely require A. A debit to cost of goods sold. B. Debits to cost of goods sold, finished goods inventory, and work-in-process inventory. C. A credit to cost of goods sold. D. Credits to cost of goods sold, finished goods inventory, and work-in-process inventory.

Fact Pattern: Nash Glassworks Company has budgeted fixed manufacturing overhead of $100,000 per month. The company uses absorption costing for both external and Capacity Levels internal financial reporting purposes. Budgeted overhead rates for cost allocations for the month of April using alternative unit output denominator levels Theoretical are shown in the next column. Practical

Budgeted

Budgeted

Denominator Level

Overhead

(units of output)

Cost Rate

1,500,000

$.0667

1,250,000

.0800

Normal

775,000

.1290

Master-budget

800,000

.1250

Actual output for the month of April was 800,000 units of glassware.

Question: 7When Nash Glassworks Company allocates fixed costs, management will select a capacity level to use as the denominator volume. All of the following are appropriate as the capacity level that approximates actual volume levels except A. Normal capacity. B. Expected annual activity. C. Theoretical capacity. D. Master-budget capacity.

Question: 8Assuming two overhead accounts are used, what is the entry to close them and to charge underapplied overhead to cost of goods sold? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A.

Cost of goods sold Finished goods

B.

C.

XX

Factory O/H applied

XX

Factory O/H control

XX

Cost of goods sold

XX

Cost of goods sold Factory O/H applied

D.

XX

XX XX

Factory O/H applied

XX

Cost of goods sold

XX

Factory O/H control

XX

Question: 9The numerator of the overhead application rate equals A. Estimated overhead costs. B. Actual overhead costs. C. The estimated activity level. D. The actual activity level.

Question: 10In a labor intensive industry in which more overhead (service, support, more expensive equipment, etc.) is incurred by the more highly skilled and paid employees, which activity base is most likely to be appropriate for applying overhead? A. Direct labor hours. B. Direct materials cost. C. Machine hours. D. Direct labor cost.

Question: 11Annual overhead application rates are used to ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Budget overhead. B. Smooth seasonal variability of overhead costs. C. Simulate seasonal variability of activity levels. D. Treat overhead as period costs.

Question: 12Departmental overhead rates are usually preferred to plant-wide overhead rates when A. The activities of each of the various departments in the plant are not homogeneous. B. The costs of many service departments are being allocated to each of the various departments. C. All products passing through the various departments require the same manufacturing effort in each department. D. Most of the overhead costs are fixed.

Question: 13Normal costing systems are said to offer a user several distinct benefits when compared with actual costing systems. Which one of the following is not a benefit associated with normal costing systems? A. More timely costing of jobs and products. B. A smoothing of product costs throughout the period. C. Improved accuracy of job and product costing. D. A more economical way of attaching overhead to a job or product.

Question: 14A company, which uses direct labor hours to apply overhead to its product line, undertook an extensive renovation and modernization program 2 years ago. Manufacturing processes were reengineered, considerable automated equipment was acquired, and 60% of the company’s nonunion factory workers were terminated. Which of the following statements would apply to the situation at the company? I. The company’s factory overhead rate has likely increased. II. The use of direct labor hours seems to be appropriate. III. The company will lack the ability to properly determine labor variances. IV. The company has likely reduced its ability to quickly cut costs in order to respond to economic downturns. A. I, II, III, and IV. B. I and IV only.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. II and IV only. D. I and III only.

Question: 15The most important criterion in accurate cost allocations is A. Using a simple allocation method. B. Allocating fixed and variable costs by using the same allocation base. C. Using homogeneous cost pools. D. Using multiple drivers for each cost pool.

Question: 16A capital-intensive manufacturer of large construction equipment has a manufacturing process that relies heavily on specialized machinery. This machinery is run by a relatively small number of highly skilled laborers. In determining its predetermined overhead rate, what allocation base should the company use? A. Sales dollars. B. Direct labor costs. C. Machine hours. D. Direct labor hours.

Question: 17A company has budgeted overhead costs at its normal capacity based on machine hours. Variable factory overhead is $180,000, and fixed manufacturing overhead is $560,000. If the firm operates at a slightly lower rate of activity, it will expect total A. Fixed manufacturing overhead of $560,000 and a lower hourly rate for variable overhead. B. Fixed manufacturing overhead of $560,000 and the same hourly rate for variable overhead. C. Fixed manufacturing overhead of $560,000 and a higher hourly rate for variable overhead. D. Variable overhead of less than $180,000 and a lower hourly rate for variable overhead.

Question: 18A company produces a wide variety of hand-crafted rocking chairs. The most appropriate allocation base for allocating production supervisor salaries to the products is A. Direct labor hours. B. Machine hours.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Number of products. D. Sales dollars.

Question: 19A company manufactures and sells three products. The products are all manufactured at the same facility. The controller of the company has decided to accumulate all budgeted overhead costs for the manufacturing facility into a single cost pool. The cost pool is then allocated to the three products based on the direct labor hours used by each product. What type of overhead rate has the controller most likely used in this allocation methodology? A. Departmental rate. B. Variable rate. C. Fixed rate. D. Plant-wide rate.

Question: 20Which one of the following would not be an appropriate cost allocation base for an organization? A. Machine hours. B. Direct labor hours. C. Square feet of a facility. D. Supervisor salaries.

Subunit 5: Overhead Allocation and Normal Costing -- Calculations Question: 1A company uses a job costing system and applies overhead to products on the basis of direct labor cost. Job No. 75, the only job in process on January 1, had the following costs assigned as of that date: direct materials, $40,000; direct labor, $80,000; and factory overhead, $120,000. The following selected costs were incurred during the year: Traceable to jobs: Direct materials

$178,000

Direct labor

345,000

Total

$523,000

Not traceable to jobs: Factory materials and supplies

$ 46,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Indirect labor Plant maintenance

235,000 73,000

Depreciation on factory equipment Other factory costs Total

29,000 76,000 $459,000

The company’s profit plan for the year included budgeted direct labor of $320,000 and overhead of $448,000. Assuming no work-in-process on December 31, the company’s overhead for the year was A. $11,000 overapplied. B. $24,000 overapplied. C. $11,000 underapplied. D. $24,000 underapplied.

Question: 2A company applies factory overhead based upon machine hours. At the beginning of the year, the company budgeted factory overhead at $250,000 and estimated that 100,000 machine hours would be used to make 50,000 units of product. During the year, the company produced 48,000 units using 97,000 machine hours. Actual overhead for the year was $252,000. Under a standard cost system, the amount of factory overhead applied during the year was A. $240,000 B. $242,500 C. $250,000 D. $252,000

Question: 3A manufacturer allocates overhead to jobs in process using direct labor costs, direct materials costs, and machine hours. The overhead application rates for the current year are 100% of direct labor 20% of direct materials $117 per machine hour A particular production run incurred the following costs: Direct labor, $8,000 Direct materials, $2,000 A total of 140 machine hours were required for the production run. What is the total cost charged to the production run?

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $18,000. B. $18,400. C. $34,780. D. None of the answers are true.

Question: 4A review of the year-end accounting records of a company discloses the following information: Raw materials

$

80,000

Work-in-process

128,000

Finished goods

272,000

Cost of goods sold

1,120,000

The company’s underapplied overhead equals $133,000. On the basis of this information, cost of goods sold is most appropriately reported as A. $987,000 B. $1,213,100 C. $1,218,000 D. $1,253,000

Question: 5During the current accounting period, a manufacturing company purchased $70,000 of raw materials, of which $50,000 of direct materials and $5,000 of indirect materials were used in production. The company also incurred $45,000 of total labor costs and $20,000 of other manufacturing overhead costs. An analysis of the workin-process control account revealed $40,000 of direct labor costs. Based upon the above information, what is the total amount accumulated in the overhead control account? A. $25,000 B. $30,000 C. $45,000 D. $50,000

Fact Pattern:

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Northcoast Manufacturing Company, a small manufacturer of parts used in appliances, has just completed its first year of operations. The company’s controller, Vic Trainor, has been reviewing the actual results for the year and is concerned about the application of factory overhead. Trainor is using the following information to assess its manufacturing operations.

Products manufactured

650,000 units

Machine use

130,000 hours

Direct labor usage

35,000 hours

Labor rate

$15 per hour

Total overhead

$1,130,000

Cost of goods sold

$1,720,960

• Northcoast’s equipment consists of several

Finished goods inventory (at year end) $430,240 machines with a combined cost of $2,200,000 and $0 no residual value. Each machine has an output of Work-in-process inventory (at year end) five units of product per hour and a useful life of • Total overhead is applied to direct labor cost using a 20,000 hours. predetermined plant-wide rate.

• Selected actual data of Northcoast’s operations for • The budgeted activity for the year included 20 employees, the year just ended is presented in the opposite column.

each working 1,800 productive hours per year to produce 540,000 units of product. The machines are highly automated, and each employee can operate two to four machines simultaneously. Normal activity is for each employee to operate three machines. Machine operators are paid $15 per hour.

• Budgeted overhead costs for the past year for various levels of activity are shown in the table below.

Northcoast Manufacturing Company Budgeted Annual Costs for Total Overhead Units of Product Labor hours Machine hours Total overhead costs Plant supervision Plant rent Equipment depreciation Maintenance Utilities Indirect material Other costs Total

360,000

540,000

720,000

30,000 72,000

36,000 108,000

42,000 144,000

$ 70,000 40,000 288,000 42,000 144,600 90,000 11,200

$ 70,000 40,000 432,000 51,000 216,600 135,000 16,600

$

$685,800

$961,200

$1,236,600

70,000 40,000 576,000 60,000 288,600 180,000 22,000

Question: 6What is Northcoast’s predetermined overhead application rate for the year? A. 1.78 B. 1.83 C. 2.09

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. 2.15

Fact Pattern: Northcoast Manufacturing Company, a small manufacturer of parts used in appliances, has just completed its first year of operations. The company’s controller, Vic Trainor, has been reviewing the actual results for the year and is concerned about the application of factory overhead. Trainor is using the following information to assess its manufacturing operations.

Products manufactured

650,000 units

Machine use

130,000 hours

Direct labor usage

35,000 hours

Labor rate

$15 per hour

Total overhead

$1,130,000

Cost of goods sold

$1,720,960

• Northcoast’s equipment consists of several

Finished goods inventory (at year end) $430,240 machines with a combined cost of $2,200,000 and $0 no residual value. Each machine has an output of Work-in-process inventory (at year end) five units of product per hour and a useful life of • Total overhead is applied to direct labor cost using a 20,000 hours. predetermined plant-wide rate.

• Selected actual data of Northcoast’s operations for • The budgeted activity for the year included 20 employees, the year just ended is presented in the opposite column.

each working 1,800 productive hours per year to produce 540,000 units of product. The machines are highly automated, and each employee can operate two to four machines simultaneously. Normal activity is for each employee to operate three machines. Machine operators are paid $15 per hour.

• Budgeted overhead costs for the past year for various levels of activity are shown in the table below.

Northcoast Manufacturing Company Budgeted Annual Costs for Total Overhead Units of Product Labor hours Machine hours Total overhead costs Plant supervision Plant rent Equipment depreciation Maintenance Utilities Indirect material Other costs Total

360,000

540,000

720,000

30,000 72,000

36,000 108,000

42,000 144,000

$ 70,000 40,000 288,000 42,000 144,600 90,000 11,200

$ 70,000 40,000 432,000 51,000 216,600 135,000 16,600

$

$685,800

$961,200

$1,236,600

70,000 40,000 576,000 60,000 288,600 180,000 22,000

Question: 7How much is Northcoast’s overhead over/underapplied? A. $195,500 overapplied.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. $168,800 overapplied. C. $168,800 underapplied. D. $195,500 underapplied.

Fact Pattern: Northcoast Manufacturing Company, a small manufacturer of parts used in appliances, has just completed its first year of operations. The company’s controller, Vic Trainor, has been reviewing the actual results for the year and is concerned about the application of factory overhead. Trainor is using the following information to assess its manufacturing operations.

Products manufactured

650,000 units

Machine use

130,000 hours

Direct labor usage

35,000 hours

Labor rate

$15 per hour

Total overhead

$1,130,000

Cost of goods sold

$1,720,960

• Northcoast’s equipment consists of several

Finished goods inventory (at year end) $430,240 machines with a combined cost of $2,200,000 and $0 no residual value. Each machine has an output of Work-in-process inventory (at year end) five units of product per hour and a useful life of • Total overhead is applied to direct labor cost using a 20,000 hours. predetermined plant-wide rate.

• Selected actual data of Northcoast’s operations for • The budgeted activity for the year included 20 employees, the year just ended is presented in the opposite column.

each working 1,800 productive hours per year to produce 540,000 units of product. The machines are highly automated, and each employee can operate two to four machines simultaneously. Normal activity is for each employee to operate three machines. Machine operators are paid $15 per hour.

• Budgeted overhead costs for the past year for various levels of activity are shown in the table below.

Northcoast Manufacturing Company Budgeted Annual Costs for Total Overhead Units of Product Labor hours Machine hours Total overhead costs Plant supervision Plant rent Equipment depreciation Maintenance Utilities Indirect material Other costs Total

360,000

540,000

720,000

30,000 72,000

36,000 108,000

42,000 144,000

$ 70,000 40,000 288,000 42,000 144,600 90,000 11,200

$ 70,000 40,000 432,000 51,000 216,600 135,000 16,600

$

$685,800

$961,200

$1,236,600

70,000 40,000 576,000 60,000 288,600 180,000 22,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 8What is the amount of underapplied overhead allocated to Northcoast’s cost of goods sold? A. $0 B. $39,100 C. $156,400 D. $195,500

Fact Pattern: Northcoast Manufacturing Company, a small manufacturer of parts used in appliances, has just completed its first year of operations. The company’s controller, Vic Trainor, has been reviewing the actual results for the year and is concerned about the application of factory overhead. Trainor is using the following information to assess its manufacturing operations.

Products manufactured

650,000 units

Machine use

130,000 hours

Direct labor usage

35,000 hours

Labor rate

$15 per hour

Total overhead

$1,130,000

Cost of goods sold

$1,720,960

• Northcoast’s equipment consists of several Finished goods inventory (at year end) $430,240 machines with a combined cost of $2,200,000 and $0 no residual value. Each machine has an output of Work-in-process inventory (at year end) five units of product per hour and a useful life of • Total overhead is applied to direct labor cost using a 20,000 hours. predetermined plant-wide rate. • Selected actual data of Northcoast’s operations for • The budgeted activity for the year included 20 employees, the year just ended is presented in the opposite column.

each working 1,800 productive hours per year to produce 540,000 units of product. The machines are highly automated, and each employee can operate two to four machines simultaneously. Normal activity is for each employee to operate three machines. Machine operators are paid $15 per hour.

• Budgeted overhead costs for the past year for various levels of activity are shown in the table below.

Northcoast Manufacturing Company Budgeted Annual Costs for Total Overhead Units of Product Labor hours Machine hours Total overhead costs Plant supervision Plant rent Equipment depreciation Maintenance Utilities Indirect material

360,000

540,000

720,000

30,000 72,000

36,000 108,000

42,000 144,000

$ 70,000 40,000 288,000 42,000 144,600 90,000

$ 70,000 40,000 432,000 51,000 216,600 135,000

$

70,000 40,000 576,000 60,000 288,600 180,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Other costs Total

11,200

16,600

22,000

$685,800

$961,200

$1,236,600

Question: 9If machine hours were used as the application base, what would be Northcoast’s predetermined overhead rate? A. $10.46 per machine hour. B. $8.90 per machine hour. C. $8.69 per machine hour. D. $7.39 per machine hour.

Fact Pattern: Madtack Company’s beginning and ending inventories for the month of November are

Production data for the month of November follows: Direct labor

$200,000

November 1 November 30 Direct materials $ 67,000 Work-in-process 145,000 Finished goods

Question:

85,000

Actual manufacturing overhead

132,000

Direct materials purchased

163,000

$ 62,000 171,000 Transportation in

4,000

Purchase returns and allowances

2,000

78,000

Madtack uses one overhead control account and charges overhead to production at 70% of direct labor cost. The company does not formally recognize over- or underapplied overhead until year end. 10Madtack Company’s net charge to overhead control for the month of November is

A. $8,000 debit, overapplied. B. $8,000 debit, underapplied. C. $8,000 credit, overapplied. D. $8,000 credit, underapplied.

Question: 11A company allocates its variable factory overhead based on direct labor hours. During the past 3 months, the actual direct labor hours and the total factory overhead allocated were as follows: January Direct labor hours

1,000

February 3,000

March 5,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Total factory overhead allocated

$80,000

$140,000

$200,000

Based upon this information, monthly fixed factory overhead was A. $50,000 B. $46,667 C. $33,333 D. $30,000

Question: 12From the following budgeted data, calculate the budgeted indirect cost rate that would be used in a normal costing system. Total direct labor hours

250,000

Total indirect labor hours

50,000

Direct costs

$10,000,000

Total indirect labor related costs

5,000,000

Total indirect nonlabor related costs

7,000,000

A. $20 B. $28 C. $40 D. $48

Question: 13A printing company uses a job order costing system and applies overhead based on machine hours. A total of 150,000 machine hours have been budgeted for the year. During the year, an order for 1,000 units was completed and incurred the following: Direct material costs

$1,000

Direct labor costs

1,500

Actual overhead

1,980

Machine hours

450

The accountant calculated the inventory cost of this order to be $4.30 per unit. The annual budgeted overhead in dollars was A. $577,500

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $600,000 C. $645,000 D. $660,000

Question: 14A cost accountant is developing departmental factory overhead application rates for the company’s tooling and fabricating departments. The budgeted overhead for each department and the data for one job are shown below. Department: Tooling Supplies

$ 850

Fabricating $

200

Supervisor’s salaries

1,500

2,000

Indirect labor

1,200

4,880

Depreciation

1,000

5,500

Repairs

4,075

3,540

$8,625

$16,120

460

620

Total budgeted overhead Total direct labor hours

Direct labor hours on Job #231 12 3 Using the departmental overhead application rates, total overhead applied to Job #231 in the Tooling and Fabricating Departments will be A. $225 B. $303 C. $537 D. $671

Question: 15The cost accountant for a manufacturing company is preparing a management report that must include an allocation of overhead. Budgeted overhead for each department and the data for one job are shown below. Department

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Tooling Supplies

$ 690

Fabricating $

80

Supervisor’s salaries

1,400

1,800

Indirect labor

1,000

4,000

Depreciation

1,200

5,200

Repairs

4,400

3,000

$8,690

$14,080

440

640

Total budgeted overhead Total direct labor hours

Direct labor hours on Job #231 10 2 Using the departmental overhead application rates and allocating overhead on the basis of direct labor hours, overhead applied to Job #231 in the Tooling Department would be A. $44.00 B. $197.50 C. $241.50 D. $501.00

Question: 16A corporation expects to incur $70,000 of factory overhead and $60,000 of general and administrative costs next year. Direct labor costs at $5 per hour are expected to total $50,000. If factory overhead is to be applied per direct labor hour, how much overhead will be applied to a job incurring 20 hours of direct labor? A. $28 B. $120 C. $140 D. $260

Question: 17Using the following budget data for a corporation, which produces only one product, calculate the company’s predetermined factory overhead application rate for variable overhead. Units to be produced

11,000

Units to be sold

10,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Indirect materials, varying with production Indirect labor, varying with production

$ 1,000 10,000

Factory supervisor’s salary, incurred regardless of production

20,000

Depreciation on factory building and equipment Utilities to operate factory machines Security lighting for factory

30,000 12,000 2,000

Selling, general, and administrative expenses

5,000

A. $2.09 B. $2.30 C. $4.73 D. $5.20

Question: 18A company uses departmental rates to assign overhead to its two products. Budgeted data for the next year are shown below. Department 1 Department 2 Overhead costs $5,000,000 Cost driver

$7,000,000

Machine hours Labor hours

Machine hours

500,000

120,000

Labor hours

100,000

1,400,000

The company expects to manufacture 400,000 units of Product A during the year. Each unit of Product A requires 0.5 machine hours in Department 1 and 1.5 labor hours in Department 2. The budgeted overhead cost for one unit of Product A is A. $11.03 B. $12.50 C. $12.73 D. $15.00

Question: 19A company manufactures radio-controlled toy dogs. Summary budget financial data for the company for the current year are as follows: Sales (5,000 units at $150 each)

$750,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Variable manufacturing cost

400,000

Fixed manufacturing cost

100,000

Variable selling and administrative cost Fixed selling and administrative cost

80,000 150,000

The company uses an absorption costing system with overhead applied based on the number of units produced, with a denominator level of activity of 5,000 units. Underapplied or overapplied manufacturing overhead is written off to cost of goods sold in the year incurred. The $20,000 budgeted operating income from producing and selling 5,000 toy dogs planned for this year is of concern to the company’s president. She believes she could increase operating income to $50,000 (her bonus threshold) if the company produces more units than it sells, thus building up the finished goods inventory. How much of an increase in the number of units in the finished goods inventory would be needed to generate the $50,000 budgeted operating income? A. 556 units. B. 600 units. C. 1,500 units. D. 7,500 units.

Fact Pattern: Dremmon Corporation uses a standard cost accounting system. Data for the last fiscal year are as follows: Units

Beginning inventory of finished goods

100

Production during the year

700

Sales

750

Ending inventory of finished goods

50 Per Unit

Product selling price

$200

Standard variable manufacturing cost

90

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Standard fixed manufacturing cost

20*

Budgeted selling and administrative costs (all fixed) $45,000 *Denominator level of activity is 750 units for the year.

There were no price, efficiency, or spending variances for the year, and actual selling and administrative expenses equaled the budget amount. Any volume variance is written off to cost of goods sold in the year incurred. There are no work-in-process inventories. Question: 20If Dremmon uses absorption costing, its operating income earned in the last fiscal year was A. $21,500 B. $27,000 C. $28,000 D. $30,000

Fact Pattern: Dremmon Corporation uses a standard cost accounting system. Data for the last fiscal year are as follows: Units

Beginning inventory of finished goods

100

Production during the year

700

Sales

750

Ending inventory of finished goods

50 Per Unit

Product selling price

$200

Standard variable manufacturing cost

90

Standard fixed manufacturing cost

20*

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Budgeted selling and administrative costs (all fixed) $45,000 *Denominator level of activity is 750 units for the year.

There were no price, efficiency, or spending variances for the year, and actual selling and administrative expenses equaled the budget amount. Any volume variance is written off to cost of goods sold in the year incurred. There are no work-in-process inventories. Question: 21If Dremmon uses variable costing, its operating income earned in the last fiscal year was A. $21,500 B. $22,500 C. $28,000 D. $31,000

Question: 22A corporation’s results for the past year are shown below. Cost of goods available for sale

$136,000

Ending balance, raw material inventory

6,000

Ending balance, work-in-process inventory

14,000

Ending balance, finished goods inventory

13,000

Manufacturing overhead applied

50,000

Actual manufacturing overhead

55,000

If the corporation prorates any overapplied or underapplied overhead at the end of the year, cost of goods sold after proration would total A. $140,150 B. $127,100 C. $126,950 D. $118,900

Question: 23Information regarding a company’s year-end account balances is shown below. Account Balance (Before Proration) Allocated Overhead in Each Balance

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Direct material inventory

$ 100,000

Work-in-process inventory

0

25,000

10,000

225,000

100,000

2,250,000

890,000

Finished goods inventory Cost of goods sold

$

If the company’s overhead was overapplied by $90,000 and the company uses the most accurate method of prorating overapplied or underapplied overhead, the balance in the cost of goods sold account after proration would be A. $2,169,000 B. $2,169,900 C. $2,172,115 D. $2,330,100

Question: 24A company uses a normal costing system and a predetermined overhead rate to allocate its overhead costs. The manufacturing process requires the use of machining equipment, which is a primary driver of overhead. The actual factory overhead amount is $450 for Department A, Job 120 as of the end of the year. Production costs are shown below. Estimated annual overhead for all departments Expected annual machine hours for all departments

$220,000 20,000

Actual machine hours for Department A, Job 120

32

Actual labor hours for Department A, Job 120

21

The overhead cost for Department A, Job 120 is A. $98 overapplied. B. $98 underapplied. C. $219 overapplied. D. $219 underapplied.

Question: 25A company had the following applied fixed overhead balances at the end of the year: Work-in-process inventory $100,000 Finished goods inventory

50,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Cost of goods sold

250,000

The company is also showing that it has materially under-applied fixed overhead by $30,000. To record the fixed overhead variance, the company should charge A. Work-in-process inventory for $18,750. B. Finished goods inventory for $3,750. C. Cost of goods sold for $7,500. D. Cost of goods sold for $30,000.

Subunit 6: Allocating Service Department Costs – Theory Question: 1In allocating factory service department costs to producing departments, which one of the following items would most likely be used as an activity base? A. Units of product sold. B. Salary of service department employees. C. Units of electric power consumed. D. Direct materials usage.

Question: 2When allocating service department costs to production departments, the method that does not consider different cost behavior patterns is the A. Step method. B. Reciprocal method. C. Direct method. D. Single-rate method.

Question: 3Allocation of service department costs to the production departments is necessary to A. Control costs. B. Coordinate production activity. C. Determine overhead rates.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Maximize efficiency.

Question: 4There are several methods for allocating service department costs to the production departments. The method that recognizes service provided by one service department to another but does not recognize reciprocal interdepartmental service is the A. Direct method. B. Variable method. C. Reciprocal method. D. Step-down method.

Question: 5A large manufacturing company has two service departments and two production departments. Each of the service departments renders services to each other and to the two production departments. Which one of the following methods would most accurately allocate the costs of the service departments to the production departments of this company? A. The direct allocation method. B. The step-down allocation method. C. The linear allocation method. D. The reciprocal allocation method.

Question: 6When allocating service and administrative costs, the least useful criterion as a basis for allocation is A. Fairness. B. Benefit. C. Cause. D. Ability to bear.

Question: 7A corporation allocates indirect corporate overhead costs to its operating divisions. The company uses a cause-and-effect criterion in the selection of appropriate allocation bases. Which of the following would be an appropriate allocation base to assign the costs of the corporate personnel department to the operating divisions using a cause-and-effect criterion? A. Number of employees in each division.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Square footage of space occupied by each division. C. Total service years of employees in each division. D. Total book value of identifiable division assets.

Question: 8A public accounting firm has two departments, Management Consulting Services (MCS) and Tax Advisory Services (TAS). These two departments use the services of two service departments, Computer Programming (CP) and Computer Operations (CO). The percentages of each service used by each department for a typical period are CP

CO

MCS

TAS

CP

--

30%

50%

20%

CO

25%

--

45%

30%

The company prices its management consulting and tax advisory services on the basis of estimated costs of providing those services. Based upon this information, the most appropriate method for allocating service department costs is the A. Physical-units method. B. Step-down method. C. Estimated NRV method. D. Reciprocal method.

Question: 9When allocating costs from one department to another, a dual-rate cost-allocation method may be used. The dual-rate cost-allocation method is most useful when A. Two or more cost pools are to be allocated. B. Two or more departments’ costs are to be allocated. C. Two or more products are produced. D. Costs are separated into variable-cost and fixed-cost subpools.

Question: 10The management of a company wishes to encourage all other departments to use the legal department, as circumstances warrant. To accomplish this, legal department costs should be A. Allocated to users on the basis of the actual cost of hours used.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Allocated to users on the basis of the budgeted cost of actual hours used. C. Allocated to users on the basis of standard cost for the type of service provided. D. Absorbed as a corporate expense.

Question: 11A tax firm has three divisions – Compliance, Tax Planning, and Financial Consulting. Based on the divisional data presented below, which one of the allocation bases for common company expenses would likely have the least negative behavioral impact on the Financial Consulting Division manager? Tax

Financial

Compliance

Planning

Consulting

$4,500,000

$6,000,000

$4,500,000

Variable expenses

1,500,000

3,750,000

2,250,000

No. of employees

68

76

56

Revenues

A. Revenues. B. Contribution margin. C. Equal sharing. D. Number of employees.

Question: 12A furniture company manufactures several steel products. It has three production departments: Fabricating, Assembly, and Finishing. The service departments include Maintenance, Material Handling, and Designing. Currently, the company does not allocate service department costs to the production departments. The new cost accountant believes that service department rates should be developed and charged to the production departments for services requested. If the company adopts this new policy, the production department managers would be least likely to A. Request an excessive amount of service. B. Replace outdated and inefficient systems. C. Refrain from using unnecessary services. D. Be encouraged to control costs.

Question: 13A company has two service departments and three operating departments. In allocating service department costs to the operating departments, which of the following three methods (direct, step-down, reciprocal) ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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will result in the same amount of service department costs being allocated to each operating department, regardless of the order in which the service department costs are allocated? A. Direct and reciprocal methods only. B. Step-down and reciprocal methods only. C. Direct and step-down methods only. D. Direct method only.

Fact Pattern: Wilcox Industrial has two support departments, the Information Systems Department and the Personnel Department, and two manufacturing departments, the Machining Department and the Assembly Department. The support departments service each other as well as the two production departments. Company studies have shown that the Personnel Department provides support to a greater number of departments than the Information Systems Department. Question: 14If Wilcox uses the reciprocal method of department allocation, which one of the following departmental allocations would occur? The costs of the A. Assembly Department are allocated to the Information Systems Department and the Personnel Department. B. Information Systems Department are allocated to the Machining Department and the costs of the Machining Department are allocated to the Assembly Department. C. Personnel Department are allocated solely to the Information Systems Department. D. Information Systems Department are allocated to the Personnel Department, Machining Department, and Assembly Department.

Fact Pattern: Wilcox Industrial has two support departments, the Information Systems Department and the Personnel Department, and two manufacturing departments, the Machining Department and the Assembly Department. The support departments service each other as well as the two production departments. Company studies have shown that the Personnel Department provides support to a greater number of departments than the Information Systems Department. Question: 15If Wilcox uses the step-down method of departmental allocation, which one of the following cost allocations would not occur? Some of the costs of the A. Personnel Department would be allocated to the Information Systems Department.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Information Systems Department would be allocated to the Personnel Department. C. Personnel Department would be allocated to the Assembly Department. D. Personnel Department would be allocated to the Assembly Department and the Machining Department.

Fact Pattern: Wilcox Industrial has two support departments, the Information Systems Department and the Personnel Department, and two manufacturing departments, the Machining Department and the Assembly Department. The support departments service each other as well as the two production departments. Company studies have shown that the Personnel Department provides support to a greater number of departments than the Information Systems Department. Question: 16If Wilcox uses the direct method of departmental allocation, which one of the following cost allocations would occur? Some of the costs of the A. Personnel Department would be allocated to the Information Systems Department. B. Machining Department would be allocated to the Information Systems Department. C. Information Systems Department would be allocated to the Assembly Department. D. Assembly Department would be allocated to the Machining Department.

Question: 17A company has four support departments (maintenance, power, human resources, and legal) and three operating departments. The support departments provide services to the operating departments as well as to the other support departments. The method of allocating the costs of the support departments that best recognizes the mutual services rendered by support departments to other support departments is the A. Direct allocation method. B. Dual-rate allocation method. C. Step-down allocation method. D. Reciprocal allocation method.

Question: 18A company has two service departments and is planning to use the reciprocal method to allocate service department costs. The following information from operations was collected for analysis. Budgeted overhead costs Human Resources

$400,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Data Processing

70,000

Machining

225,000

Assembly

125,000

Services furnished

Labor Hours

Human Resources to Data Processing

3,000

Machining

5,000

Assembly

8,200

Data Processing to Human Resources Machining Assembly

600 3,500 600

Which one of the following equations represents the complete reciprocated cost of the Data Processing Department? A. $70,000 + [(600 ÷ 4,700) × $400,000] B. $70,000 + [Fully Reciprocated Cost of Human Resources × (3,000 ÷ 16,200)] C. $70,000 × (600 ÷ 4,700) + $350,000 × (3,000 ÷ 16,200) D. $400,000 + [(600 ÷ 16,200) × $70,000]

Question: 19A company produces two products that are serviced by two support areas. The company uses the reciprocal method to allocate support area costs to the products with information as follows.

Allocation base

Support Area 1

Support Area 2

Hours used

Square feet

Area 1 hours used Space occupied Direct costs

5,000 3,000 $350,000

Product 1

Product 2

120,000

75,000

40,000

20,000

$200,000

What additional information does Columbia need in order to complete the cost allocation? A. Direct costs of Products 1 and 2. B. Hours used by Support Area 1 and the space occupied by Support Area 2.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Order in which the support areas will be allocated. D. No additional information is needed.

Question: 20A large company is in the process of allocating service department costs to revenue-generating departments. Under which one of the following allocation methods will the amount allocated to each revenuegenerating department be different if the order in which service department costs are allocated is different? A. Step-down method. B. Direct method. C. Reciprocal method. D. Activity-based method.

Subunit 7: Allocating Service Department Costs – Calculations Fact Pattern: The managers of Rochester Manufacturing are discussing ways to allocate the cost of service departments, such as Quality Control and Maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information: Quality Control

Maintenance Machining Assembly Total

Budgeted overhead costs before allocation

$350,000

$200,000

Budgeted machine hours

--

--

Budgeted direct labor hours --

--

$400,000 50,000 --

$300,000 $1,250,000 --

50,000 25,000

25,000

21,000

7,000

35,000

18,000

12,000

40,000

Budgeted hours of service: Quality Control Maintenance

--

7,000 10,000

--

Question: 1If Rochester uses the step-down method of allocating service costs beginning with quality control, the maintenance costs allocated to the assembly department would be A. $70,000 B. $108,000 C. $162,000 D. $200,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: The managers of Rochester Manufacturing are discussing ways to allocate the cost of service departments, such as Quality Control and Maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information: Quality Control

Maintenance Machining Assembly Total

Budgeted overhead costs before allocation

$350,000

$200,000

Budgeted machine hours

--

--

Budgeted direct labor hours --

--

$400,000 50,000

$300,000 $1,250,000 --

--

50,000 25,000

25,000

7,000

35,000

Budgeted hours of service: Quality Control

--

7,000

21,000

Maintenance 10,000 -18,000 12,000 40,000 Question: 2Using the direct method, the total amount of overhead allocated to each machine hour at Rochester would be A. $2.40 B. $5.25 C. $8.00 D. $15.65

Fact Pattern: The managers of Rochester Manufacturing are discussing ways to allocate the cost of service departments, such as Quality Control and Maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information: Quality Control

Maintenance Machining Assembly Total

Budgeted overhead costs before allocation

$350,000

$200,000

Budgeted machine hours

--

--

Budgeted direct labor hours --

--

$400,000 50,000 --

$300,000 $1,250,000 --

50,000 25,000

25,000

21,000

7,000

35,000

18,000

12,000

40,000

Budgeted hours of service: Quality Control Maintenance

--

7,000 10,000

--

Question: 3If Rochester uses the direct method of allocating service department costs, the total service costs allocated to the assembly department would be A. $80,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. $87,500 C. $120,000 D. $167,500

Fact Pattern: The managers of Rochester Manufacturing are discussing ways to allocate the cost of service departments, such as Quality Control and Maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information: Quality Control

Maintenance Machining Assembly Total

Budgeted overhead costs before allocation

$350,000

$200,000

Budgeted machine hours

--

--

Budgeted direct labor hours --

--

$400,000 50,000

$300,000 $1,250,000 --

--

50,000 25,000

25,000

7,000

35,000

Budgeted hours of service: Quality Control

--

7,000

21,000

Maintenance 10,000 -18,000 12,000 40,000 Question: 4If Rochester uses the reciprocal method of allocating service costs, the total amount of quality control costs (rounded to the nearest dollar) to be allocated to the other departments would be A. $284,211 B. $336,842 C. $350,000 D. $421,053

Fact Pattern: The managers of Rochester Manufacturing are discussing ways to allocate the cost of service departments, such as Quality Control and Maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information: Quality Control

Maintenance Machining Assembly Total

Budgeted overhead costs before allocation

$350,000

$200,000

Budgeted machine hours

--

--

Budgeted direct labor hours --

--

$400,000 50,000 --

$300,000 $1,250,000 --

50,000 25,000

25,000

Budgeted hours of service:

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Quality Control Maintenance

--

7,000 10,000

--

21,000

7,000

35,000

18,000

12,000

40,000

Question: 5If Rochester decides not to allocate service costs to the production departments, the overhead allocated to each direct labor hour in the Assembly Department would be A. $3.20 B. $3.50 C. $12.00 D. $16.00

Fact Pattern: Longstreet Company’s Photocopying Department provides photocopy services for both Departments A and B and has prepared its total budget using the following information for next year: Fixed costs

$100,000

Available capacity 4,000,000 pages Budgeted usage Department A

1,200,000 pages

Department B

2,400,000 pages

Variable cost

$0.03 per page

Question: 6Assume that Longstreet uses the single-rate method of cost allocation and the allocation base is budgeted usage. How much photocopying cost will be allocated to Department B in the budget year? A. $72,000 B. $122,000 C. $132,000 D. $138,667

Fact Pattern: Longstreet Company’s Photocopying Department provides photocopy services for both Departments A and B and has prepared its total budget using the following information for next year: Fixed costs

$100,000

Available capacity 4,000,000 pages Budgeted usage Department A

1,200,000 pages

Department B

2,400,000 pages

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Variable cost $0.03 per page Question: 7Assume that Longstreet uses the dual-rate cost allocation method, and the allocation basis is budgeted usage for fixed costs and actual usage for variable costs. How much cost would be allocated to Department A during the year if actual usage for Department A is 1,400,000 pages and actual usage for Department B is 2,100,000 pages? A. $42,000 B. $72,000 C. $75,333 D. $82,000

Fact Pattern: M&P Tool has three service departments that support the production area. Outlined below is the estimated overhead by department for the upcoming year: Estimated Number of Service Departments Receiving

Overhead Employees $25,000

2

35,000

2

Tool 10,000 Production Departments

1

Repair

Assembly Bolting

25 12

The Repair Department supports the greatest number of departments, followed by the Tool Department. Overhead cost is allocated to departments based upon the number of employees. Question: 8If M&P uses the direct method of allocation, how much of the Repair Department’s overhead will be allocated to the Tool Department? A. $0 B. $875 C. $7,000 D. $11,667

Fact Pattern: M&P Tool has three service departments that support the production area. Outlined below is the estimated overhead by department for the upcoming year: Estimated Number of Service Departments

Overhead Employees

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Receiving

$25,000

2

35,000

2

Tool 10,000 Production Departments

1

Repair

Assembly Bolting

25 12

The Repair Department supports the greatest number of departments, followed by the Tool Department. Overhead cost is allocated to departments based upon the number of employees. Question: 9If M&P uses the step-down method of allocation, the allocation from the Repair Department to the Tool Department would be A. $0 B. $875 C. $7,000 D. $11,667

Fact Pattern: Fabricating and Finishing are the two production departments of Ewell Company. Building Operations and Information Services are service departments that provide support to the two production departments as well as to each other. Ewell uses departmental overhead rates in the two production departments to allocate the service department costs to the production departments. Square footage is used to allocate Building Operations, and computer time is used to allocate Information Services. The costs of the service departments and relevant operating data for the departments are as follows: Building

Information

Operations

Services

$200,000

$ 300,000

350,000

900,000

$550,000

$1,200,000

5,000

10,000

Fabricating

Finishing

Costs: Labor and benefit costs Other traceable costs Total Operating Data: Square feet occupied Computer time (in hours)

200

16,000

24,000

1,200

600

Question: 10If Ewell employs the step method to allocate the costs of the service departments and if Information Services costs are allocated first, then the total amount of service department costs (Information Services and Building Operations) allocated to Finishing would be A. $657,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $681,600 C. $730,000 D. $762,000

Fact Pattern: Fabricating and Finishing are the two production departments of Ewell Company. Building Operations and Information Services are service departments that provide support to the two production departments as well as to each other. Ewell uses departmental overhead rates in the two production departments to allocate the service department costs to the production departments. Square footage is used to allocate Building Operations, and computer time is used to allocate Information Services. The costs of the service departments and relevant operating data for the departments are as follows: Building

Information

Operations

Services

$200,000

$ 300,000

350,000

900,000

$550,000

$1,200,000

5,000

10,000

Fabricating

Finishing

Costs: Labor and benefit costs Other traceable costs Total Operating Data: Square feet occupied Computer time (in hours)

200

16,000

24,000

1,200

600

Question: 11If Ewell employs the direct method to allocate the costs of the service departments, then the amount of Building Operations costs allocated to Fabricating would be A. $140,000 B. $160,000 C. $176,000 D. $220,000

Fact Pattern: Logo, Inc., has two service departments (the Systems Department and the Facilities Department) that provide support to the company’s three production departments (Machining Department, Assembly Department, and Finishing Department). The overhead costs of the Systems Department are allocated to other departments on the basis of computer usage hours. The overhead costs of the Facilities Department are allocated based on square feet occupied (in thousands). Other information pertaining to Logo is as follows: ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Computer

Square Feet

Department

Overhead Usage Hours

Occupied

Systems

$200,000

300

1,000

Facilities

100,000

900

600

Machining

400,000 3,600

2,000

Assembly

550,000 1,800

3,000

Finishing

620,000 2,700

5,000

9,300

11,600

Total

Question: 12Logo employs the direct method of allocating service department costs. The overhead of the Systems Department would be allocated by dividing the overhead amount by A. 1,200 hours. B. 8,100 hours. C. 9,000 hours. D. 9,300 hours.

Fact Pattern: Logo, Inc., has two service departments (the Systems Department and the Facilities Department) that provide support to the company’s three production departments (Machining Department, Assembly Department, and Finishing Department). The overhead costs of the Systems Department are allocated to other departments on the basis of computer usage hours. The overhead costs of the Facilities Department are allocated based on square feet occupied (in thousands). Other information pertaining to Logo is as follows: Computer

Square Feet

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Department

Overhead Usage Hours

Occupied

Systems

$200,000

300

1,000

Facilities

100,000

900

600

Machining

400,000 3,600

2,000

Assembly

550,000 1,800

3,000

Finishing

620,000 2,700

5,000

9,300

11,600

Total

Question: 13Logo employs the step-down method of allocating service department costs and begins with the Systems Department. Which one of the following correctly denotes the amount of the Systems Department’s overhead that would be allocated to the Facilities Department and the Facilities Department’s overhead charges that would be allocated to the Machining Department? Systems to Facilities Facilities to Machining A. $0 $20,000 B. $19,355 $20,578 C. $20,000 $20,000 D. $20,000 $24,000

Fact Pattern: Adam Corporation manufactures computer tables and has the following budgeted indirect manufacturing cost information for next year: Support Departments

Maintenance

Systems

Operating Departments

Machining Fabrication

Total

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Budgeted overhead

$360,000

$95,000

$200,000

$300,000 $955,000

10%

50%

40%

100%

45%

50%

100%

Support work finished:

From Maintenance

From Systems

5%

Question: 14If Adam uses the step-down method, beginning with the Maintenance Department, to allocate support department costs to production departments, the total overhead (rounded to the nearest dollar) for the Machining Department to allocate to its products would be A. $415,526 B. $422,750 C. $442,053 D. $445,000

Fact Pattern: Adam Corporation manufactures computer tables and has the following budgeted indirect manufacturing cost information for next year: Support Departments

Budgeted overhead

Operating Departments

Maintenance

Systems

Machining Fabrication

Total

$360,000

$95,000

$200,000

10%

50%

40%

100%

45%

50%

100%

$300,000 $955,000

Support work finished:

From Maintenance

From Systems

5%

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 15If Adam uses the direct method to allocate support department costs to production departments, the total overhead (rounded to the nearest dollar) for the Machining Department to allocate to its products would be A. $418,000 B. $422,750 C. $442,053 D. $445,000

Question: 16A company has accumulated its support costs into three pools that will be allocated to numerous products using the step-down method. Usage of each pool’s services is shown below. Pool 1

Pool 2

Usage of Pool 1

0%

10%

8%

82%

Usage of Pool 2

6%

4%

10%

70%

Usage of Pool 3

10%

8%

10%

78%

Direct costs

$150,000

Pool 3 All Products

$80,000 $55,000

If the company allocates Pool 1’s costs first, Pool 2’s costs second, and Pool 3’s costs third, the amount of costs allocated from Pool 2 to Pool 3 is A. $11,875 B. $11,047 C. $9,500 D. $8,000

Question: 17A company has two supporting departments, Maintenance and Information Systems, and two operating departments, the Machining Department and the Assembly Department. Each department’s overhead costs are shown below. Information Maintenance Overhead costs Maintenance hours

$6,300,000 -

Systems

Machining Assembly

$1,452,150 $4,000,000 $2,000,000 4,000

6,000

10,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Information Systems hours

500

-

4,000

500

Using the step-down method, the total overhead costs allocated to each operating department are Machining Assembly A. $8,300,800 $5,451,350 B. $7,653,300 $6,098,850 C. $8,187,025 $5,565,125 D. $5,451,350 $8,300,800

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Study Unit 8: Operational Efficiency and Business Process Performance 8: (121) Operational Efficiency and Business Process Performance 1: (21) Just-in-Time Inventory and Lean Manufacturing (Lean Resource Management) 2: (16) Enterprise Resource Planning and Outsourcing 3: (34) Theory of Constraints and Throughput Costing 4: (10) Capacity Management 5: (18) Value-Chain Analysis 6: (22) Other Process Improvement Tools

Subunit 1: Just-in-Time Inventory and Lean Manufacturing (Lean Resource Management) Question: 1The benefits of a just-in-time system for raw materials usually include A. Elimination of nonvalue-adding operations. B. Increase in the number of suppliers, thereby ensuring competitive bidding. C. Maximization of the standard delivery quantity, thereby lessening the paperwork for each delivery. D. Decrease in the number of deliveries required to maintain production.

Question: 2A company changed from a traditional manufacturing philosophy to a just-in-time philosophy. What are the expected effects of this change on inventory turnover and inventory as a percentage of total assets reported on the balance sheet? Inventory Inventory Turnover Percentage A. Decrease Decrease B. Decrease Increase C. Increase Decrease D. Increase Increase

Question: 3Which trends in purchasing and carrying costs are most conducive to switching from a traditional inventory ordering system to a just-in-time ordering system? Cost per Inventory Unit Purchase Order Carrying Costs

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Increasing Increasing B. Decreasing Increasing C. Decreasing Decreasing D. Increasing Decreasing

Question: 4A manufacturing company is attempting to implement a just-in-time (JIT) purchase policy system by negotiating with its primary suppliers to accept long-term purchase orders which result in more frequent deliveries of smaller quantities of raw materials. If the JIT purchase policy is successful in reducing the total inventory costs of the manufacturing company, which of the following combinations of cost changes would be most likely to occur? Cost Category Cost Category to Increase to Decrease A. Purchasing costs Stockout costs B. Purchasing costs Quality costs C. Quality costs Ordering costs D. Stockout costs Carrying costs

Question: 5The effectiveness of a JIT system is often facilitated by the elimination of some common forms of internal control. The elimination of which internal control is usually acceptable with a JIT system? A. Preparation of hard copy receiving reports. B. Voucher approval prior to paying accounts payable. C. Two signatures required on large checks. D. Locked doors on production areas.

Question: 6Just-in-time manufacturing practices are based in part on the belief that A. High inventory levels provide greater flexibility in production scheduling. B. Attempting to reduce inventory to a consistently low level can lead to “panic” situations. C. Goods should be “pulled” through the production process, not “pushed.”

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Beefed-up internal control in the central warehouse can greatly enhance productivity in the production areas.

Question: 7Companies that adopt just-in-time purchasing systems often experience A. A reduction in the number of suppliers. B. Fewer deliveries from suppliers. C. A greater need for inspection of goods as the goods arrive. D. Less need for linkage with a vendor’s computerized order entry system.

Question: 8A company changed from a traditional manufacturing operation with a job-order costing system to a just-in-time operation with a backflush costing system. What is(are) the expected effect(s) of these changes on the company’s inspection costs and recording detail of costs tracked to jobs in process? Inspection Detail of Costs Costs Tracked to Jobs A. Decrease Decrease B. Decrease Increase C. Increase Decrease D. Increase Increase

Question: 9Just-in-time production is also called A. Kaizen. B. Lean manufacturing. C. Activity-based management. D. Backflush costing.

Question: 10Which of the following is not a benefit of lean production? A. Reduced setup time. B. Lower central support costs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Lower training costs. D. Improved on-time delivery.

Question: 11Which of the following internal controls is not one typically eliminated when a just-in-time inventory system is introduced? A. Sophisticated inventory tracking system. B. Central receiving dock. C. Statistical methods for quality assurance. D. Hard copy receiving report.

Question: 12The physical reconfiguration of equipment that often accompanies the institution of a just-in-time manufacturing regime is described as the creation of A. Cells. B. A pull system. C. Electronic Data Interchange. D. Tickets.

Question: 13Which of the following terms is not connected with the employment of just-in-time (JIT) manufacturing? A. Cells. B. Kanban. C. Lean production. D. Safety stock.

Question: 14Which of the following is not a correct comparison of a just-in-time system with a traditional system? Traditional Just-in-Time A. Longer lead times Shorter lead times

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. Inventory is an asset Inventory is a liability C. Some scrap tolerated Zero defects desired D. Lot size based on immediate need Lot size based on formulas

Question: 15A company manufactures its products in a highly automated, just-in-time environment and uses a standard cost system. The variance that would cause the most concern would be a A. 10% unfavorable fixed overhead spending variance caused by an unanticipated raise given to production supervisors. B. 5% unfavorable material quantity variance caused by low-quality materials that resulted in reworks. C. 6% unfavorable labor efficiency variance caused by the hiring of lower-skilled part-time workers. D. 7% unfavorable variable overhead spending variance caused by the part-time workers using more supplies than predicted.

Question: 16Which one of the following is not an expected benefit of implementing a just-in-time (JIT) production system? A. Lower total storage costs. B. Lower total setup costs. C. Lower manufacturing lead time. D. Lower total rework cost.

Question: 17The work cell concept relates to A. A just-in-time production system. B. Material requirements planning. C. Throughput costing. D. Enterprise resource planning.

Question: 18A company is considering implementing a just-in-time system and would like to test the system on its packaging materials purchases. An analysis indicated that the company could reduce its carrying costs by $5,000 each month if the just-in-time system was implemented. Before making this decision, the company should also consider a possible change in all of the following costs except an increase in the cost of ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

A. Ordering. B. Packaging labor. C. Packaging materials. D. Stockouts.

Question: 19A company recently installed just-in-time production and purchasing systems. If the company’s experience is similar to that of other companies, the company will likely A. Reduce the number of suppliers with which it does business. B. Increase the size of individual orders of raw materials. C. Increase the dollar investment in finished goods inventory. D. Be less reliant on sales orders as “trigger” mechanisms for production runs.

Question: 20A company is planning to implement a just-in-time (JIT) inventory management system. All of the following are benefits expected from implementing JIT except A. Lower investment in inventory. B. Lower obsolescence and other carrying costs. C. Higher inventory turnover. D. Increased demand.

Question: 21All of the following are benefits of just-in-time manufacturing except that it A. Can significantly reduce inventory. B. Helps produce a higher-quality product in less time. C. Allows for minor defects without shutting down operations. D. Helps eliminate rework costs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Subunit 2: Enterprise Resource Planning and Outsourcing Question: 1In contrast to just-in-time manufacturing, materials requirements planning is a(n) A. Push system. B. Pull system. C. Automated system. D. Manual system.

Question: 2Materials requirements planning (MRP) sometimes results in A. Longer idle periods. B. Less flexibility in responding to customers. C. Increased inventory carrying costs. D. Decreased setup costs.

Question: 3A company uses material requirements planning (MRP) and manufactures a product with the following product structure tree.

The company has just received an order for 100 units of X, the finished product. The company has 20 units of X, 100 units of B, and 50 units of E in inventory. How many units of E must the company purchase in order to fill the order? A. 1,000 B. 950 C. 800 D. 550

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 4The manufacturing concept that relates demand forecasts to specific dates for completion is A. Master production schedule. B. Materials requirements planning. C. Manufacturing resource planning. D. Bill of materials.

Question: 5Which of the following is not a typical benefit of an outsourcing arrangement? A. Reduced costs. B. Access to technology. C. Avoidance of risk of obsolescence. D. Increased control over a necessary function.

Question: 6Which of the following is not a goal of materials requirements planning? A. Right part. B. Right quantity. C. Right customer. D. Right time.

Question: 7One reason to outsource is so a firm can focus on its A. Customers. B. Suppliers. C. Undifferentiated activities. D. Core competencies.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 8The following MRP (material requirements planning) diagram describes the assembly of Finished Good A.

The current inventory levels are shown below. A: 0 B: 50 C: 60 D: 100 E: 120 If the company has just received an order for 500 units of A, how many units of E must the company purchase? A. 3,000 B. 2,880 C. 2,820 D. 2,700

Question: 9A manufacturer needs to produce 100 wreaths in November to meet customer demand. The manufacturing facility has the capacity to produce 120 wreaths. The bill of materials for wreaths is as follows. Material Quantity November 1 Inventory Level Frame

1

Pine ribbon 3 feet Pinecones

6

100 15 feet 24

To produce 1 foot of pine ribbon, the manufacturer needs 4 units of TRX and 2 units of RBX. On November 1, the manufacturer has 80 units of TRX and 110 units of RBX on hand. Using material requirements planning, how many units of TRX will the manufacturer need to purchase in November to complete the orders for wreaths? A. 1,020 B. 1,060

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. 1,200 D. 1,360

Question: 10An advantage of an enterprise resource planning system is that A. It can usually be installed by organizations of all sizes. B. The system can be easily customized to suit the unique needs of the organization. C. The comprehensiveness of the system reduces resistance to change. D. Its implementation improves business processes.

Question: 11Enterprise resource planning (ERP) systems integrate A. Financial and non-financial information from an organization’s business processes. B. Financial information among different organizations only. C. Financial and human resources systems only. D. Financial and non-financial information from an organization’s accounting processes.

Question: 12In a traditional ERP system, the receipt of a customer order may result in I. Customer tracking of the order’s progress II. Automatic replenishment of inventory by a supplier III. Hiring or reassigning of employees IV. Automatic adjustment of output schedules A. I, II, and IV only. B. I and III only. C. III and IV only. D. I, II, III, and IV.

Question: 13A primary advantage of an ERP system is A. Program-data dependence.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. Data redundancy. C. Separate data updating for different functions. D. Centralization of data.

Question: 14An enterprise-wide resource planning (ERP) system integrates the organization’s computerized subsystems and may also provide links to external parties. An advantage of ERP is that A. The reengineering needed for its implementation should improve business processes. B. Customizing the software to suit the unique needs of the organization will facilitate upgrades. C. It can be installed by organizations of all sizes. D. The comprehensiveness of the system reduces resistance to change.

Question: 15Enterprise resource planning (ERP) belongs to which of the following categories of IT? A. Applications. B. External connections. C. IT management. D. Technical infrastructure.

Question: 16Buy-side, sell-side, back-office, and enterprise resource planning (ERP) are subcategories of which layer of IT? A. Technical infrastructure. B. IT management. C. External connections. D. Applications.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Subunit 3: Theory of Constraints and Throughput Question: 1A company manufactures three products at its highly automated factory. The products are very popular, with demand far exceeding the company’s ability to supply the marketplace. To maximize profit, management should focus on each product’s A. Gross margin. B. Segment margin. C. Contribution margin ratio. D. Contribution margin per machine hour.

Question: 2Three of the basic measurements used by the theory of constraints (TOC) are A. Gross margin (or gross profit), return on assets, and total sales. B. Number of constraints (or subordinates), number of nonconstraints, and operating leverage. C. Throughput (or throughput contribution), inventory (or investments), and operational expense. D. Fixed manufacturing overhead per unit, fixed general overhead per unit, and unit gross margin (or gross profit).

Question: 3Under throughput costing, the only cost considered to be truly variable in the short run is A. Direct materials. B. Direct labor. C. Manufacturing overhead. D. All manufacturing costs are considered variable.

Question: 4A manufacturer produces a single product that sells for $150 per unit. The product is processed through the Cutting and Finishing Departments. Additional data for these departments are as follows: Cutting

Finishing

Annual capacity (36,000 direct labor hours available in each department)

180,000 units

135,000 units

Current production rate (annualized)

108,000 units

108,000 units

$1,296,000

$1,944,000

864,000

1,296,000

Fixed manufacturing overhead Fixed selling and administrative expense

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Direct materials cost per unit 45 15 The current production rate is the budgeted rate for the entire year. Direct labor employees earn $20 per hour, and the company has a “no layoff” period in effect. What is the amount of the throughput contribution per unit as computed using the theory of constraints? A. $90.00 B. $76.67 C. $46.67 D. $26.67

Question: 5A manufacturer can sell its single product for $660. Below are the cost data for the product: Direct materials

$170

Direct labor

225

Manufacturing overhead

90

The relevant margin amount when beginning a theory of constraints (TOC) analysis is A. $490 B. $345 C. $265 D. $175

Question: 6The immediate goal of a theory of constraints (TOC) analysis is to A. Maximize the efficiency of the entire production process. B. Minimize direct materials cost. C. Maximize contribution margin through the constraint. D. Smooth production flow to eliminate backup in the system.

Fact Pattern: Bakker Industries sells three products (Products 611, 613, and 615) that it manufactures in a factory consisting of one department. Both labor and machine time are applied to the products. Bakker’s management is planning its production schedule for the next several months. There are labor shortages in the community. Some of the machines will be out of service ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

for extensive overhauling. Available machine and labor time for each of the next 6 months is listed below. Monthly Capacity Availability Normal machine capacity in machine hours

3,500

Capacity of machines being repaired in machine hours

(500)

Available machine capacity in machine hours

3,000

Labor capacity in direct labor hours

4,000

Available labor in direct labor hours

3,700

Labor and Machine Specifications per Unit of Product Product

Labor and Machine Time

611 613 615

Direct labor hours

2

Machine hours

2

Direct labor hours

1

Machine hours

1

Direct labor hours

2

Machine hours

2

The Sales Department’s forecast of product demand over the next 6 months is presented below. Product

Monthly Sales Volume (in units)

611

500

613

400

615

1,000

Bakker’s inventory levels will not be increased or decreased during the next 6 months. The unit price and cost data valid for the next 6 months are presented below. Product 611

613

615

Unit costs: Direct material

$

7 $ 13

$ 17

Direct labor

12

6

12

Variable overhead

27

20

25

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fixed overhead

15

10

32

Variable selling

3

2

4

$196 $123

$167

Unit selling price

Question: 7What is the excess (deficiency) for machine hours? A. (700) hours. B. (400) hours. C. 0 hours. D. 1,100 hours.

Fact Pattern: Bakker Industries sells three products (Products 611, 613, and 615) that it manufactures in a factory consisting of one department. Both labor and machine time are applied to the products. Bakker’s management is planning its production schedule for the next several months. There are labor shortages in the community. Some of the machines will be out of service for extensive overhauling. Available machine and labor time for each of the next 6 months is listed below. Monthly Capacity Availability Normal machine capacity in machine hours

3,500

Capacity of machines being repaired in machine hours

(500)

Available machine capacity in machine hours

3,000

Labor capacity in direct labor hours

4,000

Available labor in direct labor hours

3,700

Labor and Machine Specifications per Unit of Product Product 611 613 615

Labor and Machine Time Direct labor hours

2

Machine hours

2

Direct labor hours

1

Machine hours

1

Direct labor hours

2

Machine hours

2

The Sales Department’s forecast of product demand over the next 6 months is presented below. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Product

Monthly Sales Volume (in units)

611

500

613

400

615

1,000

Bakker’s inventory levels will not be increased or decreased during the next 6 months. The unit price and cost data valid for the next 6 months are presented below. Product 611

613

615

Unit costs: Direct material

$

7 $ 13

$ 17

Direct labor

12

6

12

Variable overhead

27

20

25

Fixed overhead

15

10

32

Variable selling

3

2

4

$196 $123

$167

Unit selling price

Question: 8What is the excess (deficiency) for labor hours each month? A. (100) hours. B. 300 hours. C. 700 hours. D. 1,800 hours.

Fact Pattern: Bakker Industries sells three products (Products 611, 613, and 615) that it manufactures in a factory consisting of one department. Both labor and machine time are applied to the products. Bakker’s management is planning its production schedule for the next several months. There are labor shortages in the community. Some of the machines will be out of service for extensive overhauling. Available machine and labor time for each of the next 6 months is listed below. Monthly Capacity Availability Normal machine capacity in machine hours

3,500

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Capacity of machines being repaired in machine hours

(500)

Available machine capacity in machine hours

3,000

Labor capacity in direct labor hours

4,000

Available labor in direct labor hours

3,700

Labor and Machine Specifications per Unit of Product Product

Labor and Machine Time

611 613 615

Direct labor hours

2

Machine hours

2

Direct labor hours

1

Machine hours

1

Direct labor hours

2

Machine hours

2

The Sales Department’s forecast of product demand over the next 6 months is presented below. Product

Monthly Sales Volume (in units)

611

500

613

400

615

1,000

Bakker’s inventory levels will not be increased or decreased during the next 6 months. The unit price and cost data valid for the next 6 months are presented below. Product 611

613

615

Unit costs: Direct material

$

7 $ 13

$ 17

Direct labor

12

6

12

Variable overhead

27

20

25

Fixed overhead

15

10

32

Variable selling

3

2

4

$196 $123

$167

Unit selling price

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 9What is product 615’s contribution per machine hour? A. $54.50 B. $58 C. $109 D. $167

Fact Pattern: Bakker Industries sells three products (Products 611, 613, and 615) that it manufactures in a factory consisting of one department. Both labor and machine time are applied to the products. Bakker’s management is planning its production schedule for the next several months. There are labor shortages in the community. Some of the machines will be out of service for extensive overhauling. Available machine and labor time for each of the next 6 months is listed below. Monthly Capacity Availability Normal machine capacity in machine hours

3,500

Capacity of machines being repaired in machine hours

(500)

Available machine capacity in machine hours

3,000

Labor capacity in direct labor hours

4,000

Available labor in direct labor hours

3,700

Labor and Machine Specifications per Unit of Product Product

Labor and Machine Time

611 613 615

Direct labor hours

2

Machine hours

2

Direct labor hours

1

Machine hours

1

Direct labor hours

2

Machine hours

2

The Sales Department’s forecast of product demand over the next 6 months is presented below. Product

Monthly Sales Volume (in units)

611

500

613

400

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

615

1,000

Bakker’s inventory levels will not be increased or decreased during the next 6 months. The unit price and cost data valid for the next 6 months are presented below. Product 611

613

615

Unit costs: Direct material

$

7 $ 13

$ 17

Direct labor

12

6

12

Variable overhead

27

20

25

Fixed overhead

15

10

32

Variable selling

3

2

4

$196 $123

$167

Unit selling price

Question: 10If Bakker’s strategy is to maximize dollar profits, how many units of product 615 will be produced? A. 400 units. B. 500 units. C. 800 units. D. 1,000 units.

Fact Pattern: Bakker Industries sells three products (Products 611, 613, and 615) that it manufactures in a factory consisting of one department. Both labor and machine time are applied to the products. Bakker’s management is planning its production schedule for the next several months. There are labor shortages in the community. Some of the machines will be out of service for extensive overhauling. Available machine and labor time for each of the next 6 months is listed below. Monthly Capacity Availability Normal machine capacity in machine hours Capacity of machines being repaired in machine hours

3,500 (500)

Available machine capacity in machine hours

3,000

Labor capacity in direct labor hours

4,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Available labor in direct labor hours

3,700

Labor and Machine Specifications per Unit of Product Product

Labor and Machine Time

611 613 615

Direct labor hours

2

Machine hours

2

Direct labor hours

1

Machine hours

1

Direct labor hours

2

Machine hours

2

The Sales Department’s forecast of product demand over the next 6 months is presented below. Product

Monthly Sales Volume (in units)

611

500

613

400

615

1,000

Bakker’s inventory levels will not be increased or decreased during the next 6 months. The unit price and cost data valid for the next 6 months are presented below. Product 611

613

615

Unit costs: Direct material

$

7 $ 13

$ 17

Direct labor

12

6

12

Variable overhead

27

20

25

Fixed overhead

15

10

32

Variable selling

3

2

4

$196 $123

$167

Unit selling price

Question: 11If Bakker’s strategy is to maximize total profits, what is the total contribution? A. $113,150 B. $193,500

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. $215,300 D. $280,800

Question: 12Below are data concerning the hours spent by a manufacturer’s two products in its two processes. Assembly Painting Product A 21

14

Product B 32

8

The constraint is A. Product A. B. Product B in Assembly. C. The assembly activity. D. Cannot be determined from the information given.

Question: 13A company produces two components: A-1 and A-2. The unit throughput contribution margins for A-1 and A-2 are $150 and $300, respectively. Each component must proceed through two processes: Operation 1 and Operation 2. The capacity of Operation 1 is 180 machine hours, with A-1 and A-2 requiring 1 hour and 3 hours, respectively. Furthermore, the company can sell only 45 units of A-1 and 100 units of A-2. However, the company is considering expanding Operation 1’s capacity by 90 machine hours at a cost of $80 per hour. Assuming that Operation 2 has sufficient capacity to handle any additional output from Operation 1, the company should produce Units of A-1 Units of A-2 A. 180 0 B. 45 100 C. 45 75 D. 0 60

Question: 14Data regarding four different products manufactured by an organization are presented as follows. Direct material and direct labor are readily available from the respective resource markets. However, the manufacturer is limited to a maximum of 3,000 machine hours per month. Products A

B

C

D

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Unit price Variable cost

$15

$18

$20

$25

7

11

10

16

Units Produced per Machine Hour: A:

3

B:

4

C:

2

D:

3

The product that is the most profitable for the manufacturer in this situation is A. Product A. B. Product B. C. Product C. D. Product D.

Fact Pattern: Rosecrans Manufacturing produces kerosene lanterns. The company can sell all of its output. Each unit sells for $120, and direct materials costing $48 per unit are added at the start of the first operation. Other variable costs are immaterial. Production data for one of its products is presented below: Operation 1

Operation 2

Operation 3

Total capacity per year 200,000 units 150,000 units 180,000 units Total output per year

150,000 units 150,000 units 150,000 units

Fixed cost of operations $1,200,000 $1,800,000 $2,250,000 Question: 15Rosecrans hires additional workers at a cost of $50,000 per year to expedite setups and materials handling in the bottleneck operation. As a result, the annual output of the bottleneck operation increases by 500 units. The change in operating income attributable to the increase in workers is A. $50,000 B. $36,000 C. $(14,000) D. $(20,000)

Fact Pattern: Rosecrans Manufacturing produces kerosene lanterns. The company can sell all of its output. Each unit sells for $120, and direct materials costing $48 per unit are added at the ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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start of the first operation. Other variable costs are immaterial. Production data for one of its products is presented below: Operation 1

Operation 2

Operation 3

Total capacity per year 200,000 units 150,000 units 180,000 units Total output per year Fixed cost of operations

150,000 units 150,000 units 150,000 units $1,200,000

$1,800,000

$2,250,000

Question: 16Tullahoma Company has offered to perform the Operation 2 function on 1,000 units at a unit price of $40, excluding direct materials cost. Chattanooga Company has offered to perform the Operation 1 function on 1,000 units at a price of $7, excluding direct materials cost. Chickamauga Company has made an offer to perform the Operation 1 function on 5,000 units at a unit cost of $5 (excluding direct materials cost). Which of these mutually exclusive offers is acceptable to Rosecrans? A. Tullahoma’s offer. B. Chattanooga’s offer. C. Chickamauga’s offer. D. None of the offers should be accepted.

Fact Pattern: Rosecrans Manufacturing produces kerosene lanterns. The company can sell all of its output. Each unit sells for $120, and direct materials costing $48 per unit are added at the start of the first operation. Other variable costs are immaterial. Production data for one of its products is presented below: Operation 1

Operation 2

Operation 3

Total capacity per year 200,000 units 150,000 units 180,000 units Total output per year

150,000 units 150,000 units 150,000 units

Fixed cost of operations $1,200,000 $1,800,000 $2,250,000 Question: 17Operation 1 produces 500 unsalable units and Operation 2 also produces 500 unsalable units. The relevant cost of the unsalable units to Rosecrans is A. $24,000 B. $60,000 C. $84,000 D. $120,000

Question: 18In a theory of constraints (TOC) analysis, the bottleneck operation (the constraint) corresponds to which part of the drum-buffer-rope model?

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Drum. B. Buffer. C. Rope. D. No part of TOC analysis corresponds to the drum-buffer-rope model.

Question: 19The process model used in a theory of constraints (TOC) analysis is called A. Just-in-time. B. Drum-buffer-rope. C. Materials requirements planning. D. Lean production.

Question: 20Which pairs of systems are considered complementary because they inherently focus on different time frames? Short-term

Long-term

A. Operation costing Theory of constraints B. Activity-based costing Theory of constraints C. Theory of constraints Operation costing D. Theory of constraints Activity-based costing

Question: 21The following steps make up the stages of a theory of constraints (TOC) analysis. I. Determine the most profitable product mix given the constraint. II. Increase capacity at the constraint. III. Identify the constraint. IV. Redesign the manufacturing process. V. Maximize the flow through the constraint. If executed in the correct order, the sequence is A. III, I, II, V, IV.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. III, II, I, V, IV. C. III, II, I, IV, V. D. III, I, V, II, IV.

Fact Pattern: Bombastic Bathrooms manufactures a certain style of plumbing fixture in four materials. Price and cost data for each are given below: Brass Chrome Nickel Aluminum Selling Price

$250 $220

$375

$400

Direct Materials Cost

$100

$90

$195

$210

$70

$70

$70

$70

Manufacturing overhead $30

$35

$45

$65

Direct Labor Cost

Hours: Boring department

3

3

6

6

Machining department

4

5

4

6

Finishing department

1

3

3

4

Inspection & packing

1

1

1

1

Bombastic is currently producing equal quantities of each fixture. Question: 22The margin amounts of interest to Bombastic Bathrooms at the start of a theory of constraints (TOC) analysis are, respectively, A. $150, $115, $260, $265. B. $150, $130, $180, $190. C. $80, $60, $110, $120. D. $50, $25, $65, $55.

Fact Pattern: Bombastic Bathrooms manufactures a certain style of plumbing fixture in four materials. Price and cost data for each are given below: Brass Chrome Nickel Aluminum Selling Price

$250 $220

$375

$400

Direct Materials Cost

$100

$90

$195

$210

$70

$70

$70

$70

Manufacturing overhead $30

$35

$45

$65

Direct Labor Cost

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Hours: Boring department

3

3

6

6

Machining department

4

5

4

6

Finishing department

1

3

3

4

Inspection & packing

1

1

1

1

Bombastic is currently producing equal quantities of each fixture. Question: 23The constraint in Bombastic’s manufacturing process is the A. Boring department. B. Machining department. C. Finishing department. D. Inspection & packing activity.

Fact Pattern: Bombastic Bathrooms manufactures a certain style of plumbing fixture in four materials. Price and cost data for each are given below: Brass Chrome Nickel Aluminum Selling Price

$250 $220

$375

$400

Direct Materials Cost

$100

$90

$195

$210

$70

$70

$70

$70

Manufacturing overhead $30

$35

$45

$65

Direct Labor Cost

Hours: Boring department

3

3

6

6

Machining department

4

5

4

6

Finishing department

1

3

3

4

Inspection & packing

1

1

1

1

Bombastic is currently producing equal quantities of each fixture. Question: 24A TOC analysis would recommend that Bombastic Bathrooms expend its limited resources mainly to produce which fixture? A. Brass. B. Chrome. C. Nickel.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Aluminum.

Question: 25A company uses a planning system that focuses first on the amount and timing of finished goods demanded and then determines the derived demand for raw materials, components, and subassemblies at each of the prior stages of production. This system is A. An economic order quantity model. B. Materials requirements planning. C. Linear programming. D. Just-in-time purchasing.

Question: 26A company is preparing the sales budget for two potential products. Both products require the use of the same manufacturing equipment, which is only available for 60 hours each month. The contribution margin of Product A is $95 per unit, and the contribution margin of Product B is $55 per unit. Product A requires 4 hours of machine time per unit, and Product B requires 2.5 hours per unit. In order to efficiently allocate the equipment resources, the company should manufacture A. Product A because the contribution margin is more per unit than Product B. B. Product B because they can produce more units of that product than Product A. C. Product A because it will make better use of the equipment than Product B. D. Product B because they can produce many units and still save hours for Product A.

Question: 27Assume that a manufacturing firm maintains its product cost accounting records using throughput costing. At the end of the fiscal year, A. Reported net income will be less than would be reported using activity-based costing. B. An adjusting entry will be required to restate the inventory accounts for external reporting purposes. C. The firm should convert its records to a direct costing basis. D. The resulting production volume variance should be closed to cost of goods sold.

Question: 28When using throughput costing, inventoriable costs would include only A. Direct material, direct labor, variable manufacturing overhead, and fixed manufacturing overhead costs. B. Direct material, direct labor, and variable manufacturing overhead costs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Direct material and direct labor costs. D. Direct material costs.

Question: 29A firm sells product XRP for $180 per unit. Overhead is allocated based on direct labor hours. The firm estimates overhead to be $600,000 per month, which is 40% variable and 60% fixed. Direct labor hours budgeted per month for the entire factory total 100,000 hours, and the hourly direct labor rate is $9. Product XRP requires $64 of direct material per unit and 2 hours of direct labor. The firm has begun using throughput costing. If the firm produces and sells 20,000 units of XRP this month, the total throughput contribution is A. $3,240,000 B. $2,320,000 C. $1,960,000 D. $1,864,000

Question: 30When demand for a product exceeds production capacity, which one of the following is the first step that managers should take? A. Spend money to eliminate the bottleneck. B. Focus their efforts on constraint identification. C. Change the throughput of operations. D. Apply activity-based management to solve the problem.

Question: 31During its first month of operations, a company manufactured 10,000 units of finished goods, incurring $100,000 of direct material costs, $75,000 of direct labor costs, and $125,000 of manufacturing overhead. During the month, the company sold 8,000 units for $60 each. What is the company’s throughput contribution margin? A. $400,000 B. $380,000 C. $340,000 D. $240,000

Question: 32The method used to maximize operating income when faced with some bottleneck and some nonbottleneck operations is described as ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Sensitivity analysis. B. Suboptimal decision making. C. Theory of constraints. D. Total factor productivity.

Question: 33A company’s workforce consists of highly skilled technicians who operate specialized equipment. The company produces three products: Turbo, Galaxy, and Charger. Demand for all three products has increased significantly in the recent year. Per unit information is shown below. Turbo Galaxy Charger Demand in units 70,000 100,000 48,000 Sales price

$520

$805 $1,240

Variable cost

$215

$585

Direct labor

$790

5 hours 5.5 hours 9 hours

The company is not able to hire more skilled technicians, therefore the direct labor hours available for production is limited to 947,000 hours. If management’s strategy is to maximize profitability, how many units of each product should be produced next year? A. 0 Turbo; 93,636 Galaxy; 48,000 Charger. B. 70,000 Turbo; 100,000 Galaxy; 5,222 Charger. C. 70,000 Turbo; 30,000 Galaxy; 48,000 Charger. D. 49,767 Turbo; 71,096 Galaxy; 34,126 Charger.

Question: 34A builder of custom homes recently invested $360,000 of material, labor, and overhead in a residence for a customer. The customer, unfortunately, has just declared bankruptcy and must back out of their contract. The builder’s management has identified the following two courses of action: 1. Sell the unfinished residence “as is.” The company’s sales manager has assigned the following selling prices and probabilities to this alternative: Selling Price Probabilities

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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$280,000

0.1

320,000

0.6

350,000

0.3

2. Make several design changes at a cost of $70,000, complete the project, and sell the home to another customer for $410,000. On the basis of this information, the builder should A. Select the sell “as is” option because of the chance of a $350,000 selling price. B. Consider the $360,000 investment as a key decision factor in selecting among alternatives. C. Redesign the residence for the new customer because, in comparison with the sell “as is” option, the firm is $20,000 better off. D. Redesign the residence for the new customer because, in comparison with the sell “as is” option, the firm is $15,000 better off.

Subunit 4: Capacity Management Question: 1Capacity expansion is also referred to as A. Market penetration. B. Market development. C. Product development. D. Diversification.

Question: 2The upper limit of a company’s efficient output capacity given its existing resources is called A. Excess capacity. B. Cycle-time capacity. C. Practical capacity.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Theoretical capacity.

Question: 3A company’s practical capacity is 80% of its theoretical capacity. The company writes off any variances to the cost of goods sold at the end of the year. If the company uses theoretical capacity to calculate its budgeted fixed manufacturing cost, as compared with using practical capacity, the company’s A. Budgeted fixed overhead will be higher. B. Selling price will be lower. C. Income will be higher. D. Assets will be lower.

Question: 4Which of the following terms best describes the average level of output that can be completed over a period of time? A. Normal capacity. B. Practical capacity. C. Theoretical capacity. D. Ideal capacity.

Question: 5According to the IMA’s Statement on Management Accounting Measuring the Cost of Capacity, several types of analysis and assessment are required for effective capacity cost management. Which of the following is not required by the IMA? A. Investment analysis. B. Breakeven analysis. C. Capacity assessment. D. Manufacturing process assessment.

Question: 6A production manager at a manufacturing plant is considering different levels of capacity while creating the production budget for the year. The manager establishes the budget based on a capacity that represents the maximum level of output that can reasonably be attained while still accounting for expected and unexpected downtime as well as expected waste. Which of the following best describes the capacity level used to create the budget? A. Normal capacity.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Theoretical capacity. C. Practical capacity. D. Ideal capacity.

Question: 7A production manager is about to start preparing a production budget for the next fiscal year. Which level of capacity is the manager least likely to use to establish an effective budget? A. Long-term average level of capacity. B. Normal capacity. C. Practical capacity. D. Theoretical capacity.

Question: 8Which of the following statements regarding capacity management is false? A. Excess capacity results in no opportunity cost. B. Producing at full capacity can incur additional opportunity costs. C. Capacity planning is part of the capital budgeting process. D. Capacity planning is an element of strategic planning.

Question: 9Which of the following steps is not included in Porter’s model of the decision process for capacity expansion? A. Identifying the relevant options related to the firm’s size, type, degree of vertical integration, and possible response by competitors. B. Estimating maximum profit without regard to technological developments. C. Predicting total industry capacity and firms’ market shares. D. Testing for inconsistencies.

Question: 10In order to better understand the capabilities of her production equipment, a production manager is creating a budget based on the premise that the machines will run full time and will not require any maintenance or downtime. Which level of capacity best describes the basis of the manager’s budget? A. Normal capacity.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Practical capacity. C. Theoretical capacity. D. Long-term average level of capacity.

Subunit 5: Value-Chain Analysis Question: 1Process value analysis is a key component of activity-based management that links product costing and A. Reduction of the number of cost pools. B. Continuous improvement. C. Accumulation of heterogeneous cost pools. D. Overhead rates based on broad averages.

Question: 2A systematic approach to reaching targeted cost levels during value chain analysis is known as A. Value engineering. B. Life-cycle costing. C. Process value analysis. D. Activity analysis.

Question: 3An entity develops computer programs to meet customers’ special requirements. How should the entity categorize payments to employees who develop these programs? Direct Costs Value-Adding Costs A. Yes Yes B. Yes No C. No No D. No Yes

Question: 4The term referring to the excess of the price of a good over its cost is ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Consumer surplus. B. Profit margin. C. Contribution margin. D. Value-added transfer.

Question: 5Which of the following is not a component of the value chain? A. Primary activities. B. Secondary activities. C. Support activities. D. The product.

Question: 6The flow of materials and services from their original sources to final consumers is the A. Value chain. B. Product chain. C. Supply chain. D. Value process.

Question: 7Which of the following is not a phase in a value-chain analysis? A. Identify activities that are candidates for cost reduction. B. Identify ways to generate additional customer value. C. Identify means for improving product cost efficiency. D. Identify the firm’s competitive advantage.

Question: 8An outside consultant has been hired by a manufacturing firm to evaluate each of the firm’s major products, beginning with the design of the products and continuing through the manufacture, warehousing, distribution, sale, and service. The consultant has also been requested to compare the manufacturer’s major products with firms that are manufacturing and marketing the same or similar products. The consultant is to identify where customer value can be increased; identify where costs can be reduced; and provide a better understanding of the ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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linkages with customers, suppliers, and other firms in the industry. The type of analysis that the consultant most likely has been asked to perform for the manufacturing firm is called a A. Balanced scorecard study. B. Benchmarking analysis. C. SWOT (strengths, weakness, opportunities, threats) analysis. D. Value-chain analysis.

Question: 9In the value creation chain model, the primary activities include A. Logistics, operations, marketing and sales, and service. B. Procurement, infrastructure, operations, and service. C. Procurement, infrastructure, operations, and technology development. D. Procurement, infrastructure, human resources, and technology development.

Question: 10Customer relationship management is best defined as A. Coordination with members of the firm’s supply chain. B. Maximizing short-term sales to customers. C. Market sensing. D. Maximizing customer loyalty by managing customer “touchpoints.”

Question: 11Customer satisfaction is related to the degree of customer loyalty. High customer loyalty A. Requires a high degree of satisfaction of other stakeholders. B. Results when quality, service, and price increase. C. Depends on the effectiveness of the firm’s core business processes. D. Is directly proportional to customer expectations.

Question: 12The firm should emphasize customer retention A. By creating low switching costs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. By maximizing customer churn. C. Although new customers are less costly than old customers. D. Because the customer base is an intangible asset.

Question: 13Which one of the following best shows the sequence of business functions in the value chain? A. Research and Development, Design of Products and Processes, Production, Marketing, Distribution, Customer Service. B. Design of Products and Processes, Research and Development, Finance, Production, Distribution, Customer Service. C. Design of Products and Processes, Finance, Research and Development, Production, Distribution, Customer Service. D. Research and Development, Finance, Design of Products and Processes, Production, Distribution, Customer Service.

Question: 14Consider the following manufacturing-related activities. I. Conducting the final assembly of wooden furniture. II. Moving completed production to the finished goods warehouse. III. Painting newly-manufactured automobiles. IV. Setting up a machine related to a new production run. V. Reworking defective goods to bring them up to quality standards. The activities that can be classified as value-added activities are

A. II, III, IV, and V only. B. I, IV, and V only. C. I, III, and V only. D. I and III only.

Question: 15A company desires to prepare two sets of financial statements. Conventional financial statements would be prepared along with a set that is totally consistent with value-chain analysis. How would customer service costs be treated in the two statements? Conventional Financial Statements Value-Chain Financial Statements ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A.

Inventoriable cost

Product cost

B.

Inventoriable cost

Non-product cost

C.

Noninventoriable cost

Product cost

D.

Noninventoriable cost

Non-product cost

Question: 16Which one of the following lists of functions is in proper value-chain order? A. Research and development, marketing, and customer services. B. Production, marketing, and product design. C. Production design, distribution, and marketing. D. Research and development, customer service, and distribution.

Question: 17A small computer manufacturer employs 25 plant workers in its main manufacturing facility. The performance improvement team has identified the following activities and relative time demanded by each activity. Percentage of workers’ time

Activities A. Assembly of the computer components

25%

B. Installing software

40%

C. Inspecting and testing the assembled units

25%

D. Moving the finished units into the storage area

10%

Classify the four activities as value-added and nonvalue-added. Value-added Nonvalue-added A. A, B, and C D B. A and B C and D C. A, B, and D C D. B and C A and D

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 18Which one of the following is a value-added activity for a company that manufactures bicycles? A. Moving a tire to the rework area. B. Placing a reworked brake on a bicycle. C. Reworking a bicycle for the second time. D. Inspecting a reworked bicycle.

Subunit 6: Other Process Improvement Tools Question: 1Which of the following statements regarding benchmarking is false? A. Benchmarking involves continuously evaluating the practices of best-in-class organization and adapting company processes to incorporate the best of these practices. B. Benchmarking, in practice, usually involves a company forming benchmarking teams. C. Benchmarking is an ongoing process that entails quantitative and qualitative measurement of the difference between the company’s performance of an activity and the performance by the best in the world or the best in the industry. D. The benchmarking organization against which a firm is comparing itself must be a direct competitor.

Question: 2An example of an internal nonfinancial benchmark is the A. Labor rate of comparably skilled employees at a major competitor’s plant. B. Average actual cost per pound of a specific product at the company’s most efficient plant becoming the benchmark for the company’s other plants. C. Company setting a benchmark of $50,000 for employee training programs at each of the company’s plants. D. Percentage of customer orders delivered on time at the company’s most efficient plant becoming the benchmark for the company’s other plants.

Question: 3The cost of scrap, rework, and tooling changes in a product quality cost system is categorized as a(n) A. Training cost. B. External failure cost. C. Internal failure cost.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Prevention cost.

Question: 4The four categories of costs associated with product quality costs are A. External failure, internal failure, prevention, and carrying. B. External failure, internal failure, prevention, and appraisal. C. External failure, internal failure, training, and appraisal. D. Warranty, product liability, training, and appraisal.

Question: 5The cost of statistical quality control in a product quality cost system is categorized as a(n) A. Internal failure cost. B. Training cost. C. External failure cost. D. Appraisal cost.

Question: 6Which of the following is not a type of process? A. Make-to-stock. B. Make-to-order. C. Buffer. D. Hybrid.

Question: 7Listed below are selected line items from the Cost of Quality Report for last month. Category

Amount

Rework

$ 725

Equipment maintenance

1,154

Product testing

786

Product repair

695

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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What is the total prevention and appraisal cost for last month? A. $786 B. $1,154 C. $1,940 D. $2,665

Question: 8Which of the following quality costs are nonconformance costs? A. Systems development costs. B. Costs of inspecting in-process items. C. Environmental costs. D. Costs of quality circles.

Fact Pattern: Listed below are costs of quality that a manufacturing company has incurred throughout its operations. The company plans to prepare a report that classifies these costs into the following four categories: preventive costs, appraisal costs, internal failure costs, and external failure costs. Cost Items Design reviews

Amount $275,000

Finished goods returned due to failure

55,000

Freight on replacement finished goods

27,000

Labor inspection during manufacturing

75,000

Labor inspection of raw materials

32,000

Manufacturing product-testing labor

63,000

Manufacturing rework labor and overhead Materials used in warranty repairs

150,000 68,000

Process engineering

180,000

Product-liability claims

145,000

Product-testing equipment

35,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Repairs to equipment due to breakdowns

22,000

Scheduled equipment maintenance

90,000

Scrap material

125,000

Training of manufacturing workers

156,000

Question: 9The dollar amount of the costs of quality classified as preventive costs for the manufacturing firm would be A. $643,000 B. $701,000 C. $736,000 D. $768,000

Fact Pattern: Listed below are costs of quality that a manufacturing company has incurred throughout its operations. The company plans to prepare a report that classifies these costs into the following four categories: preventive costs, appraisal costs, internal failure costs, and external failure costs. Cost Items Design reviews

Amount $275,000

Finished goods returned due to failure

55,000

Freight on replacement finished goods

27,000

Labor inspection during manufacturing

75,000

Labor inspection of raw materials

32,000

Manufacturing product-testing labor

63,000

Manufacturing rework labor and overhead Materials used in warranty repairs

150,000 68,000

Process engineering

180,000

Product-liability claims

145,000

Product-testing equipment

35,000

Repairs to equipment due to breakdowns

22,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Scheduled equipment maintenance

90,000

Scrap material

125,000

Training of manufacturing workers

156,000

Question: 10The costs of quality that are incurred in detecting units of product that do not conform to product specifications are referred to as A. Preventive costs. B. Appraisal costs. C. Internal failure costs. D. External failure costs.

Question: 11All of the following are examples of benchmarking standards except A. The performance of the unit during the previous year. B. The best performance of the unit in comparable past periods. C. A comparison with a similar unit within the same company. D. The best performance of a competitor with a similar operation.

Question: 12A quality cost report reveals the following information. Prevention costs

10%

Appraisal costs

15%

Internal failure costs 20% External failure costs 55% Total quality costs 100% Which one of the following should be emphasized in order to most effectively improve overall cost of quality performance? A. Quality training. B. Inspections.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Rework. D. Customer support.

Question: 13A company implemented a benchmarking program to compare itself to others in the industry. Through this program, the company management team discovered that a larger competitor has a lower overhead per unit sold. Based on this information, management concluded that steps must be taken to reduce overhead to remain competitive. Which one of the following is the best critique of this conclusion? A. Benchmarking should be performed with companies of similar size and sales. B. Fixed overhead is difficult to control and should not be benchmarked. C. Cost per unit is just one area of competitiveness; others should be looked at. D. Companies operate very differently, and comparisons should not be made.

Question: 14A manufacturer of high-technology consumer goods incurred the following quality-related expenses last year. Equipment maintenance $ 5,000 Spoilage

10,000

Liability claims

50,000

Supplier evaluations

5,000

Scrap

20,000

Customer support

50,000

Finished product testing 25,000 What is the total cost related to prevention? A. $165,000 B. $35,000 C. $10,000 D. $5,000

Question: 15A manufacturer that wants to improve its staging process compares its procedures against the check-in process for a major airline. Which of the following tools is the manufacturer using? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Total quality management. B. Statistical process control. C. Economic value added. D. Benchmarking.

Question: 16Which one of the following would be classified as an internal failure cost on a quality cost report? A. Depreciation of inspection equipment. B. Returns and allowances. C. Net cost of scrap. D. Final product testing and inspection.

Question: 17Which of the following statements are true with respect to continuous improvement? I. Improvements should be made continuously until the goal is reached. II. The continuous improvement should involve management and workers. III. Standards should be evaluated regularly, and improvements should be ongoing. IV. Continuous improvement initiatives should involve primarily the workers. A. I and II only. B. I and IV only. C. II and III only. D. III and IV only.

Question: 18A firm manufactures dishwashers and incurs the following selected costs. Monthly equipment maintenance

$5,000

Labor to ensure the closed dishwasher doors form a tight seal

8,000

Unplanned manufacturing machinery repairs

9,000

Labor to reattach doors due to misalignment found during inspection

1,500

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Labor to reattach doors due to misalignment found by customers

1,200

When preparing a cost of quality report, the amount spent in the internal failure category would total A. $1,500 B. $10,500 C. $11,700 D. $23,500

Question: 19Which one of the following statements about benchmarking is not correct? A. A budget may provide a benchmark that motivates employees to meet a company’s goals. B. A company may appropriately use benchmarks to evaluate employee or unit performance. C. Benchmarking may include comparing a unit’s achievements against other units within the company. D. Comparing a unit’s results against industry benchmarks is not usually considered as useful as comparing results to the budget.

Question: 20A retailer, which operates eight discount store chains, is seeking to reduce the costs of its purchasing activities through reengineering and heavier use of electronic data interchange (EDI). Which of the following benchmarks techniques would be appropriate in this situation? I. A comparison of the purchasing costs and practices of each of the store chains to identify their internal “best in class.” II. A comparison of the practices of the retailer to those of another retailer whose practices are often considered “best in class.” III. A comparison of the best practices of the retailer to those of an international airline whose practices are often considered “best in class.” IV. An in-depth review of a retail trade association publication on successful electronic data interchange applications. A. II and IV only. B. I and II only. C. I and IV only. D. I, II, III, and IV.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 21A company is currently performing a cost of quality analysis of one of its facilities. The following are costs compiled by the facility accountant: Inspection

$1,500

Warranty repair

2,800

Testing of new materials

400

Product testing

950

Spoilage

645

Scrap

150

Preventive equipment maintenance

590

Liability claims

1,870

Rework

1,285

Total internal failure cost is A. $2,080 B. $2,785 C. $4,945 D. $5,955

Question: 22For purposes of cost control, process reengineering is most similar to A. Activity-based costing. B. Kaizen budgeting. C. Variance analysis. D. Value-chain analysis.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ ‫‪https://t.me/CMA_part2‬‬

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Study Unit 10: Budgeting -- Concepts, Methodologies, and Preparation 10: (288) Budgeting -- Concepts, Methodologies, and Preparation 1: (43) Roles of Budgets and the Budgeting Process 2: (10) Budgeting and Standard Costs 3: (39) The Master Budget 4: (30) Budget Methodologies 5: (41) Operating Budget Calculations -- Production and Direct Materials 6: (16) Operating Budget Calculations – Others 7: (40) Projecting Cash Collections 8: (29) The Cash Budget 9: (40) Sales Forecasts and Pro Forma Financial Statements

Subunit 1: Roles of Budgets and the Budgeting Process Question: 1All of the following are advantages of the use of budgets in a management control system except that budgets A. Force management planning. B. Provide performance criteria. C. Promote communication and coordination within the organization. D. Limit unauthorized expenditures.

Question: 2In the budgeting and planning process for a firm, which one of the following should be completed first? A. Sales budget. B. Financial budget. C. Cost management plan. D. Strategic plan.

Question: 3Which one of the following best describes the role of top management in the budgeting process? Top management A. Should be involved only in the approval process. B. Lacks the detailed knowledge of the daily operations and should limit their involvement.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Needs to be involved, including using the budget process to communicate goals. D. Needs to separate the budgeting process and the business planning process into two separate processes.

Question: 4Which one of the following is usually not cited as being an advantage of a formal budgetary process? A. Forces management to evaluate the reasonableness of assumptions used and goals identified in the budgetary process. B. Ensures improved cost control within the organization and prevents inefficiencies. C. Provides a formal benchmark to be used for feedback and performance evaluation. D. Serves as a coordination and communication device between management and subordinates.

Question: 5The major objectives of any budget system are to A. Define responsibility centers, provide a framework for performance evaluation, and promote communication and coordination among organization segments. B. Define responsibility centers, facilitate the fixing of blame for missed budget predictions, and ensure goal congruence between superiors and subordinates. C. Foster the planning of operations, provide a framework for performance evaluation, and promote communication and coordination among organization segments. D. Foster the planning of operations, facilitate the fixing of blame for missed budget predictions, and ensure goal congruence between superiors and subordinates.

Question: 6One of the primary advantages of budgeting is that it A. Does not take the place of management and administration. B. Bases the profit plan on estimates. C. Is continually adapted to fit changing circumstances. D. Requires departmental managers to make plans in conjunction with the plans of other interdependent departments.

Question: 7A budget helps a company control costs by setting cost guidelines. However, a budget also performs the function(s) of A. Planning.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Motivating. C. Communicating. D. All of the answers are correct.

Question: 8An improperly executed budget process might have the effect(s) of A. Disregard of overall company goals. B. Inflated budget requests. C. Meeting short-term but not long-term goals. D. All of the answers are correct.

Question: 9Ineffective budget control systems are characterized by A. Use of budgets as a planning but not a control tool. B. Use of budgets for harassment of individuals rather than motivation. C. Lack of timely feedback in the use of the budget. D. All of the answers are correct.

Question: 10Which of the following statements regarding budgets is false? A. Budgets present organizational plans in a formal, logical, and integrated manner. B. Budgets are used only as a planning function. C. Budgets may be developed for cash flows or labor usage. D. A budget is a plan that contains a quantitative statement of expected results.

Question: 11A planning calendar in budgeting is the A. Calendar period covered by the budget. B. Schedule of activities for the development and adoption of the budget. C. Calendar period covered by the annual budget and the long-range plan.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Sales forecast by months in the annual budget period.

Question: 12A budget manual, which enhances the operation of a budget system, is most likely to include A. A chart of accounts. B. Distribution instructions for budget schedules. C. Employee hiring policies. D. Documentation of the accounting system software.

Question: 13Which one of the following is not an advantage of a participatory budgeting process? A. Coordination between departments. B. Communication between departments. C. Goal congruence. D. Control of uncertainties.

Question: 14In developing the budget for the next year, which one of the following approaches would produce the greatest amount of positive motivation and goal congruence? A. Permit the divisional manager to develop the goal for the division that in the manager’s view will generate the greatest amount of profits. B. Have senior management develop the overall goals and permit the divisional manager to determine how these goals will be met. C. Have the divisional and senior management jointly develop goals and objectives while constructing the corporation’s overall plan of operation. D. Have the divisional and senior management jointly develop goals and the divisional manager develop the implementation plan.

Question: 15Which one of the following statements concerning approaches for the budget development process is correct? A. The top-down approach to budgeting will ensure adherence to strategic organizational goals. B. To prevent ambiguity, once departmental budgeted goals have been developed, they should remain fixed even if the sales forecast upon which they are based proves to be wrong in the middle of the fiscal year.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. With the information technology available, the role of budgets as an organizational communication device has declined. D. Since department managers have the most detailed knowledge about organizational operations, they should use this information as the building blocks of the operating budget.

Question: 16When developing a budget, an external factor to consider in the planning process is A. A change to a decentralized management system. B. The implementation of a new bonus program. C. New product development. D. The merger of two competitors.

Question: 17The primary role of the budget director and the budgeting department is to A. Settle disputes among operating executives during the development of the annual operating plan. B. Develop the annual profit plan by selecting the alternatives to be adopted from the suggestions submitted by the various operating segments. C. Justify the budget to the executive committee of the board of directors. D. Compile the budget and manage the budget process.

Question: 18Which one of the following is not considered to be a benefit of participative budgeting? A. Individuals at all organizational levels are recognized as being part of the team; this results in greater support of the organization. B. The budget estimates are prepared by those in direct contact with various activities. C. Managers are more motivated to reach the budget objectives since they participated in setting them. D. When managers set the final targets for the budget, senior management need not be concerned with the overall profitability of current operations.

Question: 19The budgeting technique that is most likely to motivate managers is A. Top-down budgeting. B. Zero-based budgeting.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Program budgeting and review technique. D. Bottom-up budgeting.

Question: 20Which one of the following is most important to a successful budgeting effort? A. Experienced analysts. B. Integrated budget software. C. Reliable forecasts and trend analyses. D. Top management support.

Question: 21The major disadvantage of a budget produced by means of a top-down process is A. Impairment of goal congruence. B. Lack of involvement by upper-level management. C. Inconsistency with strategic plans. D. Positive motivational effect.

Question: 22All of the following are criticisms of the traditional budgeting process except that it A. Makes across-the-board cuts when early budget iterations show that planned expenses are too high. B. Incorporates non-financial measures as well as financial measures into its output. C. Overemphasizes a fixed time horizon, such as one year. D. Is not used until the end of the budget period to evaluate performance.

Question: 23The following sequence of steps is employed by a company to develop its annual profit plan:  Planning guidelines are disseminated downward by top management after receiving input from all levels of management.  A sales budget is prepared by individual sales units reflecting the sales targets of the various segments. This provides the basis for departmental production budgets and other related components by the various operating units. Communication is primarily lateral with some upward communication possible.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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 A profit plan is submitted to top management for coordination and review. Top management’s recommendations and revisions are acted upon by middle management. A revised profit plan is resubmitted for further review to top management.  Top management grants final approval and distributes the formal plan downward to the various operating units. This outline of steps best describes which one of the following approaches to budget development? A. Imposed budgeting by top management. B. Bottom-up approach. C. Top-down approach. D. Total justification of all activities by operating units.

Question: 24All of the following are advantages of top-down budgeting as opposed to participatory budgeting, except that it A. Increases coordination of divisional objectives. B. Reduces the time required for budgeting. C. May limit the acceptance of proposed goals and objectives. D. Facilitates implementation of strategic plans.

Question: 25A corporation’s vice president of planning has seen and heard it all. She has told the corporate controller that she is “....very upset with the degree of slack that veteran managers use when preparing their budgets.” The vice president has considered implementing some of the following activities during the budgeting process. 1.

Develop the budgets by top management and issue them to lower-level operating units.

2.

Study the actual revenues and expenses of previous periods in detail.

3. Have the budgets developed by operating units and accept them as submitted by a company-wide budget committee. 4.

Share the budgets with all employees as a means to reach company goals and objectives.

5. Use an iterative budgeting process that has several “rounds” of changes initiated by operating units and/or senior managers. Which one of these activities should the corporation implement in order to best remedy the vice president’s concerns, help eliminate the problems experienced by the corporation, and motivate personnel? A. 1 only.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. 2 and 3. C. 2 and 4. D. 2, 4, and 5.

Question: 26Budgeting problems where departmental managers are repeatedly achieving easy goals or failing to achieve demanding goals can be best minimized by establishing A. Preventive controls. B. A policy that allows managers to build slack into the budget. C. Participative budgeting where managers pursue objectives consistent with those set by top management. D. Better communication whereby managers discuss budget matters daily with their superiors.

Question: 27Which one of the following items would most likely cause the planning and budgeting system to fail? The lack of A. Historical financial data. B. Input from several levels of management. C. Top management support. D. Adherence to rigid budgets during the year.

Question: 28All of the following are disadvantages of top-down budgeting as opposed to participatory budgeting, except that it A. May result in a budget that is not possible to achieve. B. May limit the acceptance of proposed goals and objectives. C. Reduces the communication between employees and management. D. Reduces the time required for budgeting.

Question: 29Suboptimal decision making is not likely to occur when A. There is little congruence among the overall organization goals, the subunit goals, and the individual goals of decision makers.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Goals and standards of performance are set by the top management. C. Guidance is given to subunit managers about how standards and goals affect them. D. The subunits in the organization compete with each other for the same input factors or for the same customers.

Question: 30The budgeting process should be one that motivates managers and employees to work toward organizational goals. Which one of the following is least likely to motivate managers? A. Setting budget targets at attainable levels. B. Participation by subordinates in the budgetary process. C. Use of management by exception. D. Having top management set budget levels.

Question: 31The best explanation of how the efficient allocation of organizational resources is planned during the budgeting process is that a budget A. Demonstrates how important it is to have additional spare resources on hand in case the actual results vary from the budget. B. Demonstrates how a company can pull resources from bottlenecks to apply them to other areas to attain goals. C. Identifies the resources and commitments required to fulfill the organization’s goals for the period identified. D. Is a process for evaluating projects needed and related external financing required to meet resource requirements.

Question: 32A company’s annual budget provides information that can impact the company’s A. Long-term planning only. B. Long-term planning and operational budgets only. C. Operational budgets and strategy only. D. Long-term planning, operational budgets, and strategy.

Question: 33Which one of the following is an advantage of using the budgeting process to judge performance? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Management is able to measure actual performance against predicted performance. B. Past performance can be used to evaluate performance improvements. C. Management believes that past conditions are an indicator of future conditions. D. Company performance can be measured against the performance of others in the same industry.

Question: 34Which one of the following is not a characteristic of a successful budget process? A. Setting specific expectations to compare to actual results. B. Gaining top management’s support. C. Using market feedback to assist in setting expectations. D. Implementing the budget as the only benchmark for performance evaluation.

Question: 35Which one of the following statements best describes budgetary slack? A. The practice of management assigning relaxed budgetary goals after the company achieves the first several months of the annual budget. B. The total amount that actual expenses are below budgeted expenses and actual revenues exceed budgeted revenues. C. The practice of understating budgeted revenues or overestimating budgeted costs to make budgeted targets more achievable. D. The margin of error assigned to each cost center to encourage the manager to budget accurately and consistently.

Question: 36The finance department of a large company has prepared a master budget with very limited expense budgets for each department. The department managers are worried about being held accountable for these assigned targets, but senior management wants to keep spending reduced to allow for contingencies and strategic adjustments to the company-wide master budget. Based on this information, this budget process is A. A successful budgeting process because it will be a very useful tool to hold people accountable for overspending. B. A successful budgeting process because it will encourage the associates to work their hardest to meet the goals. C. Not a successful budgeting process because management has left too much room for strategic unknowns.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Not a successful budgeting process because it has not been widely accepted by the employees.

Question: 37A ceramics manufacturer is facing several challenges in its operations due to economic and industry conditions. The company is currently preparing its annual plan and budget. Which one of the following is subject to the least control by management in the current fiscal year? A. A new machine that was purchased this year has not helped reduce the company’s unfavorable labor efficiency variances. B. A competitor has achieved an unexpected technological breakthrough that has given them a significant quality advantage, and has caused the company to lose market share. C. Vendors have asked that the contract price for the goods they supply to the company be renegotiated and adjusted for inflation. D. Experienced employees have decided to terminate their employment with the company and go to work for the competition.

Question: 38A company uses participative budgeting. In order to more easily meet budgetary goals, the controller underestimates the amount of revenue and overestimates fixed selling and administrative expenses. This is an example of A. Flexible budgeting. B. Budgetary slack. C. Zero-based budgeting. D. Budgetary variance.

Question: 39All of the following are advantages of the budgeting process except that the budget A. Forces management to assess the future objectives of the company. B. Establishes benchmarks to identify unsatisfactory organizational performance. C. Facilitates communication among organizational units. D. Allocates resources on an as-needed basis.

Question: 40Which one of the following best describes a reason why a company’s budgeting should be based on the company’s strategic plans? A. Helps control costs so that products can be sold profitably.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Identifies resources needed to reach strategic goals. C. Identifies the external factors that have changed from the prior year and those that remain the same. D. Establishes standards to measure employee performance.

Question: 41An advantage of participatory budgeting is that it A. Minimizes the cost of developing budgets. B. Yields information known to management but not to employees. C. Encourages acceptance of the budget by employees. D. Reduces the effect on the budgetary process of employee biases.

Question: 42A manufacturer’s factory manager had lost her patience. Six months ago, she appointed a team from the production and service departments to finalize the allocation of costs and setting of standard costs. They were still feuding, so she hired a large consulting firm to resolve the matter. All of the following are potential consequences of having the standards set by the consulting firm except that A. The consulting firm may not fully understand the manufacturer’s manufacturing process, resulting in suboptimal performance. B. Employees could react negatively since they did not participate in setting the standards. C. There could be dissatisfaction if the standards contain costs that are not controllable by the unit held responsible. D. The standards may appear to lack management support.

Question: 43When properly developed and administered, budgets provide the following advantages to the organization except to A. Provide a structure for measuring performance. B. Motivate managers and other employees. C. Ensure that the organization makes a profit. D. Promote the efficient allocation of resources.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Subunit 2: Budgeting and Standard Costs Question: 1A corporation is developing standards for the next year. Currently, one of the material components is being purchased for $36.45 per unit. It is expected that the component’s cost will increase by approximately 10% next year and that the price could range from $38.75 to $44.18 per unit, depending on the quantity purchased. The appropriate standard for the material component for next year should be set at the A. Current actual cost plus the forecasted 10% price increase. B. Lowest purchase price in the anticipated range to keep pressure on purchasing to always buy in the lowest price range. C. Highest price in the anticipated range to ensure that there are only favorable purchase price variances. D. Price agreed upon by the purchasing manager and the appropriate level of company management.

Question: 2After performing a thorough study of a firm’s operations, an independent consultant determined that the firm’s labor standards were probably too tight. Which one of the following facts would be inconsistent with the consultant’s conclusion? A. A review of performance reports revealed the presence of many unfavorable efficiency variances. B. The firm’s budgeting process was well-defined and based on a bottom-up philosophy. C. Management noted that minimal incentive bonuses have been paid in recent periods. D. Production supervisors found several significant fluctuations in manufacturing volume, with short-term increases on output being followed by rapid, sustained declines.

Question: 3When compared with ideal standards, practical standards A. Produce lower per-unit product costs. B. Result in a less desirable basis for the development of budgets. C. Incorporate very generous allowance for spoilage and worker inefficiencies. D. Serve as a better motivating target for manufacturing personnel.

Question: 4All of the following statements concerning standard costs are correct except that A. Time and motion studies are often used to determine standard costs. B. Standard costs are usually set for one year. C. Standard costs can be used in costing inventory accounts.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Standard costs are usually stated in total, while budgeted costs are usually stated on a per-unit basis.

Question: 5One approach for developing standard costs incorporates communication, bargaining, and interaction among product line managers; the immediate supervisors for whom the standards are being developed; and the accountants and engineers before the standards are accepted by top management. This approach would best be characterized as a(n) A. Imposed approach. B. Centralized top-down approach. C. Engineering approach. D. Team development approach.

Question: 6A company is reviewing its standard machine hours per unit to use in its budget for the upcoming year. The machine manufacturer’s specifications indicated a unit could be made in 0.75 hours, and a benchmarking study showed a competitor produced at a speed of 0.78 machine hours per unit. The company’s actual results from last year averaged 0.83 machine hours per unit even though a standard of 0.80 machine hours per unit had been established using engineering studies. The standard the company should use in its upcoming budget is A. 0.75 machine hours per unit. B. 0.78 machine hours per unit. C. 0.80 machine hours per unit. D. 0.83 machine hours per unit.

Question: 7A manufacturer makes picture frames that require one sheet of glass each. Each sheet of glass comes from one larger sheet that is cut into four pieces. Normally, the company is able to produce 400 frames using 110 large sheets of glass, as there is typically some breakage during the process. To improve its operation, the company has set its standard for glass material usage at 100 sheets of large glass to manufacture 400 frames. Which one of the following statements best describes the type of standard the company has set? A. It is an ideal standard because it would normally be attainable with some deviations. B. It is a currently attainable standard because it demands perfect implementation. C. It is a theoretical standard because it assumes that all equipment is in order and employees work as expected. D. It is a practical standard because it assumes all operating factors occur as expected.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 8A manufacturer is able to sell up to 50,000 units of product X each month. Engineers are currently in the process of studying labor movement to determine the labor hours standard for product X. Engineers have found that the fastest workers who take no breaks can complete a unit of product X within 30 minutes. The average worker can complete one unit of product X within 45 minutes, including time for company-mandated breaks. The 0.75 hours per unit is known as the A. Theoretical standard. B. Average standard. C. Practical standard. D. Variance standard.

Question: 9Which one of the following statements best describes the concept of continuous improvement when developing standard costs? A. Standards become more challenging as time passes. B. Standards are developed with zero slack or downtime factored into the calculation. C. Standards remain unattainable to encourage employees to strive harder. D. Standards are established at an easily attainable level to increase employee morale.

Question: 10A company has determined the following standards for production of its dining tables: Square feet of oak per table:

10

Price per square foot of oak: $3.50 Number of screws per table: Price per screw:

12 $0.50

The company expects a 10% increase in the cost of oak and a 5% decrease in the cost of screws. What is the new standard cost per table? A. $40.88 B. $43.05 C. $44.20 D. $45.10

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Subunit 3: The Master Budget Question: 1In an organization that plans by using comprehensive budgeting, the master budget is A. A compilation of all the separate operational and financial budget schedules of the organization. B. The booklet containing budget guidelines, policies, and forms to use in the budgeting process. C. The current budget updated for operations for part of the current year. D. A budget of a not-for-profit organization after it is approved by the appropriate authoritative body.

Question: 2While an operating budget is a key element in planning and control, it is not likely to A. Establish a commitment of company resources. B. Set out long-range, strategic concepts. C. Integrate organizational activities. D. Provide subsidiary planning information.

Question: 3In preparing a corporate master budget, which one of the following is most likely to be prepared last? A. Sales budget. B. Cash budget. C. Production budget. D. Cost of goods sold budget.

Question: 4The foundation of a profit plan is the A. Capital budget. B. Sales forecast. C. Cost and expense budget. D. Production plan.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 5Which one of the following schedules would be the last item to be prepared in the normal budget preparation process? A. Direct labor budget. B. Cash budget. C. Cost of goods sold budget. D. Manufacturing overhead budget.

Question: 6A company uses a comprehensive planning and budgeting system. The proper order for the company to prepare certain budget schedules would be A. Cost of goods sold, balance sheet, income statement, and statement of cash flows. B. Income statement, balance sheet, statement of cash flows, and cost of goods sold. C. Statement of cash flows, cost of goods sold, income statement, and balance sheet. D. Cost of goods sold, income statement, balance sheet, and statement of cash flows.

Question: 7The master budget process usually begins with the A. Production budget. B. Operating budget. C. Financial budget. D. Sales budget.

Question: 8All of the following are considered operating budgets except the A. Sales budget. B. Materials budget. C. Production budget. D. Capital budget.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 9Which one of the following items is the last schedule to be prepared in the normal budget preparation process? A. Cash budget. B. Cost of goods sold budget. C. Manufacturing overhead budget. D. Selling expense budget.

Question: 10The master budget A. Shows forecasted and actual results. B. Reflects controllable costs only. C. Can be used to determine manufacturing cost variances. D. Contains the operating budget.

Question: 11The preparation of a comprehensive master budget culminates with the preparation of the A. Production budget. B. Capital investment budget. C. Cash management and working capital budget. D. Strategic budget.

Question: 12Which one of the following may be considered an independent item in the preparation of the master budget? A. Ending inventory budget. B. Capital investment budget. C. Pro forma income statement. D. Pro forma statement of financial position.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 13Many companies use comprehensive budgeting in planning for the next year’s activities. When both an operating budget and a financial budget are prepared, which one of the following is correct concerning the financial budget? Included in the Financial Budget Capital Budget

Pro-forma Balance Sheet

Cash Budget

A. Yes No Yes B. No Yes No C. Yes Yes Yes D. No No No

Question: 14The starting point for creating a master budget for a proprietary secretarial school would be A. Estimating salaries of the instructors. B. Forecasting enrollment. C. Preparing a capital expenditure budget. D. Preparing the student recruiting budget.

Question: 15Which of the following is normally included in the financial budget of a firm? A. Direct materials budget. B. Selling expense budget. C. Budgeted balance sheet. D. Sales budget.

Question: 16The financial budget process includes A. The cash budget. B. The capital budget. C. The budgeted statement of cash flows. D. All of the answers are correct.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 17The operating budget process usually begins with the A. Financial budget. B. Balance sheet. C. Income statement. D. Sales budget.

Question: 18A company produces farm tractors. The details of its budgeted cost of goods manufactured schedule should come from which of the following schedules? A. Cost of goods sold plus or minus the change planned in finished goods. B. Direct materials used, direct labor, manufacturing overhead, and work-in-process. C. Purchases, direct labor, manufacturing overhead, finished goods, and work-in-process. D. Purchases, raw material, work-in-process, and finished goods.

Question: 19In developing a comprehensive budget for a manufacturing company, which one of the following items should be done first? A. Development of a sales plan. B. Determination of manufacturing capacity. C. Development of the capital budget. D. Determination of the advertising budget.

Question: 20When budgeting, the items to be considered by a manufacturing firm in going from a sales quantity budget to a production budget would be the A. Expected change in the quantity of work-in-process inventories. B. Expected change in the quantity of finished goods and work-in-process inventories. C. Expected change in the quantity of finished goods and raw material inventories. D. Expected change in the availability of raw material without regard to inventory levels.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 21After the goals of the company have been established and communicated, the next step in the planning process is development of the A. Production budget. B. Direct materials budget. C. Selling and administrative budget. D. Sales budget.

Question: 22The production budget process usually begins with the A. Direct labor budget. B. Direct materials budget. C. Manufacturing overhead budget. D. Sales budget.

Question: 23Individual budget schedules are prepared to develop an annual comprehensive or master budget. The budget schedule that would provide the necessary input data for the direct labor budget would be the A. Sales forecast. B. Raw materials purchases budget. C. Schedule of cash receipts and disbursements. D. Production budget.

Question: 24Which one of the following items should be done first when developing a comprehensive budget for a manufacturing company? A. Determination of the advertising budget. B. Development of a sales budget. C. Development of the capital budget. D. Preparation of a pro forma income statement.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 25There are various budgets within the master budget cycle. One of these budgets is the production budget. Which one of the following best describes the production budget? A. It summarizes all discretionary costs. B. It includes required direct labor hours. C. It includes required material purchases. D. It is calculated from the desired ending inventory and the sales forecast.

Question: 26The budget that is usually the most difficult to forecast is the A. Production budget. B. Expense budget. C. Sales budget. D. Manufacturing overhead budget.

Question: 27When sales volume is seasonal in nature, certain items in the budget must be coordinated. The three most significant items to coordinate in budgeting seasonal sales volume are A. Direct labor hours, work-in-process inventory, and sales volume. B. Production volume, finished goods inventory, and sales volume. C. Raw material inventory, direct labor hours, and manufacturing overhead costs. D. Raw material inventory, work-in-process inventory, and production volume.

Question: 28A company uses a comprehensive budgeting system in planning its annual operations. Which of the following best describes the information needed to determine the budgeted cost of circuit boards to be purchased for use in building its laptop computer? Assume one circuit board is used in each laptop. A. Begin with budgeted laptop sales in units, add the desired ending inventory of circuit boards, deduct the expected beginning inventory of circuit boards, and multiply the resulting amount by the budgeted purchase cost per circuit board. B. Begin with budgeted laptop sales in units, deduct the desired ending inventory of circuit boards, add the expected beginning inventory of circuit boards, and multiply the resulting amount by the purchase cost per circuit board.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Begin with budgeted laptop production in units, deduct the desired ending inventory of circuit boards, add the expected beginning inventory of circuit boards, and multiply the resulting amount by the purchase cost per circuit board. D. Begin with budgeted laptop production in units, add the desired ending inventory of circuit boards, deduct the expected beginning inventory of circuit boards, and multiply the resulting amount by the budgeted purchase cost per circuit board.

Question: 29Which one of the combinations listed correctly depicts the chronological order of preparation for the following budgets? I. Cost of goods sold budget II. Production budget III. Purchases budget IV. Administrative budget A. I, II, III, IV. B. III, II, IV, I. C. IV, II, III, I. D. II, III, I, IV.

Question: 30Which one of the following best describes the order in which budgets should be prepared when developing the annual master operating budget? A. Production budget, direct material budget, revenue budget. B. Production budget, revenue budget, direct material budget. C. Revenue budget, production budget, direct material budget. D. Revenue budget, direct material budget, production budget.

Question: 31When preparing the series of annual operating budgets, management usually starts the process with the A. Cash budget. B. Balance sheet. C. Capital budget.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Sales budget.

Question: 32Which of the following is normally included in the operating budget? A. Capital budget. B. Cash budget. C. Selling expense budget. D. Budgeted balance sheet.

Question: 33Which budget is prepared after the creation of the cash budget? A. Sales budget. B. Capital expenditures budget. C. Production budget. D. Budgeted balance sheet.

Question: 34Which one of the following would cause a company’s production budget to decrease? A. An increase in direct labor costs per unit. B. A decrease in units produced per direct labor hour. C. A decrease in required ending inventory. D. An increase in beginning direct labor inventory.

Question: 35Which one of following budgets is regarded as the foundation of the master budget? A. Production. B. Sales. C. Operating. D. Cash.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 36The budget that describes the long-term position and objectives of an entity within its environment is the A. Capital budget. B. Operating budget. C. Cash management budget. D. Strategic budget.

Question: 37A budget that expresses the operating and financial plans of management for a fiscal year is called a A. Flexible budget. B. Rolling budget. C. Master budget. D. Strategic budget.

Question: 38When preparing a master budget, which one of the following is the order in which the component budgets are commonly prepared? A. Sales, production, direct materials purchased, cost of goods manufactured, income statement, capital, cash, and balance sheet. B. Production, sales, cost of goods manufactured, selling and administrative. C. Sales, production, cost of goods manufactured, direct materials purchased, administrative. D. Production, sales, selling and administrative, cost of goods manufactured.

Question: 39In the quest to develop a more achievable budget for the coming year, the chief executive officer has elected to develop the company’s budget by using a decentralized bottom-up budget approach. A production manager’s involvement in the budget process this year will probably A. Be negligible. B. Require development of a production budget that is forwarded to the Budget Department. C. Require development of a production budget after receiving the division’s projected sales forecast. D. Require development of a production budget based on the prior year’s manufacturing activity.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Subunit 4: Budget Methodologies Question: 1Which one of the following is not an advantage of activity-based budgeting? A. Better identification of resource needs. B. Linking of costs to outputs. C. Identification of budgetary slack. D. Reduction of planning uncertainty.

Question: 2The use of the master budget throughout the year as a constant comparison with actual results signifies that the master budget is also a A. Flexible budget. B. Capital budget. C. Zero-base budget. D. Static budget.

Question: 3An advantage of incremental budgeting when compared with zero-based budgeting is that incremental budgeting A. Encourages adopting new projects quickly. B. Accepts the existing base as being satisfactory. C. Eliminates functions and duties that have outlived their usefulness. D. Eliminates the need to review all functions periodically to obtain optimum use of resources.

Question: 4The type of budget that is available on a continuous basis for a specified future period–by adding a month, quarter, or year in the future as the month, quarter, or year just ended is dropped–is called a(n) A. Rolling budget. B. Kaizen budget. C. Activity-based budget. D. Flexible budget.

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Question: 5Which one of the following budgeting methodologies would be most appropriate for a firm facing a significant level of uncertainty in unit sales volumes for next year? A. Top-down budgeting. B. Life-cycle budgeting. C. Static budgeting. D. Flexible budgeting.

Question: 6The major appeal of zero-based budgeting is that it A. Solves the problem of measuring program effectiveness. B. Relates performance to resource inputs by an integrated planning and resource-allocation process. C. Reduces significantly the time required to review a budget. D. Deals with some of the problems of the incremental approach to budgeting.

Question: 7A systemized approach known as zero-based budgeting (ZBB) A. Presents the plan for only one level of activity and does not adjust to changes in the level of activity. B. Presents a statement of expectations for a period of time but does not present a firm commitment. C. Divides the activities of individual responsibility centers into a series of packages that are prioritized. D. Classifies budget requests by activity and estimates the benefits arising from each activity.

Question: 8A continuous profit plan A. Is a plan that is revised monthly or quarterly. B. Is an annual plan that is part of a 5-year plan. C. Is a plan devised by a full-time planning staff. D. Works best for a company that can reliably forecast events a year or more into the future.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 9A continuous (rolling) budget A. Presents the plan for only one level of activity and does not adjust to changes in the level of activity. B. Presents the plan for a range of activity so the plan can be adjusted for changes in activity. C. Is a plan that is revised monthly or quarterly, dropping one period and adding another. D. Is one of the budgets that is part of a long-range strategic plan, unchanged unless the strategy of the company changes.

Question: 10Zero-based budgeting forces managers to A. Estimate a product’s revenues and expenses over its expected life cycle. B. Prepare a budget based on historical costs. C. Formulate a budget by objective rather than function. D. Justify all expenditures at the beginning of every budget period.

Question: 11A company uses a type of budgeting that focuses on the cost of the processes required to produce and sell products and services. This type of budgeting is known as A. Process budgeting. B. Activity-based budgeting. C. Master activity budgeting. D. Controllability budgeting.

Question: 12The goal is to reduce wastefulness and develop a tight, efficient budget. The management team knows that this will take time, so they plan to allow more time and additional resources in the budget process. For the next budget year, a complete review of all activities and functions will be undertaken. The controller has elected to use this year’s master budget as the starting point for next year’s budget process. Considering management’s goals, did the controller make the most appropriate choice of budgeting methodologies? A. Yes, he should take the current budget and make incremental changes to reduce waste. B. No, he should implement a continuous budget to provide more current information. C. No, he should select zero-based budgeting to allow no costs unless they are justified. D. No, he should select activity-based budgeting to focus on the historical cost patterns.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 13A firm has found that its annual budgets are quickly outdated once actual data is recorded. Sometimes actual preparations have already begun for the period being budgeted by the time the annual budget is finished, which leaves no time to react to changing factors. The firm wants the budget to be as up-to-date as possible, and management is willing to revise budgets as needed. Which budgeting solution would be most appropriate for the firm? A. Flexible budgeting. B. Activity-based budgeting. C. Zero-based budgeting. D. Continuous budgeting.

Question: 14A budgeting approach that requires a manager to justify the entire budget for each budget period is known as A. Performance budgeting. B. Program budgeting. C. Zero-based budgeting. D. Incremental budgeting.

Question: 15There are many different budget techniques or processes that business organizations can employ. One of these techniques or processes is zero-based budgeting, which is A. Budgeting from the ground up as though the budget process were being initiated for the first time. B. Budgeting for cash inflows and outflows to time investments and borrowings in a way to maintain a bank account with a minimum balance. C. Using the prior year’s budget as a base year and adjusting it based on the experiences of the prior year and the expectations for the coming year. D. Developing budgeted costs from clear-cut measured relationships between inputs and outputs.

Question: 16A company produces and sells eight different varieties of cereal. The company has eight marketing managers, each of whom is responsible for advertising one of the varieties. Historically, the company has budgeted advertising costs as 10% of each product’s anticipated revenues, and actual advertising costs have been very close to budgeted amounts, yielding very insignificant variances. In order to provide for a more efficient allocation of resources available for its advertising, the company should A. Implement a balanced scorecard.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Implement flexible budgeting. C. Implement zero-based budgeting. D. Maintain the current system.

Question: 17The board of directors is concerned that the budget committee has fallen into the practice of applying a flat 3% growth to the prior year performance, placing too much emphasis on the past and not focusing on the future opportunities and related activities required to achieve them. The board would like the committee to take a different approach: Evaluate the activities needed to meet the strategic goals of the company and allocate resources accordingly, requiring management to justify each function and associated costs. Which budget methodology is the board recommending? A. Traditional budgeting. B. Activity-based budgeting. C. Zero-based budgeting. D. Continuous budgeting.

Question: 18Which of the following statements apply to the continuous budget methodology? I. The current financial forecast reflects the most recent monthly results and any material changes to the company’s outlook or economy. II. Forecasts are updated every few months, reassessing the company’s outlook several times a year. III. The decision-making process to develop the budget takes place during the fourth quarter of the prior year being budgeted. A. I and II only. B. I and III only. C. II and III only. D. I, II, and III.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 19The purpose of project budgeting is to identify, evaluate, and select beneficial projects that require A. Large budgeted expenses on the income statement, and the appropriate time frame is over the project’s life cycle. B. Large budgeted expenses on the income statement, and the appropriate time frame is the year being budgeted. C. Commitments of large sums of funds, and the appropriate time frame is over the project’s life cycle. D. Commitments of large sums of funds, and the appropriate time frame is the year being budgeted.

Question: 20A firm has prepared budgets for the next 5 months: May, June, July, August, and September. As soon as May results are reported, the firm will add October to their budget plans. What type of budget system is the firm using? A. Continuous budgeting. B. Activity-based budgeting. C. Flexible budgeting. D. Project budgeting.

Question: 21A home building company offers its customers the choice of 1 of 12 home designs on lots located in several developing areas. During its 15-year existence, the company created its annual budget by adjusting the prior year’s actual results for changes in inflation as well as in projected volume. During this time, the company’s profit margins have been among the lowest of all of the local home builders. Ownership of the company recently changed. New management believes there has been significant unnecessary spending in many areas of the company, although they do not know exactly where or to what extent overspending occurred. To improve profitability, the type of budgeting system the company’s new management should implement is A. Activity-based budgeting. B. Continuous budgeting. C. Project budgeting. D. Zero-based budgeting.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 22A company needs to expand its warehouse capacity and is concerned about how this project will impact the financial outlook. The company will hire a contractor to perform the work. Because the company’s margins are small and cash is always tight, the company will need to use a bank loan to finance the project. The budget for this project, which is expected to take 6 months, should include the contractor’s bid price plus which of the following? I. Interest expense on the bank loan. II. Incremental insurance expense. III. Incremental property tax expense. A. I only. B. II only. C. II and III only. D. I, II, and III.

Question: 23Traditional budgeting methods look at historical data and current resources and then project forward. Activity-based budgeting is different in that I. It looks at desired outcomes and works back from there to determine resources needed. II. It uses current levels of activity to determine future levels without regard to resources currently available. III. Being under budget in one year would not necessarily indicate that an operating unit would have its budget cut the following year. IV. The focus is on planning department by department based on resources available. A. I only. B. I and III only. C. II and III only. D. II and IV only.

Question: 24A continuous budget is one that A. Is adjusted throughout the period for changing environmental factors. B. Is available for a specified future period by adding a period to the period that just ended. C. Is created after the organization has been operating for at least one period.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Uses the prior period’s actual results as the current period’s budget.

Question: 25A construction company designs and builds custom houses for consumers. Customers have several base plans to choose from and modifications can be made from those plans. The modifications can range from being very minor to significant. The houses generally take from 3 months to 1 year to design and build depending upon the amount of customization. What is the best type of budgeting for this business situation? A. Project budgeting. B. Activity-based budgeting. C. Flexible budgeting. D. Rolling/continuous budgeting.

Question: 26The major feature of zero-based budgeting is that it A. Assumes all activities are legitimate and worthy of receiving budget increases to cover any increased costs. B. Evaluates each activity and determines whether it should be maintained as it is, reduced, or eliminated. C. Uses the previous year’s budget and adjusts it for inflation. D. Focuses on planned capital outlays for property, plant, and equipment.

Question: 27A method of budgeting in which the cost of each program must be justified, starting with the one most vital to the company, is A. Flexible budgeting. B. Zero-based budgeting. C. Continuous budgeting. D. Probabilistic budgeting.

Question: 28Which one of the following types of budgets will allow management to best assess how costs will change based on changes in cost drivers such as direct labor hours or machine hours? A. Rolling budget. B. Activity-based budget.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Production budget. D. Cost budget.

Question: 29The controller of Allenwood Steel Company has tasked the newly-hired budget manager with restructuring the company’s budget system. The controller would like her to gather information from each unit on their activities and with top management, examine each unit’s contributions to the company as a whole. Then, with the objective of eliminating inefficiency and waste, each unit’s budget for the following year will be determined without regard to past budgets and with little regard for past operating results. This method of budget development is called A. Activity-based budgeting. B. Pro forma budgeting. C. Flexible budgeting. D. Zero-based budgeting.

Question: 30A budget in which each quarter is superseded by the next, encouraging management to think about the upcoming quarter, is a A. Flexible budget. B. Master budget. C. Rolling budget. D. Sales budget.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Subunit 5: Operating Budget Calculations -- Production and Direct Materials Fact Pattern: Daffy Tunes manufactures a toy rabbit with moving parts and a built-in voice box. Projected sales in units for the next 5 months are as follows: Projected Month

Sales in Units

January

30,000

February

36,000

March

33,000

April

40,000

May

Question:

Each rabbit requires basic materials that Daffy purchases from a single supplier at $3.50 per rabbit. Voice boxes are purchased from another supplier at $1.00 each. Assembly labor cost is $2.00 per rabbit, and variable overhead cost is $.50 per rabbit. Fixed manufacturing overhead applicable to rabbit production is $12,000 per month. Daffy’s policy is to manufacture 1.5 times the coming month’s projected sales every other month, starting with January (i.e., odd-numbered months) for February sales, and to manufacture 0.5 times the coming month’s projected sales in alternate months (i.e., even-numbered months). This allows Daffy to allocate limited manufacturing resources to other products as needed during the even-numbered months.

29,000 1Daffy Tunes’ unit production budget for toy rabbits for January is

A. 45,000 units. B. 16,500 units. C. 54,000 units. D. 14,500 units.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern: Daffy Tunes manufactures a toy rabbit with moving parts and a built-in voice box. Projected sales in units for the next 5 months are as follows: Projected Month

Sales in Units

January

30,000

February

36,000

March

33,000

April

40,000

May

Question:

Each rabbit requires basic materials that Daffy purchases from a single supplier at $3.50 per rabbit. Voice boxes are purchased from another supplier at $1.00 each. Assembly labor cost is $2.00 per rabbit, and variable overhead cost is $.50 per rabbit. Fixed manufacturing overhead applicable to rabbit production is $12,000 per month. Daffy’s policy is to manufacture 1.5 times the coming month’s projected sales every other month, starting with January (i.e., odd-numbered months) for February sales, and to manufacture 0.5 times the coming month’s projected sales in alternate months (i.e., even-numbered months). This allows Daffy to allocate limited manufacturing resources to other products as needed during the even-numbered months.

29,000 2Daffy Tunes’ dollar production budget for toy rabbits for February is

A. $327,000 B. $390,000 C. $113,500 D. $127,500

Fact Pattern: Mountain Corporation manufactures cabinets but outsources the handles. Eight handles are needed for a cabinet, with assembly requiring 30 minutes of direct labor per unit. Ending finished goods inventory is planned to consist of 50% of projected unit sales for the next month, and ending handles inventory is planned to be 80% of the requirement for the next month’s projected unit output of finished goods.

Mountain’s projected unit sales: October 4,600 November 5,000 December 4,200 January 6,000 Mountain’s ending inventories in units at September 30: Finished goods Handles

Question: 3The number of units that Mountain finished during December is A. 3,000 B. 5,100 C. 4,200

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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3,800 16,000

D. 5,000

Fact Pattern: Mountain Corporation manufactures cabinets but outsources the handles. Eight handles are needed for a cabinet, with assembly requiring 30 minutes of direct labor per unit. Ending finished goods inventory is planned to consist of 50% of projected unit sales for the next month, and ending handles inventory is planned to be 80% of the requirement for the next month’s projected unit output of finished goods.

Mountain’s projected unit sales: October 4,600 November 5,000 December 4,200 January 6,000 Mountain’s ending inventories in units at September 30: Finished goods Handles

Question: 4The number of handles Mountain should purchase in October is A. 39,840 B. 76,800 C. 40,000 D. 36,800

Question: 5A company’s budget contains the following information: Units Beginning finished goods inventory

85

Beginning work-in-process in equivalent units

10

Desired ending finished goods inventory Desired ending work-in-process in equivalent units Projected sales

100 40 1,800

How many equivalent units should the company plan to produce? A. 1,800 B. 1,565 C. 1,815

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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3,800 16,000

D. 1,845

Fact Pattern: Jordan Auto has developed the following production plan: Month

Units

Each unit contains 3 pounds of direct materials. The desired direct materials ending inventory each month is 120% of the next month’s production, plus 500 pounds. (The beginning inventory meets this requirement.) Jordan has developed the following direct labor standards for production of these units: Department 1 Department 2

January 10,000 February 8,000 March April

Question:

9,000

Hours per unit Hourly rate

2.0

0.5

$7.25

$12.00

12,000 6How much direct materials should Jordan Auto purchase in March?

A. 27,000 pounds. B. 32,900 pounds. C. 36,000 pounds. D. 37,800 pounds.

Question: 7A company’s budget calls for the following production: Qtr 1 -- 45,000 units Qtr 2 -- 38,000 units Qtr 3 -- 34,000 units Qtr 4 -- 48,000 units Each unit of product requires three pounds of direct material. The company’s policy is to begin each quarter with an inventory of direct materials equal to 30% of that quarter’s direct material requirements. Budgeted direct materials purchases for the third quarter would be A. 114,600 pounds. B. 43,200 pounds. C. 38,200 pounds. D. 30,600 pounds.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 8A sales budget shows quarterly sales for the next year as follows: Quarter

Units

1

10,000

2

8,000

3

12,000

4

14,000

Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter’s sales. Budgeted production for the second quarter of the next year would be A. 7,200 units. B. 8,000 units. C. 8,800 units. D. 8,400 units.

Fact Pattern: Superflite expects April sales of its deluxe model airplane, the C-14, to be 402,000 units at $11 each. Each C-14 requires three purchased components shown below. Number Needed Purchase Cost for Each C-14 Unit A-9

$0.50

1

B-6

0.25

2

D-28

1.00

3

Manufacturing direct labor and variable overhead per unit of C-14 totals $3.00. Fixed manufacturing overhead is $1.00 per unit at a production level of 500,000 units. Superflite plans the following beginning and ending inventories for the month of April and uses standard absorption costing for valuing inventory. Part No. Units at April 1 Units at April 30 C-14

12,000

10,000

A-9

21,000

9,000

B-6

32,000

10,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D-28

14,000

6,000

Question: 9Superflite’s C-14 production budget for April should be based on the manufacture of A. 390,000 units. B. 400,000 units. C. 402,000 units. D. 424,000 units.

Fact Pattern: Superflite expects April sales of its deluxe model airplane, the C-14, to be 402,000 units at $11 each. Each C-14 requires three purchased components shown below. Number Needed Purchase Cost for Each C-14 Unit A-9

$0.50

1

B-6

0.25

2

D-28

1.00

3

Manufacturing direct labor and variable overhead per unit of C-14 totals $3.00. Fixed manufacturing overhead is $1.00 per unit at a production level of 500,000 units. Superflite plans the following beginning and ending inventories for the month of April and uses standard absorption costing for valuing inventory. Part No. Units at April 1 Units at April 30 C-14

12,000

10,000

A-9

21,000

9,000

B-6

32,000

10,000

D-28

14,000

6,000

Question: 10Assume Superflite plans to manufacture 400,000 units in April. Superflite’s April budget for the purchase of A-9 should be A. 379,000 units. B. 388,000 units. C. 402,000 units.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. 412,000 units.

Fact Pattern: Simpson, Inc., is in the process of preparing its annual budget. The following beginning and ending inventory levels (in units) are planned for the year ending December 31. Beginning Ending Inventory Inventory Raw material*

40,000

50,000

Work-in-process 10,000

10,000

Finished goods

50,000

80,000

*Two units of raw material are needed to produce each unit of finished product. Question: 11If 500,000 finished units were to be manufactured for the year by Simpson, the units of raw material that must be purchased would be A. 1,000,000 units. B. 1,020,000 units. C. 1,010,000 units. D. 990,000 units.

Fact Pattern: Paradise Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1 through June 30: July 1

June 30

Direct material* 40,000 50,000 Work-in-process 10,000 20,000 Finished goods

80,000 50,000

* Two units of direct material are needed to produce each unit of finished product. Question: 12If Paradise Company plans to sell 480,000 units during the fiscal year, the number of units it will have to manufacture during the year is A. 440,000 units. B. 480,000 units.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. 510,000 units. D. 450,000 units.

Fact Pattern: Paradise Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1 through June 30: July 1

June 30

Direct material* 40,000 50,000 Work-in-process 10,000 20,000 Finished goods

80,000 50,000

* Two units of direct material are needed to produce each unit of finished product. Question: 13If 500,000 complete units were to be manufactured during the fiscal year by Paradise Company, the number of units of raw materials to be purchased is A. 1,000,000 units. B. 1,020,000 units. C. 1,010,000 units. D. 990,000 units.

Fact Pattern: Scarborough Corporation manufactures and sells two products, Thingone and Thingtwo. Scarborough’s budget department gathered the following data to project sales and budget requirements: Projected Sales Product

Units

Price

Thingone 60,000 $ 70 Thingtwo 40,000 100 Projected Inventories -- in units

Product

Expected

Desired

January 1

December 31

Thingone 20,000

25,000

Thingtwo 8,000

9,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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To produce one unit of Thingone and Thingtwo, the following raw materials are used: Raw Material

Unit Thingone Thingtwo

A

lb.

4

5

B

lb.

2

3

C

each

0

1

Projected data for the year with respect to raw materials are as follows: Anticipated Raw

Purchase

Material

Price

Expected

Desired

Inventories Inventories 1/1

12/31

A

$8

32,000 lb.

36,000 lb.

B

5

29,000 lb.

32,000 lb.

C

3

6,000 each 7,000 each

Projected direct labor requirements and rates are as follows: Thingone -- 2 hours per unit at $3 per hour Thingtwo -- 3 hours per unit at $4 per hour

Overhead is applied at the rate of $2 per direct labor hour. Question: 14What is Scarborough’s production budget in units for each product for the year? Thingone Thingtwo A. 55,000 39,000 B. 85,000 49,000 C. 60,000 40,000 D. 65,000 41,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Scarborough Corporation manufactures and sells two products, Thingone and Thingtwo. Scarborough’s budget department gathered the following data to project sales and budget requirements: Projected Sales Product

Units

Price

Thingone 60,000 $ 70 Thingtwo 40,000 100 Projected Inventories -- in units

Product

Expected

Desired

January 1

December 31

Thingone 20,000

25,000

Thingtwo 8,000

9,000

To produce one unit of Thingone and Thingtwo, the following raw materials are used: Raw Material

Unit Thingone Thingtwo

A

lb.

4

5

B

lb.

2

3

C

each

0

1

Projected data for the year with respect to raw materials are as follows: Anticipated Raw

Purchase

Material

Expected

Desired

Inventories Inventories

Price

1/1

12/31

A

$8

32,000 lb.

36,000 lb.

B

5

29,000 lb.

32,000 lb.

C

3

6,000 each 7,000 each

Projected direct labor requirements and rates are as follows: Thingone -- 2 hours per unit at $3 per hour Thingtwo -- 3 hours per unit at $4 per hour

Overhead is applied at the rate of $2 per direct labor hour. Question: 15What is Scarborough’s raw materials budget in quantities? A B C A. 533,000 314,000 54,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. 469,000 256,000 42,000 C. 465,000 253,000 41,000 D. 501,000 285,000 48,000

Fact Pattern: Wellfleet Company manufactures recreational equipment and prepares annual operational budgets for each department. The Purchasing Department is finalizing plans for the fiscal year ending June 30, Year 2, and has gathered the information regarding two of the components used in both tricycles and bicycles. Wellfleet uses the first-in, first-out inventory method. A19

B12

Beginning inventory, July 1, Year 1 3,500 1,200

Tricycles

Bicycles

800

2,150

Ending inventory, June 30, Year 2

2,000 1,800

1,000

900

Unit cost

$1.20 $4.50 $54.50

$89.60

Projected fiscal year unit sales

--

--

96,000

130,000

Component usage: Tricycles

2/unit 1/unit

--

--

Bicycles

2/unit 4/unit

--

--

Question: 16The budgeted dollar value of Wellfleet Company’s purchases of component A19 for the fiscal year ending June 30, Year 2 is A. $309,000 B. $538,080 C. $540,600 D. $2,017,800

Fact Pattern: Berol Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of the next month’s estimated sales. There are 150,000 finished units in inventory on June 30. Each unit of finished product requires 4 pounds of direct materials at a cost of $1.20 per pound. There are 800,000 pounds of direct materials in inventory on June 30. Question: 17Berol Company’s production requirement in units of finished product for the 3-month period ending September 30 is

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. 712,025 units. B. 630,500 units. C. 638,000 units. D. 665,720 units.

Fact Pattern: Berol Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of the next month’s estimated sales. There are 150,000 finished units in inventory on June 30. Each unit of finished product requires 4 pounds of direct materials at a cost of $1.20 per pound. There are 800,000 pounds of direct materials in inventory on June 30. Question: 18Assume Berol Company plans to produce 600,000 units of finished product in the 3-month period ending September 30, and to have direct materials inventory on hand at the end of the 3-month period equal to 25% of the use in that period. The estimated cost of direct materials purchases for the 3-month period ending September 30 is A. $2,200,000 B. $2,400,000 C. $2,640,000 D. $2,880,000

Question: 19A company has budgeted sales of 24,000 finished units for the forthcoming 6-month period. It takes 4 pounds of direct materials to make one finished unit. Given the following: Finished Units Direct Materials (Pounds) Beginning inventory

14,000

44,000

Target ending inventory

12,000

48,000

How many pounds of direct materials should be budgeted for purchase during the 6-month period? A. 48,000 B. 88,000 C. 92,000 D. 96,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 20A company prices its products by adding 30% to its cost. The company anticipates sales of $715,000 in July, $728,000 in August, and $624,000 in September. The company’s policy is to have on hand enough inventory at the end of the month to cover 25% of the next month’s sales. What will be the cost of the inventory that the company should budget for purchase in August? A. $509,600 B. $540,000 C. $560,000 D. $680,000

Fact Pattern: Streeter Company produces plastic microwave turntables. Sales for the next year are expected to be 65,000 units in the first quarter, 72,000 units in the second quarter, 84,000 units in the third quarter, and 66,000 units in the fourth quarter. Streeter usually maintains a finished goods inventory at the end of each quarter equal to one half of the units expected to be sold in the next quarter. Question: 21How many units should Streeter produce in the second quarter? A. 72,000 B. 75,000 C. 78,000 D. 84,000

Fact Pattern: Streeter Company produces plastic microwave turntables. Sales for the next year are expected to be 65,000 units in the first quarter, 72,000 units in the second quarter, 84,000 units in the third quarter, and 66,000 units in the fourth quarter. Streeter usually maintains a finished goods inventory at the end of each quarter equal to one half of the units expected to be sold in the next quarter. Question: 22Due to a work stoppage, the finished goods inventory at the end of the first quarter is 8,000 units less than it should be. How many units should Streeter produce in the second quarter? A. 75,000 B. 78,000 C. 80,000 D. 86,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 23A company produces one product and budgeted 220,000 units for the month of August with the following budgeted manufacturing costs: Total Costs Cost Per Unit Variable costs Batch set-up cost Fixed costs Total

$1,408,000 $ 6.40 880,000

4.00

1,210,000

5.50

$3,498,000 $15.90

The variable cost per unit and the total fixed costs are unchanged within a production range of 200,000 to 300,000 units per month. The total for the batch set-up cost in any month depends on the number of production batches that is run. A normal batch consists of 50,000 units unless production requires less volume. In the prior year, the company experienced a mixture of monthly batch sizes of 42,000 units, 45,000 units, and 50,000 units. The company consistently plans production each month in order to minimize the number of batches. For the month of September, the company plans to manufacture 260,000 units. What will be the company’s total budgeted production costs for September? A. $3,754,000 B. $3,930,000 C. $3,974,000 D. $4,134,000

Question: 24A company has budgeted sales at 6,300 units for the next fiscal year and desires to have 590 good units on hand at the end of that year. Beginning inventory is 470 units. The company has found from past experience that 10% of all units produced do not pass final inspection and therefore must be destroyed. How many units should the company plan to produce in the next fiscal year? A. 6,890 B. 7,062 C. 7,133 D. 7,186

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 25A corporation assembles backup tape drive systems for home microcomputers. For the first quarter, the budget for sales is 67,500 units. The corporation will finish the fourth quarter of last year with an inventory of 3,500 units, of which 200 are obsolete. The target ending inventory is 10 days of sales (based upon 360 days). What is the budgeted production for the first quarter? A. 75,000 B. 71,700 C. 71,500 D. 64,350

Question: 26Data regarding a budget are shown below. Planned sales

4,000 units

Material cost

$2.50 per pound

Direct labor

3 hours per unit

Direct labor rate

$7 per hour

Finished goods beginning inventory 900 units Finished goods ending inventory

600 units

Direct materials beginning inventory 4,300 units Direct materials ending inventory

4,500 units

Materials used per unit

6 pounds

The production budget will show total units to be produced of A. 3,700 B. 4,000 C. 4,300 D. 4,600

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 27A company is in the process of developing its operating budget for the coming year. Given below are selected data regarding the company’s two products, laminated putter heads and forged putter heads, that are sold through specialty golf shops. Putter Heads Forged

Laminated

Raw materials: Steel

2 lbs. at $5/lb.

1 lb. at $5/lb.

Copper

None

1 lb. at $15/lb.

Direct labor

1/4 hr. at $20/hr. 1 hr. at $22/hr.

Expected sales (units)

8,200

2,000

Selling price per unit

$30

$80

Ending inventory target (units) 100 60 Beginning inventory (units) 300 60 Beginning inventory (cost) $5,250 $3,120 Manufacturing overhead is applied to units produced on the basis of direct labor hours. Variable manufacturing overhead is projected to be $25,000, and fixed manufacturing overhead is expected to be $15,000. The estimated cost to produce one unit of the laminated putter head is A. $42 B. $46 C. $52 D. $62

Fact Pattern: Tidwell Corporation sells a single product for $20 per unit. All sales are on account, with 60% collected in the month of sale and 40% collected in the following month. A partial schedule of cash collections for January through March of the coming year reveals the following receipts for the period: Cash Receipts January December receivables From January sales

February

March

$32,000 54,000

$36,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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From February sales

66,000

$44,000

Other information includes the following:  Inventories

are maintained at 30% of the following month’s sales.  Tidwell desires to keep a minimum cash balance of $15,000. Total payments in January are expected to be $106,500, which excludes $12,000 of depreciation expense. Any required borrowings are in multiples of $1,000.  The December 31 balance sheet for the preceding year revealed a cash balance of $24,900. Question: 28March sales total $150,000. The number of units Tidwell must purchase in February is A. 3,850 B. 4,900 C. 6,100 D. 7,750

Question: 29A company manufactures electronic components used in automobile manufacturing. Each component uses two raw materials, G and C. Standard usage of the two materials required to produce one finished electronic component, as well as the current inventory, are shown below. Standard Material

Per Unit

Price Current Inventory

G

2.0 pounds $15/lb.

5,000 pounds

C

1.5 pounds $10/lb.

7,500 pounds

The company forecasts sales of 20,000 components for the next two production periods. Company policy dictates that 25% of the raw materials needed to produce the next period’s projected sales be maintained in ending direct materials inventory. Based on this information, the budgeted direct material purchases for the coming period would be G

C

A. $450,000 $450,000 B. $675,000 $300,000 C. $675,000 $400,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $825,000 $450,000

Question: 30A company is a maker of men’s slacks (pants). The company would like to maintain 20,000 yards of fabric in ending inventory. The beginning fabric inventory is expected to contain 25,000 yards. The expected yards of fabric needed for sales is 90,000. Compute the yards of fabric that the company needs to purchase. A. 85,000 B. 90,000 C. 95,000 D. 135,000

Question: 31A gift shop maintains a 35% gross profit percentage on sales and carries an ending inventory balance each month sufficient to support 30% of the next month’s expected sales. Anticipated sales for the fourth quarter are as follows:

October

$42,000

November 58,000

December 74,000 What amount of goods should the gift shop plan to purchase during the month of November? A. $40,820 B. $51,220 C. $52,130 D. $62,800

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 32In preparing the direct material purchases budget for next quarter, the plant controller has the following information available: Budgeted unit sales

2,000

Pounds of materials per unit

4

Cost of materials per pound

$3

Pounds of materials on hand

400

Finished units on hand

250

Target ending units inventory

325

Target ending inventory of pounds of materials How many pounds of materials must be purchased?

800

A. 2,475 B. 7,900 C. 8,700 D. 9,300

Question: 33An entity estimates that it will sell 200,000 dolls during the coming year. The beginning inventory is 12,000 dolls; the target ending inventory is 15,000 dolls. Each doll requires two shoes, which are purchased from an outside supplier. The beginning inventory of shoes is 20,000; the target ending inventory is 18,000 shoes. The number of shoes that should be purchased during the year is A. 396,000 B. 398,000 C. 402,000 D. 404,000

Question: 34A corporation has a policy of maintaining inventory at 15% of the next month’s forecast sales. The cost of the corporation’s merchandise averages 60% of the selling price. The inventory balance as of May 31 is $63,000, and the forecast dollar sales for the last seven months of the year are as follows: June

$700,000

July

600,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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August

650,000

September 800,000 October

850,000

November 900,000 December 840,000 What is the budgeted dollar amount of the corporation’s purchases for July? A. $355,500 B. $360,000 C. $364,500 D. $399,000

Fact Pattern: Polk Retailers is developing cash and other budget information for July, August, and September. At June 30, Polk had cash of $6,600, accounts receivable of $524,000, inventories of $371,280, and accounts payable of $159,666. The budget is to be based on the following assumptions: Sales Each month’s sales are billed on the last day of the month. Customers are allowed a 2% discount if payment is made within 10 days after the billing date. Receivables are booked gross. 65% of the billings are collected within the discount period, 20% are collected by the end of the month, 10% are collected by the end of the second month, and 5% prove uncollectible. Purchases 60% of all purchases of materials and selling, general, and administrative expenses are paid in the month purchased and the remainder in the following month. Each month’s ending inventory in units is equal to 120% of the next month’s units of sales. The cost of each unit of inventory is $25. Selling, general, and administrative expenses, of which $3,000 is depreciation, are equal to 20% of the current month’s sales. Actual and projected sales are as follows: Dollars

Units

May

$424,000

10,600

June

436,000

10,900

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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July

428,000

10,700

August

408,000

10,200

September 432,000

10,800

October

11,000

440,000

Question: 35Polk’s budgeted purchases for July and August are A. $236,000 and $242,500 B. $247,500 and $260,000 C. $252,500 and $273,000 D. $275,000 and $292,500

Fact Pattern: Polk Retailers is developing cash and other budget information for July, August, and September. At June 30, Polk had cash of $6,600, accounts receivable of $524,000, inventories of $371,280, and accounts payable of $159,666. The budget is to be based on the following assumptions: Sales Each month’s sales are billed on the last day of the month. Customers are allowed a 2% discount if payment is made within 10 days after the billing date. Receivables are booked gross. 65% of the billings are collected within the discount period, 20% are collected by the end of the month, 10% are collected by the end of the second month, and 5% prove uncollectible. Purchases 60% of all purchases of materials and selling, general, and administrative expenses are paid in the month purchased and the remainder in the following month. Each month’s ending inventory in units is equal to 120% of the next month’s units of sales. The cost of each unit of inventory is $25. Selling, general, and administrative expenses, of which $3,000 is depreciation, are equal to 20% of the current month’s sales. Actual and projected sales are as follows: Dollars

Units

May

$424,000

10,600

June

436,000

10,900

July

428,000

10,700

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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August

408,000

10,200

September 432,000

10,800

October

11,000

440,000

Question: 36The budgeted number of units of inventory Polk will purchase during September is A. 13,200 B. 10,560 C. 10,800 D. 11,040

Question: 37A firm desires a finished goods ending inventory equal to 25% of the following month’s budgeted sales. January sales are budgeted at 10,000 units and February at 12,000 units. Each unit requires 2 pounds of Material X, which costs $4 per pound. The company has a just-in-time system and materials are delivered daily just prior to use, so no raw materials inventories are maintained. Materials are paid for in the month following purchase. The January 1 finished goods inventory is 2,500 units. In February, what amount should the company expect to pay as a cash outflow for raw materials? A. $21,000 B. $40,000 C. $42,000 D. $84,000

Fact Pattern: Rokat Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Rokat, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 20 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40% of next month’s sales are in the finished goods inventory. Rokat also purchases sufficient direct materials inventory to ensure that direct materials inventory is 60% of the following month’s scheduled production.

Rokat’s sales budget in units for the next quarter is as follows: July

2,300

August

2,500

September 2,100 Rokat’s ending inventories in units for June 30 are Finished goods

1,900

Direct materials 4,000 (legs)

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 38The number of tables to be produced by Rokat during August is A. 1,400 tables. B. 2,340 tables. C. 1,440 tables. D. 1,900 tables.

Fact Pattern: Rokat Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Rokat, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 20 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40% of next month’s sales are in the finished goods inventory. Rokat also purchases sufficient direct materials inventory to ensure that direct materials inventory is 60% of the following month’s scheduled production.

Rokat’s sales budget in units for the next quarter is as follows: July

2,300

August

2,500

September 2,100 Rokat’s ending inventories in units for June 30 are Finished goods

1,900

Direct materials 4,000 (legs)

Question: 39Assume Rokat’s required production for August and September is 1,600 and 1,800 units, respectively, and the July 31 direct materials inventory is 4,200 units. The number of table legs to be purchased in August is A. 6,520 legs. B. 9,400 legs. C. 2,200 legs. D. 6,400 legs.

Question: 40A firm is in the process of preparing budgets for the upcoming period. The firm manufactures wooden toy trucks. Sales vary significantly, peaking in the holiday season. Management wishes to maintain an ending inventory equal to 20% of the next month’s sales. Following is the firm’s anticipated sales for the upcoming period. October

2,000 toy trucks

November 2,500 toy trucks

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December 8,500 toy trucks January

1,200 toy trucks

February 850 toy trucks How many trucks should the firm manufacture in November? A. 1,300 B. 1,700 C. 3,700 D. 4,200

Question: 41A corporation sells a single product for $20 per unit. All sales are on account, with 60% collected in the month of sale and 40% collected in the following month. A partial schedule of cash collections for January through March of the coming year reveals the following receipts for the period. Cash Receipts January December receivables From January sales

February

March

$32,000 54,000

$36,000

From February sales

66,000

$44,000

Other information includes the following:  Inventories are maintained at 30% of the following month’s sales.  Assume that March sales total is $150,000 The number of units to be purchased in February is

A. 3,850 units. B. 4,900 units. C. 6,100 units. D. 7,750 units.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Subunit 6: Operating Budget Calculations -- Others Question: 1A company pays out sales commissions to its sales team in the month the company receives cash for payment. These commissions equal 5% of total (monthly) cash inflows as a result of sales. The company has budgeted sales of $300,000 for August, $400,000 for September, and $200,000 for October. Approximately half of all sales are on credit, and the other half are cash sales. Experience indicates that 70% of the budgeted credit sales will be collected in the month following the sale, 20% the month after that, and 10% of the sales will be uncollectible. Based on this information, what should be the total amount of sales commissions paid out by the company in the month of October? A. $8,500 B. $13,500 C. $17,000 D. $22,000

Fact Pattern: Mountain Corporation manufactures cabinets but outsources the handles. Eight handles are needed for a cabinet, with assembly requiring 30 minutes of direct labor per unit. Ending finished goods inventory is planned to consist of 50% of projected unit sales for the next month, and ending handles inventory is planned to be 80% of the requirement for the next month’s projected unit output of finished goods.

Mountain’s projected unit sales: October 4,600 November 5,000 December 4,200 January 6,000 Mountain’s ending inventories in units at September 30:

Finished goods 3,800 Handles 16,000 Question: 2Given that a full-time employee works 160 hours per month, no overtime is allowed, and part-time employees may be used, how many full-time equivalent employees does Mountain need to assemble the output of finished units in November? A. 14.375 B. 28.75 C. 15.625 D. 31.25

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Fact Pattern: Rokat Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Rokat, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 20 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40% of next month’s sales are in the finished goods inventory. Rokat also purchases sufficient direct materials inventory to ensure that direct materials inventory is 60% of the following month’s scheduled production.

Rokat’s sales budget in units for the next quarter is as follows: July

2,300

August

2,500

September 2,100 Rokat’s ending inventories in units for June 30 are Finished goods

1,900

Direct materials 4,000 (legs)

Question: 3Assume that Rokat Corporation will produce 1,800 units in the month of September. How many employees will be required for the Assembly Department? (Fractional employees are acceptable since employees can be hired on a part-time basis. Assume a 40-hour week and a 4-week month.) A. 15 employees. B. 3.75 employees. C. 60 employees. D. 600 employees.

Fact Pattern: Jordan Auto has developed the following production plan: Month

Units

Each unit contains 3 pounds of direct materials. The desired direct materials ending inventory each month is 120% of the next month’s production, plus 500 pounds. (The beginning inventory meets this requirement.) Jordan has developed the following direct labor standards for production of these units: Department 1 Department 2

January 10,000 February 8,000 March April

Question:

9,000

Hours per unit Hourly rate

2.0

0.5

$7.25

$12.00

12,000 4Jordan Auto’s total budgeted direct labor dollars for February usage should be

A. $164,000 B. $174,250 C. $184,500

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D. $221,400

Question: 5For the month of December, a bottling company expects to sell 12,500 cases of water at $24.80 per case and 33,100 cases of cola at $32.00 per case. Sales personnel receive 6% commission on each case of water and 8% commission on each case of cola. In order to receive a commission on a product, the sales personnel team must meet the individual product revenue quota. The sales quota for water is $500,000, and the sales quota for cola is $1,000,000. The sales commission that should be budgeted for December is A. $4,736 B. $82,152 C. $84,736 D. $103,336

Question: 6Each unit of Product XK-46 requires three direct labor hours. Employee benefit costs are treated as direct labor costs. Data on direct labor are Number of direct employees

25

Weekly productive hours per employee

35

Estimated weekly wages per employee

$245

Employee benefits (related to weekly wages) 25% The standard direct labor cost per unit of Product XK-46 is A. $21.00 B. $26.25 C. $29.40 D. $36.75

Question: 7For the month of June, a company expects to sell 12,500 cases of small cherries at $25 per case and 33,000 cases of large cherries at $32 per case. Sales personnel receive a 6% commission on each case of small cherries and an 8% commission on each case of large cherries. To receive a commission on a product, the sales personnel team must meet the individual product revenue quota. The sales quotas for small cherries and large cherries are $500,000 and $1 million, respectively. What are the sales commissions budgeted for June? A. $109,440 B. $84,480

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C. $82,110 D. $4,480

Fact Pattern: Scarborough Corporation manufactures and sells two products, Thingone and Thingtwo. Scarborough’s budget department gathered the following data to project sales and budget requirements: Projected Sales Product

Units

Price

Thingone 60,000 $ 70 Thingtwo 40,000 100 Projected Inventories -- in units

Product

Expected

Desired

January 1

December 31

Thingone 20,000

25,000

Thingtwo 8,000

9,000

To produce one unit of Thingone and Thingtwo, the following raw materials are used: Raw Material

Unit Thingone Thingtwo

A

lb.

4

5

B

lb.

2

3

C

each

0

1

Projected data for the year with respect to raw materials are as follows: Anticipated Raw

Purchase

Material

Price

Expected

Desired

Inventories Inventories 1/1

12/31

A

$8

32,000 lb.

36,000 lb.

B

5

29,000 lb.

32,000 lb.

C

3

6,000 each 7,000 each

Projected direct labor requirements and rates are as follows: Thingone -- 2 hours per unit at $3 per hour Thingtwo -- 3 hours per unit at $4 per hour

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Overhead is applied at the rate of $2 per direct labor hour. Question: 8What is Scarborough’s direct labor budget in dollars? Thingone Thingtwo A. $390,000 $369,000 B. $520,000 $492,000 C. $390,000 $492,000 D. $492,000 $390,000

Fact Pattern: Scarborough Corporation manufactures and sells two products, Thingone and Thingtwo. Scarborough’s budget department gathered the following data to project sales and budget requirements: Projected Sales Product

Units

Price

Thingone 60,000 $ 70 Thingtwo 40,000 100 Projected Inventories -- in units

Product

Expected

Desired

January 1

December 31

Thingone 20,000

25,000

Thingtwo 8,000

9,000

To produce one unit of Thingone and Thingtwo, the following raw materials are used: Raw Material

Unit Thingone Thingtwo

A

lb.

4

5

B

lb.

2

3

C

each

0

1

Projected data for the year with respect to raw materials are as follows: Anticipated Raw

Purchase

Material A

Price $8

Expected

Desired

Inventories Inventories 1/1 32,000 lb.

12/31 36,000 lb.

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B

5

29,000 lb.

32,000 lb.

C

3

6,000 each 7,000 each

Projected direct labor requirements and rates are as follows: Thingone -- 2 hours per unit at $3 per hour Thingtwo -- 3 hours per unit at $4 per hour

Overhead is applied at the rate of $2 per direct labor hour. Question: 9What is Scarborough’s budgeted finished goods inventory for Thingtwo in dollars? A. $108,000 B. $306,000 C. $522,000 D. $684,000

Question: 10The following direct labor information relates to the manufacture of televisions. Number of workers

60

Number of product hours per week, per worker 40 Hours required to make 1 unit

3

Weekly wages per worker

$600

Employee benefits treated as direct labor costs 20% of wages What is the standard direct labor cost per unit? A. $54 B. $36 C. $45 D. $18

Question: 11A firm budgeted the following amounts for the coming year: Beginning inventory, finished goods

$ 10,000

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Cost of goods sold

400,000

Direct material used in production

100,000

Ending inventory, finished goods

25,000

Beginning and ending work-in-process inventory 0 Overhead is estimated to be two times the amount of direct labor dollars. The amount that should be budgeted for direct labor for the coming year is A. $315,000 B. $210,000 C. $157,500 D. $105,000

Question: 12A company’s selling and administrative costs for the month of August, when it sold 20,000 units, were as follows. Costs Per Unit

Total

$18.60

$372,000

Step costs

4.25

85,000

Fixed costs

8.80

176,000

$31.65

$633,000

Variable costs

Total selling and administrative costs

The variable costs represent sales commissions paid at the rate of 6.2% of sales. The step costs depend on the number of salespersons employed by the company. In August there were 17 persons on the sales force. However, two members have taken early retirement effective August 31. It is anticipated that these positions will remain vacant for several months. Total fixed costs are unchanged within a relevant range of 15,000 to 30,000 units per month. The company is planning a sales price cut of 10%, which it expects will increase sales volume to 24,000 units per month. If the company implements the sales price reduction, the total budgeted selling and administrative costs for the month of September would be A. $652,760 B. $679,760 C. $714,960

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $759,600

Question: 13A manufacturer of men’s t-shirts had the following information for last year. Number of shirts sold and produced 125,000 Sale price per shirt

$40

Direct manufacturing

$10/shirt

Setup cost

$100/setup hour

Setup hours

10,000

Shipping costs

$200/shipment

Number of shipments

4,000

Administrative cost

$8/shirt

The company’s operating profit last year was A. $950,000 B. $1,950,000 C. $2,750,000 D. $3,750,000

Question: 14A retailer uses flexible budgeting as a planning tool. The company’s original budget for the upcoming year is shown below. Sales

$90,000,000

Cost of goods sold

36,000,000

Administrative expenses (all fixed)

21,000,000

Advertising expense

9,000,000

Sales commissions

6,750,000

Other marketing expenses (all fixed)

9,250,000

Operating income

$ 8,000,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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The manager of the retailer’s Marketing Department believes sales volume will increase by 10% if the advertising budget is increased by $5,000,000. Should the retailer approve the increased advertising request? A. Yes, because the increase in sales is $4,000,000 greater than the increase in advertising costs. B. No, because advertising is 10% of sales, so the maximum increase in sales would be $900,000. C. Yes, because operating income would increase by $400,000. D. No, because operating income would decrease by $275,000.

Question: 15A company is setting up a new division to sell its products in Africa. An accountant has determined that the new African division will have to sell 250,000 units in order to cover the division’s fixed costs of $365,000. The company is estimating total sales of $475,000 for the new African division. What is the contribution margin per unit for the new African division? A. $0.44 B. $0.68 C. $1.46 D. $1.90

Question: 16A company receives an order from a major customer on the first day of every quarter and has to produce an extra 10% to cover for product defects. Each finished product requires two pounds of direct material and three direct labor hours. Finished goods inventory as of January 1 is 300 units, which can be used to fulfill the order. The orders for the first quarter are shown below. January 2,000 units February 2,300 units March

2,500 units

Budgeted direct labor hours for the first quarter are A. 19,500 B. 20,400 C. 21,450 D. 22,440

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Subunit 7: Projecting Cash Collections Question: 1Which one of the following is the best characteristic concerning the capital budget? The capital budget is a(n) A. Plan to ensure that there are sufficient funds available for the operating needs of the company. B. Exercise that sets the long-range goals of the company including the consideration of external influences caused by others in the market. C. Plan that results in the cash requirements during the operating cycle. D. Plan that assesses the long-term needs of the company for plant and equipment purchases.

Question: 2Which one of the following items would have to be included for a company preparing a schedule of cash receipts and disbursements for calendar Year 1? A. A purchase order issued in December Year 1 for items to be delivered in February Year 2. B. Dividends declared in November Year 1 to be paid in January Year 2 to shareholders of record as of December Year 1. C. The amount of uncollectible customer accounts for Year 1. D. The borrowing of funds from a bank on a note payable taken out in June Year 1 with an agreement to pay the principal and interest in June Year 2.

Question: 3The cash receipts budget includes A. Funded depreciation. B. Operating supplies. C. Extinguishment of debt. D. Loan proceeds.

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Question: 4A company has developed the following sales projections for the calendar year. May

$100,000

June

120,000

July

140,000

August

160,000

September 150,000 October

130,000

Normal cash collection experience has been that 50% of sales are collected during the month of sale and 45% in the month following sale. The remaining 5% of sales is never collected. The company’s budgeted cash collections for the third calendar quarter are A. $427,500 B. $422,500 C. $414,000 D. $450,000

Question: 5A company budgeted sales on account of $120,000 for July, $211,000 for August, and $198,000 for September. Collection experience indicates that 60% of the budgeted sales will be collected the month after the sale, 36% will be collected the second month, and 4% will be uncollectible. The cash receipts from accounts receivable that should be budgeted for September would be A. $169,800 B. $147,960 C. $197,880 D. $194,760

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern: Historically, Pine Hill Wood Products has had no significant bad debt experience with its customers. Cash sales have accounted for 10% of total sales, and payments for credit sales have been received as follows:

The forecast for both cash and credit sales is as follows: Month

January $95,000

40% of credit sales in the month of the sale 30% of credit sales in the first subsequent month 25% of credit sales in the second subsequent month 5% of credit sales in the third subsequent month

Question:

Sales

February 65,000 March

70,000

April

80,000

May 6What is the forecasted cash inflow for Pine Hill Wood Products for May?

85,000

A. $70,875 B. $76,500 C. $79,375 D. $83,650

Fact Pattern: Historically, Pine Hill Wood Products has had no significant bad debt experience with its customers. Cash sales have accounted for 10% of total sales, and payments for credit sales have been received as follows:

The forecast for both cash and credit sales is as follows: Month

Sales

January $95,000

40% of credit sales in the month of the sale 30% of credit sales in the first subsequent month 25% of credit sales in the second subsequent month 5% of credit sales in the third subsequent month

February 65,000 March

70,000

April

80,000

May 85,000 Question: 7Due to deteriorating economic conditions, Pine Hill Wood Products has now decided that its cash forecast should include a bad debt adjustment of 2% of credit sales, beginning with sales for the month of April. The 5% collection in the fourth month should be reduced to reflect the bad debt. Because of this policy change, the total expected cash inflow in April related to sales made in April will A. Be unchanged. B. Decrease by $1,260.00. C. Decrease by $1,440.00. D. Decrease by $1,530.00.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern: Birch Corporation has the following historical pattern on its credit sales:  70% collected in month of sale  15% collected in the first month after sale  10% collected in the second month after sale  4% collected in the third month after sale  1% uncollectible

The sales on open account have been budgeted for the first 6 months of the year as follows: January $ 70,000 February 90,000 March

100,000

April

120,000

May

100,000

June

90,000

Question: 8Birch’s estimated total cash collections during April from accounts receivable are A. $84,000 B. $110,800 C. $118,800 D. $108,000

Fact Pattern: Birch Corporation has the following historical pattern on its credit sales:  70% collected in month of sale  15% collected in the first month after sale  10% collected in the second month after sale  4% collected in the third month after sale  1% uncollectible

The sales on open account have been budgeted for the first 6 months of the year as follows: January $ 70,000 February 90,000 March

100,000

April

120,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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May

100,000

June

90,000

Question: 9Birch’s estimated total cash collections during the second calendar quarter from sales made on open account during the second calendar quarter are A. $262,000 B. $288,800 C. $306,900 D. $310,000

Question: 10A cash budget is being prepared for the next year. Sales are expected to be $100,000 in January, $200,000 in February, $300,000 in March, and $100,000 in April. Approximately half of all sales are cash sales, and the other half are on credit. Experience indicates that 70% of the credit sales will be collected in the month following the sale, 20% the month after that, and 10% in the third month after the sale. What are the budgeted collections for April? A. $130,000 B. $180,000 C. $260,000 D. $360,000

Question: 11A company budgeted sales of $220,000 for June, $200,000 for July, $280,000 for August, $264,000 for September, $244,000 for October, and $300,000 for November. Approximately 75% of sales are on credit; the remainder are cash sales. Collection experience indicates that 60% of the budgeted credit sales will be collected the month after the sale, 36% the second month, and 4% will be uncollectible. Which month has the highest budgeted cash receipts? A. August. B. September. C. October. D. November.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 12A firm budgeted sales on account of $150,000 for July, $210,000 for August, and $198,000 for September. Collection experience indicates that 60% of the budgeted sales will be collected the month after the sale, 36% the second month, and 4% will be uncollectible. The cash receipts from accounts receivable that should be budgeted for September equal A. $180,000 B. $165,600 C. $194,400 D. $198,000

Question: 13A company budgeted sales of $200,000 for July, $280,000 for August, $198,000 for September and $200,000 for October. Approximately 75% of sales are on credit; the remainder are cash sales. Collection experience indicates that 60% of the budgeted credit sales will be collected the month after the sale, 36% will be collected the second month, and 4% will be uncollectible. The cash receipts budgeted for October equal A. $164,700 B. $200,000 C. $214,700 D. $244,400

Question: 14The cash budget for March includes the following information. This information concerns its accounts receivable: Estimated credit sales for March

$300,000

Actual credit sales for February

$250,000

Estimated collections in March for credit sales in March

30%

Estimated collections in March for credit sales in February

60%

Estimated collections in March for credit sales prior to February

$15,000

Estimated write-offs in March for uncollectible credit sales

$7,000

Estimated provision for bad debts in March for credit sales in March

$8,000

Determine the estimated cash receipts from accounts receivable collections in March. A. $240,000 B. $247,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $248,000 D. $255,000

Fact Pattern: Polk Retailers is developing cash and other budget information for July, August, and September. At June 30, Polk had cash of $6,600, accounts receivable of $524,000, inventories of $371,280, and accounts payable of $159,666. The budget is to be based on the following assumptions: Sales Each month’s sales are billed on the last day of the month. Customers are allowed a 2% discount if payment is made within 10 days after the billing date. Receivables are booked gross. 65% of the billings are collected within the discount period, 20% are collected by the end of the month, 10% are collected by the end of the second month, and 5% prove uncollectible. Purchases 60% of all purchases of materials and selling, general, and administrative expenses are paid in the month purchased and the remainder in the following month. Each month’s ending inventory in units is equal to 120% of the next month’s units of sales. The cost of each unit of inventory is $25. Selling, general, and administrative expenses, of which $3,000 is depreciation, are equal to 20% of the current month’s sales. Actual and projected sales are as follows: Dollars

Units

May

$424,000

10,600

June

436,000

10,900

July

428,000

10,700

August

408,000

10,200

September 432,000

10,800

October

11,000

440,000

Question: 15Polk’s budgeted cash collections during July are A. $407,332 B. $413,000 C. $417,675

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $422,338

Fact Pattern: Super Drive, a computer disk storage and back-up company, uses accrual accounting. The company’s Statement of Financial Position for the year ended November 30 is as follows: Super Drive Statement of Financial Position as of November 30 Assets

Liabilities and Stockholders’ Equity

Cash

$

52,000 Accounts payable

$ 175,000

Accounts receivable, net

150,000 Common stock

900,000

Inventory

315,000 Retained earnings

442,000

Property, plant, and equipment

1,000,000 Total liabilities and stockholders’ equity

Total assets

$1,517,000

$1,517,000

Additional information regarding Super Drive’s operations include the following:  Sales are budgeted at $520,000 for December and $500,000 for January of the next year.  Collections are expected to be 60% in the month of sale and 40% in the month following the sale.  Eighty percent of the disk drive components are purchased in the month prior to the month of sale, and 20% are purchased in the month of sale. Purchased components are 40% of the cost of goods sold.  Payment for the components is made in the month following the purchase.  Cost of goods sold is 80% of sales.

Question: 16Super Drive’s budgeted cash collections for the month of December are A. $208,000 B. $520,000 C. $402,000 D. $462,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Kelly Company is a retail sporting goods store that uses accrual accounting for its records. Facts regarding Kelly’s operations are as follows:  Sales are budgeted at $220,000 for December Year 1 and $200,000 for January Year 2.  Collections are expected to be 60% in the month of sale and 38% in the month following the sale.  Gross margin is 25% of sales.  A total of 80% of the merchandise held for resale is purchased in the month prior to the month of sale and 20% is purchased in the month of sale. Payment for merchandise is made in the month following the purchase.  Other expected monthly expenses to be paid in cash are $22,600.  Annual depreciation is $216,000.

Below is Kelly Company’s statement of financial position at November 30, Year 1. Assets Cash

$

22,000

Accounts receivable (net of $4,000 allowance for uncollectible accounts) Inventory

76,000 132,000

Property, plant, and equipment (net of $680,000 accumulated depreciation) Total assets

870,000 $1,100,000

Liabilities and Stockholders’ Equity Accounts payable

$ 162,000

Common stock

800,000

Retained earnings

138,000

Total liabilities and stockholders’ equity $1,100,000

Question: 17Kelly’s budgeted cash collections for December Year 1 are A. $208,000 B. $132,000 C. $203,600 D. $212,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Esplanade Company has the following historical pattern for its credit sales:  70% collected

in month of sale  15% collected in the first month after sale  10% collected in the second month after sale  4% collected

in the third month after sale  1% uncollectible The sales on open account have been budgeted for the last 6 months of the year as shown below: July

$ 60,000

August

70,000

September 80,000 October

90,000

November 100,000 December

85,000

Question: 18Esplanade’s estimated total cash collections during October from accounts receivable are A. $63,000 B. $84,400 C. $86,700 D. $21,400

Fact Pattern: Esplanade Company has the following historical pattern for its credit sales:  70% collected

in month of sale  15% collected in the first month after sale  10% collected in the second month after sale  4% collected

in the third month after sale  1% uncollectible The sales on open account have been budgeted for the last 6 months of the year as shown below: July August

$ 60,000 70,000

September 80,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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October

90,000

November 100,000 December

85,000

Question: 19Esplanade’s estimated total cash collections during the fourth calendar quarter from sales made on open account during the fourth calendar quarter are A. $170,500 B. $275,000 C. $230,000 D. $251,400

Fact Pattern: Information pertaining to Noskey Corporation’s sales revenue is presented in the following table: November

December

January

Year 1

Year 1

Year 2

(Actual)

(Budget)

(Budget)

Cash sales $ 80,000

$100,000

$ 60,000

Credit sales 240,000

360,000

180,000

Total sales $320,000

$460,000

$240,000

Management estimates that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Quantity of inventory purchased is equal to next month’s cost of sales, and gross profit margin is 30%. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder are paid in the month following the purchase. Question: 20Noskey Corporation’s budgeted cash collections in December Year 1 from November Year 1 credit sales are A. $84,000 B. $136,800 C. $228,000 D. $91,200

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Information pertaining to Noskey Corporation’s sales revenue is presented in the following table: November

December

January

Year 1

Year 1

Year 2

(Actual)

(Budget)

(Budget)

Cash sales $ 80,000

$100,000

$ 60,000

Credit sales 240,000

360,000

180,000

Total sales $320,000

$460,000

$240,000

Management estimates that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Quantity of inventory purchased is equal to next month’s cost of sales, and gross profit margin is 30%. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder are paid in the month following the purchase. Question: 21Noskey Corporation’s budgeted total cash receipts in January Year 2 are A. $240,000 B. $294,000 C. $299,400 D. $239,400

Question: 22A company budgeted $148,000 sales on account for June, $120,000 for July, $211,000 for August, $198,000 for September, and $164,000 for October. Collection experience indicates that 60% of the budgeted sales will be collected the month after the sale, 36% will be collected the second month, and 4% will be uncollectible. Which month should have the largest amount of cash receipts from accounts receivable budgeted? A. August. B. September. C. October. D. November.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 23A company sells products exclusively on account and has experienced the following collection pattern: 60% in the month of sale, 25% in the month after sale, and 15% in the second month after sale. Uncollectible accounts are negligible. Customers who pay in the month of sale are given a 2% discount. If sales are $220,000 in January, $200,000 in February, $280,000 in March, and $260,000 in April, the accounts receivable balance on May 1 will be A. $107,120 B. $143,920 C. $146,000 D. $204,000

Question: 24The controller of a store has asked a staff accountant to prepare detailed reports that summarize the firm’s cash flows for the upcoming accounting period and cash position at the end of the period. Accordingly, the controller has requested preparation of a cash budget, a pro forma statement of cash flows, a detailed listing of cash collections from customers, and a detailed listing of cash payments for merchandise purchases. Which one of the following correctly identifies the first and last document to be prepared by the accountant? First Document Last Document A. Listing of cash collections Pro forma statement of cash flows B. Listing of cash collections Cash budget C. Cash budget

Either the listing of cash collections or listing of cash payments, the order of which is unimportant

D. Listing of cash payments

Either the pro forma statement of cash flows or the cash budget, the order of which is unimportant

Question: 25Estimated monthly sales will be as follows: January $100,000 February 150,000 March

180,000

Historical trends indicate that 40% of sales are collected during the month of sale, 50% are collected in the month following the sale, and 10% are collected two months after the sale. The accounts receivable balance as of December 31 totals $80,000 ($72,000 from December’s sales and $8,000 from November’s sales). The amount of cash expected to be collected during the month of January is A. $76,800

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $84,000 C. $108,000 D. $133,000

Question: 26A corporation anticipates the following sales during the last 6 months of the year: July August

$460,000 500,000

September 525,000 October

500,000

November 480,000 December 450,000 20% of the corporation’s sales are for cash. The balance is subject to the collection pattern shown below. Percentage of balance collected in the month of sale

40%

Percentage of balance collected in the month following sale

30%

Percentage of balance collected in the second month following sale

25%

Percentage of balance uncollectible 5% What is the planned net accounts receivable balance as of December 31? A. $279,300 B. $294,000 C. $360,000 D. $367,500

Question: 27Projected monthly sales for January, February, March, and April are as follows: January $300,000 February 340,000 March

370,000

April

390,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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 The company bills each month’s sales on the last day of the month.  Receivables are booked gross and credit terms of sale are 2/10, n/30.  50% of the billings are collected within the discount period, 30% are collected by the end of the month, 15% are collected by the end of the second month, and 5% become uncollectible. Budgeted cash collections during April would be

A. $343,300 B. $347,000 C. $349,300 D. $353,000

Question: 28A firm carries a large number of different items in its inventory, giving the firm a competitive advantage in its industry. Below is part of the firm’s budget for the first quarter of next year. Sales

$855,000

Cost of goods sold

425,000

Rent and salary expenses 375,000 Historically, all of the sales are on account and are made evenly over the quarter. 5% of all sales are determined to be uncollectible and written off. The balance of the receivables is collected in 50 days. This sales and collection experience is expected to continue in the first quarter. The projected balance sheet for the first day of the quarter includes the following account balances. Cash

$ 10,000

Accounts receivable (net) 450,000 Inventory

900,000

Accounts payable

800,000

How much cash can the firm anticipate collecting in the first quarter (based on a 360-day year)? A. $811,000 B. $830,000 C. $901,250 D. $902,500

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 29A corporation’s budget for the upcoming accounting period reveals total sales of $700,000 in April and $750,000 in May. The sales cash collection pattern is 1.

20% of each month’s sales are cash sales.

2.

5% of a month’s credit sales are uncollectible.

3.

70% of a month’s credit sales are collected in the month of sale.

4.

25% of a month’s credit sales are collected in the month following the sale.

If the corporation anticipates the cash sale of a piece of old equipment in May for $25,000, May’s total budgeted cash receipts would be A. $560,000 B. $702,500 C. $735,000 D. $737,500

Question: 30A company sells products on account and experiences the following collection schedule: In the month of sale

10%

In the month after sale

60%

In the second month after sale 30% At December 31, the company reports accounts receivable of $211,500. Of that amount, $162,000 is due from December sales and $49,500 from November sales. The company is budgeting $170,000 of sales for January. If so, what amount of cash should be collected in January? A. $129,050 B. $174,500 C. $211,500 D. $228,500

Question: 31Information gathered from the past year reveals the following cash collection trends: 1.

40% of sales are on credit

2.

50% of credit sales are collected in month of sale

3.

30% of credit sales are collected first month after sale

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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4.

15% of credit sales are collected second month after sale

5.

5% of credit sales result in bad debts

Gross sales for the last 5 months were as follows: January $220,000 February 240,000 March

250,000

April

230,000

May

260,000

Sales for June are projected to be $255,000. Based on this information, the expected cash receipts for March would be A. $230,000 B. $237,400 C. $242,000 D. $243,200

Question: 32Data regarding the forecast dollar sales for the last 7 months of the year and the projected collection patterns are as follows: Forecasted sales June

$700,000

July

600,000

August

650,000

September

800,000

October

850,000

November

900,000

December 840,000 Types of sales Cash sales Credit sales

30% 70% Collection pattern on credit sales

(5% determined to be uncollectible) During the month of sale

20%

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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During the first month following the sale

50%

During the second month following the sale

25%

Budgeted cash receipts from sales and collections on account for September are A. $635,000 B. $684,500 C. $807,000 D. $827,000

Fact Pattern: The variable operating expenses (other than Karmee Company has been accumulating operating data in order to cost of goods sold) for Karmee are 10% of prepare an annual profit plan. Details regarding Karmee’s sales for sales and are paid for in the month following the first 6 months of the coming year are as follows: the sale. The annual fixed operating expenses are presented below. All of these are incurred Estimated Monthly Sales Type of Monthly Sale uniformly throughout the year and paid January $600,000 Cash sales 20% monthly except for insurance and property taxes. Insurance is paid quarterly in January, February 650,000 Credit sales 80% April, July, and October. Property taxes are paid twice a year in April and October. March 700,000 Collection Pattern for Credit Sales Annual Fixed Operating Costs

April

625,000 Month of sale

30%

May

720,000 One month following sale

40%

Advertising

June

800,000 Second month following sale

25%

Depreciation

$ 720,000 420,000

Insurance 180,000 Karmee’s cost of goods sold averages 40% of the sales value. Property taxes 240,000 Karmee’s objective is to maintain a target inventory equal to 30% of the next month’s sales in units. Purchases of merchandise for Salaries 1,080,000 resale are paid for in the month following the sale. Question: 33The amount of cash collected in March for Karmee Company from the sales made during March will be A. $140,000 B. $308,000 C. $350,000 D. $636,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: The variable operating expenses (other than Karmee Company has been accumulating operating data in order to cost of goods sold) for Karmee are 10% of prepare an annual profit plan. Details regarding Karmee’s sales for sales and are paid for in the month following the first 6 months of the coming year are as follows: the sale. The annual fixed operating expenses are presented below. All of these are incurred Estimated Monthly Sales Type of Monthly Sale uniformly throughout the year and paid January $600,000 Cash sales 20% monthly except for insurance and property taxes. Insurance is paid quarterly in January, February 650,000 Credit sales 80% April, July, and October. Property taxes are paid twice a year in April and October. March 700,000 Collection Pattern for Credit Sales Annual Fixed Operating Costs

April

625,000 Month of sale

30%

May

720,000 One month following sale

40%

Advertising

June

800,000 Second month following sale

25%

Depreciation

Insurance Karmee’s cost of goods sold averages 40% of the sales value. Property taxes Karmee’s objective is to maintain a target inventory equal to 30% of the next month’s sales in units. Purchases of merchandise for Salaries resale are paid for in the month following the sale. Question: 34Karmee Company’s total cash receipts for the month of April will be

$ 720,000 420,000 180,000 240,000 1,080,000

A. $504,000 B. $629,000 C. $653,000 D. $707,400

Question: 35A company is in the process of identifying, evaluating, and selecting projects that require a large commitment of funds and will generate benefits well into the future. The company will look at the budget over the life of the projects and review many different options. This is an example of A. A rolling budget since it wants information for multiple periods. B. A flexible budget as it can prepare the budget using several options. C. A capital budget to help with the evaluation and identification. D. An activity-based budget to evaluate all activities for each project.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 36Which one of the following best describes the capital budget? A. It ensures that there are sufficient funds available for the operating needs of the company. B. It sets the long-range goals of the company, including consideration of all available resources. C. It results in the cash requirements during the operating cycle. D. It assesses the long-term needs of the company for plant and equipment purchases.

Question: 37A corporation has the opportunity to purchase land adjacent to its existing location for $200,000. If purchased, the company would also spend $20,000 to level the property to make it usable for building construction. Management believes there is an 80% probability it will have enough cash to purchase the land outright and a 20% chance it will need to borrow the $200,000. The dollar amount the corporation should show on its initial capital budget for the purchase of this land is A. $220,000 B. $200,000 C. $180,000 D. $160,000

Question: 38A firm prepares cash budgets each month, including a forecast of monthly cash collections. Collections are expected to be 65% in the month of sale, 25% in the first month following the sale, and 10% in the second month following the sale. Sales for the first 6 months of the year were as follows. January $185,000 April $208,000 February $196,000 May $210,000 March

$216,000 June $232,000

The total cash collected during the month of May is A. $207,900 B. $208,800 C. $210,100 D. $224,100

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 39Sales during the first 3 months of operations are as follows: January February Cash Sales

$100,000 $110,000 $120,000

Sales on account Total sales

March

320,000 335,000

364,000

$420,000 $445,000 $484,000

Cash is collected from credit customers as follows: Within the first 10 days after the month of sale, at a 2% early pay discount 60% In the month after sale, after the discount period

30%

In the second month after sale

10%

What will the cash receipts be for the month of March? A. $329,480 B. $449,480 C. $466,532 D. $484,000

Question: 40Historically, a freight company has had no significant bad debt experience with its customers. Cash sales have accounted for 10% of total sales, and payments for credit sales have been received as follows:  40% of credit sales in the month of the sale  30% of credit sales in the first subsequent month  25% of credit sales in the second subsequent month  5% of credit sales in the third subsequent month The forecast for both cash and credit sales is as follows. Month

Sales

January $95,000 February 65,000 March 70,000 April 80,000 May 85,000 What is the forecasted cash inflow for the freight company for the month of May? A. $70,875

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $78,750 C. $79,375 D. $83,850

Subunit 8: The Cash Budget Question: 1A company is in the process of projecting its cash position at the end of the second quarter. Shown below is pertinent information from the company’s records. Cash balance at end of 1st quarter

$

36,000

Cash collections from customers for 2nd quarter Accounts payable at end of 1st quarter Accounts payable at end of 2nd quarter

1,300,000 100,000 75,000

All 2nd quarter costs and expenses (accrual basis)

1,200,000

Depreciation (accrued expense included above) 60,000 Purchases of equipment (for cash) 50,000 Gain on sale of asset (for cash) 5,000 Net book value of asset sold 35,000 Repayment of notes payable 66,000 From the data above, determine the company’s projected cash balance at the end of the second quarter. A. $0 B. $25,000 C. $60,000 D. $95,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 2A company has just completed its prospective financial statements for the coming year. Relevant information is summarized below: Projected net income

$100,000

Anticipated capital expenditures

50,000

Increase in working capital

25,000

Depreciation expense

15,000

From the information provided above, the increase in the cash account for the coming year will be A. $25,000 B. $40,000 C. $90,000 D. $160,000

Fact Pattern: The variable operating expenses (other than Karmee Company has been accumulating operating data in order to cost of goods sold) for Karmee are 10% of prepare an annual profit plan. Details regarding Karmee’s sales for the sales and are paid for in the month first 6 months of the coming year are as follows: following the sale. The annual fixed operating expenses are presented below. All Estimated Monthly Sales Type of Monthly Sale of these are incurred uniformly throughout January $600,000 Cash sales 20% the year and paid monthly except for insurance and property taxes. Insurance is February 650,000 Credit sales 80% paid quarterly in January, April, July, and October. Property taxes are paid twice a March 700,000 Collection Pattern for Credit Sales year in April and October. April 625,000 Month of sale 30% Annual Fixed Operating Costs May

720,000 One month following sale

40%

June

800,000 Second month following sale

25%

Advertising

$ 720,000

Depreciation

420,000

Karmee’s cost of goods sold averages 40% of the sales value. Insurance 180,000 Karmee’s objective is to maintain a target inventory equal to 30% of Property taxes 240,000 the next month’s sales in units. Purchases of merchandise for resale are Salaries 1,080,000 paid for in the month following the sale. Question: 3The purchase of merchandise that Karmee Company will need to make during February will be A. $254,000 B. $260,000 C. $266,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $338,000

Fact Pattern: The variable operating expenses (other than Karmee Company has been accumulating operating data in order to cost of goods sold) for Karmee are 10% of prepare an annual profit plan. Details regarding Karmee’s sales for the sales and are paid for in the month first 6 months of the coming year are as follows: following the sale. The annual fixed operating expenses are presented below. All Estimated Monthly Sales Type of Monthly Sale of these are incurred uniformly throughout January $600,000 Cash sales 20% the year and paid monthly except for insurance and property taxes. Insurance is February 650,000 Credit sales 80% paid quarterly in January, April, July, and October. Property taxes are paid twice a March 700,000 Collection Pattern for Credit Sales year in April and October. April 625,000 Month of sale 30% Annual Fixed Operating Costs May 720,000 One month following sale 40% Advertising $ 720,000 June 800,000 Second month following sale 25% Depreciation 420,000 Karmee’s cost of goods sold averages 40% of the sales value. Insurance 180,000 Karmee’s objective is to maintain a target inventory equal to 30% of Property taxes 240,000 the next month’s sales in units. Purchases of merchandise for resale are Salaries 1,080,000 paid for in the month following the sale. Question: 4The total cash disbursements that Karmee Company will make for the operating expenses (expenses other than the cost of goods sold) during the month of April will be A. $255,000 B. $290,000 C. $385,000 D. $420,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 5A company has budgeted its operations for August. No change in the inventory level during the month is planned. Selected data based on estimated amounts are as follows: Net loss

$(120,000)

Increase in accounts payable

48,000

Depreciation expense

42,000

Decrease in gross amounts of trade account receivables

72,000

Purchase of equipment on 90-day credit terms

18,000

Provision for estimated warranty liability

12,000

What is the expected change in the cash position during August? A. $18,000 decrease. B. $30,000 decrease. C. $36,000 increase. D. $54,000 increase.

Question: 6A master budget was prepared based on the following projections: Sales

$2,400,000

Decrease in inventories Decrease in accounts payable Gross margin

60,000 100,000 40%

Estimated cash disbursements for inventories are A. $920,000 B. $1,000,000 C. $1,400,000 D. $1,480,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 7In preparing its cash budget for April, the following projections were made: Sales

$4,000,000

Gross margin (based on sales) 25% Decrease in inventories

160,000

Decrease in accounts payable for inventories

275,000

For April, the estimated cash disbursements for inventories were A. $3,275,000 B. $3,115,000 C. $2,840,000 D. $2,565,000

Fact Pattern: The following information concerns Montero Corp. Purchases

Sales

January $42,000

$72,000

February 48,000

66,000

March

36,000

60,000

April

54,000

78,000

Collections from Montero Corp.’s customers are normally 70% in the month of sale, and 20% and 9%, respectively, in the 2 months following the sale. The balance is uncollectible. Montero takes full advantage of the 2% discount allowed on purchases paid for by the 10th of the following month. Purchases for May are budgeted at $60,000, and sales for May are forecasted at $66,000. Cash disbursements for expenses are expected to be $14,400 for the month of May. Montero’s cash balance at May 1 was $22,000. Question: 8What are Montero’s expected cash collections during May? A. $46,200 B. $61,800 C. $66,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $67,200

Fact Pattern: The following information concerns Montero Corp. Purchases

Sales

January $42,000

$72,000

February 48,000

66,000

March

36,000

60,000

April

54,000

78,000

Collections from Montero Corp.’s customers are normally 70% in the month of sale, and 20% and 9%, respectively, in the 2 months following the sale. The balance is uncollectible. Montero takes full advantage of the 2% discount allowed on purchases paid for by the 10th of the following month. Purchases for May are budgeted at $60,000, and sales for May are forecasted at $66,000. Cash disbursements for expenses are expected to be $14,400 for the month of May. Montero’s cash balance at May 1 was $22,000. Question: 9What are Montero’s expected cash disbursements for May? A. $14,400 B. $52,920 C. $67,320 D. $68,400

Fact Pattern: The following information concerns Montero Corp. Purchases

Sales

January $42,000

$72,000

February 48,000

66,000

March

36,000

60,000

April

54,000

78,000

Collections from Montero Corp.’s customers are normally 70% in the month of sale, and 20% and 9%, respectively, in the 2 months following the sale. The balance is uncollectible. Montero takes full advantage of the 2% discount allowed on purchases paid for by the 10th of the following month. Purchases for May are budgeted at $60,000, and sales for May are forecasted at $66,000. Cash disbursements for expenses are expected to be $14,400 for the month of May. Montero’s cash balance at May 1 was $22,000. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 10What was Montero’s cash balance on April 1, assuming cash disbursements for expenses increased 20% from April to May? A. $72,540 B. $22,000 C. $(3,260) D. $(2,540)

Fact Pattern: Polk Retailers is developing cash and other budget information for July, August, and September. At June 30, Polk had cash of $6,600, accounts receivable of $524,000, inventories of $371,280, and accounts payable of $159,666. The budget is to be based on the following assumptions: Sales Each month’s sales are billed on the last day of the month. Customers are allowed a 2% discount if payment is made within 10 days after the billing date. Receivables are booked gross. 65% of the billings are collected within the discount period, 20% are collected by the end of the month, 10% are collected by the end of the second month, and 5% prove uncollectible. Purchases 60% of all purchases of materials and selling, general, and administrative expenses are paid in the month purchased and the remainder in the following month. Each month’s ending inventory in units is equal to 120% of the next month’s units of sales. The cost of each unit of inventory is $25. Selling, general, and administrative expenses, of which $3,000 is depreciation, are equal to 20% of the current month’s sales. Actual and projected sales are as follows: Dollars

Units

May

$424,000

10,600

June

436,000

10,900

July

428,000

10,700

August

408,000

10,200

September 432,000

10,800

October

11,000

440,000

Question: 11Polk’s budgeted cash disbursements during August are ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $297,306 B. $272,518 C. $262,300 D. $345,000

Fact Pattern: Information pertaining to Noskey Corporation’s sales revenue is presented in the following table: November

December

January

Year 1

Year 1

Year 2

(Actual)

(Budget)

(Budget)

Cash sales $ 80,000

$100,000

$ 60,000

Credit sales 240,000

360,000

180,000

Total sales $320,000

$460,000

$240,000

Management estimates that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Quantity of inventory purchased is equal to next month’s cost of sales, and gross profit margin is 30%. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder are paid in the month following the purchase. Question: 12Noskey Corporation’s budgeted total cash payments in December Year 1 for inventory purchases are A. $405,000 B. $283,500 C. $220,500 D. $168,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern: Cooper Company’s management team is preparing a cash budget for the coming quarter. The following budgeted information is under review: January February March Revenue

$700,000 $800,000 $500,000

Inventory purchases 350,000 425,000 225,000 Other expenses

150,000 175,000 175,000

The company expects to collect 40% of its monthly sales in the month of sale and 60% in the following month. 50% of inventory purchases are paid in the month of purchase and the other 50% in the following month. All payments for other expenses are made in the month incurred. Question: 13Cooper forecasts the following account balances at the beginning of the quarter. Cash

$100,000

Accounts receivable

300,000

Accounts payable (inventory) 500,000 Given the above information, the projected change in cash during the coming quarter will be A. $412,500 B. $300,000 C. $112,500 D. $0

Question: 14An entity is preparing a cash forecast based on the following information:  Monthly sales: December, $200,000; January, $200,000; February, $350,000; March, $400,000.  All sales are on credit and collected the month following the sale.  Purchases are 60% of next month’s sales and are paid for in the month of purchase.  Other monthly expenses are $25,000, including $5,000 of depreciation. If the January beginning cash balance is $30,000, and the entity is required to maintain a minimum cash balance of $10,000, how much short-term borrowing will be required at the end of February? Loans are repaid in the following month, even though that might require additional borrowing at the end of the month. A. $60,000 B. $70,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $75,000 D. $80,000

Question: 15A company is in its first year of business. The company had a beginning cash balance of $85,000 for the quarter. The company has a $50,000 short-term line of credit. The budgeted information for the first quarter is shown below. January February March Sales

$60,000 $40,000 $50,000

Purchases

35,000 40,000

75,000

Operating costs 25,000 25,000

25,000

All sales are made on credit and are collected in the second month following the sale. Purchases are paid in the month following the purchase, while operating costs are paid in the month that they are incurred. How much will the company need to borrow at the end of the quarter if the company needs to maintain a minimum cash balance of $5,000, as required by a loan covenant agreement? A. $0 B. $5,000 C. $10,000 D. $45,000

Question: 16Which one of the following best represents a factor that should be considered for medium- and long-term cash forecasting? A. Pre-tax cost of capital projects. B. Current monthly depreciation. C. Impact of stock split. D. Non-routine property sales.

Question: 17A corporation’s current year-end sales totaled $240 million, and its ending cash balance was $20 million. The corporation anticipates its sales for the upcoming year will be $260 million. On average, 10% of a year’s sales will be collected during the following year. Assume the corporation has no uncollectible accounts. The corporation also anticipates cash expenses of $240 million and depreciation of $5 million. During the next year, the corporation intends to spend $30 million cash for capital improvements. If the corporation’s policy is to have a ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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minimum of $10 million cash available at the beginning of each year, its budgeted cash flow projections indicate that it will need outside financing of A. $0 B. $2 million C. $7 million D. $26 million

Question: 18As part of the master budget process, a merchandising company begins to prepare the cash budget for the same period. Which of the following additional information will be most useful to management in preparing this budget? A. Sales credit policies, purchasing terms, and planned capital acquisition. B. Projected revenues, projected expenses, and intended financing activities. C. Credit policies, projected expenses, and inventory procurement policies. D. Planned direct material purchases, planned direct labor, and purchasing terms.

Question: 19A company is preparing its cash budget for the coming month. All sales are made on account. Given the following:

Cash

Beginning

Budgeted

Balances

Amounts

$ 50,000

Accounts receivable

180,000

Sales

$800,000

Cash disbursements

780,000

Depreciation

25,000

Ending accounts receivable

210,000

What is the expected cash balance of the company at the end of the coming month? A. $15,000 B. $40,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $45,000 D. $70,000

Fact Pattern: Tidwell Corporation sells a single product for $20 per unit. All sales are on account, with 60% collected in the month of sale and 40% collected in the following month. A partial schedule of cash collections for January through March of the coming year reveals the following receipts for the period: Cash Receipts January December receivables From January sales From February sales

February

March

$32,000 54,000

$36,000 66,000

$44,000

Other information includes the following:  Inventories

are maintained at 30% of the following month’s sales.  Tidwell desires to keep a minimum cash balance of $15,000. Total payments in January are expected to be $106,500, which excludes $12,000 of depreciation expense. Any required borrowings are in multiples of $1,000.  The December 31 balance sheet for the preceding year revealed a cash balance of $24,900. Question: 20Ignoring income taxes, the financing Tidwell will need in January to maintain the firm’s minimum cash balance is A. $8,000 B. $10,600 C. $11,000 D. $23,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 21A firm develops an annual cash budget in order to A. Support the preparation of its cash flow statement for the annual report. B. Ascertain which capital expenditure projects are feasible and which capital expenditure projects should be deferred. C. Determine the opportunity costs of alternative sales and production strategies. D. Avoid the opportunity costs of noninvested excess cash and minimize the cost of interim financing.

Question: 22A company uses a calendar year and prepares a cash budget for each month of the year. Which one of the following items should be considered when developing July’s cash budget? A. Federal income tax and Social Security tax withheld from employees’ June paychecks to be remitted to the Internal Revenue Service in July. B. Quarterly cash dividends scheduled to be declared on July 15 and paid on August 6 to shareholders of record as of July 25. C. Property taxes levied in the last calendar year scheduled to be paid quarterly in the coming year during the last month of each calendar quarter. D. Recognition that 0.5% of the July sales on account will be uncollectible.

Question: 23A publicly traded company operates a seasonal business with high production in the month of November for which suppliers are paid in December in order to take advantage of a purchase discount. High sales typically occur in December, with payment received by the company in January. The company’s abbreviated December cash budget is shown below. Cash balance, beginning $875,000 Cash receipts

200,000

Cash disbursements Payments to suppliers

520,000

Other operating costs

500,000

Dividends

80,000

Cash balance, ending

$ (25,000)

The company is considering alternatives to provide the company with the desired ending cash balance of $75,000 in December. The best action(s) for the company would be to

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Eliminate $80,000 of dividends and postpone $20,000 of payments to suppliers. B. Eliminate $80,000 of dividends and arrange for $20,000 of short-term borrowing. C. Postpone $100,000 of payments to suppliers. D. Arrange for $100,000 of short-term borrowing.

Question: 24A company has a beginning cash balance of $10,000 and expects $40,000 in cash receipts for each of the next 2 months. Typically, disbursements total about $20,000 per month. The company’s payables policy has been to pay the bills upon receipt to maintain good vendor relationships and take advantage of any discounts. In month 1, the company also expects a one-time $40,000 bill for a patent application. Based on this information, select the statement below that reflects the most appropriate action that the company should take relative to the company’s cash position during the 2-month period. A. The company should arrange a short-term line of credit large enough to cover the projected $10,000 shortfall during the first month. B. The company should defer disbursements to maintain a desired level of cash. C. The company should finance the $40,000 payment over a longer term, but with a higher interest rate. D. No action is necessary as the company will have sufficient cash during the 2-month period.

Question: 25A company’s management team is preparing a cash budget for the coming quarter. January Revenue

February

March

$700,000

$800,000

$500,000

Inventory purchases 350,000

425,000

225,000

Other expenses

175,000

175,000

150,000

The company expects to collect 40% of its monthly sales in the month of sale and 60% in the following month. 50% of inventory purchases are paid in the month of purchase, and 50% in the following month. Payments for all other expenses are made in the month incurred. The company forecasts the following account balances at the beginning of the quarter: Cash Accounts receivable

$200,000 300,000

Accounts payable (Inventory) 400,000 Given the above information, the projected ending cash balance for February will be

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $712,500 B. $500,000 C. $232,500 D. $120,000

Question: 26Which one of the following is in a company’s cash budget? A. Depreciation of plant equipment. B. Amortization of patent costs. C. Conversion of debt for equity. D. Disposal of land.

Question: 27The cash budget must be prepared before completing the A. Capital expenditure budget. B. Sales budget. C. Forecasted balance sheet. D. Production budget.

Question: 28The cash budget is used to plan all of the following except A. The cash collection schedule. B. Outside financing activity. C. The investing of excess cash. D. The firm’s dividend policy.

Question: 29Which of the following budgets or schedules is not considered when creating the cash budget? A. Operating budget. B. Pro forma statement of cash flows.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. Cash collections schedule. D. Cash disbursements schedule.

Subunit 9: Sales Forecasts and Pro Forma Financial Statements Fact Pattern: The following information was adapted from a question The results for the first quarter required the following on Part 4 of the December 1990 CMA examination that changes in the budget assumptions: concerned preparation of a pro forma statement of cost of goods sold. The following is Watson Corporation’s pro  The estimated production in units for the fiscal forma statement of cost of goods sold for the year ended year should be revised from 140,000 to 145,000 August 31, Year 2. units with the balance of production being Watson Corporation scheduled in equal segments over the last 9 months of the year. The actual first quarter’s Pro Forma Statement of Cost of Goods Sold production was 25,000 units. For the Year Ending August 31, Year 2  The planned inventory for finished goods of ($000 omitted) 3,300 units at the end of the fiscal year remains Direct materials: unchanged and will be valued at the average Materials inventory, 9/1/Yr 1 $ 1,200 manufacturing cost for the year. The finished Materials purchased 11,400 goods inventory of 9,300 units on September 1, Materials available for use 12,600 Year 1, had dropped to 9,000 units by Materials inventory, 8/31/Yr 2 1,480 November 30, Year 1. Direct materials consumed $11,120 Direct labor

980

Factory overhead: Indirect materials General factory overhead

1,112 2,800

3,912

Cost of goods manufactured Add: Finished goods inventory 9/1/Yr 1

16,012

Cost of goods available for sale Less: Finished goods inventory, 8/31/Yr 2

16,942

Cost of goods sold

930

(377) $16,565

 Due to a new labor agreement, the labor rate will increase 8% effective June 1, Year 2, the beginning of the fourth quarter, instead of the previously anticipated effective date of September 1, Year 2, the beginning of the next fiscal year.  The assumptions remain unchanged for direct materials inventory at 16,000 units for the beginning inventory and 18,500 units for the ending inventory. Direct materials inventory is valued on a FIFO basis. During the first quarter, direct materials for 27,500 units of output were purchased for $2,200,000. Although direct materials will be purchased evenly for the last 9 months, the cost of the direct materials will increase by 5% on March 1, Year 2, the beginning of the third quarter. One unit of raw material is used in each unit of product.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

 Indirect materials costs will continue to be projected at 10% of the cost of direct materials consumed.  One-half of general factory overhead is considered fixed.

Question: 1Watson’s revised pro forma cost of goods sold statement will report direct materials purchased of A. $11,400,000 B. $11,600,000 C. $11,800,000 D. $12,120,000

Fact Pattern: The following information was adapted from a question The results for the first quarter required the following on Part 4 of the December 1990 CMA examination that changes in the budget assumptions: concerned preparation of a pro forma statement of cost of goods sold. The following is Watson Corporation’s pro  The estimated production in units for the fiscal forma statement of cost of goods sold for the year ended year should be revised from 140,000 to 145,000 August 31, Year 2. units with the balance of production being Watson Corporation scheduled in equal segments over the last 9 months of the year. The actual first quarter’s Pro Forma Statement of Cost of Goods Sold production was 25,000 units. For the Year Ending August 31, Year 2  The planned inventory for finished goods of ($000 omitted) 3,300 units at the end of the fiscal year remains Direct materials: unchanged and will be valued at the average Materials inventory, 9/1/Yr 1 $ 1,200 manufacturing cost for the year. The finished Materials purchased 11,400 goods inventory of 9,300 units on September 1, Materials available for use 12,600 Year 1, had dropped to 9,000 units by Materials inventory, 8/31/Yr 2 1,480 November 30, Year 1. Direct materials consumed $11,120 Direct labor

980

Factory overhead: Indirect materials General factory overhead

1,112 2,800

3,912

Cost of goods manufactured Add: Finished goods inventory 9/1/Yr 1

16,012

Cost of goods available for sale Less: Finished goods inventory, 8/31/Yr 2

16,942

Cost of goods sold

930

(377)

 Due to a new labor agreement, the labor rate will increase 8% effective June 1, Year 2, the beginning of the fourth quarter, instead of the previously anticipated effective date of September 1, Year 2, the beginning of the next fiscal year.  The assumptions remain unchanged for direct materials inventory at 16,000 units for the beginning inventory and 18,500 units for the ending inventory. Direct materials inventory is

$16,565

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

valued on a FIFO basis. During the first quarter, direct materials for 27,500 units of output were purchased for $2,200,000. Although direct materials will be purchased evenly for the last 9 months, the cost of the direct materials will increase by 5% on March 1, Year 2, the beginning of the third quarter. One unit of raw material is used in each unit of product.  Indirect materials costs will continue to be projected at 10% of the cost of direct materials consumed.  One-half of general factory overhead is considered fixed.

Question: 2Watson’s revised pro forma ending direct materials inventory is A. $1,280,000 B. $1,480,000 C. $1,520,136 D. $1,554,000

Fact Pattern: The following information was adapted from a question The results for the first quarter required the following on Part 4 of the December 1990 CMA examination that changes in the budget assumptions: concerned preparation of a pro forma statement of cost of goods sold. The following is Watson Corporation’s pro  The estimated production in units for the fiscal forma statement of cost of goods sold for the year ended year should be revised from 140,000 to 145,000 August 31, Year 2. units with the balance of production being Watson Corporation scheduled in equal segments over the last 9 months of the year. The actual first quarter’s Pro Forma Statement of Cost of Goods Sold production was 25,000 units. For the Year Ending August 31, Year 2  The planned inventory for finished goods of ($000 omitted) 3,300 units at the end of the fiscal year remains Direct materials: unchanged and will be valued at the average Materials inventory, 9/1/Yr 1 $ 1,200 manufacturing cost for the year. The finished Materials purchased 11,400 goods inventory of 9,300 units on September 1, Materials available for use 12,600 Year 1, had dropped to 9,000 units by Materials inventory, 8/31/Yr 2 1,480 November 30, Year 1. Direct materials consumed $11,120 Direct labor

980

Factory overhead:

 Due to a new labor agreement, the labor rate will increase 8% effective June 1, Year 2, the

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Indirect materials General factory overhead

1,112 2,800

3,912

Cost of goods manufactured Add: Finished goods inventory 9/1/Yr 1

16,012

Cost of goods available for sale Less: Finished goods inventory, 8/31/Yr 2

16,942

Cost of goods sold

930

(377) $16,565

beginning of the fourth quarter, instead of the previously anticipated effective date of September 1, Year 2, the beginning of the next fiscal year.  The assumptions remain unchanged for direct materials inventory at 16,000 units for the beginning inventory and 18,500 units for the ending inventory. Direct materials inventory is valued on a FIFO basis. During the first quarter, direct materials for 27,500 units of output were purchased for $2,200,000. Although direct materials will be purchased evenly for the last 9 months, the cost of the direct materials will increase by 5% on March 1, Year 2, the beginning of the third quarter. One unit of raw material is used in each unit of product.  Indirect materials costs will continue to be projected at 10% of the cost of direct materials consumed.  One-half of general factory overhead is considered fixed.

Question: 3Watson’s revised pro forma amount of direct labor cost is A. $980,000 B. $1,037,400 C. $1,058,400 D. $1,096,200

Fact Pattern: The following information was adapted from a question The results for the first quarter required the following on Part 4 of the December 1990 CMA examination that changes in the budget assumptions: concerned preparation of a pro forma statement of cost of goods sold. The following is Watson Corporation’s pro  The estimated production in units for the fiscal forma statement of cost of goods sold for the year ended year should be revised from 140,000 to 145,000 August 31, Year 2. units with the balance of production being Watson Corporation scheduled in equal segments over the last 9 months of the year. The actual first quarter’s Pro Forma Statement of Cost of Goods Sold production was 25,000 units. For the Year Ending August 31, Year 2 ($000 omitted)

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Direct materials: Materials inventory, 9/1/Yr 1 Materials purchased

$ 1,200 11,400

Materials available for use Materials inventory, 8/31/Yr 2

12,600 1,480

Direct materials consumed Direct labor

$11,120 980

Factory overhead: Indirect materials General factory overhead

1,112 2,800

3,912

Cost of goods manufactured Add: Finished goods inventory 9/1/Yr 1

16,012

Cost of goods available for sale Less: Finished goods inventory, 8/31/Yr 2

16,942

Cost of goods sold

930

(377) $16,565

 The planned inventory for finished goods of 3,300 units at the end of the fiscal year remains unchanged and will be valued at the average manufacturing cost for the year. The finished goods inventory of 9,300 units on September 1, Year 1, had dropped to 9,000 units by November 30, Year 1.  Due to a new labor agreement, the labor rate will increase 8% effective June 1, Year 2, the beginning of the fourth quarter, instead of the previously anticipated effective date of September 1, Year 2, the beginning of the next fiscal year.  The assumptions remain unchanged for direct materials inventory at 16,000 units for the beginning inventory and 18,500 units for the ending inventory. Direct materials inventory is valued on a FIFO basis. During the first quarter, direct materials for 27,500 units of output were purchased for $2,200,000. Although direct materials will be purchased evenly for the last 9 months, the cost of the direct materials will increase by 5% on March 1, Year 2, the beginning of the third quarter. One unit of raw material is used in each unit of product.  Indirect materials costs will continue to be projected at 10% of the cost of direct materials consumed.  One-half of general factory overhead is considered fixed.

Question: 4Watson’s revised pro forma cost of goods manufactured is A. $15,430,000 B. $16,012,000 C. $16,830,000 D. $17,760,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: The following information was adapted from a question The results for the first quarter required the following on Part 4 of the December 1990 CMA examination that changes in the budget assumptions: concerned preparation of a pro forma statement of cost of goods sold. The following is Watson Corporation’s pro  The estimated production in units for the fiscal forma statement of cost of goods sold for the year ended year should be revised from 140,000 to 145,000 August 31, Year 2. units with the balance of production being Watson Corporation scheduled in equal segments over the last 9 months of the year. The actual first quarter’s Pro Forma Statement of Cost of Goods Sold production was 25,000 units. For the Year Ending August 31, Year 2  The planned inventory for finished goods of ($000 omitted) 3,300 units at the end of the fiscal year remains Direct materials: unchanged and will be valued at the average Materials inventory, 9/1/Yr 1 $ 1,200 manufacturing cost for the year. The finished Materials purchased 11,400 goods inventory of 9,300 units on September 1, Materials available for use 12,600 Year 1, had dropped to 9,000 units by Materials inventory, 8/31/Yr 2 1,480 November 30, Year 1. Direct materials consumed $11,120 980

Direct labor Factory overhead: Indirect materials General factory overhead

1,112 2,800

3,912

Cost of goods manufactured Add: Finished goods inventory 9/1/Yr 1

16,012

Cost of goods available for sale Less: Finished goods inventory, 8/31/Yr 2

16,942

Cost of goods sold

930

(377) $16,565

 Due to a new labor agreement, the labor rate will increase 8% effective June 1, Year 2, the beginning of the fourth quarter, instead of the previously anticipated effective date of September 1, Year 2, the beginning of the next fiscal year.  The assumptions remain unchanged for direct materials inventory at 16,000 units for the beginning inventory and 18,500 units for the ending inventory. Direct materials inventory is valued on a FIFO basis. During the first quarter, direct materials for 27,500 units of output were purchased for $2,200,000. Although direct materials will be purchased evenly for the last 9 months, the cost of the direct materials will increase by 5% on March 1, Year 2, the beginning of the third quarter. One unit of raw material is used in each unit of product.  Indirect materials costs will continue to be projected at 10% of the cost of direct materials consumed.  One-half of general factory overhead is considered fixed.

Question: 5Watson’s revised pro forma cost of goods sold is closest to

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

A. $16,565,000 B. $16,942,000 C. $17,377,000 D. $17,760,000

Fact Pattern: Easecom manufactures products for networking videoconferencing equipment. Production of specialized units is, to a large extent, performed under contract, with standard units manufactured to marketing projections. Maintenance of customer equipment is an important area of customer satisfaction. Easecom’s income statement for the fiscal year ended October 31, Year 1, is presented below. Easecom Income Statement For the Year Ended October 31, Year 1 ($000 omitted) Net sales: Equipment

$6,000

Maintenance contracts Total net sales Expenses: Cost of goods sold Customer maintenance Selling expense Administrative expense Interest expense Total expenses

7,800 4,600 1,000 600 900 150

• Increase equipment sales prices by 10%. Increase the cost of each unit sold by 3% for • needed technology and quality improvements, and increased variable costs. •Increase maintenance inventory by $250,000 at the beginning of the year and add two maintenance technicians at a total cost of $130,000 to cover wages and related travel expenses. These revisions are intended to improve customer service and response time. The increased inventory will be financed at an annual interest rate of 12%; no other borrowings or loan reductions are contemplated during fiscal Year 2. All other assets will be held to fiscal Year 1 levels. • Increase selling expenses by $250,000 but hold administrative expenses at Year 1 levels. •The effective rate for Year 2 federal and state

7,250

Income before income taxes Income taxes Net income

1,800

Easecom’s management considered the growing video-conferencing market when it proposed the following actions for fiscal Year 2:

550 220

taxes is expected to be 40%, the same as Year 1. These actions are expected to increase equipment unit sales by 6%, with a corresponding 6% growth in maintenance contracts.

$ 330

Question: 6In its pro forma income statement for the fiscal year ending October 31, Year 2, Easecom estimated that total net sales will be A. $8,904,000 B. $7,800,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. $6,996,000 D. $6,000,000

Fact Pattern: Easecom manufactures products for networking videoconferencing equipment. Production of specialized units is, to a large extent, performed under contract, with standard units manufactured to marketing projections. Maintenance of customer equipment is an important area of customer satisfaction. Easecom’s income statement for the fiscal year ended October 31, Year 1, is presented below. Easecom Income Statement For the Year Ended October 31, Year 1 ($000 omitted) Net sales: Equipment

$6,000

Maintenance contracts Total net sales Expenses: Cost of goods sold Customer maintenance Selling expense Administrative expense Interest expense Total expenses

7,800 4,600 1,000 600 900 150

• Increase equipment sales prices by 10%. Increase the cost of each unit sold by 3% for • needed technology and quality improvements, and increased variable costs. •Increase maintenance inventory by $250,000 at the beginning of the year and add two maintenance technicians at a total cost of $130,000 to cover wages and related travel expenses. These revisions are intended to improve customer service and response time. The increased inventory will be financed at an annual interest rate of 12%; no other borrowings or loan reductions are contemplated during fiscal Year 2. All other assets will be held to fiscal Year 1 levels. • Increase selling expenses by $250,000 but hold administrative expenses at Year 1 levels. • effective rate for Year 2 federal and state The

7,250

Income before income taxes Income taxes Net income

1,800

Easecom’s management considered the growing video-conferencing market when it proposed the following actions for fiscal Year 2:

550 220

taxes is expected to be 40%, the same as Year 1. These actions are expected to increase equipment unit sales by 6%, with a corresponding 6% growth in maintenance contracts.

$ 330

Question: 7In its pro forma income statement for the year ended October 31, Year 2, Easecom estimated that cost of goods sold will be A. $8,082,280 B. $7,250,000 C. $5,022,280 D. $4,600,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Easecom manufactures products for networking videoconferencing equipment. Production of specialized units is, to a large extent, performed under contract, with standard units manufactured to marketing projections. Maintenance of customer equipment is an important area of customer satisfaction. Easecom’s income statement for the fiscal year ended October 31, Year 1, is presented below. Easecom Income Statement For the Year Ended October 31, Year 1 ($000 omitted) Net sales: Equipment

$6,000

Maintenance contracts Total net sales Expenses: Cost of goods sold Customer maintenance Selling expense Administrative expense Interest expense Total expenses

7,800 4,600 1,000 600 900 150

• Increase equipment sales prices by 10%. Increase the cost of each unit sold by 3% for • needed technology and quality improvements, and increased variable costs. •Increase maintenance inventory by $250,000 at the beginning of the year and add two maintenance technicians at a total cost of $130,000 to cover wages and related travel expenses. These revisions are intended to improve customer service and response time. The increased inventory will be financed at an annual interest rate of 12%; no other borrowings or loan reductions are contemplated during fiscal Year 2. All other assets will be held to fiscal Year 1 levels. • Increase selling expenses by $250,000 but hold administrative expenses at Year 1 levels. •The effective rate for Year 2 federal and state

7,250

Income before income taxes Income taxes Net income

1,800

Easecom’s management considered the growing video-conferencing market when it proposed the following actions for fiscal Year 2:

550 220

taxes is expected to be 40%, the same as Year 1. These actions are expected to increase equipment unit sales by 6%, with a corresponding 6% growth in maintenance contracts.

$ 330

Question: 8In its pro forma income statement for the year ended October 31, Year 2, estimated net income will be A. $493,032 B. $330,000 C. $328,688 D. $220,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 9A company’s sales budget for the coming year is as follows. Item Volume in Units Sales Price Sales Revenue 1

200,000

$50

$10,000,000

2

150,000

10

1,500,000

3

300,000

30

9,000,000

Total sales revenue

$20,500,000

Items 1 and 3 are different models of the same product. Item 2 is a complement to Item 1. Past experience indicates that the sales volume of Item 2 relative to the sales volume of Item 1 is fairly constant. The company is considering a 10% price increase for the coming year for Item 1, which will cause sales of Item 1 to decline by 20%, while simultaneously causing sales of Item 3 to increase by 5%. If the company institutes the price increase for Item 1, total sales revenue will decrease by A. $1,050,000 B. $850,000 C. $750,000 D. $550,000

Fact Pattern: Super Drive, a computer disk storage and back-up company, uses accrual accounting. The company’s Statement of Financial Position for the year ended November 30 is as follows: Super Drive Statement of Financial Position as of November 30 Assets Cash

Liabilities and Stockholders’ Equity $

52,000 Accounts payable

$ 175,000

Accounts receivable, net

150,000 Common stock

900,000

Inventory

315,000 Retained earnings

442,000

Property, plant, and equipment Total assets

1,000,000 Total liabilities and stockholders’ equity

$1,517,000

$1,517,000

Additional information regarding Super Drive’s operations include the following:  Sales are budgeted at $520,000 for December and $500,000 for January of the next year.  Collections are expected to be 60% in the month of sale and 40% in the month following the sale.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

 Eighty percent of the disk drive components are purchased in the month prior to the month of sale, and 20% are purchased in the month of sale. Purchased components are 40% of the cost of goods sold.  Payment for the components is made in the month following the purchase.  Cost of goods sold is 80% of sales.

Question: 10Super Drive’s projected balance in accounts payable on December 31 is A. $161,280 B. $326,400 C. $166,400 D. $416,000

Fact Pattern: Super Drive, a computer disk storage and back-up company, uses accrual accounting. The company’s Statement of Financial Position for the year ended November 30 is as follows: Super Drive Statement of Financial Position as of November 30 Assets

Liabilities and Stockholders’ Equity

Cash

$

52,000 Accounts payable

$ 175,000

Accounts receivable, net

150,000 Common stock

900,000

Inventory

315,000 Retained earnings

442,000

Property, plant, and equipment

1,000,000 Total liabilities and stockholders’ equity

Total assets

$1,517,000

$1,517,000

Additional information regarding Super Drive’s operations include the following:  Sales are budgeted at $520,000 for December and $500,000 for January of the next year.  Collections are expected to be 60% in the month of sale and 40% in the month following the sale.  Eighty percent of the disk drive components are purchased in the month prior to the month of sale, and 20% are purchased in the month of sale. Purchased components are 40% of the cost of goods sold.  Payment for the components is made in the month following the purchase.  Cost of goods sold is 80% of sales.

Question: 11Super Drive’s projected gross profit for the month ending December 31 is A. $416,000 B. $104,000 C. $134,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. $536,000

Fact Pattern: Kelly Company is a retail sporting goods store that uses accrual accounting for its records. Facts regarding Kelly’s operations are as follows:  Sales are budgeted at $220,000 for December Year 1 and $200,000 for January Year 2.  Collections are expected to be 60% in the month of sale and 38% in the month following the sale.  Gross margin is 25% of sales.  A total of 80% of the merchandise held for resale is purchased in the month prior to the month of sale and 20% is purchased in the month of sale. Payment for merchandise is made in the month following the purchase.  Other expected monthly expenses to be paid in cash are $22,600.  Annual depreciation is $216,000.

Below is Kelly Company’s statement of financial position at November 30, Year 1. Assets Cash

$

22,000

Accounts receivable (net of $4,000 allowance for uncollectible accounts) Inventory

76,000 132,000

Property, plant, and equipment (net of $680,000 accumulated depreciation) Total assets

870,000 $1,100,000

Liabilities and Stockholders’ Equity Accounts payable

$ 162,000

Common stock

800,000

Retained earnings

138,000

Total liabilities and stockholders’ equity $1,100,000

Question: 12Kelly’s pro forma income (loss) before income taxes for December Year 1 is A. $32,400 B. $28,000 C. $10,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. $9,000

Fact Pattern: Kelly Company is a retail sporting goods store that uses accrual accounting for its records. Facts regarding Kelly’s operations are as follows:  Sales are budgeted at $220,000 for December Year 1 and $200,000 for January Year 2.  Collections are expected to be 60% in the month of sale and 38% in the month following the sale.  Gross margin is 25% of sales.  A total of 80% of the merchandise held for resale is purchased in the month prior to the month of sale and 20% is purchased in the month of sale. Payment for merchandise is made in the month following the purchase.  Other expected monthly expenses to be paid in cash are $22,600.  Annual depreciation is $216,000.

Below is Kelly Company’s statement of financial position at November 30, Year 1. Assets Cash

$

22,000

Accounts receivable (net of $4,000 allowance for uncollectible accounts) Inventory

76,000 132,000

Property, plant, and equipment (net of $680,000 accumulated depreciation) Total assets

870,000 $1,100,000

Liabilities and Stockholders’ Equity Accounts payable

$ 162,000

Common stock

800,000

Retained earnings

138,000

Total liabilities and stockholders’ equity $1,100,000

Question: 13Kelly’s projected balance in accounts payable on December 31, Year 1, is A. $162,000 B. $204,000 C. $153,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Some amount other than those given.

Fact Pattern: Kelly Company is a retail sporting goods store that uses accrual accounting for its records. Facts regarding Kelly’s operations are as follows:  Sales are budgeted at $220,000 for December Year 1 and $200,000 for January Year 2.  Collections are expected to be 60% in the month of sale and 38% in the month following the sale.  Gross margin is 25% of sales.  A total of 80% of the merchandise held for resale is purchased in the month prior to the month of sale and 20% is purchased in the month of sale. Payment for merchandise is made in the month following the purchase.  Other expected monthly expenses to be paid in cash are $22,600.  Annual depreciation is $216,000.

Below is Kelly Company’s statement of financial position at November 30, Year 1. Assets Cash

$

22,000

Accounts receivable (net of $4,000 allowance for uncollectible accounts) Inventory

76,000 132,000

Property, plant, and equipment (net of $680,000 accumulated depreciation) Total assets

870,000 $1,100,000

Liabilities and Stockholders’ Equity Accounts payable

$ 162,000

Common stock

800,000

Retained earnings

138,000

Total liabilities and stockholders’ equity $1,100,000

Question: 14Kelly’s projected balance in inventory on December 31, Year 1, is A. $160,000 B. $120,000 C. $153,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $150,000

Question: 15In November, a company finalized its budget for the upcoming calendar year. In December, the decision was made to acquire new equipment in January by trading in old equipment and financing the amount due by a loan with principal and interest due at the end of 3 years. Out-of-pocket costs to operate the machinery would not change. This decision would change which of the company’s budgeted financial statements for the upcoming year? A. The budgeted balance sheet only. B. Both the budgeted balance sheet and the income statement. C. The budgeted balance sheet, the income statement, and the statement of cash flows. D. Both the budgeted income statement and the statement of cash flows.

Question: 16A company owns several retail stores. After all initial budget requests were received for the upcoming year, the company’s abbreviated pro forma income statement is as follows: Sales

$46,000,000

Cost of goods sold

20,700,000

Selling and administrative costs 19,800,000 Operating income

5,500,000

The cost of goods sold and a 5% sales commission are the only variable costs. The company’s upper management believes that the sales manager underestimated projected sales units and wants the sales budget increased such that the company can achieve its goal of a 15% return on sales. The amount by which sales must increase to achieve this goal is A. $4,000,000 B. $3,500,000 C. $1,750,000 D. $1,400,000

Question: 17Pro forma financial statements are part of the budgeting process. Normally, the last pro forma statement prepared is the A. Capital expenditure plan. B. Income statement.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Statement of cost of goods sold. D. Statement of cash flows.

Fact Pattern: The variable operating expenses (other than Karmee Company has been accumulating operating data in order to cost of goods sold) for Karmee are 10% of prepare an annual profit plan. Details regarding Karmee’s sales for the sales and are paid for in the month first 6 months of the coming year are as follows: following the sale. The annual fixed operating expenses are presented below. All Estimated Monthly Sales Type of Monthly Sale of these are incurred uniformly throughout January $600,000 Cash sales 20% the year and paid monthly except for insurance and property taxes. Insurance is February 650,000 Credit sales 80% paid quarterly in January, April, July, and October. Property taxes are paid twice a March 700,000 Collection Pattern for Credit Sales year in April and October. April 625,000 Month of sale 30% Annual Fixed Operating Costs May

720,000 One month following sale

40%

June

800,000 Second month following sale

25%

Advertising

$ 720,000

Depreciation

420,000

Karmee’s cost of goods sold averages 40% of the sales value. Insurance 180,000 Karmee’s objective is to maintain a target inventory equal to 30% of Property taxes 240,000 the next month’s sales in units. Purchases of merchandise for resale are Salaries 1,080,000 paid for in the month following the sale. Question: 18The amount for cost of goods sold that will appear on Karmee Company’s pro forma income statement for the month of February will be A. $195,000 B. $254,000 C. $260,000 D. $272,000

Question: 19A production plan should be based on A. A sales forecast adjusted for projected inventory levels. B. Economic order quantities and reorder points. C. Exponential smoothing. D. Linear regression.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 20The cash budget must be prepared before the company can complete the A. Capital expenditure budget. B. Forecasted income statement. C. Production budget. D. Forecasted balance sheet.

Question: 21One of the final steps in completing a master budget is the preparation of a pro forma cash flow statement. This statement is intended to help users of financial statements A. Evaluate a firm’s economic resources and obligations. B. Evaluate a firm’s liquidity, solvency, and financial flexibility. C. Determine a firm’s components of income from operations. D. Determine whether or not accounts receivable are collectible.

Question: 22A company has used the following data to prepare a pro forma income statement for the first quarter of next year. The company’s effective income tax rate is 40%. The company’s targeted gross margin percentage is 50%. Sales

$4,678,500

Beginning finished goods inventory

12,600

Ending finished goods inventory

18,900

Selling and administrative expenses 1,250,760 Cost of goods manufactured

2,445,790

Which one of the following is the best course of action? A. Since the pro forma gross margin percentage is lower than 50%, management should plan to lower the company’s tax rate to improve next quarter’s results. B. Since the pro forma gross margin percentage is higher than 50%, management should plan to follow the master budget to achieve the targeted results. C. Since the pro forma gross margin percentage is lower than 50%, management should plan to decrease manufacturing costs next quarter.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Since the pro forma gross margin percentage is higher than 50%, management should plan to increase the sales price next quarter.

Question: 23A corporation manufactures goods that are sold by independent sales agents who receive a 20% payment based on sales value. The corporation’s pro forma income statement for the upcoming year is below. Sales

$15,000,000

Cost of goods sold (all variable)

6,000,000

Payment to sales agents

3,000,000

Other expenses (all fixed)

2,000,000

Operating income

$ 4,000,000

After the budget was created, the corporation became aware that its primary competitors would each be raising their selling prices by 5%. If the corporation also increased its selling price by 5%, the company’s revised operating income would be A. $4,750,000 B. $4,600,000 C. $4,300,000 D. $4,200,000

Question: 24A corporation’s annual budget shows expected inventory purchases of $55,000,000 from its suppliers. Selected financial information from the corporation’s pro forma beginning and ending balance sheets are as shown below. January 1 December 31 Inventory

$6,000,000 $7,500,000

Accounts payable $4,000,000 $5,000,000 On the corporation’s pro forma Statement of Cash Flows, the dollar amount that would be shown for “Cash payments to suppliers” is A. $56,000,000 B. $55,500,000 C. $54,500,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $54,000,000

Question: 25A company is creating its pro forma balance sheet for next year. The company anticipates that 50% of sales will be collected during the month of sale, 40% will be collected in the month following the sale, and 10% will be collected 2 months after the sale. If the company’s budgeted sales for the months of October, November, and December of the upcoming year are $200,000, $350,000, and $450,000, respectively, the company’s budgeted yearend accounts receivable balance is A. $260,000 B. $285,000 C. $299,000 D. $385,000

Question: 26A budgeted income statement based upon sales of 100,000 units is shown below: Sales

€10,000,000

Cost of sales (all variable)

6,000,000

Selling and general expenses (55% fixed)

3,000,000

Interest expense

50,000

Income tax expense Income

285,000 €

665,000

If the sales estimate increased to 120,000 units, the company’s projected operating income would be A. €1,530,000 B. €1,480,000 C. €1,465,000 D. €1,200,000

Question: 27A company makes one product that it sells for €125 per unit. The product has a contribution margin of 35% of sales. Direct materials account for 10% of sales. Variable manufacturing overhead is 5% of sales. Fixed costs are €200,000 per year. The controller wants to create a pro forma income statement where the sales increase from 10,000 units to 12,000 units. The average income tax rate is 25.71%. What is the change in operating income as a result of the increase in unit sales? A. €50,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. €65,000 C. €75,000 D. €87,500

Question: 28The pro forma income statement for a manufacturing company is built on projections of all of the following except A. Marketing costs. B. Production overhead. C. Cash balances. D. Ending inventory.

Question: 29A company expects the following results for Year 1. Sales

$2,000,000

Cost of goods sold

1,200,000

Indirect costs

400,000

Earnings before interest and taxes

$ 400,000

The controller is preparing a forecast for Year 2 using the following assumptions. Unit sales growth: 5% per year Increase in unit selling price: 3% per year Increase in direct cost per unit: 2% per year Increase in indirect costs: 4% per year The forecast of earnings before interest and taxes for Year 2 using the above assumptions (rounded to the nearest thousand) would be A. $523,000 B. $462,000 C. $460,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $423,000

Question: 30A large manufacturer’s forecast of total sales revenues for a year is least likely to be influenced by A. The seasonal pattern of sales revenues throughout the year. B. Anticipated interest rates and unemployment rates. C. Expected shortages of key raw materials. D. Input from sales personnel.

Question: 31Which one of the following statements regarding selling and administrative budgets is most accurate? A. Selling and administrative budgets are usually optional. B. Selling and administrative budgets are fixed in nature. C. Selling and administrative budgets are difficult to allocate by month and are best presented as one number for the entire year. D. Selling and administrative budgets need to be detailed in order that the key assumptions can be better understood.

Question: 32The pro forma statement of employee benefit costs, a budget schedule that is prepared as part of an organization’s annual profit plan, would include costs related to A. Employees’ gross wages and salaries and the related company-paid benefits. B. Employees’ net wages and salaries and the related company-paid benefits. C. All payroll-related deductions withheld from employees and company-paid benefits. D. Company-paid benefits and company-paid payroll taxes.

Question: 33A company that manufactures furniture is establishing its budget for the upcoming year. All of the following items would appear in the overhead budget except for the A. Overtime paid to the workers who perform production scheduling. B. Cost of glue used to secure the attachment of the legs to the tables. C. Fringe benefits paid to the production supervisor.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Freight charges paid for the delivery of raw materials to the company.

Question: 34All of the following would appear on a projected schedule of cost of goods manufactured except for A. Ending work-in-process inventory. B. Beginning finished goods inventory. C. The cost of raw materials used. D. Applied manufacturing overhead.

Question: 35The information contained in a cost of goods manufactured budget most directly relates to the A. Materials used, direct labor, overhead applied, and ending work-in-process budgets. B. Materials used, direct labor, overhead applied, and work-in-process inventories budgets. C. Materials used, direct labor, overhead applied, work-in-process inventories, and finished goods inventories budgets. D. Materials used, direct labor, overhead applied, and finished goods inventories budgets.

Question: 36When preparing the annual budget, which one of the following is an acceptable method of allocating production line workers’ fringe benefits? A. 100% allocation to manufacturing overhead. B. 100% allocation to administrative expenses. C. Pro rata allocation between manufacturing overhead and administrative expenses. D. Pro rata allocation between nonoperating expenses and administrative expenses.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 37A company is developing its annual budget. The company’s products are made to order and shipped immediately. The controller has information on the following accounts: Raw materials Direct labor Advertising Research and development (R&D) Trade discounts Factory indirect labor Factory overhead Selling costs Which of the above accounts should not be included in the cost of goods sold budget? A. Advertising, R&D, and selling costs, only. B. R&D and trade discounts, only. C. Advertising and selling costs, only. D. Advertising, R&D, trade discounts, and selling costs, only.

Question: 38In general, which of the following pro forma financial statements is prepared first? A. Pro forma income statement. B. Pro forma balance sheet. C. Pro forma statement of cash flows. D. Pro forma statement of retained earnings.

Question: 39Which of the following is not a reason that a bank would be interested in reviewing a firm’s pro forma financial statements? A. To determine a borrower’s expected future profitability. B. To determine whether a debt covenant has been violated. C. To assess a current borrower’s projected solvency.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. To evaluate a potential borrower’s projected capital structure.

Question: 40Which of the following parties is least likely to be interested in an entity’s pro forma financial statements? A. Potential lenders. B. Current creditors. C. Governmental taxing authorities. D. Investment analysts.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Study Unit 9: Analysis, Forecasting, and Strategy 9: (195) Analysis, Forecasting, and Strategy 1: (29) Correlation and Regression 2: (43) Learning Curve Analysis 3: (56) Expected Value 4: (11) Sensitivity Analysis 5: (28) Strategic Management 6: (12) The Balanced Scorecard 7: (16) Strategic Planning

Subunit 1: Correlation and Regression Question: 1A company is an automobile replacement parts dealer in a large metropolitan community. The company is preparing its sales forecast for the coming year. Data regarding both the company’s and industry sales of replacement parts as well as both the used and new automobile sales in the community for the last 10 years have been accumulated. If the company wants to determine whether its sales of replacement parts are dependent upon the industry sales of replacement parts or upon the sales of used and new automobiles, the company should employ A. Simulation techniques. B. Correlation and regression analysis. C. Statistical sampling. D. Time series analysis.

Question: 2A company has accumulated data for the last 24 months in order to determine if there is an independent variable that could be used to estimate shipping costs. Three possible independent variables being considered are packages shipped, miles shipped, and pounds shipped. The quantitative technique that should be used to determine whether any of these independent variables might provide a good estimate for shipping costs is A. Flexible budgeting. B. Linear programming. C. Linear regression. D. Variable costing.

Question: 3In the standard regression equation y = a + bx, the letter b is best described as a(n) A. Independent variable. B. Dependent variable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Constant coefficient. D. Variable coefficient.

Question: 4The correlation coefficient that indicates the weakest linear association between two variables is A. –0.73 B. –0.11 C. 0.12 D. 0.35

Question: 5Correlation is a term frequently used in conjunction with regression analysis and is measured by the value of the coefficient of correlation, r. The best explanation of the value r is that it A. Is always positive. B. Interprets variances in terms of the independent variable. C. Ranges in size from negative infinity to positive infinity. D. Is a measure of the relative relationship between two variables.

Question: 6A regression equation A. Estimates the dependent variable. B. Encompasses factors outside the relevant range. C. Is based on objective and constraint functions. D. Estimates the independent variable.

Question: 7What coefficient of correlation results from the following data? X Y 1 10 2 8

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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3 6 4 4 5 2

A. 0 B. –1 C. +1 D. Cannot be determined from the data given.

Question: 8All of the following are assumptions underlying the validity of linear regression output except A. The values of y for a given value of x are normally distributed. B. The mean of the subpopulations of y around the regression line is zero. C. Certainty. D. The variance of the subpopulations of y is constant.

Fact Pattern: Hours of Maintenance In preparing the annual profit plan for the coming year, Wilkens Company Activity Costs wants to determine the cost behavior pattern of the maintenance costs. Wilkens has decided to use linear regression by employing the equation y = January 480 $ 4,200 a + bx for maintenance costs. The prior year’s data regarding maintenance February 320 3,000 hours and costs, and the results of the regression analysis, are given below March 400 3,600 and in the opposite column. April 300 2,820 May 500 4,350 Average cost per hour $9.00 June 310 2,960 a 684.65 July 320 3,030 August 520 4,470 b 7.2884 September 490 4,260 Standard error of a 49.515 October 470 4,050 November 350 3,300 Standard error of b .12126 December 340 3,160 Standard error of the estimate 34.469 Sum 4,800 $43,200 r2 .99724 Average 400 $ 3,600 Question: 9Based upon the data derived from the regression analysis, 420 maintenance hours in a month would mean that Wilkens Co.’s maintenance costs (rounded to the nearest dollar) would be budgeted at

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $3,780 B. $3,600 C. $3,790 D. $3,746

Fact Pattern: Hours of Maintenance In preparing the annual profit plan for the coming year, Wilkens Company Activity Costs wants to determine the cost behavior pattern of the maintenance costs. Wilkens has decided to use linear regression by employing the equation y = January 480 $ 4,200 a + bx for maintenance costs. The prior year’s data regarding maintenance February 320 3,000 hours and costs, and the results of the regression analysis, are given below March 400 3,600 and in the opposite column. April 300 2,820 May 500 4,350 Average cost per hour $9.00 June 310 2,960 a 684.65 July 320 3,030 August 520 4,470 b 7.2884 September 490 4,260 Standard error of a 49.515 October 470 4,050 November 350 3,300 Standard error of b .12126 December 340 3,160 Standard error of the estimate 34.469 Sum 4,800 $43,200 r2 .99724 Average 400 $ 3,600 Question: 10The percentage of Wilkens Co.’s total variance that can be explained by the regression equation is A. 99.724% B. 69.613% C. 80.982% D. 99.862%

Question: 11The letter x in the standard regression equation is best described as a(n) A. Independent variable. B. Dependent variable. C. Constant coefficient.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Coefficient of determination.

Question: 12In regression analysis, which of the following correlation coefficients represents the strongest relationship between the independent and dependent variables? A. 1.03 B. –.02 C. –.89 D. .75

Question: 13The internal auditor of a bank has developed a multiple regression model that has been used for a number of years to estimate the amount of interest income from commercial loans. During the current year, the auditor applies the model and discovers that the r 2 value has decreased dramatically, but the model otherwise seems to be working well. Which of the following conclusions are justified by the change? A. The auditor should calculate the coefficient of correlation. B. Regression analysis is no longer an appropriate technique to estimate interest income. C. Some new factors, not included in the model, are causing interest income to change. D. A linear regression analysis would increase the model’s reliability.

Fact Pattern: Alpha Company produces several different products and is making plans for the introduction of a new product, which it will sell for $6 a unit. The following estimates have been made for manufacturing costs on 100,000 units to be produced the first year: Direct materials $500,000 Direct labor

$40,000 (the labor rate is $4/hour)

Overhead costs have not been established for the new product, but monthly data on total production and overhead cost for the past 24 months have been analyzed using simple linear regression. The results below were derived from the simple regression and provide the basis for overhead cost estimates for the new product. Dependent variable (y) -- Factory overhead costs Independent variable (x) -- Direct labor hours Computed values: y intercept

$40,000

Coefficient of independent variable

$2.10

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Coefficient of correlation

0.953

Standard error of estimate

$2,840

Standard error of regression coefficient 0.42 Mean value of independent variable

$18,000

Coefficient of determination

0.908

Question: 14What percentage of the variation in Alpha’s overhead costs is explained by the independent variable? A. 90.8% B. 42% C. 48.8% D. 95.3%

Fact Pattern: Alpha Company produces several different products and is making plans for the introduction of a new product, which it will sell for $6 a unit. The following estimates have been made for manufacturing costs on 100,000 units to be produced the first year: Direct materials $500,000 Direct labor

$40,000 (the labor rate is $4/hour)

Overhead costs have not been established for the new product, but monthly data on total production and overhead cost for the past 24 months have been analyzed using simple linear regression. The results below were derived from the simple regression and provide the basis for overhead cost estimates for the new product. Dependent variable (y) -- Factory overhead costs Independent variable (x) -- Direct labor hours Computed values: y intercept

$40,000

Coefficient of independent variable

$2.10

Coefficient of correlation

0.953

Standard error of estimate

$2,840

Standard error of regression coefficient 0.42 Mean value of independent variable

$18,000

Coefficient of determination

0.908

Question: 15Alpha’s total overhead cost for an estimated activity level of 20,000 direct labor hours would be

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $42,000 B. $82,000 C. $122,000 D. $222,000

Question: 16The manager of the assembly department of a company would like to estimate the fixed and variable components of the department’s cost. To do so, the manager has collected information on total cost and output for the past 24 months. To estimate the fixed and variable components of total cost, the manager should use A. Regression analysis. B. Game theory. C. Sensitivity analysis. D. Queuing theory.

Question: 17In determining cost behavior in business, the cost function is often expressed as y = a + bx. Which one of the following cost estimation methods should not be used in estimating fixed and variable costs for the equation? A. Graphic method. B. Simple regression. C. High and low point method. D. Multiple regression.

Question: 18For cost estimation, simple regression differs from multiple regression in that simple regression uses only A. One dependent variable, while multiple regression uses all available data to estimate the cost function. B. Dependent variables, while multiple regression can use both dependent and independent variables. C. One independent variable, while multiple regression uses more than one independent variable. D. One dependent variable, while multiple regression uses more than one dependent variable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 19A manufacturer developed the following multiple regression equation, utilizing many years of data, and uses it to model, or estimate, the cost of its product. Cost = FC + (a × L) + (b × M) Where: FC = fixed costs L = labor rate per hour M = material cost per pound Which one of the following changes would have the greatest impact on invalidating the results of this model? A. A significant reduction in factory overheads, which are a component of fixed costs. B. Renegotiation of the union contract calling for much higher wage rates. C. A large drop in material costs, as a result of purchasing the material from a foreign source. D. A significant change in labor productivity.

Question: 20In order to analyze sales as a function of advertising expenses, the sales manager developed a simple regression model. The model included the following equation, which was based on 32 monthly observations of sales and advertising expenses with a related coefficient of determination of .90. Sales = $10,000 + (2.5 × Advertising expenses) If the advertising expenses in one month amounted to $1,000, the related point estimate of sales would be A. $2,500 B. $11,250 C. $12,250 D. $12,500

Question: 21The results of regressing Y against X are as follows: Coefficient Intercept

5.23

Slope

1.54

When the value of X is 10, the estimated value of Y is A. 6.77

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. 8.05 C. 20.63 D. 53.84

Question: 22While gathering information to use in preparing the annual budget, a company identifies cost drivers associated with manufacturing costs. Which one of the following is a quantitative analysis method the company can use to measure the average change in the manufacturing costs associated with a change in a cost driver? A. Time series analysis. B. Exponential smoothing. C. Regression analysis. D. Learning curve analysis.

Question: 23A company uses simple regression to predict one of its semi-variable costs. The computed equation of y = –25,000 + 2.5x appears to have a good visual fit. The cause of the negative term in this equation could be that A. The zero level of output is outside of the relevant range. B. Too many outliers were included in the data. C. An inappropriate cost driver was used as the independent variable. D. The cost does not exhibit semi-variable behavior.

Question: 24A single-product company uses regression to predict one of its factory overhead costs with materials used as the independent variable. The regression equation is as follows: Y = 542,000 + 0.0000253X. Based on R², management has determined that this model captures a significant portion of the relationship. The behavior of this company’s factory overhead cost with respect to units of finished goods produced is

A. Fixed. B. Semivariable. C. Variable. D. Not determinable from the provided information.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 25A nationwide retail mattress firm will begin selling high-end crib mattresses next year. Management believes sales for this product will be driven primarily by birth rates but will be influenced to a lesser extent by income levels. The best method to use to predict next year’s sales is A. Simple regression. B. Time-series regression. C. Multiple regression. D. Maximum likelihood regression.

Question: 26A cleaning company is evaluating the costs to clean a standard office. The controller has done a linear regression of the hours spent cleaning various offices and the total costs (labor, supplies, transportation) for each office cleaned. The regression analysis yielded the following information. y = $25x + $75 y = the total cost to clean an office x = the hours spent cleaning an office What is the best description of the costs of cleaning an office based on this regression analysis? A. The cost is $100 per hour to clean an office. B. There is $25 of fixed costs and $75 of variable costs per hour to clean an office. C. There is $25 of variable costs per hour and $75 of fixed costs to clean an office. D. The cost is $25 per hour to clean an office.

Question: 27A company uses regression analysis in which monthly advertising expenses are used to predict monthly product sales, both in millions of dollars. The results show a regression coefficient for the independent variable equal to 0.8. This coefficient value indicates that A. On average, every additional dollar of advertising results in $0.8 of additional sales. B. Advertising is not a good predictor of sales because the coefficient is so small. C. When monthly advertising is at its average level, product sales will be $800,000. D. The average monthly advertising expenditure in the sample is $800,000.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 28An accountant for a biotechnology company is working on a projection of next year’s maintenance expenditures for the company’s laboratory equipment used in research and development. By analyzing past maintenance expenditures, the accountant was able to determine that future maintenance expenditures can be expressed by the following simple regression equation: Y = $20,000 + ($50 × X). The variable X is the number of hours the laboratory equipment has been in service. For the previous year, the variable X was determined to be 4,500 hours. If the accountant is projecting that X will be 5,000 hours next year, how much should the accountant project for next year’s maintenance expenditures? A. $225,000 B. $245,000 C. $250,000 D. $270,000

Question: 29An electronics company has developed a regression model to forecast quarterly sales. The model explains the relationship between the company’s sales and the amount it spends on marketing activities. The regression equation for the model is expressed below. s = $3(m) + $150,000 s = sales per quarter m = dollars spent on marketing activities per quarter If the company has forecasted sales of $189,000 for the next quarter, what amount is it planning to spend on marketing activities in the next quarter? A. $13,000 B. $39,000 C. $63,000 D. $113,000

Subunit 2: Learning Curve Analysis Question: 1An entity is preparing a bid for a special project requiring the production of 35,000 units. The engineering personnel have advised that the units can be produced in groups with the first group consisting of 1,000 units. A review of prior experience indicates that the direct labor time needed per unit will be progressively smaller by a constant percentage rate as experience is gained in the production process. The quantitative method that would best estimate the entity’s total cost for the project is A. Linear programming. B. Dynamic programming.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Learning curve analysis. D. Time series analysis.

Question: 2The average labor cost per unit for the first batch produced by a new process is $120. The cumulative average labor cost after the second batch is $72 per product. Using a batch size of 100 and assuming the learning curve continues, the total labor cost of four batches will be A. $4,320 B. $10,368 C. $2,592 D. $17,280

Fact Pattern: Direct materials $ 1,500 Moss Point Manufacturing recently completed and sold an Direct labor ($8.50 × 1,000 hours) 8,500 order of 50 units that had costs as shown in the next column. Variable overhead (1,000 hours × $4.00)* 4,000 Fixed overhead** 1,400 The company has now been requested to prepare a bid for $15,400 150 units of the same product. *Applied on the basis of direct labor hours. **Applied at the rate of 10% of variable cost. Question: 3If an 80% learning curve is applicable, Moss Point’s total cost on this order would be estimated at A. $26,400 B. $32,000 C. $38,000 D. $41,800

Fact Pattern: Direct materials $ 1,500 Moss Point Manufacturing recently completed and sold an Direct labor ($8.50 × 1,000 hours) 8,500 order of 50 units that had costs as shown in the next column. Variable overhead (1,000 hours × $4.00)* 4,000 Fixed overhead** 1,400 The company has now been requested to prepare a bid for $15,400 150 units of the same product. *Applied on the basis of direct labor hours. **Applied at the rate of 10% of variable cost. Question: 4If Moss Point had experienced a 70% learning curve, the bid for the 150 units would A. Show a 30% reduction in the total direct labor hours required with no learning curve.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Include increased fixed overhead costs. C. Be 10% lower than the total bid at an 80% learning curve. D. Include 6.40 direct labor hours per unit at $8.50 per hour.

Question: 5A corporation manufactures specialty components for the electronics industry in a highly labor intensive environment. A manufacturer has asked the corporation to bid on a component that the corporation made for the manufacturer last month. The previous order was for 80 units and required 120 hours of direct labor to manufacture. The manufacturer would now like 240 additional components. The corporation experiences an 80% learning curve on all of its jobs. The number of direct labor hours needed for the corporation to complete the 240 additional components is A. 360.0 B. 187.2 C. 307.2 D. 256.0

Question: 6A particular manufacturing job is subject to an estimated 90% learning curve. The first unit required 50 labor hours to complete. What is the cumulative average time per unit after four units are completed? A. 50.0 hours. B. 45.0 hours. C. 40.5 hours. D. 40.0 hours.

Question: 7A particular manufacturing job is subject to an estimated 80% learning curve. The first unit required 50 labor hours to complete. What is the cumulative average time per unit after eight units are completed? A. 20.0 hours. B. 25.6 hours. C. 32.0 hours. D. 40.0 hours.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 8A particular manufacturing job is subject to an estimated 80% learning curve. The first unit required 50 labor hours to complete. If the learning curve is based on a cumulative average time per unit assumption, what is the time required to complete the second unit? A. 30.0 hours. B. 40.0 hours. C. 45.0 hours. D. 50.0 hours.

Question: 9A learning curve of 80% assumes that direct labor costs are reduced by 20% for each doubling of output. What is the incremental cost of the sixteenth unit produced as an approximate percentage of the first unit produced? A. 41% B. 31% C. 80% D. 64%

Question: 10A new manufacturer in the production of airplane propellers has to train its employees in the process of making propellers. To increase the speed of learning, the manufacturer will give a bonus to the employee with the lowest cumulative average time per unit after eight units are completed. L took 50 hours to complete the first unit, and she is subject to an 80% learning curve. S took 60 hours to complete the first unit, and she is subject to a 70% learning curve. M took 40 hours to complete the first unit, and she is subject to a 90% learning curve. P took 55 hours to complete the first unit, and she is subject to a 75% learning curve. Which employee will receive the bonus? A. L. B. S. C. M. D. P.

Question: 11It is estimated that a particular manufacturing job is subject to an 80% learning curve. The first unit required 50 labor hours to complete. What is the cumulative average time per unit after completing four units? A. 50.0 hours. B. 40.0 hours.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. 32.0 hours. D. 30.0 hours.

Question: 12A company plans to bid on a special project that calls for a total of 24,000 units. The units will be produced in lots, with the first lot consisting of 750 units. Based on prior experience, the direct labor time needed per unit of product will be progressively smaller by a constant percentage rate as experience is gained in the manufacturing process. The quantitative method that would best estimate the company’s total cost for the project is A. Learning curve techniques. B. Differential calculus. C. Discounted cash flow techniques. D. Linear programming.

Question: 13An entity received a request for a competitive bid for the sale of one of its unique boating products with a desired modification. The entity is now in the process of manufacturing this product but with a slightly different modification for another customer. These unique products are labor intensive and both will have long production runs. Which one of the following methods should be used to estimate the cost of the new competitive bid? A. Expected value analysis. B. Learning curve analysis. C. Regression analysis. D. Continuous probability simulation.

Question: 14The technique used to predict the change in direct labor hours as a new process stabilizes is A. Simple regression. B. Multiple regression. C. Time series analysis. D. Learning curve analysis.

Fact Pattern: LCB, Inc., is preparing a bid to produce engines. The company has experienced the following costs: Cumulative

Total Cumulative Costs

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Units Produced

Materials

Labor

10

$ 60,000

$120,000

20

120,000

192,000

40

240,000

307,200

At LCB, variable overhead is applied on the basis of $1.00 per direct labor dollar. Based on historical costs, LCB knows that the production of 40 engines will incur $100,000 of fixed overhead costs. The bid request is for an additional 40 units; all companies submitting bids are allowed to charge a maximum of 25% above full cost for each order. Question: 15In order to ensure that the company would not lose money on the project, LCB’s minimum bid for the 40 units would be A. $760,800 B. $608,640 C. $885,800 D. $708,640

Fact Pattern: LCB, Inc., is preparing a bid to produce engines. The company has experienced the following costs: Cumulative

Total Cumulative Costs

Units Produced

Materials

Labor

10

$ 60,000

$120,000

20

120,000

192,000

40

240,000

307,200

At LCB, variable overhead is applied on the basis of $1.00 per direct labor dollar. Based on historical costs, LCB knows that the production of 40 engines will incur $100,000 of fixed overhead costs. The bid request is for an additional 40 units; all companies submitting bids are allowed to charge a maximum of 25% above full cost for each order. Question: 16LCB’s rate of learning on the 3-year engine contract is A. 75.5% B. 79.0% C. 80.0%

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. 62.6%

Fact Pattern: LCB, Inc., is preparing a bid to produce engines. The company has experienced the following costs: Cumulative

Total Cumulative Costs

Units Produced

Materials

Labor

10

$ 60,000

$120,000

20

120,000

192,000

40

240,000

307,200

At LCB, variable overhead is applied on the basis of $1.00 per direct labor dollar. Based on historical costs, LCB knows that the production of 40 engines will incur $100,000 of fixed overhead costs. The bid request is for an additional 40 units; all companies submitting bids are allowed to charge a maximum of 25% above full cost for each order. Question: 17The maximum bid price that LCB, Inc., could submit to the Department of the Navy for the 40 units is A. $760,800 B. $608,640 C. $885,800 D. $708,640

Fact Pattern: Donehart Corporation produces agricultural vehicles. Most of the component parts for these vehicles are subcontracted to reliable vendors. The final assembly of all vehicles is accomplished at Donehart’s plant. Donehart’s Engineering Department has developed a new fuel injection system that can be produced in-house because of the availability of production capacity. The first production run of the new fuel injection system has already been completed in-house. This 80-unit production run took 60 direct labor hours per unit to produce based on the cumulative average labor hours per fuel injection unit. Donehart has experienced an 80% learning curve with similar products, and this experience indicates that learning tends to cease by the time 640 systems are produced. Donehart’s direct labor cost (including employee benefits) is $18 per direct labor hour. Donehart’s management must decide whether to continue producing the fuel injection system or to subcontract the work. Donehart’s purchasing agent has received a proposal from Midland, Inc., a company specializing in fuel injection systems. From past contracts, Midland has proven to be efficient and reliable. The terms of Midland’s proposal are outlined below. - Donehart must supply all materials required for the fuel injection system units.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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- The first 80 units produced by Midland will require direct labor input at the rate of 56 hours per unit. Current direct labor cost is $20 per hour. - The direct labor cost charged to Donehart will be the hourly rate in effect at the time the work is performed. Midland is currently negotiating its labor contract, which includes a 4% increase in direct labor cost and should be applicable when Donehart signs the contract. - A learning curve factor of 75% will be applied through the first 640 units produced, and all benefits derived from the learning factor will accrue to Donehart. - Donehart must pay the actual labor cost incurred plus a 5% margin.

Question: 18If Donehart manufactures the units in-house, what is the average labor hours per unit after manufacturing 640 units? A. 60 B. 30.72 C. 23.63 D. 23.04

Fact Pattern: Donehart Corporation produces agricultural vehicles. Most of the component parts for these vehicles are subcontracted to reliable vendors. The final assembly of all vehicles is accomplished at Donehart’s plant. Donehart’s Engineering Department has developed a new fuel injection system that can be produced in-house because of the availability of production capacity. The first production run of the new fuel injection system has already been completed in-house. This 80-unit production run took 60 direct labor hours per unit to produce based on the cumulative average labor hours per fuel injection unit. Donehart has experienced an 80% learning curve with similar products, and this experience indicates that learning tends to cease by the time 640 systems are produced. Donehart’s direct labor cost (including employee benefits) is $18 per direct labor hour. Donehart’s management must decide whether to continue producing the fuel injection system or to subcontract the work. Donehart’s purchasing agent has received a proposal from Midland, Inc., a company specializing in fuel injection systems. From past contracts, Midland has proven to be efficient and reliable. The terms of Midland’s proposal are outlined below. - Donehart must supply all materials required for the fuel injection system units. - The first 80 units produced by Midland will require direct labor input at the rate of 56 hours per unit. Current direct labor cost is $20 per hour. - The direct labor cost charged to Donehart will be the hourly rate in effect at the time the work is performed. Midland is currently negotiating its labor contract, which includes a 4% increase in direct labor cost and should be applicable when Donehart signs the contract. - A learning curve factor of 75% will be applied through the first 640 units produced, and all benefits derived from the learning factor will accrue to Donehart. - Donehart must pay the actual labor cost incurred plus a 5% margin.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 19If Donehart manufactures the units in-house, how many total hours will it take to complete 1,000 units? A. 8,294.4 hours. B. 19,660.8 hours. C. 24,330 hours. D. 27,955.2 hours.

Fact Pattern: Donehart Corporation produces agricultural vehicles. Most of the component parts for these vehicles are subcontracted to reliable vendors. The final assembly of all vehicles is accomplished at Donehart’s plant. Donehart’s Engineering Department has developed a new fuel injection system that can be produced in-house because of the availability of production capacity. The first production run of the new fuel injection system has already been completed in-house. This 80-unit production run took 60 direct labor hours per unit to produce based on the cumulative average labor hours per fuel injection unit. Donehart has experienced an 80% learning curve with similar products, and this experience indicates that learning tends to cease by the time 640 systems are produced. Donehart’s direct labor cost (including employee benefits) is $18 per direct labor hour. Donehart’s management must decide whether to continue producing the fuel injection system or to subcontract the work. Donehart’s purchasing agent has received a proposal from Midland, Inc., a company specializing in fuel injection systems. From past contracts, Midland has proven to be efficient and reliable. The terms of Midland’s proposal are outlined below. - Donehart must supply all materials required for the fuel injection system units. - The first 80 units produced by Midland will require direct labor input at the rate of 56 hours per unit. Current direct labor cost is $20 per hour. - The direct labor cost charged to Donehart will be the hourly rate in effect at the time the work is performed. Midland is currently negotiating its labor contract, which includes a 4% increase in direct labor cost and should be applicable when Donehart signs the contract. - A learning curve factor of 75% will be applied through the first 640 units produced, and all benefits derived from the learning factor will accrue to Donehart. - Donehart must pay the actual labor cost incurred plus a 5% margin.

Question: 20If Donehart manufactures the units in-house, how much additional cost will the company incur after the first batch in order to produce a total of 1,000 units? A. $416,793.60 B. $463,104 C. $503,193.60

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. $559,104

Fact Pattern: Donehart Corporation produces agricultural vehicles. Most of the component parts for these vehicles are subcontracted to reliable vendors. The final assembly of all vehicles is accomplished at Donehart’s plant. Donehart’s Engineering Department has developed a new fuel injection system that can be produced in-house because of the availability of production capacity. The first production run of the new fuel injection system has already been completed in-house. This 80-unit production run took 60 direct labor hours per unit to produce based on the cumulative average labor hours per fuel injection unit. Donehart has experienced an 80% learning curve with similar products, and this experience indicates that learning tends to cease by the time 640 systems are produced. Donehart’s direct labor cost (including employee benefits) is $18 per direct labor hour. Donehart’s management must decide whether to continue producing the fuel injection system or to subcontract the work. Donehart’s purchasing agent has received a proposal from Midland, Inc., a company specializing in fuel injection systems. From past contracts, Midland has proven to be efficient and reliable. The terms of Midland’s proposal are outlined below. - Donehart must supply all materials required for the fuel injection system units. - The first 80 units produced by Midland will require direct labor input at the rate of 56 hours per unit. Current direct labor cost is $20 per hour. - The direct labor cost charged to Donehart will be the hourly rate in effect at the time the work is performed. Midland is currently negotiating its labor contract, which includes a 4% increase in direct labor cost and should be applicable when Donehart signs the contract. - A learning curve factor of 75% will be applied through the first 640 units produced, and all benefits derived from the learning factor will accrue to Donehart. - Donehart must pay the actual labor cost incurred plus a 5% margin.

Question: 21If Donehart subcontracts the order to Midland, what is the total number of labor hours required to produce the 640 units on the learning curve? A. 15,120 hours. B. 18,350 hours. C. 19,530 hours. D. 35,840 hours.

Fact Pattern: Donehart Corporation produces agricultural vehicles. Most of the component parts for these vehicles are subcontracted to reliable vendors. The final assembly of all vehicles is accomplished at Donehart’s plant. Donehart’s Engineering Department has developed a new fuel injection system that can be produced in-house because of the availability of production capacity. The first production run of the new fuel injection system has already been completed in-house. This 80-unit production run took 60 direct labor hours per unit to produce based on the ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

cumulative average labor hours per fuel injection unit. Donehart has experienced an 80% learning curve with similar products, and this experience indicates that learning tends to cease by the time 640 systems are produced. Donehart’s direct labor cost (including employee benefits) is $18 per direct labor hour. Donehart’s management must decide whether to continue producing the fuel injection system or to subcontract the work. Donehart’s purchasing agent has received a proposal from Midland, Inc., a company specializing in fuel injection systems. From past contracts, Midland has proven to be efficient and reliable. The terms of Midland’s proposal are outlined below. - Donehart must supply all materials required for the fuel injection system units. - The first 80 units produced by Midland will require direct labor input at the rate of 56 hours per unit. Current direct labor cost is $20 per hour. - The direct labor cost charged to Donehart will be the hourly rate in effect at the time the work is performed. Midland is currently negotiating its labor contract, which includes a 4% increase in direct labor cost and should be applicable when Donehart signs the contract. - A learning curve factor of 75% will be applied through the first 640 units produced, and all benefits derived from the learning factor will accrue to Donehart. - Donehart must pay the actual labor cost incurred plus a 5% margin.

Question: 22If Donehart subcontracts the order to Midland, how many hours will it take to complete a unit after the initial 640 units on the learning curve are finished? A. 11.81 hours. B. 15.75 hours. C. 21.50 hours. D. 23.625 hours.

Fact Pattern: Donehart Corporation produces agricultural vehicles. Most of the component parts for these vehicles are subcontracted to reliable vendors. The final assembly of all vehicles is accomplished at Donehart’s plant. Donehart’s Engineering Department has developed a new fuel injection system that can be produced in-house because of the availability of production capacity. The first production run of the new fuel injection system has already been completed in-house. This 80-unit production run took 60 direct labor hours per unit to produce based on the cumulative average labor hours per fuel injection unit. Donehart has experienced an 80% learning curve with similar products, and this experience indicates that learning tends to cease by the time 640 systems are produced. Donehart’s direct labor cost (including employee benefits) is $18 per direct labor hour. Donehart’s management must decide whether to continue producing the fuel injection system or to subcontract the work. Donehart’s purchasing agent has received a proposal from Midland, Inc., a company specializing in fuel injection systems. From past contracts, Midland has proven to be efficient and reliable. The terms of Midland’s proposal are outlined below. - Donehart must supply all materials required for the fuel injection system units.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

- The first 80 units produced by Midland will require direct labor input at the rate of 56 hours per unit. Current direct labor cost is $20 per hour. - The direct labor cost charged to Donehart will be the hourly rate in effect at the time the work is performed. Midland is currently negotiating its labor contract, which includes a 4% increase in direct labor cost and should be applicable when Donehart signs the contract. - A learning curve factor of 75% will be applied through the first 640 units produced, and all benefits derived from the learning factor will accrue to Donehart. - Donehart must pay the actual labor cost incurred plus a 5% margin.

Question: 23If Donehart subcontracts the order to Midland, how much additional cost will Donehart incur after the first batch in order to obtain a total of 1,000 units? A. $302,400 B. $330,220.80 C. $390,600 D. $426,535.20

Question: 24Management of a bookkeeping company observed that the average time spent to perform identical tasks using a new software package decreases as the number of tasks performed increases. The following information on the use of the new software was collected. Number of Total Time to Average Time Tasks

Perform All

Performed Tasks

to Perform Each Task

1

10 minutes

10 minutes

2

18 minutes

9 minutes

4

32.4 minutes

8.1 minutes

If this learning effect continues, what is the average time to perform each of the first eight tasks? A. 7.29 minutes. B. 8.1 minutes. C. 6.56 minutes. D. 5.90 minutes.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 25Learning curves are best used to predict A. Unit material costs. B. Overhead variances. C. Total unit costs. D. Unit direct labor costs.

Fact Pattern: Aerosub, Inc., has developed a new product for spacecraft that includes the production of a complex part. The manufacture of this part requires a high degree of technical skill. Management believes there is a good opportunity for its technical force to learn and improve as they become accustomed to the production process. The production of the first unit requires 10,000 direct labor hours. Management projects an 80% learning curve and wants to produce a total of eight units. Question: 26Upon completion of the eighth unit, Aerosub’s cumulative average direct labor hours required per unit of the product will be A. 5,120 hours. B. 6,400 hours. C. 8,000 hours. D. 10,000 hours.

Fact Pattern: Aerosub, Inc., has developed a new product for spacecraft that includes the production of a complex part. The manufacture of this part requires a high degree of technical skill. Management believes there is a good opportunity for its technical force to learn and improve as they become accustomed to the production process. The production of the first unit requires 10,000 direct labor hours. Management projects an 80% learning curve and wants to produce a total of eight units. Question: 27Upon completion of the eighth unit, Aerosub’s cumulative direct labor hours will be A. 29,520 hours. B. 40,960 hours. C. 64,000 hours. D. 80,000 hours.

Fact Pattern: Aerosub, Inc., has developed a new product for spacecraft that includes the production of a complex part. The manufacture of this part requires a high degree of technical ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

skill. Management believes there is a good opportunity for its technical force to learn and improve as they become accustomed to the production process. The production of the first unit requires 10,000 direct labor hours. Management projects an 80% learning curve and wants to produce a total of eight units. Question: 28After completing the first unit, the estimated total direct labor hours Aerosub will require to produce the seven additional units will be A. 30,960 hours. B. 40,960 hours. C. 56,000 hours. D. 70,000 hours.

Question: 29A manufacturing company has the opportunity to submit a bid for 20 units of a product on which it has already produced two 10-unit lots. The production manager believes that the learning experience observed on the first two lots will continue for at least the next two lots. The direct labor required on the first two lots was as follows:  5,000 direct labor hours for the first lot of 10 units  3,000 additional direct labor hours for the second lot of 10 units The learning rate experienced by the company on the first two lots of this product is A. 40.0% B. 60.0% C. 62.5% D. 80.0%

Fact Pattern: Proper Propeller, Inc., plans to manufacture a newly designed high-technology propeller for airplanes. Proper Propeller forecasts that as workers gain experience, they will need less time to complete the job. Based on prior experience, Proper Propeller estimates a 70% cumulative learning curve and has projected the following costs: Cumulative Number of Units Produced

Manufacturing Projections Average Cost per Unit

Total Costs

1

$20,000

$20,000

2

14,000

28,000

Question: 30If Proper Propeller produces eight units, the average manufacturing cost per unit will be ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

A. $1,647 B. $6,860 C. $9,800 D. $14,000

Fact Pattern: Proper Propeller, Inc., plans to manufacture a newly designed high-technology propeller for airplanes. Proper Propeller forecasts that as workers gain experience, they will need less time to complete the job. Based on prior experience, Proper Propeller estimates a 70% cumulative learning curve and has projected the following costs: Cumulative Number of Units Produced

Manufacturing Projections Average Cost per Unit

Total Costs

1

$20,000

$20,000

2

14,000

28,000

Question: 31If Proper Propeller produces eight units, the total manufacturing cost will be A. $50,660 B. $54,880 C. $62,643 D. $112,000

Fact Pattern: Proper Propeller, Inc., plans to manufacture a newly designed high-technology propeller for airplanes. Proper Propeller forecasts that as workers gain experience, they will need less time to complete the job. Based on prior experience, Proper Propeller estimates a 70% cumulative learning curve and has projected the following costs: Cumulative Number of Units Produced

Manufacturing Projections Average Cost per Unit

Total Costs

1

$20,000

$20,000

2

14,000

28,000

Question: 32After completing production of the first propeller, the estimated cost for Proper Propeller to fill an order for seven additional propellers is

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

A. $34,880 B. $54,880 C. $92,000 D. $98,000

Question: 33A manufacturer uses a cumulative average-time learning curve model to monitor labor costs. Data regarding two recently completed batches of a part that is used in tractor-trailer rigs is as follows: Batch Number Cumulative Average Number of Units

Hours Per Unit

1

50

20

2

50

16

If the same rate of learning continues for the next several batches produced, which of the following best describes (1) the type (i.e., degree) of learning curve that the firm is experiencing and (2) the average hours per unit for units included in the 201-400 range of units produced (i.e., the last 200 units)? Type (Degree) of Average Hours Per Learning Curve Unit for Units 201-400 A. 20% 10.24 B. 80% 10.24 C. 80% 7.68 D. 20% 3.84

Question: 34A manufacturing company required 800 direct labor hours to produce the first lot of four units of a new motor. Management believes that a 90% learning curve will be experienced over four lots of production. How many direct labor hours will be required to manufacture the next 12 units? A. 1,792 B. 1,944 C. 2,016 D. 2,160

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 35Which one of the following will allow a better use of standard costs and variance analysis to help improve managerial decision-making? A. Company A does not differentiate between variable and fixed overhead in calculating its overhead variances. B. Company B uses the prior year’s average actual cost as the current year’s standard. C. Company C investigates only negative variances. D. Company D constantly revises standards to reflect learning curves.

Question: 36Which one of the following techniques would most likely be used to analyze reductions in the time required to perform a task as experience with that task increases? A. Regression analysis. B. Learning curve analysis. C. Sensitivity analysis. D. Normal probability analysis.

Question: 37A manufacturing firm plans to bid on a special order of 80 units that will be manufactured in lots of 10 units each. The production manager estimates that the direct labor hours per unit will decline by a constant percentage each time the cumulative quantity of units produced doubles. The quantitative technique used to capture this phenomenon and estimate the direct labor hours required for the special order is A. Cost-profit-volume analysis. B. The Markov process. C. Linear programming analysis. D. Learning curve analysis.

Question: 38Which one of the following statements best demonstrates the concept of the learning curve? A. A learning curve is a linear cost behavior influenced by learning. B. A learning curve is a judgmental method of estimating costs when learning is present. C. A learning curve is a percentage by which average time per unit produced decreases as output doubles. D. A learning curve is a percentage by which average time falls as output increases by 1.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 39A corporation is developing a new product that will be manufactured in pairs. The company recently produced the first two units of this product using 200 hours of direct labor time. If the corporation has a 90% learning curve and uses the cumulative average-time learning model, the total direct labor time to manufacture the first four units of this new product is A. 400 hours. B. 380 hours. C. 360 hours. D. 324 hours.

Question: 40The quantitative technique used to project the direct labor costs for full-scale production of a product from the initial run of the product is A. Learning curve analysis. B. Linear programming. C. Monte Carlo simulation. D. Expected value analysis.

Question: 41A company experiences a cumulative learning curve of 75% on the manufacturing of a particular electrical product. It takes 100 hours to make the first 500 units. How many hours will it take to make 2,000 units in total? A. 225.00 B. 231.25 C. 250.00 D. 300.00

Question: 42A software company recently established a customer service department. After the first week, the average time required to handle one customer call was 15 minutes. The manager of the customer service department estimates an 80% learning curve. Under the cumulative average-time learning model, the cumulative average time required to handle one customer call by the fourth week will be A. 7.7 minutes. B. 9.6 minutes.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. 12.0 minutes. D. 15.0 minutes.

Question: 43A manufacturing company notices that when its cumulative production doubles, it observes a 10% decrease in the time it takes to produce one unit of product. Based on a cumulative average-time learning model, this decrease in unit production time implies a learning curve of A. 5% B. 10% C. 90% D. 110%

Subunit 3: Expected Value Fact Pattern: The probabilities shown in the table below represent the estimate of sales for a new product. Sales (Units) Probability 0-200

15%

201-400

45%

401-600

25%

601-800 15% Question: 1What is the probability of selling between 201 and 600 units of the product? A. 0% B. 11.25% C. 70% D. 25%

Fact Pattern: The probabilities shown in the table below represent the estimate of sales for a new product. Sales (Units) Probability 0-200

15%

201-400

45%

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

401-600

25%

601-800

15%

Question: 2What is the best estimate of the expected sales of the new product? A. 480 B. 380 C. 400 D. 800

Question: 3In decision making under conditions of uncertainty, expected value refers to the A. Likely outcome of a proposed action. B. Present value of alternative actions. C. Probability of a given outcome from a proposed action. D. Weighted average of probable outcomes of an action.

Fact Pattern: A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks and the weather is hot, it will make $2,500; if the weather is cold, the profit will be $1,000. If the stand sells coffee and the weather is hot, it will make $1,900; if the weather is cold, the profit will be $2,000. The probability of cold weather on a given day at this time is 60%. Question: 4If the probability of hot weather, given a hot weather forecast, is 50%, how much would the vendor be willing to pay for the forecast? A. $600 B. $300 C. $1,000 D. $500

Fact Pattern: Butler and Burnside are projecting market conditions for the upcoming month. They have prepared the following payoff table: Demand in Units 0

2 4 6 Probability of Demand

Supply

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

in Units 0.1 0.3 0.4 0.2 0 $ 0 $ 0 $ 0 $ 0 2 (80) 40 40 40 4 (160) (40) 80 80 6 (240) (120) 0 120 Question: 5Butler and Burnside’s expected profit when supply equals 4 units is A. $(40) B. $80 C. $20 D. $120

Fact Pattern: Butler and Burnside are projecting market conditions for the upcoming month. They have prepared the following payoff table: Demand in Units 0

2 4 6 Probability of Demand

Supply in Units 0.1 0.3 0.4 0.2 0 $ 0 $ 0 $ 0 $ 0 2 (80) 40 40 40 4 (160) (40) 80 80 6 (240) (120) 0 120 Question: 6Butler and Burnside’s expected profit with perfect information is A. $28 B. $20 C. $(36) D. $68

Fact Pattern: Butler and Burnside are projecting market conditions for the upcoming month. They have prepared the following payoff table: Demand in Units 0 Supply in Units 0.1 0 $ 0 2 (80)

2 4 6 Probability of Demand 0.3 $ 0 40

0.4 0.2 $ 0 $ 0 40 40

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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4 6

(160) (40) 80 80 (240) (120) 0 120 Question: 7The price Butler and Burnside are willing to pay for perfect information is A. $68 B. $40 C. $48 D. $104

Question: 8A company’s managers are attempting to value a piece of land they own. One potential occurrence is that the old road bordering the land gets paved. Another possibility is that the road does not get paved. A third outcome is that the road might be destroyed and completely replaced by a new road. Based on the following future states of nature, their probabilities, and subsequent values of the land, what is the expected value of the land? Future States of Nature (SN)

Probability

SN 1: Current road gets paved

.5

SN 2: Road does not get paved

.4

SN 3: Current road destroyed and replaced with new road

.1

Estimates of land value under each possible future state of nature: Value if SN 1: $200,000 Value if SN 2: $100,000 Value if SN 3: $550,000 A. $133,333 B. $195,000 C. $225,000 D. $283,333

Question: 9Under favorable weather conditions, the management of a farm expects its raspberry crop to have a $120,000 market value. An unprotected crop subject to frost has an expected market value of $80,000. If the farm protects the raspberries against frost, the market value of the crop is still expected to be $120,000 under frost-free ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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conditions and $180,000 if a frost occurs. What must be the probability of a frost for the farm to be indifferent to spending $20,000 for tents to provide frost protection? A. .167 B. .200 C. .250 D. .333

Question: 10During the past few years, a company has experienced the following average number of power outages: Number per Month Number of Months 0

3

1

2

2

4

3

3 12

Each power outage results in out-of-pocket costs of $800. For $1,000 per month, the company can lease a generator to provide power during outages. If the company leases a generator in the coming year, the estimated savings (or additional expense) for the year will be A. $(15,200) B. $(1,267) C. $3,200 D. $7,200

Fact Pattern: The College Honor Society sells hot pretzels at the home football games. The pretzels are sold for $1.00 each, and the cost per pretzel is $.30. Any unsold pretzels are discarded because they will be stale before the next home game. The frequency distribution of the demand for pretzels per game is presented as follows: Unit Sales Volume Probability 2,000 pretzels

.10

3,000 pretzels

.15

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

4,000 pretzels

.20

5,000 pretzels

.35

6,000 pretzels .20 Question: 11The estimated demand for pretzels at the next home football game using an expected value approach is A. 4,000 pretzels. B. 4,400 pretzels. C. 5,000 pretzels. D. Some amount other than those given.

Fact Pattern: The College Honor Society sells hot pretzels at the home football games. The pretzels are sold for $1.00 each, and the cost per pretzel is $.30. Any unsold pretzels are discarded because they will be stale before the next home game. The frequency distribution of the demand for pretzels per game is presented as follows: Unit Sales Volume Probability 2,000 pretzels

.10

3,000 pretzels

.15

4,000 pretzels

.20

5,000 pretzels

.35

6,000 pretzels .20 Question: 12The estimated demand for pretzels at the next home football game using a deterministic approach based on the most likely outcome is A. 4,000 pretzels. B. 4,400 pretzels. C. 5,000 pretzels. D. 6,000 pretzels.

Fact Pattern: The College Honor Society sells hot pretzels at the home football games. The pretzels are sold for $1.00 each, and the cost per pretzel is $.30. Any unsold pretzels are discarded because they will be stale before the next home game. The frequency distribution of the demand for pretzels per game is presented as follows: Unit Sales Volume Probability

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

2,000 pretzels

.10

3,000 pretzels

.15

4,000 pretzels

.20

5,000 pretzels

.35

6,000 pretzels

.20

Question: 13The conditional profit per game of having 4,000 pretzels available but only selling 3,000 pretzels is A. $1,800 B. $2,100 C. $2,800 D. Some amount other than those given.

Fact Pattern: The College Honor Society sells hot pretzels at the home football games. The pretzels are sold for $1.00 each, and the cost per pretzel is $.30. Any unsold pretzels are discarded because they will be stale before the next home game. The frequency distribution of the demand for pretzels per game is presented as follows: Unit Sales Volume Probability 2,000 pretzels

.10

3,000 pretzels

.15

4,000 pretzels

.20

5,000 pretzels

.35

6,000 pretzels

.20

Question: 14The conditional profit per game of having 4,000 pretzels available and selling all 4,000 pretzels is A. $1,200 B. $2,100 C. $2,800 D. $800

Question: 15A company is in the process of preparing its budget. As part of the process, the company has prepared sales estimates and estimated the probability associated with each sales estimate. Which one of the following techniques should be used by the company to determine sales for budgeting purposes? A. Linear programming.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Minimax regret criteria. C. Expected value analysis. D. Monte Carlo simulation.

Question: 16The expected monetary value of an event A. Is equal to the conditional value or profit of the event. B. Is equal to the payoff of the event times the probability the event will occur. C. Is the profit forgone by not choosing the best alternative. D. Is the absolute profit from a particular event.

Question: 17Expected value in decision analysis is A. A standard deviation using the probabilities as weights. B. An arithmetic mean using the probabilities as weights. C. The square root of the squared deviations. D. A measure of the difference between the best possible outcome and the outcome of the original decision.

Question: 18The following table contains the profit outcomes for each state of nature and decision combination for a firm: States of Nature S1

S2

S3

Decision 1 $ 24

$14

$ (6)

Decision 2 $ 20

$10

$ 5

Decision 3

$ 8

$15

0.50

0.40

$(20)

Probabilities 0.10

The expected value of perfect information for this firm in this case is A. $6.40

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $8.40 C. $9.00 D. $8.60

Fact Pattern: A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks and the weather is hot, it will make $2,500; if the weather is cold, the profit will be $1,000. If the stand sells coffee and the weather is hot, it will make $1,900; if the weather is cold, the profit will be $2,000. The probability of cold weather on a given day at this time is 60%. Question: 19The expected payoff for selling coffee is A. $1,360 B. $2,200 C. $3,900 D. $1,960

Fact Pattern: A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks and the weather is hot, it will make $2,500; if the weather is cold, the profit will be $1,000. If the stand sells coffee and the weather is hot, it will make $1,900; if the weather is cold, the profit will be $2,000. The probability of cold weather on a given day at this time is 60%. Question: 20The expected payoff if the vendor has perfect information is A. $3,900 B. $2,200 C. $1,360 D. $1,960

Question: 21A distributor of video discs is developing its budgeted cost of goods sold for next year. The distributor has developed the following range of sales estimates and associated probabilities for the year: Sales Estimate Probability $ 60,000

25%

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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85,000

40

100,000

35

The distributor’s cost of goods sold averages 80% of sales. What is the expected value of the distributor’s budgeted cost of goods sold? A. $85,000 B. $84,000 C. $68,000 D. $67,200

Question: 22The expected monetary value of an act is the A. Sum of the conditional profit (loss) for each event. B. Sum of the conditional profit (loss) for each event times the probability of each event’s occurrence. C. Conditional profit (loss) for the best event times the probability of each event’s occurrence. D. Revenue minus the costs for the act.

Question: 23The expected value of perfect information is the A. Same as the expected profit under certainty. B. Sum of the conditional profit (loss) for the best event of each act times the probability of each event occurring. C. Difference between the expected profit under certainty and the expected opportunity loss. D. Difference between the expected profit under certainty and the expected monetary value of the best act under uncertainty.

Question: 24In decision theory, those uncontrollable future events that can affect the outcome of a decision are A. Payoffs. B. States of nature. C. Probabilities.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Nodes.

Fact Pattern: The Booster Club at Blair College sells hot dogs at home basketball games. The group has a frequency distribution of the demand for hot dogs per game and plans to apply the expected value decision rule to determine the number of hot dogs to stock. Question: 25The Booster Club should select the demand level that A. Is closest to the expected demand. B. Has the greatest probability of occurring. C. Has the greatest expected opportunity cost. D. Has the greatest expected monetary value.

Fact Pattern: A company is considering three alternative machines to produce a new product. The cost structures (unit variable costs plus avoidable fixed costs) for the three machines are shown as follows. The selling price is unaffected by the machine used. Single purpose machine $.60x + $20,000 Semiautomatic machine $.40x + $50,000 Automatic machine

$.20x + $120,000

The demand for units of the new product is described by the following probability distribution. Demand Probability 200,000

0.4

300,000

0.3

400,000

0.2

500,000

0.1

Question: 26Ignoring the time value of money, the expected cost of using the semiautomatic machine is A. $170,000 B. $130,000 C. $210,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $250,000

Fact Pattern: A company is considering three alternative machines to produce a new product. The cost structures (unit variable costs plus avoidable fixed costs) for the three machines are shown as follows. The selling price is unaffected by the machine used. Single purpose machine $.60x + $20,000 Semiautomatic machine $.40x + $50,000 Automatic machine

$.20x + $120,000

The demand for units of the new product is described by the following probability distribution. Demand Probability 200,000

0.4

300,000

0.3

400,000

0.2

500,000

0.1

Question: 27Using the expected value criterion, A. The single purpose machine should be used because of the low expected demand. B. The automatic machine should be used because of the high expected demand. C. The semiautomatic machine should be used because it has the lowest expected cost. D. The automatic machine has the lowest expected cost.

Fact Pattern: Stan Berry is considering selling peanuts at the Keefer High School football games. The peanuts would cost $.50 per bag and could be sold for $1.50 per bag. No other costs would be incurred to sell the peanuts. All unsold bags can be returned to the supplier for $.30 each. Berry estimated the demand for peanuts at each football game and constructed the payoff table that follows. Demand Probability (Bags) of Demand

Action (Bags to Stock) 20

30

40

50

20

.2

$20

$18

$16

$14

30

.4

$20

$30

$28

$26

40

.3

$20

$30

$40

$38

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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50

.1

$20

$30

$40

$50

Question: 28The optimum number of bags of peanuts for Stan Berry to stock is A. 20 B. 30 C. 40 D. 50

Fact Pattern: Stan Berry is considering selling peanuts at the Keefer High School football games. The peanuts would cost $.50 per bag and could be sold for $1.50 per bag. No other costs would be incurred to sell the peanuts. All unsold bags can be returned to the supplier for $.30 each. Berry estimated the demand for peanuts at each football game and constructed the payoff table that follows. Demand Probability (Bags) of Demand

Action (Bags to Stock) 20

30

40

50

20

.2

$20

$18

$16

$14

30

.4

$20

$30

$28

$26

40

.3

$20

$30

$40

$38

50

.1

$20

$30

$40

$50

Question: 29The maximum that Stan Berry should pay for perfect information so that he could always stock the correct number of bags of peanuts is A. $.80 B. $2.60 C. $10.40 D. $30.00

Question: 30An entity sells sweatshirts and is preparing for a World Cup Soccer match. The cost per sweatshirt varies with the quantity purchased as follows: Quantity Unit Cost 4,000

$14.00

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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5,000

13.50

6,000

13.00

7,000

12.50

The entity must purchase the sweatshirts one month before the game and has analyzed the market and estimated sales levels as follows: Unit sales 4,000 5,000 6,000 7,000 Probability 15% 20% 35% 30% The estimated selling price is $25 for sales made before and during game day. Any sweatshirts remaining after game day can be sold at wholesale to a local discount store for $10. The expected profit if the entity purchased 6,000 shirts is A. $64,500 B. $66,000 C. $69,000 D. $72,000

Fact Pattern: A computer store sells four computer models designated as P104, X104, A104, and S104. The store manager has made random number assignments to represent customer choices based on past sales data. The assignments are shown below. Model

Random Numbers

P104 0-1 X104 2-6 A104 7-8 S104

9

Question: 31The probability that a customer will select model P104 is A. 10% B. 20% C. 50% D. Some percentage other than those given.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: A computer store sells four computer models designated as P104, X104, A104, and S104. The store manager has made random number assignments to represent customer choices based on past sales data. The assignments are shown below. Model

Random Numbers

P104 0-1 X104 2-6 A104 7-8 S104

9

Question: 32In running a simulation of the computer demand, the following numbers are drawn in sequence: 2, 8, and 6. The simulation indicates that the third customer will purchase. A. Model P104. B. Model X104. C. Model A104. D. Model S104.

Question: 33A company is simulating the actions of a government agency in which 50% of the time a recall of a product is required, 40% of the time only notification of the buyer about a potential defect is required, and 10% of the time no action on its part is required. Random numbers of 1 to 100 are being used. An appropriate assignment of random numbers for the recall category would be A. 1-40 B. 40-90 C. 61-100 D. 11-60

Question: 34A software company has developed a new software package. The sales manager has prepared the following probability distribution describing the relative likelihood of monthly sales levels and relative income (loss) for the company’s new software package. Monthly Sales In Units

Probability Income(Loss)

10,000

.2

$(4,000)

20,000

.3

10,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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30,000

.3

30,000

40,000

.2

60,000

If the software company decides to market its new software package, the expected value of additional monthly income will be A. $23,200 B. $24,000 C. $24,800 D. $25,000

Question: 35According to recent focus sessions, a corporation has a “can’t miss” consumer product on its hands. Sales forecasts indicate either excellent or good results, with the sales manager assigning a probability of .6 to a good results outcome. The company is now studying various sales compensation plans for the product and has determined the following contribution margin data: Contribution Margin If sales are excellent and Plan 1 is adopted

$300,000

Plan 2 is adopted

370,000

If sales are good and Plan 1 is adopted

240,000

Plan 2 is adopted

180,000

On the basis of this information, which of the following statements is correct? A. Plan 2 should be adopted because it is $10,000 more attractive than Plan 1. B. Plan 1 should be adopted because it is $8,000 more attractive than Plan 2. C. Plan 1 should be adopted because of the sales manager’s higher confidence in good results. D. Either Plan should be adopted, the decision being dependent on the probability of excellent sales results.

Question: 36An entity manufactures industrial machinery and requires 100,000 switches per year in its assembly process. When switches are received from a vendor they are installed in the specific machine and tested. If the switches fail, they are scrapped and the associated labor cost of $25 is considered lost productivity. The entity purchases “off the shelf” switches as opposed to custom-made switches and experiences quality problems with some ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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vendors’ products. A decision must be made as to which vendor to buy from during the next year based on the following information. Percentage Expected Vendor Price per Switch

to Pass the Test

P

$35

90%

Q

37

94%

R

39

97%

S

40

99%

Which vendor should the controller recommend to management? A. Vendor P. B. Vendor Q. C. Vendor R. D. Vendor S.

Question: 37A controller has decided to use a decision model to cope with uncertainty. With a particular proposal, currently under consideration, the controller has two possible actions, invest or not invest in a joint venture with an international firm. The controller has determined the following: Action:

Invest in the Joint Venture

Events and Probabilities: Probability of success

= 60%

Cost of investment

= $9.5 million

Cash flow if investment is successful

= $15.0 million

Cash flow if investment is unsuccessful = $2.0 million Additional costs to be paid

= $0

Costs incurred up to this point

= $650,000

Action:

Do Not Invest in the Joint Venture

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Events: Costs incurred up to this point = $650,000 Additional costs to be paid

= $100,000

Which one of the following alternatives correctly reflects the respective expected values of investing versus not investing? A. $300,000 and $(750,000). B. $(350,000) and $(100,000). C. $300,000 and $(100,000). D. $(350,000) and $(750,000).

Question: 38A company has three possible investment opportunities. The controller calculated the payoffs and probabilities as follows: Probabilities Payoffs Investment A Investment B Investment C $(20,000)

.3

.2

.3

(10,000)

.1

.2

.1

30,000

.3

.2

.2

70,000

.2

.2

.3

100,000

.1

.2

.1

The cost of investments A, B, and C are the same. Using the expected-value criterion, which one of the following rankings of these investments, from highest payoff to lowest payoff, is correct? A. A, B, C. B. B, A, C. C. C, A, B. D. B, C, A.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 39The sales manager has suggested that an expanded advertising campaign costing $40,000 would increase the sales and profits of the company. He has developed the following probability distribution for the effect of the advertising campaign on company sales: Sales Increase (Units)

Probability

15,000

.10

30,000

.35

45,000

.10

60,000

.25

75,000

.20

The company sells the dolls at $5.20 each. The cost of each doll is $3.20. The expected incremental profit, if the advertising campaign is adopted, is A. $6,500 B. $46,500 C. $53,000 D. $93,000

Question: 40Stock X has the following probability distribution of expected future returns: Expected Probability Return .1

–20%

.2

5%

.4

15%

.2

20%

.1

30%

The expected rate of return on Stock X is A. 10%

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. 12% C. 16% D. 19%

Question: 41Which one of the following four probability distributions provides the highest expected monetary value? Alternative #1

Alternative #2

Cash

Cash

Prob

Inflows

Prob

Inflows

10%

$ 50,000 10%

$ 50,000

20%

75,000 20%

75,000

40%

100,000 45%

100,000

30%

150,000 25%

150,000

Alternative #3

Alternative #4

Cash

Cash

Prob

Inflows

Prob

Inflows

10%

$ 50,000 10%

$150,000

20%

75,000 20%

100,000

40%

100,000 40%

75,000

30%

125,000 30%

50,000

A. Alternative #1. B. Alternative #2. C. Alternative #3. D. Alternative #4.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 42A company is preparing its budget and, taking into consideration the recent pace of economic recovery, has developed several sales forecasts and the estimated probability associated with each sales forecast. To determine the sales forecast to be used for budgeting purposes, which one of the following techniques should be used? A. Expected value analysis. B. Continuous probability simulation. C. Exponential distribution analysis. D. Sensitivity analysis.

Fact Pattern: Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for introduction. However, plant capacity is limited, and only one product can be introduced at present. Therefore, Gleason has conducted a market study at a cost of $26,000, to determine which product will be more profitable. The results of the study follow. Sales of Desserts at $1.80/unit Volume

Probability

Sales of Rolls at $1.20/unit Volume

Probability

250,000

.30

200,000

.20

300,000

.40

250,000

.50

350,000

.20

300,000

.20

400,000

.10

350,000

.10

The costs associated with the two products have been estimated by Gleason’s cost accounting department and are as follows: Dessert Rolls Ingredients per unit

$

.40 $

.25

Direct labor per unit

.35

.30

Variable overhead per unit

.40

.20

Production tooling*

48,000 25,000

Advertising

30,000 20,000

*Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed asset. Question: 43According to Gleason’s market study, the expected value of the sales volume of the breakfast rolls is

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

A. 125,000 units. B. 260,000 units. C. 275,000 units. D. Some amount other than those given.

Fact Pattern: Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for introduction. However, plant capacity is limited, and only one product can be introduced at present. Therefore, Gleason has conducted a market study at a cost of $26,000, to determine which product will be more profitable. The results of the study follow. Sales of Desserts at $1.80/unit Volume

Probability

Sales of Rolls at $1.20/unit Volume

Probability

250,000

.30

200,000

.20

300,000

.40

250,000

.50

350,000

.20

300,000

.20

400,000

.10

350,000

.10

The costs associated with the two products have been estimated by Gleason’s cost accounting department and are as follows: Dessert Rolls Ingredients per unit

$

.40 $

.25

Direct labor per unit

.35

.30

Variable overhead per unit

.40

.20

Production tooling*

48,000 25,000

Advertising

30,000 20,000

*Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed asset. Question: 44Applying a deterministic approach, Gleason’s revenue from sales of frozen desserts would be A. $550,000 B. $540,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. $216,000 D. Some amount other than those given.

Fact Pattern: Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for introduction. However, plant capacity is limited, and only one product can be introduced at present. Therefore, Gleason has conducted a market study at a cost of $26,000, to determine which product will be more profitable. The results of the study follow. Sales of Desserts at $1.80/unit Volume

Probability

Sales of Rolls at $1.20/unit Volume

Probability

250,000

.30

200,000

.20

300,000

.40

250,000

.50

350,000

.20

300,000

.20

400,000

.10

350,000

.10

The costs associated with the two products have been estimated by Gleason’s cost accounting department and are as follows: Dessert Rolls Ingredients per unit

$

.40 $

.25

Direct labor per unit

.35

.30

Variable overhead per unit

.40

.20

Production tooling*

48,000 25,000

Advertising

30,000 20,000

*Gleason treats production tooling as a current operating expense rather than capitalizing it as a fixed asset. Question: 45The expected value of Gleason’s operating profit directly traceable to the sale of frozen desserts is A. $198,250 B. $150,250 C. $120,250 D. Some amount other than those given.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 46Ryotel is conducting market research to determine whether or not to launch a new product. Management believes there is a 60% probability the research will yield favorable results and a 40% probability the results will be unfavorable. If the results are favorable, there is a 70% probability the product will be successful; if the results are unfavorable, the probability the product will be unsuccessful is 75%. If the product is successful, Ryotel anticipates annual profits of $10,000,000, but if the product is unsuccessful, Ryotel will lose $4,000,000 each year. The expected value of the new product’s annual profit is A. $3,000,000 B. $3,280,000 C. $4,000,000 D. $5,300,000

Question: 47Last year, a corporation’s sales totaled $200 million. In the current year, the corporation believes there is a 10% chance sales will decrease to $180 million due to the loss of a major customer. The corporation also estimates there is a 40% probability sales will remain constant, a 30% chance sales will increase to $240 million, and a 20% probability sales will increase to $250 million. The expected value of the corporation’s sales in millions for the current year is A. $160 B. $184 C. $202 D. $220

Question: 48An entity sells its product for $100 per unit while incurring variable operating costs of $60 per unit and $25,000,000 of fixed operating costs. The management team believes there is a 20% probability sales for the upcoming period will be 600,000 units, a 50% probability sales will be 800,000 units, and a 30% probability sales will be 1,000,000 units. The expected value of the entity’s operating profit for the upcoming period is A. $32,800,000 B. $8,200,000 C. $7,800,000 D. $7,000,000

Question: 49A veterinary clinic schedules weekend staff based on the number of animals being boarded. The clinic has a total of four staff members available to work on weekends. Based on state regulations, the clinic is required to have one staff member on site for up to 10 animals. Two staff members are required for 11-23 animals, three staff for 24-36 animals and all four staff members must work if there are 37-45 animals being boarded. The clinic has experienced the following average number of animals in the past 12 weekends. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Average Number of Animals Number of Weekends 12

1

20

4

25

3

35

2

40

2

Using expected value analysis, how many staff members should the clinic schedule for each weekend during the upcoming month? A. 1 B. 2 C. 3 D. 4

Question: 50An entrepreneur has four booth rental options at the county fair where he plans to sell his new product for $37.50 per unit with a cost of $12.50. The booth rental options are shown below. Option 1: $1,000 fixed fee Option 2: $750 fixed fee + 5% of all revenues generated at the fair Option 3: 20% of all revenues generated at the fair Option 4: $200 fixed fee + 16% of all revenues generated at the fair Assuming there is a 40% probability that 70 units will be sold and a 60% probability that 40 units will be sold, which option maximizes income? A. Option 1. B. Option 2. C. Option 3. D. Option 4.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 51A manager is reviewing a potential investment, which has significant uncertainty related to its ultimate financial outcome. The manager has estimated the following probabilities for the various levels of net cash flows that may result from the investment. Likelihood of Outcome Net Cash Flows 10%

$(300,000)

20%

0

50%

100,000

20%

600,000

What is the expected value of net cash flows that the manager should use in evaluating the investment? A. $100,000 B. $137,000 C. $140,000 D. $400,000

Question: 52A quantitative technique useful in projecting a firm’s sales and profits is A. Probability distribution theory. B. Gantt charting. C. Learning curves. D. Queuing theory.

Question: 53A toy company is in the process of forecasting sales for a new toy. The company has the following estimates of unit sales with a corresponding probability distribution: Unit Sales Probability 550,000

20%

475,000

35%

350,000

45%

How many units should the company forecast for sales of the new toys?

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. 350,000 B. 433,750 C. 458,288 D. 1,375,000

Question: 54A clothing company is evaluating two possible locations for a new retail store. The company’s research indicates that Location A has a 45% probability of generating $400,000 in cash flow and a 55% probability of generating $325,000 in cash flow. Location B has a 25% probability of generating $600,000 in cash flow and a 75% probability of generating $250,000 in cash flow. Based on the expected value for each location, the company should choose Location A. A because its expected value is $21,250 higher than Location B. B. A because its expected value is $75,000 higher than Location B. C. B because its expected value is $125,000 higher than Location A. D. B because its expected value is $146,250 higher than Location A.

Question: 55An accountant estimated the repair costs for the company’s plant facilities for next year’s operating budget. The accountant has determined the following probability distribution after analyzing historical repair costs: Probability Repair Costs 15%

$2,000,000

45%

2,500,000

30%

3,500,000

10%

5,000,000

What is the estimated repair cost that the accountant should project for next year’s operating budget? A. $1,850,000 B. $1,925,000 C. $2,975,000 D. $3,250,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 56A company needs special gears. The machinery to make the gears can be rented for $100,000 for 1 year, but the company can buy the gears and avoid the rental cost. Because the demand for the gears may be high (0.6 probability) or low (0.4 probability) and contribution margins vary, the company prepared the following decision tree:

Which of the following statements is true? A. The expected value of making is $20,000. B. The expected value of buying is $70,000. C. Making the gears is the best choice. D. Buying the gears is the best choice.

Subunit 4: Sensitivity Analysis Question: 1A widely used approach that managers use to recognize uncertainty about individual items and to obtain an immediate financial estimate of the consequences of possible prediction errors is A. Expected value analysis. B. Learning curve analysis. C. Sensitivity analysis. D. Regression analysis.

Question: 2Through the use of decision models, managers thoroughly analyze many alternatives and decide on the best alternative for the company. Often, the actual results achieved from a particular decision are not what was expected when the decision was made. In addition, an alternative that was not selected would have actually been the best decision for the company. The appropriate technique to analyze the alternatives by using expected inputs and altering them before a decision is made is A. Expected value analysis. B. Linear programming.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Program Evaluation Review Technique (PERT). D. Sensitivity analysis.

Question: 2Through the use of decision models, managers thoroughly analyze many alternatives and decide on the best alternative for the company. Often, the actual results achieved from a particular decision are not what was expected when the decision was made. In addition, an alternative that was not selected would have actually been the best decision for the company. The appropriate technique to analyze the alternatives by using expected inputs and altering them before a decision is made is A. Expected value analysis. B. Linear programming. C. Program Evaluation Review Technique (PERT). D. Sensitivity analysis.

Question: 3The process of evaluating the effect of changes in variables such as sales price or wage rates on the optimum solution in a linear programming application is called A. Iterative analysis. B. Regression analysis. C. Sensitivity analysis. D. Matrix analysis.

Question: 4An analyst has developed an estimate of the earnings per share for her firm for the next year using the following parameters. Sales

$20 million

Cost of goods sold

70% of sales

General & administrative expenses $300,000 Selling expense

$100,000 plus 10% of sales

Debt outstanding

$5 million at 8% interest rate

Effective tax rate

35%

Common shares outstanding

2 million

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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She is now interested in the sensitivity of earnings per share to sales forecast changes. A 10% sales increase would increase earnings per share by A. 7.0 cents per share. B. 10.4 cents per share. C. 13.0 cents per share. D. 20.0 cents per share.

Question: 5A company operates several retail stores. To support the company’s long-term goals, operating income should be at least 10% of sales. The company’s abbreviated pro forma income statement for next year is shown below. Revenues Cost of goods sold

$7,500,000 3,750,000

Operating fixed costs 3,125,000 Operating income

$ 625,000

The best action for the company to take in order to meet its income goal is to A. Increase the advertising budget by $25,000, which would increase sales units by 5%. B. Raise the selling price by 2%, which would reduce sales units by 2% but save $50,000 in operating costs. C. Require all managers to reduce their budgeted operating fixed costs by 3%. D. Wait until the end of next year’s first quarter to re-evaluate its situation.

Question: 6In order to achieve its strategic goals, a company wants operating income to equal at least 10% of revenue. A portion of the company’s pro forma income statement for the upcoming year is shown below. Cost of goods sold moves proportionately with revenue activity. Revenue

$5,000,000

Cost of goods sold

$3,000,000

Operating costs

$1,700,000

Operating income

$ 300,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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If the company wishes to reach this goal in the upcoming year, it should

A. Increase the marketing budget by $20,000, which would increase sales units by 10%. B. Sell the same number of units but decrease cost of goods sold by 10%. C. Reevaluate its financial standing the following year. D. Reduce operating costs by 10%.

Question: 7The CEO of Marx is analyzing a $100,000 investment opportunity. The investment promises a return of $10,000 per year and a rate of return of 5%. The $100,000 is based on an estimate. The CEO wants to know how acceptable the investment would be if the return was only $60,000 per year. What type of analysis should the CEO perform? A. Sensitivity analysis. B. Cumulative average-time learning analysis. C. Learning curve analysis. D. PEST analysis.

Question: 8Corporation A recently hired a CFO to improve its project management function. The CFO is interested in implementing a new type of project analysis that will help evaluate the effects of small changes in variables on the overall solution. The CFO believes that this form of analysis will be useful in determining whether further resources should be expended to obtain better forecasts. What type of analysis best describes the method that the CFO is attempting to implement? A. Simple regression analysis. B. Learning curve analysis. C. Sensitivity analysis. D. SWOT analysis.

Question: 9Which of the following statements regarding sensitivity analysis is false? A. Sensitivity analysis is used to evaluate the effect of changes in variables on the least optimal solution. B. Sensitivity analysis is useful in determining whether additional expenditures to obtain a better forecast are justified. C. Sensitivity analysis inherently contains a trial-and-error method.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Sensitivity analysis is useful in capital budgeting.

Question: 10Which of the following statements regarding sensitivity analysis is true? A. Sensitivity analysis does not help to estimate the consequences of possible prediction errors. B. Sensitivity analysis is useful in justifying the additional expenditure of resources in order to obtain better forecasts. C. A limitation of sensitivity analysis is that managers cannot see the effect of changed assumptions on the final objective. D. Sensitivity analysis cannot be used in the capital budgeting process.

Question: 11A company is deciding whether to purchase an automated machine to manufacture one of its products. Expected net cash flows from this decision depend on several factors, interactions among those factors, and the probabilities associated with different levels of those factors. The method that the company should use to evaluate the distribution of net cash flows from this decision and changes in net cash flows resulting from changes in levels of various factors is A. Simulation and sensitivity analysis. B. Linear programming. C. Correlation analysis. D. Differential analysis.

Subunit 5: Strategic Management Question: 1Which of the following steps in the strategic management process should be completed first? A. Translate objectives into goals. B. Determine actions to achieve goals. C. Develop performance measures. D. Create a mission statement.

Question: 2A firm’s statement of broad objectives or mission statement should accomplish all of the following except A. Outlining strategies for technological development, market expansion, and product differentiation.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Defining the purpose of the company. C. Providing an overall guide to those in high-level, decision-making positions. D. Stating the moral and ethical principles that guide the actions of the firm.

Question: 3Intensity of rivalry among existing firms in an industry increases when I. Products are relatively undifferentiated II. Consumer switching costs are low A. I only. B. II only. C. Both I and II. D. Neither I nor II.

Question: 4Structural considerations affecting the threat of substitutes include all of the following except A. Relative prices. B. Brand identity. C. Cost of switching to substitutes. D. Customers’ inclination to use a substitute.

Question: 5A corporation is performing research to determine the feasibility of entering the truck rental industry. The decision to enter the market is most likely to be deterred if A. The fixed costs are high in relation to variable costs in the truck rental industry. B. Buyers view the product as differentiated. C. The market is dominated by a small consortium of buyers. D. Buying firms enjoy large profit margins on their end products.

Question: 6Which industry factor does not contribute to competitive rivalry? A. Price-cutting, large advertising budgets, and frequent introduction of new products.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. A firm’s growth must come from winning other firms’ customers. C. High costs of customers switching suppliers. D. High fixed costs relative to variable costs.

Question: 7Which condition does not increase the threat of new competitor entry into the industry? A. Strong brand identity. B. Existing firms do not enjoy the cost advantages of vertical integration. C. Few proprietary product differences. D. Low capital requirements.

Question: 8The concurrent action of basic competitive forces as defined by Porter’s model determines the A. Long-term profitability and the competitive intensity of the industry. B. Entrance barriers that potential players must face to get into the industry. C. Rivalry inside the industry. D. Nonvalue-adding activities that should be eliminated.

Question: 9Which factor most likely encourages entry into an existing market? A. Governmental subsidies for new investors. B. High product differentiation, principally produced by trademarks. C. Knowledge of the industry, with high investments in development. D. Low fixed exit costs.

Question: 10Which of the following is a favorable condition for a firm competing in a profitable, expanding industry? A. The firm does not have a strong customer base. B. A few suppliers who can restrict supply.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Competitors find it difficult to acquire the firm’s customers. D. The firm has high costs relative to other firms in the industry.

Question: 11Michael E. Porter’s competitive strategies model includes an analysis of the competitive forces that determine the attractiveness of an industry. These forces include I. The stage of the industry life cycle II. Threats of, and barriers to, entry III. Threat of substitutes IV. The threat of suppliers’ bargaining power A. I and II only. B. I and III only. C. II, III, and IV only. D. I, II, III, and IV.

Question: 12Which factor increases the threat of entry into an industry? A. Economies of scale are significant. B. Capital requirements are high. C. An industry leader may retaliate against a new entrant. D. Exit barriers are low.

Question: 13A manufacturing company produces plastic utensils for a particular segment at the lowest possible cost. The company is pursuing a cost A. Leadership strategy. B. Focus strategy. C. Differentiation strategy. D. Containment strategy.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 14What operations strategy is most likely to be adopted when the product sold by an organization is a commodity and the market is very large? A. Flexibility strategy. B. Quality strategy. C. Service strategy. D. Cost strategy.

Question: 15A company is trying to decide which competitive strategy it should try to implement. Since the company has recently started producing Halloween products and selling them in its Halloween stores a few months prior, it is trying to focus on low costs. The company believes that this will give it a competitive advantage since much of the competition across the nation is selling more expensive Halloween products. Which competitive strategy should the company most likely try to implement? A. Cost leadership. B. Differentiation. C. Cost focus. D. Focused differentiation.

Question: 16A bowling alley has identified three revenue streams with the following income statements. Bowling Revenues

Equipment Rental Food Sales

$9,000,000

Variable costs

$300,000 $1,200,000

1,100,000

150,000

1,150,000

250,000

40,000

120,000

Common costs

6,400,000

35,000

365,000

Income (loss)

$1,250,000

Direct employee salaries

$ 75,000 $ (435,000)

The most important consideration in determining whether to discontinue its food sales is A. Employee morale. B. Its interrelationships with other products. C. The ability to increase food sales.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. The ease of implementing activity-based costing to better assign costs.

Question: 17A strategic business unit (SBU) has a high relative market share (RMS) and a low market growth rate (MGR). According to the growth-share matrix for competitive analysis created by the Boston Consulting Group, such an SBU is considered a A. Star. B. Question mark. C. Cash cow. D. Dog.

Question: 18In the Boston Consulting Group (BCG) growth-share matrix, which strategic business units are strong competitors in high growth markets but usually have modest net cash flow? A. Cash cows. B. Question marks. C. Dogs. D. Stars.

Question: 19A strategic business unit (SBU) has a low relative market share (RMS) and a high market growth rate (MGR). According to the portfolio model for competitive analysis (the growth-share matrix) created by the Boston Consulting Group, the SBU is considered a A. Star. B. Question mark. C. Cash cow. D. Dog.

Question: 20According to the growth-share matrix approach developed by the Boston Consulting Group, a harvest strategy is most likely to be used for SBUs that are A. Question marks that may become stars. B. Strong cash cows.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Weak cash cows. D. Dogs that reduce the firm’s profits.

Question: 21According to the Boston Consulting Group’s portfolio model for competitive analysis, the strategy for a strong cash cow should be A. Harvest. B. Divest. C. Hold. D. Build.

Question: 22A typical life cycle progression for a successful firm within the Boston Consulting Group’s growthshare matrix is A. Star, question mark, cash cow, dog. B. Question mark, star, cash cow, dog. C. Star, cash cow, question mark, dog. D. Question mark, cash cow, star, dog.

Question: 23A company has developed and implemented a wireless charging feature into one of their flashlights. No other competitor in the marketplace currently offers this feature. In a marketing research study, the vast majority of consumers indicated that they would pay a premium for this feature. Which one of the following is the best strategy to bring this product to the market? A. Porter’s cost strategy. B. Porter’s focus strategy. C. Porter’s differentiation strategy. D. Porter’s segmentation strategy.

Question: 24Products identified in the BCG growth-share matrix as cash cows possess relatively A. High market share in a low growth market. B. Low market share in a high growth market.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. High market share in a high growth market. D. Low market share in a low growth market.

Question: 25A company is the leading company in the premium bottled water industry. Its growth is mainly driven by the negative health publicity on carbonated soft drinks and other sweetened beverages. Extensive inventory and distribution infrastructure is needed to compete in this industry. Its main packaging materials can be sourced either locally or easily imported from overseas. With its 60% market share, the company is able to influence prices and competitive activity. The second biggest competitor holds 20% market share, while the remaining 20% is shared by many small companies. Supermarkets and other grocery retailers are the largest customer segment, accounting for approximately 45% of sales. The supermarkets and grocery retailers are driving volume growth and are undergoing consolidation into larger supermarket conglomerates. Using Porter’s 5 Forces, which one of the following statements best reflects the industry environment? A. Low profitability but can increase due to increasing power of buyers. B. Low profitability due to low threat of substitutes and new entrants. C. High profitability but can decrease due to increasing power of buyers. D. High profitability due to high power of buyers and sellers.

Question: 26Analyzing a company’s technological capabilities, employee skills, and sales team performance will provide A. External factors that identify the company’s strengths and threats. B. Internal factors that identify the company’s strengths and opportunities. C. External factors that identify the company’s strengths and weaknesses. D. Internal factors that identify the company’s strengths and weaknesses.

Question: 27Which one of the following describes what an organization wants to accomplish and leads to the formulation of long-term business objectives? A. Values. B. Strategy. C. Competency. D. Mission statement.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 28What type of plan is formulated at the highest levels of management; takes the broadest view of the company and its environment; is the least quantifiable; and determines the future nature of the firm, its products, and its customers? A. Short-range plan. B. Long-range plan. C. Strategic plan. D. Future plan.

Subunit 6: The Balanced Scorecard Question: 1The balanced scorecard provides an action plan for achieving competitive success by focusing management attention on critical success factors. Which one of the following is not one of the perspectives on the business into which critical success factors are commonly grouped in the balanced scorecard? A. Competitor business strategies. B. Financial performance. C. Internal business processes. D. Employee innovation and learning.

Question: 2Using the balanced scorecard approach, an organization evaluates managerial performance based on A. A single ultimate measure of operating results, such as residual income. B. Multiple financial and nonfinancial measures. C. Multiple nonfinancial measures only. D. Multiple financial measures only.

Question: 3On a balanced scorecard, which is more of an internal process measure than an external-based measure? A. Cycle time. B. Profitability. C. Customer satisfaction.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Market share.

Question: 4Consider the following categories of performance measures. I. Profitability measures. II. Customer-satisfaction measures. III. Efficiency, quality, and time measures. IV. Innovation measures. A cruise line operates on a national scale in a very competitive marketplace. In view of this information, which measures should the company use in the evaluation of its managers?

A. I only. B. I and II. C. II and III. D. I, II, III, and IV.

Question: 5Which one of the following statements about a balanced scorecard is incorrect? A. It seeks to address the problems associated with traditional financial measures used to assess performance. B. The notion of value chain analysis plays a major role in the drawing up of a balanced scorecard. C. It relies on the perception of the users with regard to service provided. D. It is directly derived from the scientific management theories.

Question: 6Two examples of the learning and innovation measures of a balanced scorecard are A. Employee promotion rate and number of environmental incidents. B. Employee training hours and product defect rates. C. Number of employee suggestions and finished products per day per employee. D. Employee turnover rate and number of internal process improvements.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 7Which one of the following statements best describes the definition of critical success factors? A. Financial measures that track a company’s competitive performance. B. Financial and nonfinancial aspects of performance that are essential to have a competitive advantage. C. The key nonfinancial performance indicators on a balanced scorecard. D. The aspects of a business that are focused on measuring key costs.

Question: 8A sign of the successful implementation of a balanced scorecard is the presence of cause-and-effect relationship. An example of this success for a hotel is meeting the target of A. Decreasing a customer’s check-in time, which causes an increase in the number of implemented employee suggestions. B. Increasing employee training hours, which causes employee compensation to increase. C. Increasing profit, which causes an increase in employee job satisfaction ratings. D. Receiving more 5-star ratings from customers, which causes an increase in profit.

Question: 9An example of an item that would fall under the customer perspective on the balanced scorecard of an airline is A. Customer complaints will decrease by 10%. B. Customers will have to wait no longer than 15 minutes to check their bags. C. 90% of the flights will arrive on time. D. Three new in-flight meals will replace existing offerings that are unpopular with customers.

Question: 10Which of the following statements is false with respect to best practices analysis? A. The balanced scorecard facilitates best practice analysis. B. Best practice analysis is a way or method of accomplishing a business function or process that is considered to be superior to all other known methods. C. Best practices analysis assumes that a lesson learned from one area of a business can be passed on to another area of the business or between businesses. D. The concept of benchmarking is incompatible with best practices analysis.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 11In strategic planning, PEST analysis is best described as evaluating which of the following factors? A. Political, economic, social, and technological. B. People, environment, sustainability, and tactics. C. Process, efficiency, scale, and timing. D. Products, employees, strengths, and threats.

Question: 12On a balanced scorecard, each of the following is an example of the customer perspective measure except A. Economic value-added. B. Customer retention. C. Time taken to fulfill orders. D. Number of customer complaints.

Subunit 7: Strategic Planning Question: 1Which of the following cycles does not have accounting information recorded into the required general ledger reporting system? A. Expenditure. B. Production. C. Planning. D. Revenue.

Question: 2What is strategic planning? A. It establishes the general direction of the organization. B. It establishes the resources that the plan will require. C. It establishes the budget for the organization. D. It consists of decisions to use parts of the organization’s resources in specified ways.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 3A distinction between forecasting and planning A. Is not valid because they are synonyms. B. Arises because forecasting covers the short-term and planning does not. C. Is that forecasts are used in planning. D. Is that forecasting is a management activity whereas planning is a technical activity.

Question: 4Which of the following is an example of an outcome of strategic planning? A. A formal statement of the organization’s definition of the fundamental truths that guide its actions. B. A broad statement of concepts that emphasizes the implementation of organizational objectives over the long term. C. A set of general guides for action that channel thinking and allow a certain amount of discretion in execution. D. A document specifying a sequence of steps detailing the exact manner in which a certain activity must be accomplished.

Question: 5Which one of the following management considerations is usually addressed first in strategic planning? A. Outsourcing. B. Overall objectives of the firm. C. Organizational structure. D. Recent annual budgets.

Question: 6Strategy is a broad term that usually means the selection of overall objectives. Strategic analysis ordinarily excludes the A. Trends that will affect the entity’s markets. B. Target product mix and production schedule to be maintained during the year. C. Forms of organizational structure that would best serve the entity. D. Best ways to invest in research, design, production, distribution, marketing, and administrative activities.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 7All of the following are characteristics of the strategic planning process except the A. Emphasis on long run. B. Analysis of external economic factors. C. Review of the attributes and behavior of the organization’s competition. D. Analysis and review of departmental budgets.

Question: 8Strategic planning, as practiced by most modern organizations, includes all of the following except A. Top-level management participation. B. A long-term focus. C. Strategies that will help in achieving long-range goals. D. Analysis of the current month’s actual variances from budget.

Question: 9An organization’s policies and procedures are part of its overall system of internal controls. The control function performed by policies and procedures is A. Feedforward control. B. Implementation control. C. Feedback control. D. Application control.

Question: 10The management of an organization has stated that two members of the same family may not be employed in the same department. Identify the component of organizational planning that is being demonstrated by management’s action. A. A strategy. B. A policy. C. An objective. D. A mission statement.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 11Formal written policies are normally recommended. However, the presence of certain conditions in an organization minimizes the need for written policies. One condition that minimizes the need for written policies is a A. High division of labor. B. Strong organizational culture. C. Large span of control. D. Strict unity of command.

Question: 12During the strategic planning process, which one of the following is an external factor to be analyzed? A. Organizational culture. B. Societal culture. C. Employee morale. D. Organizational structure.

Question: 13A company has a compensation system for its managers based on a management-by-objectives (MBO) approach. The essential premise of MBO is that A. Compensation should be based on qualitative factors. B. Employees should be concerned with routine matters, and managers should attend to exceptions. C. Employees should participate in setting objectives. D. Managers should establish objectives for their employees.

Question: 14MBO managers are most likely to believe that employees A. Dislike their work. B. Avoid responsibility whenever possible. C. Work best when threatened with punishment. D. Are self-motivated.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 15A company has established a strategic initiative to increase operating income by increasing market share through being the lower-cost provider. Assuming the total market size remains the same, and based on the information provided below, has the company achieved the stated objectives? Current Year Revenues

Next Year

$325,000

$325,000

Cost of goods sold

152,000

146,000

Gross margin

$173,000

$179,000

100,000

100,000

50,000

50,000

Operating income $ 23,000

$ 29,000

Operating costs Marketing Administrative

Units sold

1,000

1,000

A. Yes, because the company was able to lower costs and increase operating income. B. No, because the company did not reduce marketing and administrative costs. C. Yes, because the statements show a reduced cost of goods sold. D. No, because it does not appear that the company has increased market share.

Question: 16A company is anticipating that a major supplier might experience a strike this year. Because of the nature of the product and emphasis on quality, extra production cannot be stored as finished goods inventory. When developing a contingency budget that would anticipate a direct materials buildup, the two most significant items that will be affected are A. Production volume and direct material. B. Sales and ending inventory. C. Production and cash flow. D. Direct materials and cash flow.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Study Unit 11: Cost and Variance Measures 11: (261) Cost and Variance Measures 1: (16) Variance Analysis Overview 2: (34) Static and Flexible Budget Variances 3: (44) Direct Materials Variances 4: (36) Direct Labor Variances 5: (12) Mix and Yield Variances 6: (69) Overhead Variances 7: (18) Comprehensive Example 8: (32) Sales Variances

Subunit 1: Variance Analysis Overview Question: 1The purpose of identifying manufacturing variances and assigning their responsibility to a person/department should be to A. Use the knowledge about the variances to promote learning and continuous improvement in the manufacturing operations. B. Trace the variances to finished goods so that the inventory can be properly valued at year-end. C. Determine the proper cost of the products produced so that selling prices can be adjusted accordingly. D. Pinpoint fault for operating problems in the organization.

Question: 2A difference between standard costs used for cost control and the budgeted costs of the same manufacturing effort can exist because A. Standard costs represent what costs should be, whereas budgeted costs are expected actual costs. B. Budgeted costs are historical costs, whereas standard costs are based on engineering studies. C. Budgeted costs include some slack, whereas standard costs do not. D. Standard costs include some slack, whereas budgeted costs do not.

Question: 3In a responsibility accounting system, a feedback report that focuses on the difference between budgeted amounts and actual amounts is an example of ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Management by exception. B. Assessing blame. C. Granting rewards to successful managers. D. Ignoring other variables for which the budgeted goals were met.

Question: 4Which of the following factors should not be considered when deciding whether to investigate a variance? A. Magnitude of the variance. B. Trend of the variances over time. C. Likelihood that an investigation will eliminate future occurrences of the variance. D. Whether the variance is favorable or unfavorable.

Question: 5Which of the following management practices involves concentrating on areas that deserve attention and placing less attention on areas operating as expected? A. Management by objectives. B. Responsibility accounting. C. Benchmarking. D. Management by exception.

Question: 6The controller of a company holds a monthly meeting where any department that has a 10% unfavorable variance to budget must explain the variance and develop a plan to remedy the situation. This is an example of A. Activity-based management. B. Cost management. C. Continuous improvement. D. Management by exception.

Question: 7The benefits of management by exception reporting include all of the following except a reduction in ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Reports/production costs. B. Information overload. C. Reliance on advance planning. D. Unfocused management actions.

Question: 8Within a performance monitoring system, which of the following is the least valid reason for calculating variances between actual performance and budgeted performance? A. Allowing managers to take early corrective action. B. Identifying the manager who is responsible for not achieving desired results. C. Identifying efficient practices that can be transferred to other areas of the company. D. Improving future performance forecasts.

Question: 9A company uses a standard cost system. During the past year, the variances from standard were significant. The company is considering whether to allocate the variances among the appropriate inventory accounts and cost of goods sold or to allocate all of the variances directly to cost of goods sold. Under which one of the following situations would reported net income be largest? A. All of the variances are favorable and are written off directly to cost of goods sold. B. All of the variances are unfavorable and are written off directly to cost of goods sold. C. All of the variances are favorable and are allocated among cost of goods sold and ending inventory accounts. D. All of the variances are unfavorable and are allocated among cost of goods sold and ending inventory accounts.

Question: 10Which one of the following is the least likely reason that variances are computed within a performance monitoring system? A. To trigger organization learning. B. To make continuous improvements. C. To verify the accuracy of standards. D. To alert management to existing problems.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 11Which one of the following statements about management by exception is least likely to be correct? A. Managers can focus efforts on the most critical areas. B. It is especially useful when directed at controllable items. C. It could result in changing a process altogether. D. Positive variances need not be investigated.

Question: 12A standard cost system is often used in variance analysis because standard costs A. Include past inefficiencies and take into account expected future changes. B. Exclude past inefficiencies and take into account expected future changes. C. Include past inefficiencies and exclude expected future changes. D. Exclude past inefficiencies and exclude expected future changes.

Question: 13Use of a standard cost system can include all of the following advantages except that it A. Assists in performance evaluation. B. Emphasizes qualitative characteristics. C. Permits development of flexible budgeting. D. Allows employees to better understand what is expected of them.

Question: 14When comparing performance report information for top management with that for lower-level management, A. Top management reports are more detailed. B. Lower-level management reports are typically for longer time periods. C. Top management reports show control over fewer costs. D. Lower-level management reports are likely to contain more quantitative data and less financial data.

Question: 15Which one of the following statements is correct concerning a flexible budget cost formula? Variable costs are stated ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Per unit and fixed costs are stated in total. B. In total and fixed costs are stated per unit. C. In total and fixed costs are stated in total. D. Per unit and fixed costs are stated per unit.

Question: 16To maintain competitive prices, control of costs is critical. Management has considered moving production overseas, but so far they are committed to remaining in the U.S. Management has decided to permit their employees to participate in setting up a new standard cost system. Management likely expects the new standard cost system, along with the employee input, to provide all of the following benefits except that A. Unfavorable variances are more likely to occur. B. Employees who participate in setting standards may be more efficient. C. Standard costs will help management in uncovering potential cost problems. D. Standard costing permits management by exception, which should save some time.

Subunit 2: Static and Flexible Budget Variances Question: 1A static budget A. Drops the current month or quarter and adds a future month or a future quarter as the current month or quarter is completed. B. Presents a statement of expectations for a period but does not present a firm commitment. C. Presents the plan for only one level of activity and does not adjust to changes in the level of activity. D. Presents the plan for a range of activity so that the plan can be adjusted for changes in activity.

Question: 2A major disadvantage of a static budget is that A. It is more difficult to develop than a flexible budget. B. It is made for only one level of activity. C. Variances tend to be smaller than when flexible budgeting is used. D. Variances are more difficult to compute than when flexible budgeting is used.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 3A manufacturing firm planned to manufacture and sell 100,000 units of product during the year at a variable cost per unit of $4.00 and a fixed cost per unit of $2.00. The firm fell short of its goal and only manufactured 80,000 units at a total incurred cost of $515,000. The firm’s manufacturing cost variance was A. $85,000 favorable. B. $35,000 unfavorable. C. $5,000 favorable. D. $5,000 unfavorable.

Question: 4The difference between the actual amounts and the flexible budget amounts for the actual output achieved is the A. Production volume variance. B. Flexible budget variance. C. Sales volume variance. D. Standard cost variance.

Question: 5The company’s master budget shows straight-line depreciation on factory equipment of $258,000. The master budget was prepared at an annual production volume of 103,200 units of product. This production volume is expected to occur uniformly throughout the year. During September, the company produced 8,170 units of product, and the accounts reflected actual depreciation on factory machinery of $20,500. The company controls manufacturing costs with a flexible budget. The flexible budget amount for depreciation on factory machinery for September would be A. $19,475 B. $20,425 C. $20,500 D. $21,500

Question: 6When preparing a performance report for a cost center using flexible budgeting techniques, the planned cost column should be based on the A. Budgeted amount in the original budget prepared before the beginning of the year. B. Actual amount for the same period in the preceding year. C. Budget adjusted to the actual level of activity for the period being reported.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Budget adjusted to the planned level of activity for the period being reported.

Question: 7The corporation expected to sell 150,000 board games during the month of November, and the corporation’s master budget contained the following data related to the sale and production of these games: Revenue

$2,400,000

Cost of goods sold: Direct materials

675,000

Direct labor

300,000

Variable overhead

450,000

Contribution margin

$ 975,000

Fixed overhead

250,000

Fixed selling and administration

500,000

Operating income

$ 225,000

Actual sales during November were 180,000 games. Using a flexible budget, the corporation expects the operating income for the month of November to be A. $225,000 B. $270,000 C. $420,000 D. $510,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 8Based on past experience, a company has developed the following budget formula for estimating its shipping expenses. The company’s shipments average 12 lbs. per shipment: Shipping costs = $16,000 + ($0.50 × lbs. shipped) The planned activity and actual activity regarding orders and shipments for the current month are given in the following schedule: Plan

Actual

Sales orders

800

780

Shipments

800

820

8,000

9,000

$120,000

$144,000

9,600

12,300

Units shipped Sales Total pounds shipped

The actual shipping costs for the month amounted to $21,000. The appropriate monthly flexible budget allowance for shipping costs for the purpose of performance evaluation would be A. $20,680 B. $20,920 C. $20,800 D. $22,150

Question: 9Which one of the following statements regarding the difference between a flexible budget and a static budget is true? A. A flexible budget primarily is prepared for planning purposes, while a static budget is prepared for performance evaluation. B. A flexible budget provides cost allowances for different levels of activity, whereas a static budget provides costs for one level of activity. C. A flexible budget includes only variable costs, whereas a static budget includes only fixed costs. D. A flexible budget is established by operating management, while a static budget is determined by top management.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 10A flexible budget is appropriate for A. Control of fixed factory overhead but not direct materials and direct labor. B. Control of direct materials and direct labor but not selling and administrative expenses. C. Any level of activity, regardless of range. D. Control of direct labor and direct materials but not fixed factory overhead.

Question: 11A company uses flexible budgeting for the control of costs. The company’s annual master budget includes $324,000 for fixed production supervisory salaries at a volume of 180,000 units. Supervisory salaries are expected to be incurred uniformly throughout the year. During the month of September, 15,750 units were produced, and production supervisory salaries incurred were $28,000. A performance report for September would reflect a budget variance of A. $350 favorable. B. $350 unfavorable. C. $1,000 unfavorable. D. $1,000 favorable.

Question: 12A company uses flexible budgeting for cost control. The company produced 10,800 units of product during October, incurring indirect materials costs of $13,000. Its master budget for the year reflected indirect materials costs of $180,000 at a production volume of 144,000 units. A flexible budget for October production would reflect indirect materials costs of A. $13,000 B. $13,500 C. $13,975 D. $11,700

Question: 13Flexible budgets A. Provide for external factors affecting company profitability. B. Are used to evaluate capacity use. C. Are budgets that project costs based on anticipated future improvements.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Accommodate changes in activity levels.

Question: 14When compared to static budgets, flexible budgets A. Offer managers a more realistic comparison of budget and actual fixed cost items under their control. B. Provide a better understanding of the capacity variances during the period being evaluated. C. Encourage managers to use fewer fixed cost items and more variable cost items that are under their control. D. Offer managers a more realistic comparison of budget and actual revenue and cost items under their control.

Question: 15Flexible budgets A. Accommodate changes in the inflation rate. B. Are used to evaluate capacity use. C. Are static budgets that have been revised for changes in prices. D. Accommodate changes in activity levels.

Question: 16A company is focused on continuous improvement and wants to ensure that its budgeting process supports this goal. The company has already eliminated much of the waste from activities during previous budget periods and now wants to concentrate on value-added activities and improving relationships with suppliers and customers. Which of the following is the least beneficial budget solution for this company? A. Flexible budgeting. B. Activity-based budgeting. C. Zero-based budgeting. D. Continuous budgeting.

Question: 17A company planned to sell 100 canoes for the month of April at an average sales price of $600. Midway through the month, the company had sold 65 canoes and forecasted total sales of 130 canoes at an average price of $595. The actual sales for April were 120 canoes at an average sales price of $590. What is the flexible budget amount for canoe sales revenue for April? A. $60,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $72,000 C. $77,350 D. $78,000

Question: 18An advantage of using a flexible budget compared to a static budget is that, in a flexible budget, A. Shortfalls in planned production are clearly presented. B. Standards can easily be changed to adjust to changing circumstances. C. Fixed cost variances are more clearly presented. D. Budgeted costs for a given output level can be compared with actual costs for the same level of output.

Question: 19A controller has prepared a flexible budget for the year just ended, adjusting the original static budget for the unexpected large increase in the volume of sales. The costs are mostly variable. The controller is pleased to note that both actual revenues and actual costs approximated amounts shown on the flexible budget. If actual revenues and actual costs are compared with amounts shown on the original (static) budget, what variances would arise? A. Both revenue variances and cost variances would be favorable. B. Revenue variances would be favorable and cost variances would be unfavorable. C. Revenue variances would be unfavorable and cost variances would be favorable. D. Both revenue variances and cost variances would be unfavorable.

Question: 20The monthly sales volume of a corporation varies from 7,000 units to 9,800 units over the course of a year. Management is currently studying anticipated selling expenses along with the related cash resources that will be needed. Which of the following types of budgets (1) should be used in planning and (2) will provide the best feedback in performance reports for comparing planned expenditures with actual amounts? Planning Performance Reporting A. Static Static B. Static Flexible C. Flexible Static D. Flexible Flexible

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 21Which one of the following will allow a better use of standard costs and variance analysis to help improve managerial decision-making? A. Set standards with the help of line personnel directly involved in the process. B. Do not differentiate between variable and fixed overhead in calculating overhead variances. C. Use standard costs only for inventory valuation. D. Use the prior year’s average actual cost as the current year’s standard.

Question: 22A plan that is created using budgeted revenue and costs but is based on the actual units of output is known as a A. Continuous budget. B. Flexible budget. C. Strategic plan. D. Static budget.

Question: 23Comparing actual results with a budget based on achieved volume is possible with the use of a A. Monthly budget. B. Master budget. C. Rolling budget. D. Flexible budget.

Question: 24The use of standard costs in the budgeting process signifies that an organization has most likely implemented a A. Flexible budget. B. Capital budget. C. Zero-based budget. D. Static budget.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 25The vice president of finance (VP) has been asked to design a new budgeting system. The VP has changed to a monthly budgeting system by dividing the company’s annual budget by 12. The VP then prepared monthly budgets for each department and asked the managers to submit monthly reports comparing actual to budget. A sample monthly report for Department A is shown below. Monthly Report for Department A Actual Budget Variance Units

1,000

900

100 F

Variable production costs: Direct material $ 2,800 $ 2,700 $ 100 U Direct labor

4,800

4,500

300 U

4,250

4,050

200 U

Depreciation

3,000

2,700

300 U

Taxes

1,000

900

100 U

Insurance

1,500

1,350

150 U

Administration

1,100

990

110 U

Marketing

1,000

900

100 U

Variable factory overhead Fixed costs:

Total costs

$19,450 $18,090 $1.360 U

This monthly budget has been imposed from the top and will create behavior problems. All of the following are causes of such problems except A. The use of a flexible budget rather than a fixed budget. B. Top management authoritarian attitude toward the budget process. C. The inclusion of noncontrollable costs, such as depreciation. D. The lack of consideration for factors, such as seasonality.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 26Due to an unexpected road construction project, traffic passing by a restaurant has significantly increased. As a result, restaurant volume has similarly increased well beyond the level expected. Which type of budget would be most appropriate in helping the restaurant manager plan for restaurant labor costs? A. Zero-based budget. B. Rolling budget. C. Activity-based budget. D. Flexible budget.

Question: 27An organization’s revenues and variable costs vary significantly with seasonal weather conditions. This variability has frustrated management’s attempts to evaluate the organization’s actual results against budgeted performance because there are often large variances in revenues. Which one of the following budgeting methods is most likely to assist management in planning and assessment of results? A. Zero-based budgeting. B. Continuous budgeting. C. Flexible budgeting. D. Project budgeting.

Question: 28A firm has begun using budgeting to evaluate performance. Budgets were prepared for the current year based on anticipated sales of 40,000 units. Actual sales totaled 45,000. What type of budgeting methodology should the firm use to evaluate performance this year? A. Zero-based budgeting. B. Continuous budgeting. C. Static budgeting. D. Flexible budgeting.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 29A retirement home provides accommodations for up to 200 residents on its 4-acre retirement community. The manager was disappointed to see that last month’s actual results were quite different from the budget for March. The retirement home charged $2,000 per resident as planned. Expenses are categorized by the four departments that run the community home: Housekeeping, Maintenance, Dietary, and Nursing. The manager is not sure what went wrong and is concerned she will need to lay off employees if this happens again in April. March’s budget and actual results are shown below. March Budget Revenue ($2,000 per resident × 180 residents)

$360,000

Less expenses: Housekeeping ($65,000 plus $15 per resident)

67,700

Maintenance ($30,000 plus $23 per resident)

34,140

Dietary ($40,000 plus $180 per resident)

72,400

Nursing ($85,000 plus $300 per resident)

139,000

Operating income

$ 46,760 March Actual Results

Revenue

$400,000

Less expenses: Housekeeping

97,800

Maintenance

59,200

Dietary

75,800

Nursing

144,900

Operating income

$ 22,300

Using flexible budgeting, which one of the following statements is correct? A. All four departments have an unfavorable variance. B. Nursing is the department with the highest unfavorable variance. C. The revenue variance is favorable. D. Housekeeping and Maintenance departments have unfavorable variances.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 30At the beginning of the year, a company budgeted to sell 600,000 units at a price of $12 per unit. It actually sold 585,000 units at a price of $12.50 per unit. The sales-volume variance is A. $112,500 favorable. B. $180,000 unfavorable. C. $187,500 unfavorable. D. $292,500 favorable.

Question: 31A manufacturing firm has certain peak seasons, the summer season and the last two weeks of February. During these periods of increased output, the firm leases additional production equipment and hires additional temporary employees. Which one of the following budget techniques would best fit this firm’s needs? A. Zero-based budgeting because it is based on manager input. B. Project budgeting because discrete financial information is available. C. Flexible budgeting because it allows for adjustments to the budget based on actual activity levels. D. Static budgeting because it shows the changes in sales or production levels.

Question: 32A company’s master budget projected the following information: Sales (25,000 units)

$250,000

Manufacturing costs (1/3 fixed) 120,000 Other operating costs (all fixed) 100,000 If the company actually sold 27,500 units, the operating income when using a flexible budget would be A. $33,000 B. $43,000 C. $47,000 D. $51,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern: Nash Glassworks Company has budgeted fixed manufacturing overhead of $100,000 per month. The company uses absorption costing for both external and Capacity Levels internal financial reporting purposes. Budgeted overhead rates for cost allocations for the month of April using alternative unit output denominator levels Theoretical are shown in the next column. Practical

Budgeted

Budgeted

Denominator Level

Overhead

(units of output)

Cost Rate

1,500,000

$.0667

1,250,000

.0800

Normal

775,000

.1290

Master-budget

800,000

.1250

Actual output for the month of April was 800,000 units of glassware.

Question: 33The choice of a production volume level as a denominator in the computation of fixed overhead rates can significantly affect reported net income. Which one of the following statements is true for Nash Glassworks Company if its beginning inventory is zero, production exceeded sales, and variances are adjustments to cost of goods sold? The choice of A. Practical capacity as the denominator level will result in a lower net income amount than if master-budget capacity is chosen. B. Normal capacity as the denominator level will result in a lower net income amount than if any other capacity volume is chosen. C. Master-budget capacity as the denominator level will result in a lower net income amount than if theoretical capacity is chosen. D. Practical capacity as the denominator level will result in a higher net income amount than if normal capacity is chosen.

Question: 34A furniture maker has recently finished operations for the current year and is in the process of planning next year’s production budget. In the current year, it had a budgeted production volume of 1,000 tables to be sold at a price of $200 each. Each table had a budgeted requirement of 5 pounds of direct materials, and the direct materials had an estimated cost of $80/lb. However, upon the close of the current year, it was discovered that each table required only 4.5 pounds of direct materials, and the direct materials had an actual cost of $100/lb. Assuming that the company produces and sells 1,000 tables for $200 per table, what is the flexible budget variance for the current year? A. $90,000 unfavorable. B. $90,000 favorable. C. $50,000 unfavorable. D. $50,000 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Subunit 3: Direct Materials Variances Question: 1A favorable materials price variance coupled with an unfavorable materials usage variance most likely results from A. Machine efficiency problems. B. Product mix production changes. C. The purchase and use of higher-than-standard quality materials. D. The purchase of lower than standard quality materials.

Question: 2A manufacturer planned to produce 5,000 units of its single product during November. The standard specifications for one unit include ten pounds of materials at $.50 per pound. Actual production in November was 5,200 units. The accountant computed a favorable materials purchase price variance of $580 and an unfavorable materials quantity variance of $320. Based on these variances, one could conclude that A. More materials were purchased than were used. B. More materials were used than were purchased. C. The actual cost of materials was less than the standard cost. D. The actual usage of materials was less than the standard allowed.

Question: 3Under a standard cost system, the materials efficiency variances are the responsibility of A. Production and industrial engineering. B. Purchasing and industrial engineering. C. Purchasing and sales. D. Sales and industrial engineering.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern: Blaster, Inc., a manufacturer of portable radios, purchases the components from subcontractors to use to assemble into a complete radio. Each radio requires three units each of Part XBEZ52, which has a standard cost of $1.45 per unit. During May, Blaster experienced the following with respect to Part XBEZ52: Units Purchases ($18,000)

12,000

Consumed in manufacturing 10,000 Radios manufactured 3,000 Question: 4During May, Blaster incurred a purchase price variance of A. $450 unfavorable. B. $450 favorable. C. $500 favorable. D. $600 unfavorable.

Fact Pattern: Blaster, Inc., a manufacturer of portable radios, purchases the components from subcontractors to use to assemble into a complete radio. Each radio requires three units each of Part XBEZ52, which has a standard cost of $1.45 per unit. During May, Blaster experienced the following with respect to Part XBEZ52: Units Purchases ($18,000)

12,000

Consumed in manufacturing 10,000 Radios manufactured 3,000 Question: 5During May, Blaster incurred a materials efficiency variance of A. $1,450 unfavorable. B. $1,450 favorable. C. $4,350 unfavorable. D. $4,350 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern: ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 units of direct materials in inventory were purchased for $105,000, and two units of direct materials are required to produce one unit of final product. In November, the company produced 12,000 units of product. The standard allowed for materials was $60,000, and the unfavorable quantity variance was $2,500. Question: 6ChemKing’s standard price for one unit of direct materials is A. $2.00 B. $2.50 C. $3.00 D. $5.00

Fact Pattern: ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 units of direct materials in inventory were purchased for $105,000, and two units of direct materials are required to produce one unit of final product. In November, the company produced 12,000 units of product. The standard allowed for materials was $60,000, and the unfavorable quantity variance was $2,500. Question: 7ChemKing’s units of direct materials used to produce November output totaled A. 12,000 units. B. 12,500 units. C. 23,000 units. D. 25,000 units.

Fact Pattern: ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 units of direct materials in inventory were purchased for $105,000, and two units of direct materials are required to produce one unit of final product. In November, the company produced 12,000 units of product. The standard allowed for materials was $60,000, and the unfavorable quantity variance was $2,500. Question: 8ChemKing’s direct materials price variance for the units used in November was A. $2,500 unfavorable. B. $11,000 unfavorable. C. $12,500 unfavorable. D. $3,500 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 9A company planned to produce 3,000 units of its single product, Titactium, during November. The standard specifications for one unit of Titactium include 6 pounds of materials at $.30 per pound. Actual production in November was 3,100 units of Titactium. The accountant computed a favorable direct materials purchase price variance of $380 and an unfavorable direct materials quantity variance of $120. Based on these variances, one could conclude that A. More materials were purchased than were used. B. More materials were used than were purchased. C. The actual cost of materials was less than the standard cost. D. The actual usage of materials was less than the standard allowed.

Question: 10A purchasing manager was able to acquire a large quantity of direct materials from a new supplier at a discounted price. The inventory supervisor is concerned because the warehouse has become crowded and some things had to be rearranged. The vice president of production is concerned about the quality of the discounted materials. However, the Engineering Department tested the new materials and indicated that they are of acceptable quality. At the end of the month, the corporation experienced a favorable direct materials usage variance, a favorable direct labor usage variance, and a favorable direct materials price variance. The usage variances were solely the result of a higher yield from the new material. The favorable direct materials price variance is considered the responsibility of the A. Purchasing manager. B. Inventory supervisor. C. Vice president of production. D. Engineering manager.

Question: 11Price variances and efficiency variances can be key to the performance measurement within a company. In evaluating the performance within a company, a materials efficiency variance can be caused by all of the following except the A. Performance of the workers using the material. B. Actions of the purchasing department. C. Design of the product. D. Sales volume of the product.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 12A company uses a standard cost system. The standard for each finished unit of product allows for 3 pounds of plastic at $0.72 per pound. During December, the company bought 4,500 pounds of plastic at $0.75 per pound, and used 4,100 pounds in the production of 1,300 finished units of product. What is the materials purchase price variance for the month of December? A. $117 unfavorable. B. $123 unfavorable. C. $135 unfavorable. D. $150 unfavorable.

Question: 13Which one of the following variances is most controllable by the production control supervisor? A. Materials price variance. B. Materials usage variance. C. Variable overhead spending variance. D. Fixed overhead budget variance.

Fact Pattern: The controller for Durham Skates is reviewing the production cost report for July. An analysis of direct materials costs reflects an unfavorable flexible budget variance of $25. The plant manager believes this is excellent performance on a flexible budget for 5,000 units of direct materials. However, the production supervisor is not pleased with this result because she claims to have saved $1,200 in materials cost on actual production using 4,900 units of direct materials. The standard materials cost is $12 per unit. Actual materials used for the month amounted to $60,025. Question: 14Durham’s actual average cost per unit for materials was A. $12.00 B. $12.01 C. $12.24 D. $12.25

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern: The controller for Durham Skates is reviewing the production cost report for July. An analysis of direct materials costs reflects an unfavorable flexible budget variance of $25. The plant manager believes this is excellent performance on a flexible budget for 5,000 units of direct materials. However, the production supervisor is not pleased with this result because she claims to have saved $1,200 in materials cost on actual production using 4,900 units of direct materials. The standard materials cost is $12 per unit. Actual materials used for the month amounted to $60,025. Question: 15If Durham’s direct materials variance is investigated further, it will reflect a price variance of A. Zero. B. $1,200 favorable. C. $1,225 unfavorable. D. $2,500 favorable.

Question: 16In a standard cost system, the investigation of an unfavorable materials usage variance should begin with the A. Production manager only. B. Plant controller only. C. Purchasing manager only. D. Production manager or the purchasing manager.

Question: 17Under a standard cost system, the materials price variances are usually the responsibility of the A. Production manager. B. Cost accounting manager. C. Sales manager. D. Purchasing manager.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 18When items are transferred from stores to production, an accountant debits work-in-process and credits materials accounts. During production, a materials quantity variance may occur. The materials quantity variance is debited for an unfavorable variance and credited for a favorable variance. The intent of variance entries is to provide A. Accountability for materials lost during production. B. A means of safeguarding assets in the custody of the system. C. Compliance with GAAP. D. Information for use in controlling the cost of production.

Question: 19Which of the following is least likely to cause an unfavorable materials quantity (usage) variance? A. Materials that do not meet specifications. B. Machinery that has not been maintained properly. C. Labor that possesses skills equal to those required by the standards. D. Scheduling of substantial overtime.

Question: 20Which department is typically responsible for a materials price variance? A. Engineering. B. Production. C. Purchasing. D. Sales.

Question: 21Data regarding Mill Company’s direct materials costs is as follows: Actual unit cost

$2.00

Standard unit cost

2.20

Actual quantity purchased and used 28,000 units Standard units of materials per unit of finished goods

3 units

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Actual output of finished goods

9,000 units

What is the direct materials price variance? A. $2,800 favorable. B. $5,600 unfavorable. C. $5,600 favorable. D. $2,200 unfavorable.

Question: 22A company uses a standard-costing system in relation to its manufacture of scarves. Each finished scarf contains 1.5 yards of direct materials. However, a 25% direct materials spoilage, which is calculated based on input quantities, occurs during the manufacturing process. The cost of the direct materials is $2.00 per yard. The standard direct materials cost per unit of finished product is A. $2.25 B. $3.00 C. $3.75 D. $4.00

Fact Pattern: A manufacturer of radios purchases components from subcontractors for assembly into complete radios. Each radio requires three units each of Part X, which has a standard cost of $2.90 per unit. During June, the company had the following experience with respect to Part X: Units Purchases ($36,000)

12,000

Consumed in manufacturing 10,000 Radios manufactured

3,000

Question: 23During June, the company incurred a materials efficiency variance of A. $2,900 unfavorable. B. $2,900 favorable. C. $8,700 unfavorable. D. $8,700 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern: A manufacturer of radios purchases components from subcontractors for assembly into complete radios. Each radio requires three units each of Part X, which has a standard cost of $2.90 per unit. During June, the company had the following experience with respect to Part X: Units Purchases ($36,000)

12,000

Consumed in manufacturing 10,000 Radios manufactured

3,000

Question: 24Assuming that budgeted and actual radio production was the same, the amount that will be shown on a static budget for Part X usage during the month of June is A. $26,100 B. $27,000 C. $29,000 D. $36,000

Question: 25A company has a raw material price variance that is unfavorable. An analysis of this variance indicates that the company’s only available supplier of one of its raw materials unexpectedly raised the price of the material. The action management should take regarding this situation should be to A. Negatively evaluate the performance of the purchasing manager. B. Negatively evaluate the performance of the production manager. C. Change the raw material price standard. D. Ask the production manager to lower the material usage standard to compensate for higher material costs.

Question: 26A company recently purchased 108,000 units of raw material for $583,200. Three units of raw materials are budgeted for use in each finished good manufactured, with the raw material standard set at $16.50 for each completed product. The company manufactured 32,700 finished units during the period just ended and used 99,200 units of raw material. If management is concerned about the timely reporting of variances in an effort to improve cost control and bottom-line performance, the materials purchase price variance should be reported as A. $6,050 unfavorable. B. $9,920 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. $10,800 unfavorable. D. $10,800 favorable.

Question: 27The financial statements have just arrived showing a $3,000 loss on the new stadium job that was budgeted to show a $6,000 profit. Actual and budget information relating to the materials for the job are as follows.

Actual Budget

Bricks -- number of bundles 3,000

2,850

Bricks -- cost per bundle

$8.00

$7.90

Which one of the following is a correct statement regarding the stadium job? A. The price variance was favorable by $285. B. The price variance was favorable by $300. C. The efficiency variance was unfavorable by $1,185. D. The flexible budget variance was unfavorable by $900.

Question: 28A company isolates its raw material price variance in order to provide the earliest possible information to the manager responsible for the variance. The budgeted amount of material usage for the year was computed as follows: 150,000 units of finished goods × 3 lbs./unit × $2.00/lb. = $900,000 Actual results for the year were the following: Finished goods produced 160,000 units Raw materials purchased 500,000 pounds Raw materials used

490,000 pounds

Cost per pound

$2.02

The raw material price variance for the year was A. $9,600 unfavorable. B. $9,800 unfavorable. C. $10,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. $20,000 unfavorable.

Question: 29At the beginning of the year, a company prepared the following monthly budget for direct materials.

Units produced and sold 10,000 15,000 Direct material

$15,000 $22,500

At the end of the month, the company’s records showed that 12,000 units were produced and sold and $20,000 was spent for direct materials. Each unit of output requires one unit of direct material. The flexible budget variance for direct materials is A. $2,000 favorable. B. $2,000 unfavorable. C. $5,000 favorable. D. $5,000 unfavorable.

Question: 30A company has an unfavorable materials efficiency (usage) variance for a particular month. Which one of the following is least likely to be the cause of this variance? A. Inadequate training of the direct labor employees. B. Poor performance of the shipping employees. C. Poor design of the production process or product. D. Poor quality of the raw materials.

Question: 31A corporation’s Marketing Department recently accepted a rush order for a nonstock item from a valued customer. The Marketing Department filed the necessary paperwork with the Production Department, which complained greatly about the lack of time to do the job the right way. Nevertheless, the Production Department accepted the manufacturing commitment and filed the required paperwork with the Purchasing Department for the needed raw materials. A purchasing clerk temporarily misplaced the paperwork. By the time the paperwork was found, it was too late to order from the company’s regular supplier. A new supplier was located, and that vendor quoted a very attractive price. The materials arrived and were rushed into production, bypassing the normal inspection processes (as directed by the Production Department supervisor) to make up for lost time. Unfortunately, the goods were of low quality and created considerable difficulty for the assembly-line personnel. Which of the following best indicates the responsibility for the materials usage variance in this situation? A. Purchasing.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. Purchasing and Marketing. C. Marketing and Production. D. Purchasing, Marketing, and Production.

Question: 32A corporation has established per-unit standards for material and labor for its production department based on 900 units of normal production capacity as shown below.

3 lbs. of direct materials at $4 per lb. $12 1 direct labor hour at $15 per hr.

15

Standard cost per unit

$27

During the year, 1,000 units were produced. The accounting department has charged the production department supervisor with the following unfavorable variances.

Materials Quantity Variance

Actual usage

3,300 lbs.

Standard usage

3,000 lbs.

Unfavorable

300 lbs.

Material Price Variance Actual cost Standard cost Unfavorable

$13,200 12,000 $ 1,200

The production supervisor has received a memorandum from his boss stating that he did not meet the established standards for material prices and quantity, and corrective action should be taken. The production manager is very unhappy about the situation and is preparing to reply to the memorandum explaining the reasons for his dissatisfaction. All of the following are valid reasons for the production manager’s dissatisfaction except that the A. Material price variance is the responsibility of the purchasing department. B. Cause of the unfavorable material usage variance was the acquisition of substandard material.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Standards have not been adjusted to the engineering changes. D. Variance calculations fail to properly reflect that actual production exceeded normal production capacity.

Question: 33During the month of May, a company experienced a significant unfavorable material efficiency variance in the production of its single product at one of the company’s plants. Which one of the following reasons would be least likely to explain why the unfavorable variance arose? A. Inferior materials were purchased. B. Actual production was lower than planned production. C. Workers used were less skilled than expected. D. Replacement production equipment had just been installed.

Question: 34A company established a standard direct material cost of $20 per finished unit for its main product. The standard is calculated using direct materials of 4 pounds and a standard rate of $5 per pound. For the month of March, the company expected to produce 32,000 units. During the month, the company purchased and used 130,000 pounds of material and produced 31,000 finished units. The actual price paid per pound was $5.40. What was the material quantity variance for the month of March?

A. $10,000 unfavorable. B. $20,000 unfavorable. C. $30,000 unfavorable. D. $32,400 favorable.

Question: 35A company began business on January 1 of the current year. The firm’s standard cost system allows for 4 yards of fabric at $1.55 per yard for each finished unit of product. During the year, the company produced 20,000 units of finished product and sold 18,000 units. Although there was no work-in-process inventory at the end of the year, there were 2,100 yards of fabric included in the ending raw materials inventory. If the materials quantity variance was $1,240 unfavorable, how many yards of fabric did the company buy during the year? A. 72,800 yards. B. 74,900 yards. C. 80,800 yards.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. 82,900 yards.

Question: 36A company established its annual direct material budget to produce 300,000 units as follows. 150,000 pounds of material at $0.75 per pound = $112,500 Throughout the year, the company produced 310,000 units of finished goods using 0.48 pounds per unit at a cost of $0.76 per pound. The direct material efficiency variance is A. $588 unfavorable. B. $900 favorable. C. $1,488 unfavorable. D. $4,650 favorable.

Fact Pattern: Jackson Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for the prime costs of one unit of product: Standard

Standard

Standard

Quantity

Price

Cost

Direct materials

5 pounds

$ 3.60/pound $18.00

Direct labor

1.25 hours

$12.00/hour

15.00 $33.00

During May, Jackson purchased 125,000 pounds of direct materials at a total cost of $475,000. The total factory wages for May were $364,000, 90% of which were for direct labor. Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct materials and 28,000 direct labor hours. Question: 37Jackson’s direct materials usage (quantity) variance for May is A. $7,200 unfavorable. B. $7,600 favorable. C. $5,850 unfavorable. D. $7,200 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 38A company uses a standard cost system. On January 1 of the current year, the company budgeted fixed manufacturing overhead cost of $600,000 and production at 200,000 units. During the year, the firm produced 190,000 units and incurred fixed manufacturing overhead of $595,000. The production volume variance for the year was A. $5,000 unfavorable. B. $10,000 unfavorable. C. $25,000 unfavorable. D. $30,000 unfavorable.

Fact Pattern: Jackson Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for the prime costs of one unit of product: Standard

Standard

Standard

Quantity

Price

Cost

Direct materials

5 pounds

$ 3.60/pound $18.00

Direct labor

1.25 hours

$12.00/hour

15.00 $33.00

During May, Jackson purchased 125,000 pounds of direct materials at a total cost of $475,000. The total factory wages for May were $364,000, 90% of which were for direct labor. Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct materials and 28,000 direct labor hours. Question: 39The purchase price variance for the direct materials acquired by Jackson Industries during May is: A. $21,600 favorable. B. $25,000 unfavorable. C. $21,600 unfavorable. D. $25,000 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product. Standard

Standard

Standard

Quantity

Price

Cost

Direct materials 8 pounds $1.80 per pound $14.40 Direct labor

.25 hour $8.00 per hour

2.00 $16.40

During November, Arrow purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory wages for November were $42,000, 90% of which were for direct labor. Arrow manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours. Question: 40Arrow’s direct materials usage (quantity) variance for November is A. $14,400 unfavorable. B. $1,100 favorable. C. $17,100 unfavorable. D. $17,100 favorable.

Fact Pattern: A company manufactures one product and has a standard cost system. In April the company had the following experience: Direct Materials Direct Labor Actual $/unit of input (lbs. & hrs.)

$28

$18

Standard price/unit of input

$24

$20

Standard inputs allowed per unit of output 10

4

Actual units of input

190,000

78,000

Actual units of output

20,000

20,000

Question: 41The direct materials price variance for April is A. $760,000 favorable. B. $760,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. $240,000 unfavorable. D. $156,000 favorable.

Fact Pattern: A company manufactures one product and has a standard cost system. In April the company had the following experience: Direct Materials Direct Labor Actual $/unit of input (lbs. & hrs.)

$28

$18

Standard price/unit of input

$24

$20

Standard inputs allowed per unit of output 10

4

Actual units of input

190,000

78,000

Actual units of output

20,000

20,000

Question: 42The direct materials efficiency variance for April is A. $156,000 favorable. B. $240,000 favorable. C. $240,000 unfavorable. D. $760,000 unfavorable.

Question: 43A company’s master budget indicated that 50,000 units of finished goods should be produced using 25,000 feet of materials at $4 per foot. The company actually produced 48,000 units of finished goods, purchased 27,000 feet of materials at $4.25 per foot, and used 25,000 feet of materials in production. The direct material efficiency variance is A. $0. B. $4,000 unfavorable. C. $6,000 unfavorable. D. $8,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 44In which of the following variances is the standard unit cost used in the calculations? A. Both the direct materials usage variance and the direct materials price variance. B. The direct materials usage variance but not the direct materials price variance. C. The direct labor price variance but not the direct labor efficiency variance. D. The direct labor efficiency variance but not the direct labor rate variance.

Subunit 4: Direct Labor Variances Question: 1The inventory control supervisor at a corporation reported that a large quantity of a part purchased for a special order that was never completed remains in stock. The order was not completed because the customer defaulted on the order. The part is not used in any of the corporation’s regular products. After consulting with the corporation’s engineers, the vice president of production approved the substitution of the purchased part for a regular part in a new product. The corporation’s engineers indicated that the purchased part could be substituted providing it was modified. The units manufactured using the substituted part required additional direct labor hours resulting in an unfavorable direct labor efficiency variance in the Production Department. The unfavorable direct labor efficiency variance resulting from the substitution of the purchased part in inventory is best assigned to the A. Sales manager. B. Inventory supervisor. C. Production manager. D. Vice president of production.

Question: 2Under a standard cost system, direct labor price variances are usually not attributable to A. Union contracts approved before the budgeting cycle. B. Labor rate predictions. C. The use of a single average standard rate. D. The assignment of different skill levels of workers than planned.

Question: 3The static budget for the month of May was for 9,000 units with direct materials at $15 per unit. Direct labor was budgeted at 45 minutes per unit for a total of $81,000. Actual output for the month was 8,500 units with $127,500 in direct materials and $77,775 in direct labor expense. The direct labor standard of 45 minutes was maintained throughout the month. Variance analysis of the performance for the month of May shows a(n) A. Favorable direct materials usage variance of $7,500.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. Favorable direct labor efficiency variance of $1,275. C. Unfavorable direct labor efficiency variance of $1,275. D. Unfavorable direct labor price variance of $1,275.

Fact Pattern: Jackson Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for the prime costs of one unit of product: Standard

Standard

Standard

Quantity

Price

Cost

Direct materials

5 pounds

$ 3.60/pound $18.00

Direct labor

1.25 hours

$12.00/hour

15.00 $33.00

During May, Jackson purchased 125,000 pounds of direct materials at a total cost of $475,000. The total factory wages for May were $364,000, 90% of which were for direct labor. Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct materials and 28,000 direct labor hours. Question: 4Jackson’s direct labor price (rate) variance for May is A. $8,400 favorable. B. $7,200 unfavorable. C. $8,400 unfavorable. D. $6,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Jackson Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for the prime costs of one unit of product: Standard

Standard

Standard

Quantity

Price

Cost

Direct materials

5 pounds

$ 3.60/pound $18.00

Direct labor

1.25 hours

$12.00/hour

15.00 $33.00

During May, Jackson purchased 125,000 pounds of direct materials at a total cost of $475,000. The total factory wages for May were $364,000, 90% of which were for direct labor. Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct materials and 28,000 direct labor hours. Question: 5Jackson’s direct labor usage (efficiency) variance for May is A. $5,850 favorable. B. $6,000 unfavorable. C. $5,850 unfavorable. D. $6,000 favorable.

Question: 6An unfavorable direct labor efficiency variance could be caused by a(n) A. Unfavorable variable overhead spending variance. B. Unfavorable direct materials usage variance. C. Unfavorable fixed overhead volume variance. D. Favorable variable overhead spending variance.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Zazoo, Inc. specializes in reviewing and editing technical magazine articles. Zazoo sets the following standards for evaluating the performance of the professional staff: Annual budgeted fixed overhead costs for normal capacity level of 10,000 articles reviewed and edited

$600,000

Standard professional hours per 10 articles

200

Flexible budget of standard labor costs to process 10,000 articles

$10,000,000

The following data apply to the 9,500 articles that were actually reviewed and edited during the current year. Total hours used by professional staff 192,000 Flexible costs $9,120,000 Total cost $9,738,000 Question: 7Zazoo’s labor efficiency variance for the year is A. $100,000 unfavorable. B. $238,000 unfavorable. C. $380,000 favorable. D. $500,000 favorable.

Fact Pattern: Zazoo, Inc. specializes in reviewing and editing technical magazine articles. Zazoo sets the following standards for evaluating the performance of the professional staff: Annual budgeted fixed overhead costs for normal capacity level of 10,000 articles reviewed and edited Standard professional hours per 10 articles

$600,000 200

Flexible budget of standard labor costs to process 10,000 articles

$10,000,000

The following data apply to the 9,500 articles that were actually reviewed and edited during the current year. Total hours used by professional staff 192,000 Flexible costs $9,120,000 Total cost $9,738,000 Question: 8Using a flexible budget, Zazoo’s total cost planned for the review and editing of 9,500 articles should be A. $9,500,000 B. $10,070,000 C. $10,100,000 D. $10,570,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product. Standard

Standard

Standard

Quantity

Price

Cost

Direct materials 8 pounds $1.80 per pound $14.40 Direct labor

.25 hour $8.00 per hour

2.00 $16.40

During November, Arrow purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory wages for November were $42,000, 90% of which were for direct labor. Arrow manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours. Question: 9Arrow’s direct labor price (rate) variance for November is A. $2,200 favorable. B. $1,900 unfavorable. C. $2,000 unfavorable. D. $2,090 favorable.

Fact Pattern: Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product. Standard

Standard

Standard

Quantity

Price

Cost

Direct materials 8 pounds $1.80 per pound $14.40 Direct labor

.25 hour $8.00 per hour

2.00 $16.40

During November, Arrow purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory wages for November were $42,000, 90% of which were for direct labor. Arrow manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours. Question: 10Arrow’s direct labor usage (efficiency) variance for November is ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

A. $2,200 favorable. B. $2,000 favorable. C. $2,000 unfavorable. D. $1,800 unfavorable.

Question: 11A company uses a standard cost system. The following information pertains to direct labor for product B for the month of October: Standard hours allowed for actual production

2,000

Actual rate paid per hour

$8.40

Standard rate per hour

$8.00

Labor efficiency variance $1,600 U What were the actual hours worked? A. 1,800 B. 1,810 C. 2,190 D. 2,200

Question: 12The following is a standard cost variance analysis report on direct labor cost for a division of a manufacturing company. Job Actual Hours at Actual Wages Actual Hours at Standard Wages

Standard Hours at Standard Wages

213 $ 3,243 $ 3,700 215 15,345 15,675 217 6,754 7,000 219 19,788 18,755 221 3,370 3,470 Totals $48,500 $48,600 What is the total static budget direct labor variance for the division?

$ 3,100 15,000 6,600 19,250 2,650 $46,600

A. $100 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. $1,900 unfavorable. C. $1,900 favorable. D. $100 unfavorable.

Fact Pattern: A company manufactures one product and has a standard cost system. In April the company had the following experience: Direct Materials Direct Labor Actual $/unit of input (lbs. & hrs.)

$28

$18

Standard price/unit of input

$24

$20

Standard inputs allowed per unit of output 10

4

Actual units of input

190,000

78,000

Actual units of output

20,000

20,000

Question: 13The direct labor rate variance for April is A. $240,000 favorable. B. $156,000 unfavorable. C. $156,000 favorable. D. $40,000 unfavorable.

Fact Pattern: One of the items produced by a manufacturer of lawn and garden tools is a chain saw. The direct labor standard for assembling and testing a chain saw is 2.5 hours at $8 per hour. Budgeted production for October was 1,200 units. Actual production during the month was 1,000 units, and direct labor cost was $27,840 for 3,200 hours. Question: 14Using a two-variance system, what was the direct labor rate variance for October? A. $2,240 favorable. B. $2,240 unfavorable. C. $3,840 favorable. D. $5,600 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: One of the items produced by a manufacturer of lawn and garden tools is a chain saw. The direct labor standard for assembling and testing a chain saw is 2.5 hours at $8 per hour. Budgeted production for October was 1,200 units. Actual production during the month was 1,000 units, and direct labor cost was $27,840 for 3,200 hours. Question: 15Using a two-variance system, what is the direct labor efficiency variance? A. $2,240 unfavorable. B. $5,600 favorable. C. $5,600 unfavorable. D. $6,090 favorable.

Question: 16A manager prepared the following table by which to analyze labor costs for the month: Actual Hours at Actual Hours at Standard Hours at Actual Rate

Standard Rate

Standard Rate

$10,000

$9,800

$8,820

What variance was $980? A. Labor efficiency variance. B. Labor rate variance. C. Volume variance. D. Labor spending variance.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 17The total budgeted direct labor cost of a company for the month was set at $75,000 when 5,000 units were planned to be produced. The following standard cost, stated in terms of direct labor hours (DLH), was used to develop the budget for direct labor cost: 1.25 DLH × $12.00/DLH = $15.00/unit produced The actual operating results for the month were as follows: Actual units produced

5,200

Actual direct labor hours worked

6,600

Actual direct labor cost $77,220 The direct labor efficiency variance for the month would be A. $4,200 unfavorable. B. $3,000 unfavorable. C. $2,220 unfavorable. D. $1,200 unfavorable.

Question: 18A company produced 600 units of one of its products last year. The standard for labor hours allowed was 2 hours per unit at a standard rate of $6 per hour. Actual hours worked amounted to 1,230 hours. The labor rate variance was $246 unfavorable, and the labor efficiency variance was $180 unfavorable. What was the actual direct labor cost for the period? A. $7,134 B. $7,200 C. $7,380 D. $7,626

Question: 19A company manufactures a single product with a standard direct labor cost of 2 hours at $10.00 per hour. During November, 1,500 units were produced requiring 3,200 hours at $10.25 per hour. What was the unfavorable direct labor efficiency variance? A. $2,050 B. $2,000 C. $1,250 D. $1,200

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 20A company’s direct labor costs for April are as follows: Standard direct labor hours

42,000

Actual direct labor hours

41,200

Total direct labor payroll

$247,200

Direct labor efficiency variance -- favorable $ 3,840 What is the direct labor rate variance? A. $44,496 unfavorable. B. $49,440 unfavorable. C. $49,440 favorable. D. $50,400 favorable.

Question: 21Direct labor costs for the month of May are as follows: Standard direct labor hours allowed

12,500

Actual direct labor rate

$8.25

Actual direct labor hours

10,000

Direct labor rate variance -- favorable $5,600 What was the standard direct labor rate in May? A. $7.69 B. $7.80 C. $8.25 D. $8.81

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 22A company uses a standard-cost system. Direct labor information for July is as follows: Standard hours allowed for actual production 3,000 Actual rate paid per hour

$9.35

Standard rate per hour

$8.50

Labor efficiency variance

$1,870 U

The actual hours worked equaled A. 2,780 B. 2,800 C. 3,200 D. 3,220

Question: 23Direct labor costs for June were as follows: Actual direct labor hours

32,000

Standard direct labor hours

33,600

Direct labor rate variance -- favorable $6,720 Standard direct labor rate per hour

$5.04

Compute total direct labor payroll for the month of June. A. $154,560 B. $154,880 C. $167,680 D. $168,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 24A company has a direct labor price variance that is favorable. Of the following, the most serious concern the company may have about this variance is that A. The circumstances giving rise to the favorable variance will not continue in the future. B. The production manager may not be using human resources as efficiently as possible. C. The cause of the favorable variance may result in other larger unfavorable variances in the value-chain. D. Actual production is less than budgeted production.

Question: 25A company performs oil changes and other minor maintenance services (e.g., tire pressure checks) for cars. The company advertises that all services are completed within 15 minutes for each service. On a recent Saturday, 160 cars were serviced, resulting in the following labor variances: rate, $19 unfavorable; efficiency, $14 favorable. If the company’s standard labor rate is $7 per hour, determine the actual wage rate per hour and the actual hours worked. Wage Rate Hours Worked A. $6.55 42.00 B. $6.67 42.71 C. $7.45 42.00 D. $7.50 38.00

Question: 26A manufacturer uses a standard cost system with overhead applied based on direct labor hours. The manufacturing budget for the production of 5,000 units for the month of May included the following information. Direct labor (10,000 hrs. at $15 per hr.) $150,000 Variable overhead

30,000

Fixed overhead

80,000

During May, 6,000 units were produced and the direct labor efficiency variance was $1,500 unfavorable. Based on this information, the actual number of direct labor hours used in May was A. 9,900 B. 10,100 C. 11,900 D. 12,100

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 27A company uses standard costing and flexible budgeting and is evaluating its direct labor. The flexible budget variance can usually be broken down into two other variances identified as the A. Direct labor rate variance and direct labor efficiency variance. B. Direct labor cost variance and direct labor volume variance. C. Direct labor rate variance and direct labor volume variance. D. Direct labor cost variance and direct labor efficiency variance.

Question: 28A company had a total labor variance of $15,000 favorable and a labor efficiency variance of $18,000 unfavorable. The labor price variance was A. $3,000 favorable. B. $3,000 unfavorable. C. $33,000 favorable. D. $33,000 unfavorable.

Question: 29The accounting records of a corporation reveal a favorable labor efficiency variance for the period just ended. Which of the following comments by the executives reflect a limited knowledge of the variance investigation process? 1. “We can use statistical testing procedures to determine whether or not the variance should be investigated.” 2. “Let’s look into it. Yes, our operations might be fine; however, our standard labor time may need revision.” 3. “I don’t believe in all of these rules to decide whether or not variances should be investigated. Good judgment is the real key.” 4. “Don’t worry – the variance was caused by a random event and is well within our range of possible acceptable outcomes.” 5.

“Why are you getting so upset? This is a favorable variance, so let’s forget it.”

A. 2 and 5 only. B. 1, 3, and 4 only. C. 4 and 5 only. D. 5 only.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 30A company is a mattress manufacturer. The company has a standard direct labor rate of $25 per hour, 75 direct labor employees, and 50 indirect labor employees. Last week, the direct labor payroll was $90,000 for 3,000 hours worked. The company manufactured 1,000 mattresses. The standard cost sheet allows for 2.5 hours of labor per mattress. The direct labor rate variance is A. $15,000 unfavorable. B. $27,500 unfavorable. C. $15,000 favorable. D. $27,500 favorable.

Question: 31A corporation’s master budget calls for the production of 5,000 units of product monthly. The master budget includes indirect labor of $144,000 annually; the corporation considers indirect labor to be a variable cost. During the month of April, 4,500 units of product were produced, and indirect labor costs of $10,100 were incurred. A performance report utilizing flexible budgeting would report a budget variance for indirect labor of A. $1,900 unfavorable. B. $700 favorable. C. $1,900 favorable. D. $700 unfavorable.

Question: 32A company’s budget indicated it should produce 11,000 units of finished goods using 22,000 hours of direct labor at a cost of $20 per hour. Actual results showed that 10,000 units of finished goods were manufactured, utilizing 21,000 labor hours at $19.75 per hour. If the company used a standard cost system, the dollar amount of direct labor traced to the units manufactured would total A. $440,000 B. $420,000 C. $414,750 D. $400,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 33A company budgets to sell 4,000 units of its product. Actual sales are 4,200 units. The product has a standard price of $43. When analyzing its direct labor flexible-budget variance for the period, the company determined that its direct labor efficiency variance was an unfavorable variance of $8,600. Which one of the following is closest to the actual price for direct labor if the total direct labor flexible-budget variance was an unfavorable variance of $4,400? A. $39 B. $40 C. $41 D. $42

Question: 34A pizza restaurant has recently experienced a decline in profit margin although sales have remained steady. An analysis of direct cost inputs revealed the following.  A favorable materials price variance  An unfavorable materials quantity variance  A favorable labor rate variance  An unfavorable labor efficiency variance Which one of the following is the most likely cause of the decline in the profit margin? A. The cheese supplier has raised prices. B. The new employees are still learning the recipes. C. The employees are being paid more than the budgeted standard rates. D. The employees are working fewer hours than budgeted standard hours.

Question: 35A manufacturing firm recently hired a large number of employees for an expected increase in upcoming projects. After the first few projects were completed, the firm’s management accountants analyzed the direct labor rate variance and found an unfavorable labor rate variance. The least likely explanation for this unfavorable variance is A. The new hires were less skilled. B. A new union contract resulted in higher wages for the workers. C. Using overly skilled employees for less skilled work, resulting in higher labor costs. D. The actual cost of the labor is greater than the standard cost.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 36Firm XYZ is looking to reduce its labor costs. In doing so, it has hired workers who are less skilled. Assigning these workers to a job will most likely result in A. Higher-quality products. B. An unfavorable labor rate variance. C. Expedited job times. D. An unfavorable efficiency variance.

Subunit 5: Mix and Yield Variances Question: 1The efficiency variance for either direct labor or materials can be divided into A. Spending variance and yield variance. B. Yield variance and price variance. C. Volume variance and mix variance. D. Yield variance and mix variance.

Fact Pattern: Mack Fuels produces a gasoline additive. The standard costs and input for a 500-liter batch of the additive are presented below.

Chemical

The quantities purchased and used during the current period are shown below. A total of 140 batches were made during the current period.

Standard

Standard

Quantity

Total

Quantity

Input Quantity

Cost

Purchased

Purchase

Used

in Liters

per Liter

(Liters)

Price

(Liters)

Total Cost Chemical

Echol

20 0

$.20 0

$ 40.0 0

Echol

25,00 0

$ 5,36 5

26,60 0

Protex

10 0

.425

42.50

Protex

13,00 0

6,240

12,88 0

Benz

25 0

.150

37.50

Benz

40,00 0

5,840

37,80 0

CT-40

50

.300

15.00

CT-40

7,500

2,220

7,140

Total 85,50 s 0

$19,66 5

84,42 0

Total 60 s 0

$135.0 0

Question: 2What is Mack’s direct materials mix variance for this operation? A. $294.00 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. $388.50 favorable. C. $94.50 unfavorable. D. $94.50 favorable.

Fact Pattern: Mack Fuels produces a gasoline additive. The standard costs and input for a 500-liter batch of the additive are presented below.

Chemical

The quantities purchased and used during the current period are shown below. A total of 140 batches were made during the current period.

Standard

Standard

Quantity

Total

Quantity

Input Quantity

Cost

Purchased

Purchase

Used

in Liters

per Liter

(Liters)

Price

(Liters)

Total Cost Chemical

Echol

20 0

$.20 0

$ 40.0 0

Echol

25,00 0

$ 5,36 5

26,60 0

Protex

10 0

.425

42.50

Protex

13,00 0

6,240

12,88 0

Benz

25 0

.150

37.50

Benz

40,00 0

5,840

37,80 0

CT-40

50

.300

15.00

CT-40

7,500

2,220

7,140

Total 85,50 s 0

$19,66 5

84,42 0

Total 60 s 0

$135.0 0

Question: 3What is Mack’s direct materials yield variance for this operation? A. $294.00 favorable. B. $388.50 favorable. C. $94.50 unfavorable. D. $388.50 unfavorable.

Question: 4A materials or labor mix variance equals A. The actual total quantity of inputs times the difference between the weighted-average standard price for standard mix and the weighted-average standard price for actual mix. B. The actual total quantity of inputs times the difference between the weighted-average budgeted price for inputs and the weighted-average actual price for inputs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. The budgeted total quantity of inputs times the difference between the weighted-average budgeted price for inputs and the weighted-average expected price for inputs. D. The actual total quantity of inputs times the difference between the weighted-average actual price for inputs and the weighted-average expected price for inputs.

Fact Pattern: Mountain View Hospital (MVH) has adopted a standard cost accounting system for evaluation and control of nursing labor. Diagnosis Related Groups (DRGs), instituted by the U.S. government for health insurance reimbursement, are used as the output measure in the standard cost system. A DRG is a patient classification scheme in which hospitals are regarded as multiproduct firms with inpatient treatment procedures related to the numbers and types of patient ailments treated. MVH has developed standard nursing times for the treatment of each DRG classification, and nursing labor hours are assumed to vary with the number of DRGs treated within a time period. The nursing unit on the fourth floor treats patients with four DRG classifications. The unit is staffed with registered nurses (RNs), licensed practical nurses (LPNs), and aides. The standard nursing hours and salary rates and actual numbers of patients for the month of May were as follows: DRG

No. of

Classification

Patients

Standard Hours per DRG RN

LPN

Aide

Total Standard Hours RN

LPN

Aide

1

250

6

4

5

1,500

1,000

1,250

2

90

26

16

10

2,340

1,440

900

3

240

10

5

4

2,400

1,200

960

4

140

12

7

10

1,680

980

1,400

7,920

4,620

4,510

Standard Hourly Rates RN

$12.00

LPN

8.00

Aide

6.00

The results of operations during May for the fourth floor nursing unit are presented below: RN

LPN

Actual hours

8,150

Actual salary

$100,245 $35,260 $25,300

Actual hourly rate $12.30

4,300

Aide

$8.20

4,400

$5.75

Because MVH does not have data to calculate variances by DRG, it uses a flexible budgeting approach to calculate labor variances for each reporting period by labor classification (RN, LPN, ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Aide). Labor mix and labor yield variances are also calculated because one labor input can be substituted for another. The variances are used by nursing supervisors and hospital administration to evaluate the performance of nurses. Question: 5What is the direct labor static budget variance? A. $2,205 favorable. B. $2,205 unfavorable. C. $1,745 favorable. D. $1,745 unfavorable.

Fact Pattern: Mountain View Hospital (MVH) has adopted a standard cost accounting system for evaluation and control of nursing labor. Diagnosis Related Groups (DRGs), instituted by the U.S. government for health insurance reimbursement, are used as the output measure in the standard cost system. A DRG is a patient classification scheme in which hospitals are regarded as multiproduct firms with inpatient treatment procedures related to the numbers and types of patient ailments treated. MVH has developed standard nursing times for the treatment of each DRG classification, and nursing labor hours are assumed to vary with the number of DRGs treated within a time period. The nursing unit on the fourth floor treats patients with four DRG classifications. The unit is staffed with registered nurses (RNs), licensed practical nurses (LPNs), and aides. The standard nursing hours and salary rates and actual numbers of patients for the month of May were as follows: DRG

No. of

Classification

Patients

Standard Hours per DRG RN

LPN

Aide

Total Standard Hours RN

LPN

Aide

1

250

6

4

5

1,500

1,000

1,250

2

90

26

16

10

2,340

1,440

900

3

240

10

5

4

2,400

1,200

960

4

140

12

7

10

1,680

980

1,400

7,920

4,620

4,510

Standard Hourly Rates RN

$12.00

LPN

8.00

Aide

6.00

The results of operations during May for the fourth floor nursing unit are presented below: RN

LPN

Aide

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Actual hours

8,150

Actual salary

$100,245 $35,260 $25,300

Actual hourly rate $12.30

4,300

$8.20

4,400

$5.75

Because MVH does not have data to calculate variances by DRG, it uses a flexible budgeting approach to calculate labor variances for each reporting period by labor classification (RN, LPN, Aide). Labor mix and labor yield variances are also calculated because one labor input can be substituted for another. The variances are used by nursing supervisors and hospital administration to evaluate the performance of nurses. Question: 6What is the labor mix variance? A. $460 unfavorable. B. $460 favorable. C. $1,406 unfavorable. D. $1,406 favorable.

Fact Pattern: Mountain View Hospital (MVH) has adopted a standard cost accounting system for evaluation and control of nursing labor. Diagnosis Related Groups (DRGs), instituted by the U.S. government for health insurance reimbursement, are used as the output measure in the standard cost system. A DRG is a patient classification scheme in which hospitals are regarded as multiproduct firms with inpatient treatment procedures related to the numbers and types of patient ailments treated. MVH has developed standard nursing times for the treatment of each DRG classification, and nursing labor hours are assumed to vary with the number of DRGs treated within a time period. The nursing unit on the fourth floor treats patients with four DRG classifications. The unit is staffed with registered nurses (RNs), licensed practical nurses (LPNs), and aides. The standard nursing hours and salary rates and actual numbers of patients for the month of May were as follows: DRG

No. of

Classification

Patients

Standard Hours per DRG RN

LPN

Aide

Total Standard Hours RN

LPN

Aide

1

250

6

4

5

1,500

1,000

1,250

2

90

26

16

10

2,340

1,440

900

3

240

10

5

4

2,400

1,200

960

4

140

12

7

10

1,680

980

1,400

7,920

4,620

4,510

Standard Hourly Rates

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

RN

$12.00

LPN

8.00

Aide

6.00

The results of operations during May for the fourth floor nursing unit are presented below: RN

LPN 4,300

Aide

Actual hours

8,150

Actual salary

$100,245 $35,260 $25,300

Actual hourly rate $12.30

$8.20

4,400

$5.75

Because MVH does not have data to calculate variances by DRG, it uses a flexible budgeting approach to calculate labor variances for each reporting period by labor classification (RN, LPN, Aide). Labor mix and labor yield variances are also calculated because one labor input can be substituted for another. The variances are used by nursing supervisors and hospital administration to evaluate the performance of nurses. Question: 7What is the labor yield variance? A. $1,866 unfavorable. B. $1,866 favorable. C. $1,406 unfavorable. D. $1,406 favorable.

Fact Pattern: Tamsin Company’s standard direct labor rates in effect for the fiscal year ending June 30 and standard hours allowed for the output in April are as follows: Standard DL

Standard DLH

Rate per Hour Allowed for Output Labor class III

$8.00

500

Labor class II

7.00

500

Labor class I

5.00

500

The wage rates for each labor class increased January 1 under the terms of a new union contract. The standard wage rates were not revised. The actual direct labor hours (DLH) and the actual direct labor rates for April were as follows: Actual Rate Actual DLH Labor class III $8.50

550

Labor class II

7.50

650

Labor class I

5.40

375

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 8What is the direct labor yield variance (rounded) for Tamsin? A. $500 unfavorable. B. $325 unfavorable. C. $825 unfavorable. D. $325 favorable.

Fact Pattern: Tamsin Company’s standard direct labor rates in effect for the fiscal year ending June 30 and standard hours allowed for the output in April are as follows: Standard DL

Standard DLH

Rate per Hour Allowed for Output Labor class III

$8.00

500

Labor class II

7.00

500

Labor class I

5.00

500

The wage rates for each labor class increased January 1 under the terms of a new union contract. The standard wage rates were not revised. The actual direct labor hours (DLH) and the actual direct labor rates for April were as follows: Actual Rate Actual DLH Labor class III $8.50

550

Labor class II

7.50

650

Labor class I

5.40

375

Question: 9What is the direct labor mix variance (rounded) for Tamsin? A. $500 unfavorable. B. $325 unfavorable. C. $325 favorable. D. $500 favorable.

Question: 10A materials or labor yield variance equals A. The difference between the standard total quantity of inputs and the actual total quantity of inputs times the weighted-average standard price of the actual mix of inputs. B. The actual total quantity of inputs times the difference between the weighted-average standard price of the standard mix of inputs and the weighted-average standard price of the actual mix of inputs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. The standard total quantity of inputs times the difference between the weighted-average standard price using the standard mix of inputs and the weighted-average standard price of the actual mix of inputs. D. The difference between the standard total quantity of inputs and the actual total quantity of inputs times the weighted-average standard price of the standard mix of inputs.

Question: 11The labor mix and labor yield variances together equal the A. Total labor variance. B. Labor rate variance. C. Labor efficiency variance. D. Sum of the labor efficiency and overhead efficiency variances.

Question: 12A firm manufactures a product by mixing two materials as shown by the following standards for one unit of finished goods. 1.

Material A: 4 ounces at $1.50/ounce

2.

Material B: 6 ounces at $2.50/ounce

The firm actually produced 25,000 units of finished goods using 105,000 ounces of Material A and 145,000 ounces of Material B. The actual costs of the materials were $1.48 per ounce for Material A and $2.55 per ounce for Material B. The firm’s direct material yield variance was A. $0 B. $5,000 unfavorable. C. $5,000 favorable. D. $5,350 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Subunit 6: Overhead Variances Question: 1A manufacturer has an estimated practical capacity of 90,000 machine hours, and each unit requires two machine hours. The following data apply to a recent accounting period: Actual variable overhead

$240,000

Actual fixed overhead

$442,000

Actual machine hours worked

88,000

Actual finished units produced

42,000

Budgeted variable overhead at 90,000 machine hours $200,000 Budgeted fixed overhead $450,000 Of the following factors, the manufacturer’s production volume variance is most likely to have been caused by A. A wage hike granted to a production supervisor. B. A newly imposed initiative to reduce finished goods inventory levels. C. Acceptance of an unexpected sales order. D. Temporary employment of workers with lower skill levels than originally anticipated.

Question: 2Which one of the following variances is of least significance from a behavioral control perspective? A. Unfavorable direct materials quantity variance amounting to 20% of the quantity allowed for the output attained. B. Unfavorable direct labor efficiency variance amounting to 10% more than the budgeted hours for the output attained. C. Favorable direct labor rate variance resulting from an inability to hire experienced workers to replace retiring workers. D. Fixed overhead volume variance resulting from management’s decision midway through the fiscal year to reduce its budgeted output by 20%.

Question: 3Variable overhead is applied on the basis of standard direct labor hours. If, for a given period, the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance will be A. Favorable. B. Unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. Zero. D. The same amount as the direct labor efficiency variance.

Question: 4A manufacturer uses a standard cost system with overhead applied based upon direct labor hours. The manufacturing budget for the production of 5,000 units for the month of May included the following information: Direct labor 10,000 hours at $15 per hour $150,000 Variable overhead

30,000

Fixed overhead

80,000

During May, 6,000 units were produced and the fixed overhead budget variance was $2,000 favorable. Fixed overhead during May was A. Underapplied by $2,000. B. Underapplied by $16,000. C. Overapplied by $16,000. D. Overapplied by $18,000.

Question: 5The fixed overhead volume variance is the A. Measure of the lost profits from the lack of sales volume. B. Amount of the underapplied or overapplied fixed overhead costs. C. Potential cost reduction that can be achieved from better cost control. D. Measure of production inefficiency.

Question: 6Which of these variances is least significant for cost control? A. Labor price variance. B. Materials quantity variance. C. Fixed O/H volume variance.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. Variable O/H spending variance.

Fact Pattern: Tiny Tykes Corporation had the following activity relating to its fixed and variable overhead for the month of July: Actual costs Fixed overhead

$120,000

Variable overhead 80,000 Flexible budget (Standard input allowed for actual output achieved × budgeted rate) Variable overhead 90,000 Applied (Standard input allowed for actual output achieved × budgeted rate) Fixed overhead 125,000 Variable overhead spending variance 2,000 F Production volume variance 5,000 U Question: 7If the budgeted rate for applying variable overhead was $20 per direct labor hour, how efficient or inefficient was Tiny Tykes Corporation in terms of using direct labor hours as an activity base? A. 100 direct labor hours inefficient. B. 100 direct labor hours efficient. C. 400 direct labor hours inefficient. D. 400 direct labor hours efficient.

Fact Pattern: Tiny Tykes Corporation had the following activity relating to its fixed and variable overhead for the month of July: Actual costs Fixed overhead

$120,000

Variable overhead 80,000 Flexible budget (Standard input allowed for actual output achieved × budgeted rate) Variable overhead 90,000 Applied (Standard input allowed for actual output achieved × budgeted rate) Fixed overhead 125,000 Variable overhead spending variance 2,000 F Production volume variance 5,000 U

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 8Tiny Tykes’ fixed overhead efficiency variance is A. $3,000 favorable. B. $3,000 unfavorable. C. $5,000 favorable. D. Never a meaningful variance.

Question: 9The variance in an absorption costing system that measures the departure from the denominator level of activity that was used to set the fixed overhead rate is the A. Spending variance. B. Efficiency variance. C. Production volume variance. D. Flexible budget variance.

Question: 10The production volume variance is due to A. Inefficient or efficient use of direct labor hours. B. Efficient or inefficient use of variable overhead. C. Difference from the planned level of the base used for overhead allocation and the actual level achieved. D. Excessive application of direct labor hours over the standard amounts for the output level actually achieved.

Question: 11If overhead is applied on the basis of units of output, the variable overhead efficiency variance will be A. Zero. B. Favorable, if output exceeds the budgeted level. C. Unfavorable, if output is less than the budgeted level. D. A function of the direct labor efficiency variance.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 12A corporation is considering which capacity measure is appropriate to use as the denominator level of activity when applying fixed overhead to units produced. Assume that the corporation selects direct labor hours as the cost driver and the following additional data are available from the prior year: Hours Standard direct labor hours for normal capacity

200,000

Standard direct labor hours allowed for units produced in the prior year 210,000 Standard direct labor hours for the master budget capacity 220,000 Which of the following capacity measures for the denominator-level of activity would have resulted in an unfavorable volume variance? A. Both normal capacity and master budget capacity. B. Neither normal capacity nor master budget capacity. C. Normal capacity only. D. Master budget capacity only.

Fact Pattern: Nanjones Company manufactures a line of products distributed nationally through wholesalers. Presented below are planned manufacturing data for the year and actual data for November of the current year. The company applies overhead based on planned machine hours using a predetermined annual rate. Planning Data Annual

November

Direct labor hours (actual) Direct labor hours (plan based on output) Machine hours (actual) Machine hours (plan based on output) Fixed overhead Variable overhead 13The predetermined overhead application rate for Nanjones Company is

Fixed overhead Variable overhead Direct labor hours Machine hours

Question:

Data for November

$1,200,000 $2,400,000 48,000 240,000

$100,000 $220,000 4,000 22,000

4,200 4,000 21,600 21,000 $101,200 $214,000

A. $5.00 B. $25.00 C. $10.00 D. $15.00

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Nanjones Company manufactures a line of products distributed nationally through wholesalers. Presented below are planned manufacturing data for the year and actual data for November of the current year. The company applies overhead based on planned machine hours using a predetermined annual rate. Planning Data Annual

November

Direct labor hours (actual) 4,200 Direct labor hours (plan based on output) 4,000 Machine hours (actual) 21,600 Machine hours (plan based on output) 21,000 Fixed overhead $101,200 Variable overhead $214,000 14Nanjones’ total amount of overhead applied to production for November was

Fixed overhead Variable overhead Direct labor hours Machine hours

Question:

Data for November

$1,200,000 $2,400,000 48,000 240,000

$100,000 $220,000 4,000 22,000

A. $316,200 B. $315,000 C. $320,000 D. $300,000

Fact Pattern: Nanjones Company manufactures a line of products distributed nationally through wholesalers. Presented below are planned manufacturing data for the year and actual data for November of the current year. The company applies overhead based on planned machine hours using a predetermined annual rate. Planning Data Annual

November

Direct labor hours (actual) 4,200 Direct labor hours (plan based on output) 4,000 Machine hours (actual) 21,600 Machine hours (plan based on output) 21,000 Fixed overhead $101,200 Variable overhead $214,000 15Nanjones’ amount of over- or underapplied variable manufacturing overhead for November was

Fixed overhead Variable overhead Direct labor hours Machine hours

Question:

Data for November

$1,200,000 $2,400,000 48,000 240,000

$100,000 $220,000 4,000 22,000

A. $6,000 overapplied. B. $4,000 underapplied. C. $20,000 overapplied. D. $6,000 underapplied.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Nanjones Company manufactures a line of products distributed nationally through wholesalers. Presented below are planned manufacturing data for the year and actual data for November of the current year. The company applies overhead based on planned machine hours using a predetermined annual rate. Planning Data Annual

November

Direct labor hours (actual) Direct labor hours (plan based on output) Machine hours (actual) Machine hours (plan based on output) Fixed overhead Variable overhead 16Nanjones’ variable overhead spending variance for November was

Fixed overhead Variable overhead Direct labor hours Machine hours

Question:

Data for November

$1,200,000 $2,400,000 48,000 240,000

$100,000 $220,000 4,000 22,000

4,200 4,000 21,600 21,000 $101,200 $214,000

A. $2,000 favorable. B. $6,000 favorable. C. $14,000 unfavorable. D. $6,000 unfavorable.

Fact Pattern: Nanjones Company manufactures a line of products distributed nationally through wholesalers. Presented below are planned manufacturing data for the year and actual data for November of the current year. The company applies overhead based on planned machine hours using a predetermined annual rate. Planning Data Annual

November

Direct labor hours (actual) Direct labor hours (plan based on output) Machine hours (actual) Machine hours (plan based on output) Fixed overhead Variable overhead 17Nanjones’ fixed overhead volume variance for November was

Fixed overhead Variable overhead Direct labor hours Machine hours

Question:

Data for November

$1,200,000 $2,400,000 48,000 240,000

$100,000 $220,000 4,000 22,000

4,200 4,000 21,600 21,000 $101,200 $214,000

A. $1,200 unfavorable. B. $5,000 unfavorable. C. $10,000 favorable. D. $5,000 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 18A fixed overhead volume variance based on standard direct labor hours measures A. Deviation from standard direct labor hour capacity. B. Deviation from the normal, or denominator, level of direct labor hours. C. Fixed overhead efficiency. D. Fixed overhead use.

Fact Pattern: Franklin Glass Works’ production budget for the year ended November 30 was based on 200,000 units. Each unit requires 2 standard hours of labor for completion. Total overhead was budgeted at $900,000 for the year, and the fixed overhead rate was estimated to be $3.00 per unit. Both fixed and variable overhead are assigned to the product on the basis of direct labor hours. The actual data for the year ended November 30 are presented as follows. Actual production in units 198,000 Actual direct labor hours

440,000

Actual variable overhead $352,000 Actual fixed overhead

$575,000

Question: 19The standard hours allowed for actual production for the year ended November 30 total A. 247,500 B. 396,000 C. 400,000 D. 495,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Franklin Glass Works’ production budget for the year ended November 30 was based on 200,000 units. Each unit requires 2 standard hours of labor for completion. Total overhead was budgeted at $900,000 for the year, and the fixed overhead rate was estimated to be $3.00 per unit. Both fixed and variable overhead are assigned to the product on the basis of direct labor hours. The actual data for the year ended November 30 are presented as follows. Actual production in units 198,000 Actual direct labor hours

440,000

Actual variable overhead $352,000 Actual fixed overhead

$575,000

Question: 20Franklin’s variable overhead efficiency variance for the year is A. $33,000 unfavorable. B. $35,520 favorable. C. $66,000 unfavorable. D. $33,000 favorable.

Fact Pattern: Franklin Glass Works’ production budget for the year ended November 30 was based on 200,000 units. Each unit requires 2 standard hours of labor for completion. Total overhead was budgeted at $900,000 for the year, and the fixed overhead rate was estimated to be $3.00 per unit. Both fixed and variable overhead are assigned to the product on the basis of direct labor hours. The actual data for the year ended November 30 are presented as follows. Actual production in units 198,000 Actual direct labor hours

440,000

Actual variable overhead $352,000 Actual fixed overhead

$575,000

Question: 21Franklin’s variable overhead spending variance for the year is A. $20,000 unfavorable. B. $19,800 favorable. C. $22,000 unfavorable. D. $20,000 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Franklin Glass Works’ production budget for the year ended November 30 was based on 200,000 units. Each unit requires 2 standard hours of labor for completion. Total overhead was budgeted at $900,000 for the year, and the fixed overhead rate was estimated to be $3.00 per unit. Both fixed and variable overhead are assigned to the product on the basis of direct labor hours. The actual data for the year ended November 30 are presented as follows. Actual production in units 198,000 Actual direct labor hours

440,000

Actual variable overhead $352,000 Actual fixed overhead

$575,000

Question: 22Franklin’s fixed overhead spending variance for the year is A. $19,000 favorable. B. $25,000 favorable. C. $5,750 favorable. D. $25,000 unfavorable.

Fact Pattern: Franklin Glass Works’ production budget for the year ended November 30 was based on 200,000 units. Each unit requires 2 standard hours of labor for completion. Total overhead was budgeted at $900,000 for the year, and the fixed overhead rate was estimated to be $3.00 per unit. Both fixed and variable overhead are assigned to the product on the basis of direct labor hours. The actual data for the year ended November 30 are presented as follows. Actual production in units 198,000 Actual direct labor hours

440,000

Actual variable overhead $352,000 Actual fixed overhead

$575,000

Question: 23The fixed overhead applied to Franklin’s production for the year is A. $484,200 B. $575,000 C. $594,000 D. $600,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Franklin Glass Works’ production budget for the year ended November 30 was based on 200,000 units. Each unit requires 2 standard hours of labor for completion. Total overhead was budgeted at $900,000 for the year, and the fixed overhead rate was estimated to be $3.00 per unit. Both fixed and variable overhead are assigned to the product on the basis of direct labor hours. The actual data for the year ended November 30 are presented as follows. Actual production in units 198,000 Actual direct labor hours

440,000

Actual variable overhead $352,000 Actual fixed overhead

$575,000

Question: 24Franklin’s fixed overhead volume variance for the year is A. $6,000 unfavorable. B. $19,000 favorable. C. $25,000 favorable. D. $55,000 unfavorable.

Fact Pattern: Dori Castings, a job-order shop, uses a full-absorption, standard-cost system to account for its production costs. The O/H costs are applied on a direct-labor-hour basis. Question: 25Dori’s choice of a production volume as a denominator for calculating its factory O/H rate has A. An effect on the variable factory O/H rate for applying costs to production. B. No effect on the fixed factory O/H budget variance. C. No effect on the fixed factory O/H production volume variance, nor the variable O/H spending variance. D. No effect on the overall (net) fixed factory O/H variance.

Fact Pattern: Dori Castings, a job-order shop, uses a full-absorption, standard-cost system to account for its production costs. The O/H costs are applied on a direct-labor-hour basis. Question: 26A production volume variance will exist for Dori in a month when A. Production volume differs from sales volume. B. Actual direct labor hours differ from standard allowed direct labor hours. C. The product of the budgeted application rate and the standard input allowed for the actual output differs from actual fixed factory O/H.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. The fixed factory O/H applied on the basis of standard allowed direct labor hours differs from the budgeted fixed factory O/H.

Fact Pattern: Dori Castings, a job-order shop, uses a full-absorption, standard-cost system to account for its production costs. The O/H costs are applied on a direct-labor-hour basis. Question: 27The amount of fixed factory O/H that Dori will apply to finished production is the A. Actual direct labor hours times the standard fixed factory O/H rate per direct labor hour. B. Standard allowed direct labor hours for the actual units of finished output times the standard fixed factory O/H rate per direct labor hour. C. Standard units of output for the actual direct labor hours worked times the standard fixed factory O/H rate per unit of output. D. Actual fixed factory O/H cost per direct labor hour times the standard allowed direct labor hours.

Question: 28A company ends the month with a volume variance of $6,360 unfavorable. If budgeted fixed O/H was $480,000, O/H was applied on the basis of 32,000 budgeted machine hours, and budgeted variable O/H was $170,000, what were the actual number of machine hours (AH) for the month? A. 32,425 B. 32,318 C. 32,000 D. 31,576

Fact Pattern: Patie Company uses a standard FIFO, process-cost system to account for its only product, Mituea. Patie has found that direct machine hours (DMH) provide the best estimate of the application of O/H. Four (4) standard direct machine hours are allowed for each unit. Using simple linear regression analysis in the form y = a + b(DMH), given that (a) equals fixed costs and (b) equals variable costs, Patie has developed the following O/H budget for a normal activity level of 100,000 direct machine hours: ITEM (y)

a

Supplies

b $ 0.50

Indirect Labor

$ 54,750

Depreciation -- Plant and Equipment

27,000

Property Taxes and Insurance

32,300

6.50

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Repairs and Maintenance Utilities Total O/H

14,550

1.25

3,400

4.75

$132,000

$13.00

Actual fixed O/H incurred was $133,250, and actual variable O/H was $1,225,000. Patie produced 23,500 equivalent units during the year using 98,700 direct machine hours. Question: 29What is the standard O/H rate? A. $13.00 per DMH. B. $1.32 per DMH C. $14.32 per DMH. D. $13.76 per DMH.

Fact Pattern: Patie Company uses a standard FIFO, process-cost system to account for its only product, Mituea. Patie has found that direct machine hours (DMH) provide the best estimate of the application of O/H. Four (4) standard direct machine hours are allowed for each unit. Using simple linear regression analysis in the form y = a + b(DMH), given that (a) equals fixed costs and (b) equals variable costs, Patie has developed the following O/H budget for a normal activity level of 100,000 direct machine hours: ITEM (y)

a

Supplies

b $ 0.50

Indirect Labor

$ 54,750

6.50

Depreciation -- Plant and Equipment

27,000

Property Taxes and Insurance

32,300

Repairs and Maintenance

14,550

1.25

3,400

4.75

$132,000

$13.00

Utilities Total O/H

Actual fixed O/H incurred was $133,250, and actual variable O/H was $1,225,000. Patie produced 23,500 equivalent units during the year using 98,700 direct machine hours. Question: 30How much O/H should be applied to production? A. $1,413,384

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

B. $1,432,000 C. $1,358,250 D. $1,346,080

Fact Pattern: Patie Company uses a standard FIFO, process-cost system to account for its only product, Mituea. Patie has found that direct machine hours (DMH) provide the best estimate of the application of O/H. Four (4) standard direct machine hours are allowed for each unit. Using simple linear regression analysis in the form y = a + b(DMH), given that (a) equals fixed costs and (b) equals variable costs, Patie has developed the following O/H budget for a normal activity level of 100,000 direct machine hours: ITEM (y)

a

Supplies

b $ 0.50

Indirect Labor

$ 54,750

6.50

Depreciation -- Plant and Equipment

27,000

Property Taxes and Insurance

32,300

Repairs and Maintenance

14,550

1.25

3,400

4.75

$132,000

$13.00

Utilities Total O/H

Actual fixed O/H incurred was $133,250, and actual variable O/H was $1,225,000. Patie produced 23,500 equivalent units during the year using 98,700 direct machine hours. Question: 31What is the total O/H variance? A. $12,170 unfavorable. B. $55,134 unfavorable. C. $55,134 favorable. D. $73,750 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 32A possible short-term problem in controlling overhead costs would be detected by which of the following variances? A. Both the fixed overhead spending variance and the volume variance. B. Both the variable overhead spending variance and the volume variance. C. The spending variance but not the volume variance. D. The volume variance but not the fixed overhead spending variance.

Question: 33A supervisor controls her department’s costs. The following data relate to her department for the month of June: Variable factory overhead Budgeted based on actual input $100,000 Actual

106,250 Fixed factory overhead

Budgeted Actual

$31,250 33,750

What was the department’s total spending variance for June? A. $8,750 U. B. $6,250 U. C. $3,750 F. D. $2,500 U.

Question: 34The following data relate to manufacturing operations: Standard direct labor hours per unit

3

Actual direct labor hours

24,500

Number of units produced

8,000

Standard variable overhead per standard direct labor hour $2 Actual variable overhead $46,000 Variable overhead efficiency variance is

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $0 B. $1,000 U. C. $2,000 F. D. $3,000 F.

Question: 35When calculating variances from standard costs, the difference between budgeted fixed overhead and the amount applied yields a A. Price variance. B. Combined price-quantity variance. C. Volume variance. D. Mix variance.

Question: 36A company uses a standard-cost accounting system. It applies overhead based on direct labor hours. The following overhead costs and production data are available for March: Standard fixed overhead rate per DLH

$1.50

Standard variable overhead rate per DLH

$5.00

Budgeted monthly DLH

30,000

Actual DLH worked

28,000

Standard DLH allowed for actual production 27,500 Overall overhead variance -- favorable $2,500 What is the applied factory overhead for March? A. $137,500 B. $176,250 C. $178,750 D. $182,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 37Which type of variance will reflect overtime premiums when the overall volume of work is greater than expected? A. Materials quantity. B. Overhead. C. Labor efficiency. D. Yield.

Question: 38Using the two-variance method for analyzing overhead, which of the following variances contains both variable and fixed overhead elements? Controllable (Budget) Volume Efficiency Variance Variance Variance A. Yes Yes Yes B. Yes Yes No C. Yes No No D. No No No

Question: 39Using the two-variance method for analyzing factory overhead, which of the following is used to compute the controllable (budget) variance? A. Both a budget allowance based on actual input and a volume allowance based on standard input. B. A budget allowance based on actual input but not a budget allowance based on standard input. C. A budget allowance based on standard input but not a budget allowance based on actual input. D. A budget allowance based on standard input and a budget allowance based on applied fixed overhead.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 40Using the three-variance method for analyzing factory overhead, which of the following is used to compute the spending variance? Budget Budget Actual Allowance Allowance Factory Based on Based on Overhead Actual Input Standard Input A. Yes Yes No B. Yes No Yes C. No Yes Yes D. No No No

Question: 41A company uses a predetermined factory overhead application rate based on direct labor cost. Budgeted factory overhead was $756,000 based on a budgeted volume of 60,000 direct labor hours, at a standard direct labor rate of $7.20 per hour. Actual factory overhead amounted to $775,000 with actual direct labor cost of $450,000 for the year ended December 31. How much was overapplied factory overhead? A. $12,500 B. $18,000 C. $19,000 D. $37,000

Question: 42A company prepared the following information using a flexible budget system. Percentage of total capacity 75% Direct labor hours Variable factory overhead Fixed factory overhead Total factory overhead rate per DLH

90%

30,000

36,000

$52,500

$63,000

$144,000

$144,000

$6.55

$5.75

The company operated at 75% of capacity during the year. However, the company applied factory overhead based on 90% of capacity. If actual factory overhead was equal to the factory overhead budgeted for 75% of capacity, what is the amount of overhead variance for the year? A. $28,500 underabsorbed.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $28,500 overabsorbed. C. $24,000 underabsorbed. D. $24,000 overabsorbed.

Question: 43A company uses a standard-cost system. The company prepared the following budget using normal capacity for the month of May: Direct labor hours

36,000

Variable factory overhead $ 72,000 Fixed factory overhead

$162,000

Actual results were as follows: Direct labor hours worked

33,000

Total factory overhead

$220,500

Standard DLH allowed for capacity attained

31,500

What is the budget (controllable) variance for May using the two-way analysis of overhead variances? A. $4,500 favorable. B. $7,500 favorable. C. $7,500 unfavorable. D. $13,500 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 44A company compiled the following information: Actual factory overhead

$22,500

Fixed overhead expenses, actual

$10,800

Fixed overhead expenses, budgeted $10,500 Actual hours

5,250

Standard hours

5,700

Variable overhead rate per DLH

$3.80

What is the spending variance assuming the company uses a three-way analysis of overhead? A. $9,660 unfavorable. B. $8,250 favorable. C. $7,950 favorable. D. $7,950 unfavorable.

Question: 45A company provided the following data for June production activity. The company uses a two-way analysis of overhead variances. Actual variable factory overhead incurred $294,000 Variable factory overhead rate per DLH $

6.00

Standard DLH allowed

49,500

Actual DLH

48,000

The budget (controllable) variance for June, assuming that budgeted fixed overhead costs equal actual fixed costs, is A. $3,000 favorable. B. $6,000 unfavorable. C. $9,000 favorable. D. $9,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 46A company applies variable overhead based upon direct labor hours and has a variable overhead efficiency variance that is $25,000 favorable. A possible cause of this variance is that A. Higher skilled labor was used. B. Electricity rates were lower than expected. C. Fewer supplies were used than anticipated. D. Fewer units of finished goods were produced.

Question: 47A firm uses a four-way allocation of overhead, machine hours to allocate overhead, and years of experience as the main determinant for wage increases. The standards are set and revised on an annual basis. Due to a surge in competitive pressures, the firm’s management decided to undertake downsizing. The firm offered incentives that permitted a large number of senior employees to opt in the middle of the year for early retirement. As a result, the firm had to bring in temporary replacements who were paid entry-level wages to see that work deadlines were met. Which one of the following is most likely to result from this situation? A. Unfavorable efficiency variances and favorable price variances. B. Unfavorable efficiency variances and unfavorable price variances. C. Favorable efficiency variances and unfavorable price variances. D. Favorable efficiency variances and favorable price variances.

Question: 48A manufacturer uses a standard cost system with overhead applied based on direct labor hours. The manufacturing budget for the production of 5,000 units for the month of June included 10,000 hours of direct labor at $15 per hour, or $150,000. During June, 4,500 units were produced, using 9,600 direct labor hours, incurring $39,360 of variable overhead, and showing a variable overhead efficiency variance of $2,400 unfavorable. The standard variable overhead rate per direct labor hour was A. $3.85 B. $4.00 C. $4.10 D. $6.00

Question: 49A firm uses a standard cost system and applies factory overhead to products on the basis of direct labor hours. If the firm recently reported a favorable direct labor efficiency variance, then the A. Variable overhead spending variance must be favorable. B. Variable overhead efficiency variance must be favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Fixed overhead volume variance must be unfavorable. D. Direct labor rate variance must be unfavorable.

Question: 50The performance report indicated the following information for the past month. Actual total overhead

$1,600,000

Budgeted fixed overhead

1,500,000

Applied fixed overhead at $3 per labor hour

1,200,000

Applied variable overhead at $.50 per labor hour

200,000

Actual labor hours

430,000

Total overhead spending variance for the month was A. $100,000 favorable. B. $115,000 favorable. C. $185,000 unfavorable. D. $200,000 unfavorable.

Question: 51A company manufactures dolls for sale in toy stores. In planning for this year, the company estimated variable factory overhead of $600,000 and fixed factory overhead of $400,000. The company uses a standard costing system, and factory overhead is allocated to units produced on the basis of standard direct labor hours. The denominator level of activity budgeted for this year was 10,000 direct labor hours, and the company used 10,300 actual direct labor hours. Based on the output accomplished during this year, 9,900 standard direct labor hours should have been used. Actual variable factory overhead was $596,000, and actual fixed factory overhead was $410,000 for the year. Based on this information, the variable overhead spending variance for the company for this year was

A. $24,000 unfavorable. B. $2,000 unfavorable. C. $4,000 favorable. D. $22,000 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 52A company has a fixed overhead volume variance that is $10,000 unfavorable. The most likely cause for this variance is that A. The production supervisory salaries were greater than planned. B. The production supervisory salaries were less than planned. C. More was produced than planned. D. Less was produced than planned.

Question: 53When using a flexible budgeting system, the computation for the variable overhead spending variance is the difference between A. Actual variable overhead and the previously budgeted amount. B. The previously budgeted amount and actual inputs times the budgeted rate. C. The amount applied to work-in-process and actual variable overhead. D. Actual variable overhead and actual inputs times the budgeted rate.

Question: 54A company produces and sells replacement parts for cotton processing equipment. Which one of the following cost variances are least likely to be controllable by the production manager? A. Variable overhead spending variance. B. Labor efficiency variance. C. Materials quantity variance. D. Fixed overhead production volume variance.

Question: 55A corporation’s budget indicated that it should produce 50,000 units of finished goods while incurring 20,000 hours of direct labor and $150,000 of variable manufacturing overhead. The corporation actually produced 52,000 finished goods units using 22,000 hours of direct labor and incurring $160,000 of variable manufacturing overhead. If the corporation uses a standard cost system and applies variable manufacturing overhead based upon direct labor hours, its variable overhead spending variance is A. $4,000 unfavorable. B. $5,000 favorable. C. $15,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $10,000 unfavorable.

Question: 56Last year, a firm budgeted $600,000 of fixed overhead for its plant that manufactures moisturizing cream. The $600,000 was based on a denominator activity level of 40,000 machine hours. There are 0.1 standard machine hours for each bottle of moisturizing cream. 350,000 bottles of moisturizing cream were produced, and 360,000 bottles were sold last year. What was the production volume variance? A. $60,000 unfavorable. B. $75,000 unfavorable. C. $60,000 favorable. D. $75,000 favorable.

Question: 57A company using a standard cost system established a standard fixed cost per finished unit of $4.00 and forecasted production and sales of 300,000 units. For the year, the company experienced an unfavorable production volume variance of $14,000. Which one of the following would be the cause of this variance? A. The number of units produced was more than 300,000. B. The number of units produced was less than 300,000. C. The number of units sold was more than 300,000. D. The number of units sold was less than 300,000.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern: Planned Costs

Valyn Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Valyn’s planned and actual operations for the calendar year are presented below. Planned

Actual

Activity

Activity

Per Unit Total Direct materials Direct labor

$12.00 $1,680,000 $1,560,000 9.00

1,260,000 1,170,000

manufacturing overhead

4.00

560,000

520,000

5.00

700,000

715,000

Fixed manufacturing 35,000

35,000

Sales in units

140,000

125,000

Production in units

140,000

130,000

overhead Variable selling expenses

8.00

Fixed selling expenses

7.00

980,000

980,000

2.00

280,000

250,000

3.00

420,000

425,000

The planned per-unit cost figures shown in the schedule were based on the estimated production and sale of 140,000 units for the year. Valyn uses a predetermined manufacturing overhead rate for applying manufacturing overhead to its product; thus, a combined manufacturing overhead rate of $9.00 per unit was employed for absorption costing purposes. Any over- or underapplied manufacturing overhead is closed to the cost of goods sold account at the end of the reporting year.

Question:

Costs

Variable

Beginning finished goods inventory in units

Incurred

1,120,000 1,000,000

Variable administrative expenses Fixed administrative expenses Total

$50.00 $7,000,000 $6,620,000

The beginning finished goods inventory for absorption costing purposes was valued at the previous year’s planned unit manufacturing cost, which was the same as the current year’s planned unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for the current year was $70.00 per unit. 58Valyn Corporation’s total fixed costs expensed this year on the absorption costing basis were

A. $2,095,000 B. $2,000,000 C. $2,055,000 D. $2,030,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 59Which one of the following is a variance that could appear if a company uses a normal costing system? A. Direct material price variance. B. Direct labor efficiency variance. C. Variable overhead spending variance. D. Variable overhead efficiency variance.

Question: 60A company’s flexible budgeted cost for indirect materials, a variable overhead cost, is $2.15 per unit of output. The company’s flexible budget performance report for last month showed a $4,500 favorable variance for the indirect materials. During that month, 19,700 units were produced. Budgeted activity for the month had been 19,000 units. The actual costs incurred for indirect materials were A. $1.89 B. $1.92 C. $2.38 D. $2.63

Question: 61A firm uses a standard costing system and allocates variable overhead costs based on direct labor hours. The annual budget projected 1,000 finished units, 10,000 hours of direct labor, and $100,000 of variable overhead costs. At the end of the year, 750 units were completed using 8,000 hours of direct labor and $75,000 in variable overhead. What is the variable overhead spending variance? A. $0 B. $5,000 favorable. C. $5,000 unfavorable. D. $25,000 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 62Which of the following overhead variances would be helpful in bringing attention to a potential short-term problem in the control of overhead costs? Spending Variance Volume Variance A. Yes Yes B. Yes No C. No Yes D. No No

Question: 63A company that manufactures a product using scarce and costly materials utilizes management by exception. The company’s flexible budget indicated $2,000,000 of material costs, $3,000,000 of direct labor, and $5,000,000 of manufacturing overhead to support $20,000,000 of sales. Under this system, which one of the following variances would not be further investigated? A. A $400,000 unfavorable production volume variance. B. A $70,000 unfavorable material quantity variance. C. A $370,000 favorable labor efficiency variance. D. A $2,000,000 unfavorable sales quantity variance.

Question: 64A firm manufactures dresses for children. The variable overhead costs are allocated on the basis of budgeted direct labor hours. According to the December budget, each dress takes 4 direct labor hours to produce. Budgeted variable manufacturing overhead cost per labor hour is $12, and the budgeted number of dresses to be made is 1,040. Actual variable manufacturing costs in December were $52,164 for 1,080 dresses produced. Actual direct labor hours were 4,536 hours. The variable overhead spending variance is A. $2,592 favorable. B. $2,592 unfavorable. C. $2,268 favorable. D. $2,268 unfavorable.

Question: 65If a corporation used a normal cost system, applying overhead based on the number of units produced, the variance that could arise that would not be present under an actual cost system is the A. Direct material efficiency variance. B. Direct labor efficiency variance.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Variable overhead efficiency variance. D. Fixed overhead production volume variance.

Fact Pattern: Zazoo, Inc. specializes in reviewing and editing technical magazine articles. Zazoo sets the following standards for evaluating the performance of the professional staff: Annual budgeted fixed overhead costs for normal capacity level of 10,000 articles reviewed and edited Standard professional hours per 10 articles

$600,000 200

Flexible budget of standard labor costs to process 10,000 articles

$10,000,000

The following data apply to the 9,500 articles that were actually reviewed and edited during the current year. Total hours used by professional staff 192,000 Flexible costs $9,120,000 Total cost $9,738,000 Question: 66Zazoo’s fixed overhead spending variance for the year is A. $18,000 unfavorable. B. $30,000 favorable. C. $48,000 unfavorable. D. $18,000 favorable.

Question: 67A company has gathered the following information from a recent production run: Standard variable overhead rate $10 Actual variable overhead rate

8

Standard process hours

20

Actual process hours

25

What is the company’s variable overhead spending variance? A. $50 unfavorable. B. $50 favorable. C. $40 unfavorable. D. $40 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 68Baby Frames, Inc., evaluates manufacturing overhead in its factory by using variance analysis. The following information applies to the month of May: Actual

Budgeted

Number of frames manufactured

19,000

20,000

Variable overhead costs

$4,100 $2 per direct labor hour

Fixed overhead costs Direct labor hours

$22,000

$20,000

2,100 hours

0.1 hour per frame

What is the fixed overhead spending variance? A. $1,000 favorable. B. $1,000 unfavorable. C. $2,000 favorable. D. $2,000 unfavorable.

Question: 69A manufacturing company uses a standard cost system that applies overhead based upon direct labor hours. The manufacturing budget for the production of 7,500 units for the month is shown below: Direct labor (15,000 hours at $20 per hour) $300,000 Variable overhead

50,000

Fixed overhead

105,000

During the month, 8,000 units were produced, and the fixed overhead budget variance was $1,000 unfavorable. Fixed overhead during the month was A. Underapplied by $7,000. B. Underapplied by $6,000. C. Overapplied by $6,000. D. Overapplied by $7,000.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Subunit 7: Comprehensive Example Fact Pattern: Ardmore Enterprises uses a standard cost system in its The budgeted variable overhead rate is $3 per direct labor small appliance division. The standard cost of hour, and the budgeted fixed overhead is $27,000 per manufacturing one unit of Zeb is as follows: month. During May, Ardmore produced 1,650 units of Zeb compared with a normal capacity of 1,800 units. The Direct materials -- 60 pounds at $1.50 per pound $ 90 actual cost per unit was as follows: Direct labor -- 3 hours at $12 per hour 36 Direct materials (purchased and used) -Overhead -- 3 hours at $8 per hour Total standard cost per unit

24 58 pounds at $1.65 per pound $150 Direct labor -- 3.1 hours at $12 per hour Overhead -- $39,930 per 1,650 units Total actual cost per unit

$ 95.70 37.20 24.20 $157.10

Question: 1Ardmore’s total direct materials quantity variance for May is A. $14,355 favorable. B. $14,355 unfavorable. C. $4,950 favorable. D. $4,950 unfavorable.

Fact Pattern: Ardmore Enterprises uses a standard cost system in its The budgeted variable overhead rate is $3 per direct labor small appliance division. The standard cost of hour, and the budgeted fixed overhead is $27,000 per manufacturing one unit of Zeb is as follows: month. During May, Ardmore produced 1,650 units of Zeb compared with a normal capacity of 1,800 units. The Direct materials -- 60 pounds at $1.50 per pound $ 90 actual cost per unit was as follows: Direct labor -- 3 hours at $12 per hour 36 Direct materials (purchased and used) -Overhead -- 3 hours at $8 per hour Total standard cost per unit

24 58 pounds at $1.65 per pound $150 Direct labor -- 3.1 hours at $12 per hour Overhead -- $39,930 per 1,650 units Total actual cost per unit

$ 95.70 37.20 24.20 $157.10

Question: 2Ardmore’s direct materials price variance for May is A. $14,355 unfavorable. B. $14,850 unfavorable. C. $14,355 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. $14,850 favorable.

Fact Pattern: Ardmore Enterprises uses a standard cost system in its The budgeted variable overhead rate is $3 per direct labor small appliance division. The standard cost of hour, and the budgeted fixed overhead is $27,000 per manufacturing one unit of Zeb is as follows: month. During May, Ardmore produced 1,650 units of Zeb compared with a normal capacity of 1,800 units. The Direct materials -- 60 pounds at $1.50 per pound $ 90 actual cost per unit was as follows: Direct labor -- 3 hours at $12 per hour 36 Direct materials (purchased and used) -Overhead -- 3 hours at $8 per hour Total standard cost per unit

24 58 pounds at $1.65 per pound $150 Direct labor -- 3.1 hours at $12 per hour Overhead -- $39,930 per 1,650 units Total actual cost per unit

$ 95.70 37.20 24.20 $157.10

Question: 3Ardmore’s direct labor rate variance for May is A. $1,920 favorable. B. $0 C. $4,950 unfavorable. D. $4,950 favorable.

Fact Pattern: Ardmore Enterprises uses a standard cost system in its The budgeted variable overhead rate is $3 per direct labor small appliance division. The standard cost of hour, and the budgeted fixed overhead is $27,000 per manufacturing one unit of Zeb is as follows: month. During May, Ardmore produced 1,650 units of Zeb compared with a normal capacity of 1,800 units. The Direct materials -- 60 pounds at $1.50 per pound $ 90 actual cost per unit was as follows: Direct labor -- 3 hours at $12 per hour 36 Direct materials (purchased and used) -Overhead -- 3 hours at $8 per hour Total standard cost per unit

24 58 pounds at $1.65 per pound $150 Direct labor -- 3.1 hours at $12 per hour Overhead -- $39,930 per 1,650 units Total actual cost per unit

$ 95.70 37.20 24.20 $157.10

Question: 4Ardmore’s flexible budget overhead variance for May is A. $3,270 unfavorable. B. $3,270 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. $1,920 unfavorable. D. $1,920 favorable.

Fact Pattern: Water Control Systems manufactures water pumps and uses a The following information is available for standard cost system. The standard overhead costs per water pump the month of November: are based on direct labor hours and are as follows: Variable overhead (4 hours at $8 per hour)

$32

Fixed overhead (4 hours at $5* per hour) Total overhead cost per unit

20 $52

* Based on a capacity of 100,000 direct labor hours per month.

 22,000 pumps were produced although 25,000 had been scheduled for production.  94,000 direct labor hours were worked at a total cost of $940,000.  The standard direct labor rate is $9 per hour.  The standard direct labor time per unit is four hours.  Variable overhead costs were $740,000.  Fixed overhead costs were $540,000.

Question: 5Water Control’s fixed overhead spending variance for November was A. $40,000 unfavorable. B. $70,000 unfavorable. C. $60,000 unfavorable. D. $240,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Water Control Systems manufactures water pumps and uses a The following information is available for standard cost system. The standard overhead costs per water pump the month of November: are based on direct labor hours and are as follows: Variable overhead (4 hours at $8 per hour)

$32

Fixed overhead (4 hours at $5* per hour) Total overhead cost per unit

20 $52

* Based on a capacity of 100,000 direct labor hours per month.

 22,000 pumps were produced although 25,000 had been scheduled for production.  94,000 direct labor hours were worked at a total cost of $940,000.  The standard direct labor rate is $9 per hour.  The standard direct labor time per unit is four hours.  Variable overhead costs were $740,000.  Fixed overhead costs were $540,000.

Question: 6Water Control’s variable overhead spending variance for November was A. $60,000 favorable. B. $12,000 favorable. C. $48,000 unfavorable. D. $40,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Water Control Systems manufactures water pumps and uses a The following information is available for standard cost system. The standard overhead costs per water pump the month of November: are based on direct labor hours and are as follows: Variable overhead (4 hours at $8 per hour) Fixed overhead (4 hours at $5* per hour) Total overhead cost per unit

 22,000 pumps were produced although 25,000 had been scheduled for production.

$32 20 $52

 94,000 direct labor hours were worked at a total cost of $940,000.

* Based on a capacity of 100,000 direct labor hours per month.

 The standard direct labor rate is $9 per hour.  The standard direct labor time per unit is four hours.  Variable overhead costs were $740,000.  Fixed overhead costs were $540,000.

Question: 7Water Control’s direct labor price variance for November was A. $54,000 unfavorable. B. $94,000 unfavorable. C. $60,000 favorable. D. $148,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Water Control Systems manufactures water pumps and uses a The following information is available for standard cost system. The standard overhead costs per water pump the month of November: are based on direct labor hours and are as follows: Variable overhead (4 hours at $8 per hour)

$32

Fixed overhead (4 hours at $5* per hour) Total overhead cost per unit

20 $52

* Based on a capacity of 100,000 direct labor hours per month.

 22,000 pumps were produced although 25,000 had been scheduled for production.  94,000 direct labor hours were worked at a total cost of $940,000.  The standard direct labor rate is $9 per hour.  The standard direct labor time per unit is four hours.  Variable overhead costs were $740,000.  Fixed overhead costs were $540,000.

Question: 8Water Control’s variable overhead efficiency variance for November was A. $48,000 unfavorable. B. $60,000 favorable. C. $96,000 unfavorable. D. $200,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Water Control Systems manufactures water pumps and uses a The following information is available for standard cost system. The standard overhead costs per water pump the month of November: are based on direct labor hours and are as follows: Variable overhead (4 hours at $8 per hour)

$32

Fixed overhead (4 hours at $5* per hour) Total overhead cost per unit

20 $52

* Based on a capacity of 100,000 direct labor hours per month.

 22,000 pumps were produced although 25,000 had been scheduled for production.  94,000 direct labor hours were worked at a total cost of $940,000.  The standard direct labor rate is $9 per hour.  The standard direct labor time per unit is four hours.  Variable overhead costs were $740,000.  Fixed overhead costs were $540,000.

Question: 9Water Control’s direct labor efficiency variance for November was A. $108,000 favorable. B. $120,000 favorable. C. $60,000 favorable. D. $54,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Funtime prepares monthly performance reports based Funtime, Inc., manufactures video game machines. Market on standard costs. Presented below is the contribution saturation and technological innovations have caused report for May when production and sales both reached pricing pressures, which have resulted in declining profits. 2,200 units. To stem the slide in profits until new products can be introduced, an incentive program has been developed to Funtime, Inc. reward production managers who contribute to an increase in the number of units produced and effect cost reductions. Contribution Report The managers have responded to the pressure of improving manufacturing in several ways. The video game machines are put together by the Assembly Group which requires parts from both the Printed Circuit Boards (PCB) and the Reading Heads (RH) groups. To attain increased production levels, the PCB and RH groups commenced rejecting parts that previously would have been tested and modified to meet manufacturing standards. Preventive maintenance on machines used in the production of these parts has been postponed with only emergency repair work being performed to keep production lines moving. The more aggressive Assembly Group production supervisors have pressured maintenance personnel to attend to their machines at the expense of other groups. This has resulted in machine downtime in the PCB and RH groups that, when coupled with demands for accelerated parts delivery by the Assembly Group, has led to more frequent parts rejections and increased friction among departments. Funtime operates under a standard cost system. The standard costs for video game machines are as follows:

For the Month of May Budget Units

2,000

Revenue

Quantity

Variance

2,200

200 F

$400,000 $440,000 $40,000 F

Variable costs Direct materials

180,000 220,400 40,400 U

Direct labor

80,000

93,460 13,460 U

Variable overhead

18,000

18,800

Total variable costs

800 U

278,000 332,660 54,660 U

Contribution margin $122,000 $107,340 $14,660 U Funtime’s top management was surprised by the unfavorable contribution to overall corporate profits despite the increased sales in May. Jack Rath, cost accountant, was assigned to identify the reasons for the unfavorable contribution results as well as the individuals or groups responsible. After review, Rath prepared the Usage Report presented below. Funtime, Inc.

Standard Cost per Unit Cost Item

Actual

Usage Report

Cost

Total

Direct Materials

For the Month of May Cost Item

Housing unit

1

$20

$ 20

Printed circuit boards

2

15

30

Reading heads

4

10

40

Direct labor hours Assembly group

2

8

16

PCB group

1

9

9

RH group

1.5

10

15

Quantity

Actual Cost

Direct materials Housing units

2,200 units

$ 44,000

Printed circuit boards

4,700 units

75,200

Reading heads

9,200 units

101,200

Assembly

3,900 hours

31,200

Printed circuit boards

2,400 hours

23,760

Direct labor

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Variable overhead hours

4.5

2

Total standard cost per unit

9 $139

Reading heads

3,500 hours

38,500

Variable overhead

9,900 hours

18,800

Total variable cost

Question:

$332,660

Rath reported that the PCB and RH groups supported the increased production levels but experienced abnormal machine downtime, causing the idling of workers that required the use of overtime to keep up with the accelerated demand for parts. The idle time was charged to direct labor. Rath also reported that the production managers of these two groups resorted to parts rejections, as opposed to testing and modification procedures formerly applied. Rath determined that the Assembly Group met management’s objectives by increasing production while using lower than standard hours. 10What is Funtime’s total direct materials price variance?

A. $346,500 favorable. B. $346,500 unfavorable. C. $13,900 favorable. D. $13,900 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Funtime prepares monthly performance reports based Funtime, Inc., manufactures video game machines. Market on standard costs. Presented below is the contribution saturation and technological innovations have caused report for May when production and sales both reached pricing pressures, which have resulted in declining profits. 2,200 units. To stem the slide in profits until new products can be introduced, an incentive program has been developed to Funtime, Inc. reward production managers who contribute to an increase in the number of units produced and effect cost reductions. Contribution Report The managers have responded to the pressure of improving manufacturing in several ways. The video game machines are put together by the Assembly Group which requires parts from both the Printed Circuit Boards (PCB) and the Reading Heads (RH) groups. To attain increased production levels, the PCB and RH groups commenced rejecting parts that previously would have been tested and modified to meet manufacturing standards. Preventive maintenance on machines used in the production of these parts has been postponed with only emergency repair work being performed to keep production lines moving. The more aggressive Assembly Group production supervisors have pressured maintenance personnel to attend to their machines at the expense of other groups. This has resulted in machine downtime in the PCB and RH groups that, when coupled with demands for accelerated parts delivery by the Assembly Group, has led to more frequent parts rejections and increased friction among departments. Funtime operates under a standard cost system. The standard costs for video game machines are as follows:

For the Month of May Budget Units

2,000

Revenue

Quantity

Variance

2,200

200 F

$400,000 $440,000 $40,000 F

Variable costs Direct materials

180,000 220,400 40,400 U

Direct labor

80,000

93,460 13,460 U

Variable overhead

18,000

18,800

Total variable costs

800 U

278,000 332,660 54,660 U

Contribution margin $122,000 $107,340 $14,660 U Funtime’s top management was surprised by the unfavorable contribution to overall corporate profits despite the increased sales in May. Jack Rath, cost accountant, was assigned to identify the reasons for the unfavorable contribution results as well as the individuals or groups responsible. After review, Rath prepared the Usage Report presented below. Funtime, Inc.

Standard Cost per Unit Cost Item

Actual

Usage Report

Cost

Total

Direct Materials

For the Month of May Cost Item

Housing unit

1

$20

$ 20

Printed circuit boards

2

15

30

Reading heads

4

10

40

Direct labor hours Assembly group

2

8

16

PCB group

1

9

9

RH group

1.5

10

15

Quantity

Actual Cost

Direct materials Housing units

2,200 units

$ 44,000

Printed circuit boards

4,700 units

75,200

Reading heads

9,200 units

101,200

Assembly

3,900 hours

31,200

Printed circuit boards

2,400 hours

23,760

Direct labor

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Variable overhead hours

4.5

2

Total standard cost per unit

9 $139

Reading heads

3,500 hours

38,500

Variable overhead

9,900 hours

18,800

Total variable cost

Question:

$332,660

Rath reported that the PCB and RH groups supported the increased production levels but experienced abnormal machine downtime, causing the idling of workers that required the use of overtime to keep up with the accelerated demand for parts. The idle time was charged to direct labor. Rath also reported that the production managers of these two groups resorted to parts rejections, as opposed to testing and modification procedures formerly applied. Rath determined that the Assembly Group met management’s objectives by increasing production while using lower than standard hours. 11What is Funtime’s total direct materials quantity variance?

A. $8,500 unfavorable. B. $8,500 favorable. C. $9,200 unfavorable. D. $9,200 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Funtime prepares monthly performance reports based Funtime, Inc., manufactures video game machines. Market on standard costs. Presented below is the contribution saturation and technological innovations have caused report for May when production and sales both reached pricing pressures, which have resulted in declining profits. 2,200 units. To stem the slide in profits until new products can be introduced, an incentive program has been developed to Funtime, Inc. reward production managers who contribute to an increase in the number of units produced and effect cost reductions. Contribution Report The managers have responded to the pressure of improving manufacturing in several ways. The video game machines are put together by the Assembly Group which requires parts from both the Printed Circuit Boards (PCB) and the Reading Heads (RH) groups. To attain increased production levels, the PCB and RH groups commenced rejecting parts that previously would have been tested and modified to meet manufacturing standards. Preventive maintenance on machines used in the production of these parts has been postponed with only emergency repair work being performed to keep production lines moving. The more aggressive Assembly Group production supervisors have pressured maintenance personnel to attend to their machines at the expense of other groups. This has resulted in machine downtime in the PCB and RH groups that, when coupled with demands for accelerated parts delivery by the Assembly Group, has led to more frequent parts rejections and increased friction among departments. Funtime operates under a standard cost system. The standard costs for video game machines are as follows:

For the Month of May Budget Units

2,000

Revenue

Quantity

Variance

2,200

200 F

$400,000 $440,000 $40,000 F

Variable costs Direct materials

180,000 220,400 40,400 U

Direct labor

80,000

93,460 13,460 U

Variable overhead

18,000

18,800

Total variable costs

800 U

278,000 332,660 54,660 U

Contribution margin $122,000 $107,340 $14,660 U Funtime’s top management was surprised by the unfavorable contribution to overall corporate profits despite the increased sales in May. Jack Rath, cost accountant, was assigned to identify the reasons for the unfavorable contribution results as well as the individuals or groups responsible. After review, Rath prepared the Usage Report presented below. Funtime, Inc.

Standard Cost per Unit Cost Item

Actual

Usage Report

Cost

Total

Direct Materials

For the Month of May Cost Item

Housing unit

1

$20

$ 20

Printed circuit boards

2

15

30

Reading heads

4

10

40

Direct labor hours Assembly group

2

8

16

PCB group

1

9

9

RH group

1.5

10

15

Quantity

Actual Cost

Direct materials Housing units

2,200 units

$ 44,000

Printed circuit boards

4,700 units

75,200

Reading heads

9,200 units

101,200

Assembly

3,900 hours

31,200

Printed circuit boards

2,400 hours

23,760

Direct labor

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Variable overhead hours

4.5

2

Total standard cost per unit

9 $139

Reading heads

3,500 hours

38,500

Variable overhead

9,900 hours

18,800

Total variable cost

Question:

$332,660

Rath reported that the PCB and RH groups supported the increased production levels but experienced abnormal machine downtime, causing the idling of workers that required the use of overtime to keep up with the accelerated demand for parts. The idle time was charged to direct labor. Rath also reported that the production managers of these two groups resorted to parts rejections, as opposed to testing and modification procedures formerly applied. Rath determined that the Assembly Group met management’s objectives by increasing production while using lower than standard hours. 12What is Funtime’s variable overhead efficiency variance?

A. $0 B. $900 unfavorable. C. $9,900 unfavorable. D. $9,900 favorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Funtime prepares monthly performance reports based Funtime, Inc., manufactures video game machines. Market on standard costs. Presented below is the contribution saturation and technological innovations have caused report for May when production and sales both reached pricing pressures, which have resulted in declining profits. 2,200 units. To stem the slide in profits until new products can be introduced, an incentive program has been developed to Funtime, Inc. reward production managers who contribute to an increase in the number of units produced and effect cost reductions. Contribution Report The managers have responded to the pressure of improving manufacturing in several ways. The video game machines are put together by the Assembly Group which requires parts from both the Printed Circuit Boards (PCB) and the Reading Heads (RH) groups. To attain increased production levels, the PCB and RH groups commenced rejecting parts that previously would have been tested and modified to meet manufacturing standards. Preventive maintenance on machines used in the production of these parts has been postponed with only emergency repair work being performed to keep production lines moving. The more aggressive Assembly Group production supervisors have pressured maintenance personnel to attend to their machines at the expense of other groups. This has resulted in machine downtime in the PCB and RH groups that, when coupled with demands for accelerated parts delivery by the Assembly Group, has led to more frequent parts rejections and increased friction among departments. Funtime operates under a standard cost system. The standard costs for video game machines are as follows:

For the Month of May Budget Units

2,000

Revenue

Quantity

Variance

2,200

200 F

$400,000 $440,000 $40,000 F

Variable costs Direct materials

180,000 220,400 40,400 U

Direct labor

80,000

93,460 13,460 U

Variable overhead

18,000

18,800

Total variable costs

800 U

278,000 332,660 54,660 U

Contribution margin $122,000 $107,340 $14,660 U Funtime’s top management was surprised by the unfavorable contribution to overall corporate profits despite the increased sales in May. Jack Rath, cost accountant, was assigned to identify the reasons for the unfavorable contribution results as well as the individuals or groups responsible. After review, Rath prepared the Usage Report presented below. Funtime, Inc.

Standard Cost per Unit Cost Item

Actual

Usage Report

Cost

Total

Direct Materials

For the Month of May Cost Item

Housing unit

1

$20

$ 20

Printed circuit boards

2

15

30

Reading heads

4

10

40

Direct labor hours Assembly group

2

8

16

PCB group

1

9

9

RH group

1.5

10

15

Quantity

Actual Cost

Direct materials Housing units

2,200 units

$ 44,000

Printed circuit boards

4,700 units

75,200

Reading heads

9,200 units

101,200

Assembly

3,900 hours

31,200

Printed circuit boards

2,400 hours

23,760

Direct labor

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Variable overhead hours

4.5

2

Total standard cost per unit

9 $139

Reading heads

3,500 hours

38,500

Variable overhead

9,900 hours

18,800

Total variable cost

Question:

$332,660

Rath reported that the PCB and RH groups supported the increased production levels but experienced abnormal machine downtime, causing the idling of workers that required the use of overtime to keep up with the accelerated demand for parts. The idle time was charged to direct labor. Rath also reported that the production managers of these two groups resorted to parts rejections, as opposed to testing and modification procedures formerly applied. Rath determined that the Assembly Group met management’s objectives by increasing production while using lower than standard hours. 13What is Funtime’s variable overhead spending variance?

A. $1,000 unfavorable. B. $1,000 favorable. C. $1,800 unfavorable. D. $1,800 favorable.

Question: 14Of the following pairs of variances found in a flexible budget report, which pair is most likely to be related? A. Material price variance and variable overhead efficiency variance. B. Labor rate variance and variable overhead efficiency variance. C. Material usage variance and labor efficiency variance. D. Labor efficiency variance and fixed overhead volume variance.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 15A corporation uses the following format to present performance results to the production managers. Month’s Month’s Price

Quantity

Actual Budget Variance Variance Direct materials Direct labor Variable overhead

$10,000 $12,000 $1,000 F $1,000 F 20,000 19,500 4,000

500 F 1,000 U

4,000

100 U

Fixed overhead

12,000 12,200

200 F

Sales units

50,000 52,000

100 F

This format may be confusing to the production manager because A. Year-to-date information is not shown. B. A fixed overhead volume variance is not shown. C. More detail of variable overhead items should be included. D. The report includes variances beyond the control and knowledge of the production manager.

Question: 16For a given time period, a company had a favorable material quantity variance, a favorable direct labor efficiency variance, and a favorable fixed overhead volume variance. Of the following, the one factor that could not have caused all three variances is A. The purchase of higher quality materials. B. The use of lower-skilled workers. C. The purchase of more efficient machinery. D. An increase in production supervision.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 17A company has a cost-benefit policy to investigate any variance that is greater than $1,000 or 10% of budget, whichever is larger. Actual results for the previous month indicate the following.

Budget

Actual

Raw material $100,000 $89,000 Direct labor

50,000 54,000

The company should investigate A. Neither the material variance nor the labor variance. B. The material variance only. C. The labor variance only. D. Both the material variance and the labor variance.

Question: 18A corporation reported the following standard-to-actual cost information. Actual Costs

Total Variance

Direct materials

$19,250

$900 Favorable

Direct labor

$17,600

$800 Unfavorable

Which one of the following best explains both of the corporation’s variances? A. Change in the collective bargaining agreement resulting in higher hourly wage rates. B. Learning curve resulted in more efficient production. C. Lower-quality, lower-cost materials resulted in higher than expected rework costs. D. Unexpected increase in electricity costs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Subunit 8: Sales Variances Question: 1In analyzing company operations, the controller of the corporation found a $250,000 favorable flexible-budget revenue variance. The variance was calculated by comparing the actual results with the flexible budget. This variance can be wholly explained by A. The total flexible budget variance. B. The total sales volume variance. C. The total static budget variance. D. Changes in unit selling prices.

Question: 2The variance that arises solely because the quantity actually sold differs from the quantity budgeted to be sold is A. Static budget variance. B. Master budget increment. C. Sales mix variance. D. Sales volume variance.

Question: 3The sales volume variance is partly a function of the unit contribution margin (UCM). For a singleproduct company, it is A. The difference between actual and master budget sales volume, times actual UCM. B. The difference between flexible budget and actual sales volume, times master budget UCM. C. The difference between flexible budget and master budget sales volume, times actual UCM. D. The difference between flexible budget and master budget sales volume, times master budget UCM.

Question: 4For a company that produces more than one product, the sales volume variance can be divided into which two of the following additional variances? A. Sales price variance and flexible budget variance. B. Sales mix variance and sales price variance. C. Sales quantity variance and sales mix variance.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. Sales mix variance and production volume variance.

Question: 5The sales quantity variance is partly a function of the unit contribution margin (UCM). It equals A. Actual units × (budgeted weighted-average UCM for planned mix – budgeted weighted-average UCM for actual mix). B. (Actual units – master budget units) × budgeted weighted-average UCM for the planned mix. C. Budgeted market share percentage × (actual market size in units – budgeted market size in units) × budgeted weighted-average UCM. D. (Actual market share percentage-budgeted market share percentage) × actual market size in units × budgeted weighted-average UCM.

Question: 6The sales mix variance is partly a function of the unit contribution margin (UCM). It equals A. Actual units × (budgeted weighted-average UCM for planned mix – budgeted weighted-average UCM for actual mix). B. (Actual units – master budget units) × budgeted weighted-average UCM for planned mix. C. Budgeted market share percentage × (actual market size in units – budgeted market size in units) × budgeted weighted-average UCM. D. (Actual market share percentage – budgeted market share percentage) × actual market size in units × budgeted weighted-average UCM.

Question: 7The market size variance is partly a function of the unit contribution margin (UCM). It equals A. Actual units × (budgeted weighted-average UCM for planned mix – budgeted weighted-average UCM for actual mix). B. (Actual units – master budget units) × budgeted weighted-average UCM for the planned mix. C. Budgeted market share percentage × (actual market size in units – budgeted market size in units) × budgeted weighted-average UCM. D. (Actual market share percentage – budgeted market share percentage) × actual market size in units × budgeted weighted-average UCM.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Folsom Fashions sells a line of women’s dresses. Folsom’s performance report for November follows. The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.

Dresses sold Sales Variable costs

Budget

5,000

6,000

$235,000 $300,000 (145,000) (180,000)

Contribution margin (CM) Fixed costs Operating income

Actual

90,000 120,000 (84,000) (80,000) $

6,000 $ 40,000

Question: 8The effect of the sales quantity variance on Folsom’s contribution margin for November is A. $30,000 unfavorable. B. $18,000 unfavorable. C. $20,000 unfavorable. D. $15,000 unfavorable.

Fact Pattern: Folsom Fashions sells a line of women’s dresses. Folsom’s performance report for November follows. The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.

Dresses sold Sales Variable costs

Budget

5,000

6,000

$235,000 $300,000 (145,000) (180,000)

Contribution margin (CM) Fixed costs Operating income

Actual

90,000 120,000 (84,000) (80,000) $

6,000 $ 40,000

Question: 9The retailer’s sales price variance for November is A. $30,000 unfavorable. B. $18,000 unfavorable. C. $20,000 unfavorable. D. $15,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Folsom Fashions sells a line of women’s dresses. Folsom’s performance report for November follows. The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.

Dresses sold Sales Variable costs

Budget

5,000

6,000

$235,000 $300,000 (145,000) (180,000)

Contribution margin (CM) Fixed costs Operating income

Actual

90,000 120,000 (84,000) (80,000) $

6,000 $ 40,000

Question: 10Folsom’s variable cost flexible budget variance for November is A. $5,000 favorable. B. $5,000 unfavorable. C. $4,000 favorable. D. $4,000 unfavorable.

Fact Pattern: Folsom Fashions sells a line of women’s dresses. Folsom’s performance report for November follows. The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.

Dresses sold Sales Variable costs

Budget

5,000

6,000

$235,000 $300,000 (145,000) (180,000)

Contribution margin (CM) Fixed costs Operating income

Actual

90,000 120,000 (84,000) (80,000) $

6,000 $ 40,000

Question: 11Folsom’s fixed cost variance for November is A. $5,000 favorable. B. $5,000 unfavorable. C. $4,000 favorable. D. $4,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Clear Plus, Inc., manufactures and sells boxes of pocket protectors. The static master budget and the actual results for May appear in the opposite column.

Actual Unit sales

Static Budget

12,000

10,000

Sales Variable costs of sales

$132,000 (70,800)

$100,000 (60,000)

Contribution margin Fixed costs

61,200 (32,000)

40,000 (30,000)

Operating income

$ 29,200

$ 10,000

Question: 12The operating income for Clear Plus using a flexible budget for May is A. $12,000 B. $19,200 C. $30,000 D. $18,000

Fact Pattern: Actual

Clear Plus, Inc., manufactures and sells boxes of pocket protectors. The Unit sales static master budget and the actual Sales results for May appear in the Variable costs of sales opposite column. Contribution margin Fixed costs Operating income

Static Budget

12,000

10,000

$132,000 (70,800)

$100,000 (60,000)

61,200 (32,000)

40,000 (30,000)

$ 29,200

$ 10,000

Question: 13Which one of the following statements concerning Clear Plus’s actual results for May is correct? A. The flexible budget variance is $8,000 favorable. B. The sales price variance is $32,000 favorable. C. The sales volume variance is $8,000 favorable. D. The flexible budget variable cost variance is $10,800 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Funtime prepares monthly performance reports based Funtime, Inc., manufactures video game machines. Market on standard costs. Presented below is the contribution saturation and technological innovations have caused report for May when production and sales both reached pricing pressures, which have resulted in declining profits. 2,200 units. To stem the slide in profits until new products can be introduced, an incentive program has been developed to Funtime, Inc. reward production managers who contribute to an increase in the number of units produced and effect cost reductions. Contribution Report The managers have responded to the pressure of improving manufacturing in several ways. The video game machines are put together by the Assembly Group which requires parts from both the Printed Circuit Boards (PCB) and the Reading Heads (RH) groups. To attain increased production levels, the PCB and RH groups commenced rejecting parts that previously would have been tested and modified to meet manufacturing standards. Preventive maintenance on machines used in the production of these parts has been postponed with only emergency repair work being performed to keep production lines moving. The more aggressive Assembly Group production supervisors have pressured maintenance personnel to attend to their machines at the expense of other groups. This has resulted in machine downtime in the PCB and RH groups that, when coupled with demands for accelerated parts delivery by the Assembly Group, has led to more frequent parts rejections and increased friction among departments. Funtime operates under a standard cost system. The standard costs for video game machines are as follows:

For the Month of May Budget Units

2,000

Revenue

Quantity

Variance

2,200

200 F

$400,000 $440,000 $40,000 F

Variable costs Direct materials

180,000 220,400 40,400 U

Direct labor

80,000

93,460 13,460 U

Variable overhead

18,000

18,800

Total variable costs

800 U

278,000 332,660 54,660 U

Contribution margin $122,000 $107,340 $14,660 U Funtime’s top management was surprised by the unfavorable contribution to overall corporate profits despite the increased sales in May. Jack Rath, cost accountant, was assigned to identify the reasons for the unfavorable contribution results as well as the individuals or groups responsible. After review, Rath prepared the Usage Report presented below. Funtime, Inc.

Standard Cost per Unit Cost Item

Actual

Usage Report

Cost

Total

Direct Materials

For the Month of May Cost Item

Housing unit

1

$20

$ 20

Printed circuit boards

2

15

30

Reading heads

4

10

40

Direct labor hours Assembly group

2

8

16

PCB group

1

9

9

RH group

1.5

10

15

Quantity

Actual Cost

Direct materials Housing units

2,200 units

$ 44,000

Printed circuit boards

4,700 units

75,200

Reading heads

9,200 units

101,200

Assembly

3,900 hours

31,200

Printed circuit boards

2,400 hours

23,760

Direct labor

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Variable overhead hours

4.5

2

Total standard cost per unit

9 $139

Reading heads

3,500 hours

38,500

Variable overhead

9,900 hours

18,800

Total variable cost

$332,660

Rath reported that the PCB and RH groups supported the increased production levels but experienced abnormal machine downtime, causing the idling of workers that required the use of overtime to keep up with the accelerated demand for parts. The idle time was charged to direct labor. Rath also reported that the production managers of these two groups resorted to parts rejections, as opposed to testing and modification procedures formerly applied. Rath determined that the Assembly Group met management’s objectives by increasing production while using lower than standard hours.

Question: 14What is Funtime’s sales volume variance? A. $9,800 unfavorable. B. $9,800 favorable. C. $12,200 favorable. D. $14,660 unfavorable.

Question: 15The market share variance is partly a function of the unit contribution margin (UCM). It equals A. Actual units × (budgeted weighted-average UCM for planned mix – budgeted weighted-average UCM for actual mix). B. (Actual units – master budget units) × budgeted weighted-average UCM for the planned mix. C. Budgeted market share percentage × (actual market size in units – budgeted market size in units) × budgeted weighted-average UCM. D. (Actual market share percentage – budgeted market share percentage) × actual market size in units × budgeted weighted-average UCM.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 16The following information is available for the month of July: Master Budget Units

Actual

4,000

3,800

Sales revenue

$60,000

$53,200

Variable manufacturing costs

$16,000

$19,000

Fixed manufacturing costs

$15,000

$16,000

$8,000

$7,600

Variable selling and administrative expense

Fixed selling and administrative expense $9,000 $10,000 The sales volume variance for the month of July would be A. $400 unfavorable. B. $1,800 unfavorable. C. $200 favorable. D. $6,800 unfavorable.

Question: 17The sales mix variance A. Will be an unfavorable 5% whenever a 5% decrease occurs in a company’s overall sales volume. B. Will be favorable when a company sells fewer products bearing unit contribution margins higher than average. C. Measures the effect of the deviation from the budgeted weighted-average contribution margin per unit associated with a change in the quantities of products in the mix. D. Equals the difference between the budgeted weighted-average materials unit costs for the actual and planned mixes, times the actual materials input.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 18Actual and budgeted information about the sales of a product are presented for June as follows. Actual Units

Budget

8,000

10,000

Sales Revenue $92,000 $105,000 The sales price variance for June was A. $8,000 favorable. B. $10,000 favorable. C. $10,000 unfavorable. D. $10,500 unfavorable.

Question: 19The following exhibit reflects a summary of performance for a single item of a retail store’s inventory for April. Flexible

Sales (units)

Static

Actual

Budget

Flexible

(Master)

Results

Variances

Budget

Budget

11,000

--

11,000

12,000

$208,000

$12,000 U

$220,000

$240,000

121,000

11,000 U

110,000

120,000

Contribution Margin $ 87,000

$23,000 U

$110,000

$120,000

72,000

--

72,000

72,000

$ 15,000

$23,000 U

$ 38,000

$ 48,000

Revenue (sales) Variable costs

Fixed costs Operating Income

The sales volume variance is A. $1,000 F. B. $10,000 U. C. $11,000 F.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. $12,000 U.

Question: 20The following data are available for July:

Sales

Budget

Actual

40,000 units

42,000 units

Selling price $6 per unit

$5.70 per unit

Variable cost $3.50 per unit

$3.40 per unit

What is the sales quantity variance for July? A. $5,000 favorable. B. $4,600 favorable. C. $12,000 unfavorable. D. $12,600 unfavorable.

Question: 21A company’s gross profit for Year 2 and Year 1 was as follows:

Sales

Year 2

Year 1

$ 950,400

$ 960,000

Cost of goods sold (556,800) Gross profit

$ 393,600

(576,000) $ 384,000

Assuming that Year 2 selling prices were 15% lower than Year 1 selling prices, what was the decrease in gross profit caused by the selling price change? A. $134,400 B. $142,560 C. $144,000 D. $167,718

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: The following are the relevant data for calculating sales variances for Fortuna Co., which sells its sole product in two countries: Gallia Budgeted selling price per unit Budgeted variable cost per unit

$6.00 (3.00)

Budgeted contribution margin per unit $3.00

Budgeted unit sales Budgeted mix percentage Actual units sold Actual selling price per unit

Helvetica $10.00 (7.50)

Total ---

$ 2.50

--

300

200

500

60%

40%

100%

260

260

520

$6.00

$ 9.50

NA

Question: 22The sales volume variance for the two countries is A. $130 U. B. $120 U. C. $30 F. D. $150 U.

Fact Pattern: The following are the relevant data for calculating sales variances for Fortuna Co., which sells its sole product in two countries: Gallia Budgeted selling price per unit Budgeted variable cost per unit

$6.00 (3.00)

Budgeted contribution margin per unit $3.00

Budgeted unit sales Budgeted mix percentage Actual units sold

Helvetica $10.00 (7.50)

Total ---

$ 2.50

--

300

200

500

60%

40%

100%

260

260

520

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Actual selling price per unit

$6.00

$ 9.50

NA

Question: 23The sales quantity variance for the two countries is A. $156 U. B. $30 F. C. $56 F. D. $100 F.

Fact Pattern: The following are the relevant data for calculating sales variances for Fortuna Co., which sells its sole product in two countries: Gallia Budgeted selling price per unit Budgeted variable cost per unit

$6.00 (3.00)

Budgeted contribution margin per unit $3.00

Budgeted unit sales Budgeted mix percentage Actual units sold Actual selling price per unit

Helvetica $10.00 (7.50)

Total ---

$ 2.50

--

300

200

500

60%

40%

100%

260

260

520

$6.00

$ 9.50

NA

Question: 24The sales mix variance for the two countries is A. $156 U. B. $26 U. C. $56 F. D. $150 F.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 25A company sells two products, Product E and Product F, and had the following data for last month: Product E

Product F

Budget

Actual

Budget

Actual

Unit sales

5,500

6,000

4,500

6,000

Unit contribution margin

$4.50

$4.80

$10.00

$10.50

The company’s sales mix variance is A. $3,300 favorable. B. $3,420 favorable. C. $17,250 favorable. D. $18,150 favorable.

Question: 26The following information is from the accounting records of a company. Static Budget Actual Sales volume (units) Selling price/unit Variable cost/unit Fixed cost

82,000 $

75,000

15.00 $

15.00

9.00

9.25

280,000 285,000

A staff assistant performed a comparison of budget and actual data and calculated an unfavorable operating income variance of $65,750. The assistant concluded that performance did not meet expectations because there was an unfavorable variance in operating income. Which one of the following is the best evaluation of this preliminary conclusion? A. Both the conclusion and the variance calculation are correct. B. The conclusion is incorrect, but the variance calculation is informative. C. The conclusion is correct, but the variance calculation could be more informative. D. Both the conclusion and the variance calculation are incorrect.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 27The following performance report was prepared for the month of April: Actual

Static

Results

Budget

Sales units Sales dollars

100,000

80,000

20,000 F

$190,000

$160,000

$30,000 F

125,000

96,000

29,000 U

45,000

40,000

5,000 U

$ 20,000

$ 24,000

$ 4,000 U

Variable costs Fixed costs Operating income

Variance

If inventories did not change during the month, using a flexible budget, the total production-volume variance is A. $4,000 unfavorable. B. $6,000 favorable. C. $10,000 favorable. D. $20,000 unfavorable.

Question: 28The most recent performance report indicated the following: Actual Results Flexible Budget Static Budget Revenues

$5,000,000

$4,600,000

$5,200,000

Variable costs

2,600,000

2,300,000

2,600,000

Fixed costs

2,300,000

2,000,000

2,000,000

Operating income $ 100,000

$ 300,000

$ 600,000

The sales-volume variance for operating income is A. $200,000 U. B. $300,000 U. C. $400,000 F. D. $500,000 U.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 29The actual and budgeted sales for the premier line of optical frames for the month of October is as follows. Actual Units Sales Dollars

Budget

24,000

28,000

$336,000

$350,000

The sales-volume variance is A. $14,000 unfavorable. B. $50,000 unfavorable. C. $56,000 unfavorable. D. $56,000 favorable.

Question: 30When comparing its actual operating income to its master budget operating income, the controller noted that actual total sales units equaled budgeted total sales units and budgeted fixed costs equaled actual fixed costs. He also noted that both products were sold for their budgeted selling prices per unit and each product had both a budgeted and actual contribution margin ratio of 40%. However, the company experienced a favorable static budget variance for operating income for the period. Which one of the following is a viable explanation for this variance? A. The company produced fewer units than budgeted. B. The company’s income tax rate was lower than budgeted. C. The method used to allocate fixed selling and administrative costs to its products was different than planned. D. The product mix was different than budgeted.

Question: 31For the first week of the month, a bakery budgeted to sell 100 cakes at $35 each. They actually sold 105 cakes at $40 each. The selling-price variance is A. $525 favorable. B. $525 unfavorable. C. $700 favorable. D. $700 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 32A company’s master budget for the year planned for the manufacture and sale of 5,600 toys for ¥750,000 in revenue, ¥400,000 in variable expenses, and ¥255,000 in fixed expenses. By the end of the year, the company had only manufactured and sold 4,500 toys for ¥650,000 in revenue, ¥375,000 in variables expenses, and ¥195,000 in fixed expenses. What is the operating income variance for the company for the year? A. ¥15,000 unfavorable. B. ¥25,000 favorable. C. ¥75,000 unfavorable. D. ¥100,000 unfavorable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Study Unit 12: Responsibility Accounting and Performance Measures 12: (153) Responsibility Accounting and Performance Measures 1: (38) Responsibility Centers 2: (16) Performance Measures -- Cost, Revenue, and Profit Centers (Contribution Margin Reporting) 3: (35) Performance Measures -- Investment Centers 4: (18) Comparing Performance Measures for Investment Centers 5: (12) Allocating Common Costs 6: (34) Transfer Pricing

Subunit 1: Responsibility Centers Question: 1A corporation uses an accounting system that charges costs to the manager who has been delegated the authority to make the decisions incurring the costs. For example, if the sales manager accepts a rush order that will result in higher-than-normal manufacturing costs, these additional costs are charged to the sales manager because the authority to accept or decline the rush order was given to the sales manager. This type of accounting system is known as A. Responsibility accounting. B. Functional accounting. C. Reciprocal allocation. D. Transfer price accounting.

Question: 2The basic purpose of a responsibility accounting system is A. Budgeting. B. Motivation. C. Authority. D. Variance analysis.

Question: 3A successful responsibility accounting reporting system is dependent upon A. The correct allocation of controllable variable costs. B. Identification of the management level at which all costs are controllable. C. The proper delegation of responsibility and authority.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. A reasonable separation of costs into their fixed and variable components since fixed costs are not controllable and must be eliminated from the responsibility report.

Question: 4In responsibility accounting, a center’s performance is measured by controllable costs. Controllable costs are best described as including A. Direct material and direct labor only. B. Only those costs that the manager can influence in the current time period. C. Only discretionary costs. D. Those costs about which the manager is knowledgeable and informed.

Question: 5A segment of an organization is referred to as a service center if it has A. Responsibility for developing markets and selling the output of the organization. B. Responsibility for combining the raw materials, direct labor, and other factors of production into a final output. C. Authority to make decisions affecting the major determinants of profit including the power to choose its markets and sources of supply. D. Authority to provide specialized support to other units within the organization.

Question: 6The least complex segment or area of responsibility for which costs are allocated is a(n) A. Profit center. B. Investment center. C. Contribution center. D. Cost center.

Question: 7Responsibility accounting defines an operating center that is responsible for revenue and costs as a(n) A. Profit center. B. Revenue center. C. Division.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Operating unit.

Question: 8Decentralized firms can delegate authority and yet retain control and monitor managers’ performance by structuring the organization into responsibility centers. Which one of the following organizational segments is most like an independent business? A. Revenue center. B. Profit center. C. Cost center. D. Investment center.

Question: 9A corporation uses a responsibility accounting system in its operations. Which one of the following items is least likely to appear in a performance report for a manager of one of the assembly lines? A. Direct labor. B. Materials. C. Repairs and maintenance. D. Depreciation on the manufacturing facility.

Question: 10A company uses a performance reporting system that reflects the company’s decentralization of decision making. The departmental performance report shows one line of data for each subordinate who reports to the group vice president. The data presented show the actual costs incurred during the period, the budgeted costs, and all variances from budget for that subordinate’s department. Which type of system is being used? A. Contribution accounting. B. Cost-benefit accounting. C. Flexible budgeting. D. Responsibility accounting.

Question: 11A manufacturer uses an accounting system that charges costs to the manager who has been delegated the authority to make the decisions incurring the costs. For example, if the sales manager accepts a rush order that requires the incurrence of additional manufacturing costs, these additional costs are charged to the sales manager because the authority to accept or decline the rush order was given to the sales manager. This type of accounting system is known as A. Functional accounting.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Contribution accounting. C. Reciprocal allocation. D. Profitability accounting.

Question: 12In a highly decentralized organization, the best option for measuring the performance of subunits is the establishment of A. Marketing centers. B. Product centers. C. Revenue centers. D. Cost centers.

Question: 13A segment of an organization is referred to as a profit center if it has A. Authority to make decisions affecting the major determinants of profit including the power to choose its markets and sources of supply. B. Authority to make decisions affecting the major determinants of profit including the power to choose its markets and sources of supply and significant control over the amount of invested capital. C. Authority to make decisions over the most significant costs of operations including the power to choose the sources of supply. D. Authority to provide specialized support to other units within the organization.

Question: 14A segment of an organization is referred to as an investment center if it has A. Authority to make decisions affecting the major determinants of profit including the power to choose its markets and sources of supply. B. Authority to make decisions affecting the major determinants of profit including the power to choose its markets and sources of supply and significant control over the amount of invested capital. C. Authority to make decisions over the most significant costs of operations including the power to choose the sources of supply. D. Authority to provide specialized support to other units within the organization.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 15A company uses a performance reporting system that reflects the company’s decentralization of decision making. The departmental performance reports show actual costs incurred during the period against budgeted costs. Any variances from the budget are assigned to the individual department manager who controls the costs. The company is using a type of system called A. Transfer-pricing accounting. B. Flexible budgeting. C. Responsibility accounting. D. Activity-based budgeting.

Question: 16A tech firm uses an accounting system that charges costs to the manager who has the authority to make decisions incurring the costs. For example, if a sales manager authorizes a rush order that results in additional manufacturing costs, these additional costs are charged to the sales manager. This type of accounting system is known as A. Responsibility accounting. B. Functional accounting. C. Transfer-pricing accounting. D. Contribution accounting.

Question: 17If a manufacturing company uses responsibility accounting, which one of the following items is least likely to appear in a performance report for a manager of an assembly line? A. Supervisory salaries. B. Materials. C. Repairs and maintenance. D. Equipment depreciation.

Question: 18Which of the following is not true of responsibility accounting? A. Managers should only be held accountable for factors over which they have significant influence. B. The focus of cost center managers will normally be more narrow than that of profit center managers. C. Every factor that affects a firm’s financial performance ultimately is controllable by someone, even if that someone is the person at the top of the firm.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. When a responsibility account system exists, operations of the business are organized into separate areas controlled by individual managers.

Question: 19A company plans to implement a bonus plan based on segment performance. In addition, the company plans to convert to a responsibility accounting system for segment reporting. The following costs, which have been included in the segment performance reports that have been prepared under the current system, are being reviewed to determine if they should be included in the responsibility accounting segment reports: I. Corporate administrative costs allocated on the basis of net segment sales. II. Personnel costs assigned on the basis of the number of employees in each segment. III. Fixed computer facility costs divided equally among each segment. IV. Variable computer operational costs charged to each segment based on actual hours used times a predetermined standard rate; any variable cost efficiency or inefficiency remains in the computer department. Of these four cost items, the only item that could logically be included in the segment performance reports prepared on a responsibility accounting basis would be the A. Corporate administrative costs. B. Personnel costs. C. Fixed computer facility costs. D. Variable computer operational costs.

Question: 20In a responsibility accounting system, managers are accountable for A. Variable costs but not for fixed costs. B. Product costs but not for period costs. C. Incremental costs. D. Costs over which they have significant influence.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 21Which of the following types of responsibility centers include controllable revenues in their performance reports? Cost Investment Profit Centers Centers Centers A. Yes Yes Yes B. Yes No No C. No Yes Yes D. No No No

Question: 22Periodic internal reports used for performance evaluation purposes and based on a responsibility accounting system should not include A. Allocated fixed overhead. B. A distinction between controllable and noncontrollable costs. C. An organization chart. D. Variances between actual and budgeted controllable costs.

Question: 23Which one of the following best identifies a profit center? A. The Information Technology Department of a large consumer products company. B. A large toy company. C. The Production Operations Department of a small job-order machine shop company. D. A new car sales division for a large local auto agency.

Question: 24Characteristics of a responsibility accounting system include all of the following except that A. Responsibility for performance according to budget must be linked to the appropriate authority. B. The system should encourage employee involvement and participation. C. Cost centers are responsible for revenues as well as common costs. D. Each level of management is responsible for its department’s operations and employees.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 25Responsibility costs motivate managers of responsibility centers to act in the organization’s interest. The attribute that would be least persuasive in deciding to allocate costs to responsibility centers is that they A. Are limited to staff services, such as consulting or internal audit. B. Can be influenced by actions of the center’s manager. C. Are helpful in measuring support used by the responsibility center. D. Are used in product pricing.

Question: 26Making segment disclosures is an advantage to a company because it A. Facilitates evaluation of company management by providing data on particular segments. B. Eliminates the interdependence of segments. C. Masks the effect of intersegment transfers. D. Provides competitors with comparative information on the company’s performance.

Question: 27A manager of the telecommunication sales team has the following department budget: Billings -- long distance

$350,000

Billings -- phone card

75,000

Billings -- toll free

265,000

The responsibility center is best described as a A. Cost center. B. Revenue center. C. Profit center. D. Investment center.

Question: 28An organization employs a system of internal reporting that furnishes departmental managers with revenue and cost information on only those items that are subject to their control. Items not subject to the manager’s control are not included in the performance reports. This method of accounting is known as A. Contribution margin reporting. B. Segment reporting.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Absorption cost accounting. D. Responsibility accounting.

Question: 29The role of a marketing manager for a local recreational sports complex in the marketing department is to advertise events, meet potential clients, and plan future events. The marketing manager is responsible for the revenues and costs of each event and reports to the sports complex manager. The marketing department is an example of which type of responsibility center? A. Investment center. B. Cost center. C. Profit center. D. Revenue center.

Question: 30A manager who is accountable for both income statement and balance sheet items is responsible for a(n) A. Cost center. B. Investment center. C. Profit center. D. Revenue center.

Question: 31A cosmetics company is expanding its marketing presence by placing stores within a national department store chain. The cosmetics company hires its own store managers who are responsible for generating sales. The company pays rent per square foot to the department store. For the purpose of assessing the managers’ performance, each cosmetics store would most appropriately be considered a(n) A. Cost center. B. Revenue center. C. Profit center. D. Investment center.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 32The maintenance department of a hotel would be considered a(n) A. Cost center. B. Revenue center. C. Profit center. D. Investment center.

Question: 33A company expects its plant manager to control manufacturing costs and to set prices for the products manufactured. The company’s plant manager is evaluated as directing which type of responsibility center? A. Profit center. B. Cost center. C. Revenue center. D. Investment center.

Question: 34Accountants for Hire is a firm that specializes in providing accounting-related services to a wide range of clients across several geographical areas. The accounting-related services vary and the unique qualifications required in each local market may differ significantly. Each geographical office has a manager who controls the type of accounting services offered to clients as well as the hiring of necessary staff to provide those services. The CEO is in the process of determining the appropriate responsibility centers to use for performance management in the organization. Based on this business scenario, which one of the following is the best type of responsibility center for each geographical area’s office? A. Cost center. B. Investment center. C. Profit center. D. Revenue center.

Question: 35Ordinarily, the most appropriate basis on which to evaluate the performance of a division manager is the division’s A. Contribution margin. B. Net revenue minus controllable division costs. C. Gross profit.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Net income minus the division’s fixed costs.

Question: 36Controllable revenue would be included in a performance report for a Profit Center Cost Center A. No No B. No Yes C. Yes No D. Yes Yes

Question: 37Which of the following is not a potential disadvantage of a cost center? A. Increased monitoring of costs. B. The potential for cost shifting. C. Long-term issues may be disregarded. D. The complexity of allocating service department costs to cost centers.

Question: 38An investment center is responsible for each of the following except: A. Revenues. B. Earnings per share. C. Expenses. D. Invested capital.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Subunit 2: Performance Measures -- Cost, Revenue, and Profit Centers (Contribution Margin Reporting) Question: 1The segment margin of the Wire Division of a manufacturer should not include A. Net sales of the Wire Division. B. Fixed selling expenses of the Wire Division. C. Variable selling expenses of the Wire Division. D. The Wire Division’s fair share of the salary of the manufacturer’s president.

Question: 2When using a contribution margin format for internal reporting purposes, the major distinction between segment manager performance and segment performance is A. Unallocated fixed costs. B. Direct variable costs of producing the product. C. Direct fixed costs controllable by the segment manager. D. Direct fixed costs controllable by others.

Question: 3Which of the following techniques would be best for evaluating the management performance of a department that is operated as a cost center? A. Return on assets ratio. B. Return on investment ratio. C. Payback method. D. Variance analysis.

Question: 4An entity’s income statement for profit center No. 12 for August includes Contribution margin

$84,000

Manager’s salary

24,000

Depreciation on accommodations

9,600

Allocated corporate expenses

6,000

The profit center’s manager is most likely able to control which of the following?

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. $84,000 B. $68,400 C. $60,000 D. $44,400

Question: 5A firm prepared a segmented income statement that included the following data for its suburban marketing segment: Fixed costs controllable by the suburban marketing segment manager

$150,000

Fixed suburban marketing costs controllable by corporate management

250,000

Fixed manufacturing costs allocated to the suburban marketing segment

110,000

Variable manufacturing costs

200,000

Variable selling costs

100,000

Variable administrative costs

130,000

Net sales

950,000

The best measure of the economic performance of the suburban marketing segment is: A. $370,000 B. $10,000 C. $520,000 D. $120,000

Question: 6The performance of a supervisor of claims processing for a health care system is evaluated using various measures agreed upon in advance with the general manager. The general manager asked the supervisor to recommend several measures to evaluate the performance of his unit next year. Which one of the following performance measures would likely have the least positive effect on the supervisor’s motivation and performance? A. Processing cost per claim. B. Average processing time per claim.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Percentage of claims processed accurately the first time. D. Total dollar amount of claims processed per month.

Question: 7The shipping manager for a distributor is responsible for managing the staff and all related transportation equipment to fill orders for bakery products from local retailers and deliver the products to those retailers. Wage rates are established by union contract. Which one of the following groups of three performance measures most likely would result in the highest level of goal congruence? A. Labor cost per order; transportation cost per order; number of orders completed per day. B. The percentage of orders filled on time; the percentage of orders filled accurately; average cost to fill and deliver an order. C. Customer satisfaction; elapsed time to complete an order; percentage of orders filled accurately. D. Orders completed per employee per day; employee injuries per hour worked; number of vehicle accidents per year.

Question: 8A software firm produces software for individual users and small businesses.The manager for the customer hotline department is responsible for answering customer questions related to software products produced by all divisions of the firm. For purposes of promoting goal congruence, which one of the following would be the least appropriate measure of the manager’s performance? A. Average time to provide an answer or solution to a customer. B. Number of calls to the hotline for each new release of software. C. Average time a customer is on hold. D. Number of customer complaints due to incorrect responses given to customers.

Question: 9Which one of the following should be used for evaluating the performance of the Repair and Maintenance Department that repairs production equipment in a firm devoted to making keyboards for computers? A. The variance between the firm’s budgeted and actual net income. B. The total factory overhead variances. C. The fixed overhead volume variances. D. The response time and degree of satisfaction among the production departments.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 10The chief information officer of a university Computing Services Department is assigned to help reduce the recurrent problem of cost overruns due to uncontrolled computer usage by the user community, while at the same time, not curtailing the use of information technology for research and teaching. To ensure goal congruence, which one of the following algorithms should be used to allocate the cost of the university Computing Services Department to other departments within the university? A. Actual rate times actual hours of computer usage. B. Actual rate times budgeted hours of computer usage. C. Budgeted rate times actual hours of computer usage. D. Budgeted rate times budgeted hours of computer usage.

Question: 11Which of the following is a characteristic of a contribution income statement? A. Fixed and variable expenses are combined as one line. B. Fixed expenses are listed separately from variable expenses. C. Fixed and variable manufacturing costs are combined as one line item, but fixed operating expenses are shown separately from variable operating expenses. D. Fixed and variable operating expenses are combined as one line item, but fixed manufacturing expenses are shown separately from variable manufacturing expenses.

Fact Pattern: Data available for the current year are presented below. Whole Company Variable manufacturing cost of goods sold

$ 400,000

Unallocated costs (e.g., president’s salary)

100,000

Division 1

Division 2

$220,000

$180,000

90,000

50,000

40,000

1,000,000

600,000

400,000

130,000

70,000

60,000

120,000

70,000

50,000

Fixed costs controllable by division managers (e.g., advertising, engineering supervision costs) Net revenue Variable selling and administrative costs Fixed costs controllable by others (e.g., depreciation, insurance)

Question: 12Based upon the information presented above, the contribution margin for the company was A. $400,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. $470,000 C. $530,000 D. $600,000

Question: 13A company has four customers. Details on revenues and expenses are presented below. Customer A Units sold

Customer B

Customer C

Customer D

10,000

20,000

35,000

50,000

$100,000

$150,000

$200,000

$250,000

Cost of goods sold

50,000

60,000

70,000

75,000

Delivery costs

10,000

25,000

30,000

50,000

Administration

30,000

30,000

30,000

30,000

Depreciation

20,000

20,000

20,000

20,000

Utilities

10,000

10,000

10,000

10,000

5,000

$ 40,000

$ 65,000

Sales

Profit

$(20,000)

$

Which customer has the lowest customer level operating profit per unit sold? A. Customer A. B. Customer B. C. Customer C. D. Customer D.

Question: 14Management has been asked to evaluate the profitability of its customers and determine which should be discontinued. Each customer has unique characteristics. Although the same product is sold by the manufacturer, different contracted discounts apply. Furthermore, specific handling and shipping needs determine the variable costs incurred for each case sold. Data for the customers are presented below: Alpha Cases sold List price Price discount

Beta

27,000 $

Theta

36,000

15.40 $

15.40 $

(1.10)

(1.20)

24,000 15.40 (0.50)

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Invoice price

$

Total revenues

$386,100 $511,200 $357,600

Total variable cost per case $ Total variable costs

14.30 $

8.75 $

14.20 $

14.90

10.00 $

8.50

$236,250 $360,000 $204,000

Based on customer profitability analysis, which customer should the manufacturer discontinue? A. Beta because it has the highest variable cost per unit. B. Theta because it has the lowest revenues. C. Alpha because it has the lowest profitability. D. Beta because it has the highest price discount.

Question: 15Details on revenues and expenses for four customers are presented below. Customer A Customer B Customer C Customer D Units sold

10,000

20,000

35,000

50,000

$100,000

$150,000

$200,000

$250,000

Cost of goods sold

50,000

60,000

70,000

75,000

Delivery cost

10,000

25,000

30,000

50,000

Order taking

15,000

20,000

25,000

30,000

Administrative

30,000

30,000

30,000

30,000

Depreciation

20,000

20,000

20,000

20,000

Utilities

10,000

10,000

10,000

10,000

(35,000)

(15,000)

15,000

35,000

Sales

Profit/Loss

Which customer has the largest customer level operating profit per unit sold? A. Customer A. B. Customer B. C. Customer C.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Customer D.

Question: 16A company has divided its customers into two groups. Group 1 consists of 20% of the company’s most loyal and reliable customers. Group 2 consists of 80% of the company’s customers who are either small customers or larger customers who order small quantities to test the product before placing larger orders. The most recent results are shown below.

Sales Sales discounts Cost of sales Order processing Delivery Income (loss)

Group 1

Group 2

$7,500,000

$2,000,000

375,000

0

5,250,000

1,400,000

40,000

150,000

120,000

500,000

$1,715,000

$

(50,000)

The best way for the company to improve profitability is to

A. Charge a separate fee for the delivery of small quantities. B. Discontinue sales to Group 2 customers. C. Eliminate discounts for Group 1 customers. D. Raise the selling price of the product.

Subunit 3: Performance Measures -- Investment Centers Question: 1The imputed interest rate used in the residual income approach to performance evaluation can best be described as the A. Average lending rate for the year being evaluated. B. Historical weighted-average cost of capital for the company. C. Target return on investment set by the company’s management. D. Average return on investments for the company over the last several years.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 2A firm earning a profit can increase its return on investment by A. Increasing sales revenue and operating expenses by the same dollar amount. B. Decreasing sales revenues and operating expenses by the same percentage. C. Increasing investment and operating expenses by the same dollar amount. D. Increasing sales revenues and operating expenses by the same percentage.

Question: 3Which one of the following statements pertaining to the return on investment (ROI) as a performance measurement is false? A. When the average age of assets differs substantially across segments of a business, the use of ROI may not be appropriate. B. ROI relies on financial measures that are capable of being independently verified, while other forms of performance measures are subject to manipulation. C. The use of ROI may lead managers to reject capital investment projects that can be justified by using discounted cash flow models. D. The use of ROI can make it undesirable for a skillful manager to take on troubleshooting assignments such as those involving turning around unprofitable divisions.

Question: 4Listed below is selected financial information for the Western Division of a corporation for last year. Amount Account

(thousands)

Average working capital

$ 625

General and administrative expenses

75

Net sales

4,000

Average plant and equipment

1,775

Cost of goods sold

3,525

If the corporation treats the Western Division as an investment center for performance measurement purposes, what is the before-tax return on investment (ROI) for last year? A. 34.78% B. 22.54%

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. 19.79% D. 16.67%

Question: 5One approach to measuring divisional performance is return on investment. Return on investment is expressed as operating income A. Divided by the current year’s capital expenditures plus cost of capital. B. Minus imputed interest charged for invested capital. C. Divided by fixed assets. D. Divided by total assets.

Question: 6Return on investment (ROI) is a very popular measure employed to evaluate the performance of corporate segments because it incorporates all of the major ingredients of profitability (revenue, cost, investment) into a single measure. Under which one of the following combinations of actions regarding a segment’s revenues, costs, and investment would a segment’s ROI always increase? Revenues Costs Investments A. Increase Decrease Increase B. Decrease Decrease Decrease C. Increase Increase Increase D. Increase Decrease Decrease

Question: 7In evaluating an investment center, top management should concentrate on A. Dollar sales. B. Net income. C. Profit percentages. D. Return on investment.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 8Which one of the following will not improve return on investment if other factors are constant? A. Decreasing expenses or assets. B. Increasing selling prices. C. Increasing sales volume while holding fixed expenses constant. D. None of the answers is correct.

Question: 9Which one of the following items would most likely not be incorporated into the calculation of a division’s investment base when using the residual income approach for performance measurement and evaluation? A. Fixed assets employed in division operations. B. Land being held by the division as a site for a new plant. C. Division inventories when division management exercises control over the inventory levels. D. Division accounts payable when division management exercises control over the amount of short-term credit used.

Question: 10The segment margin of an investment center after deducting the imputed interest on the assets used by the investment center is known as A. Return on investment. B. Residual income. C. Operating income. D. Return on assets.

Question: 11The imputed interest rate used in the residual income approach for performance measurement and evaluation can best be characterized as the A. Historical weighted average cost of capital for the company. B. Marginal after-tax cost of new equity capital. C. Average return on investment that has been earned by the company over a particular period. D. Target return on investment set by management.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 12Performance of the general manager of the Industrial Product Division is measured using the residual income method. The general manager is reviewing the following forecasted information for the division for next year: Amount Category

(thousands)

Working capital

$ 1,800

Revenue

30,000

Plant and equipment

17,200

If the imputed interest charge is 15% and the general manager wants to achieve a residual income target of $2,000,000, what will costs have to be in order to achieve the target? A. $9,000,000 B. $10,800,000 C. $25,150,000 D. $25,690,000

Question: 13The basic objective of the residual income approach to performance measurement and evaluation is to have a division maximize its A. Return on investment rate. B. Imputed interest rate charge. C. Cash flows. D. Income in excess of a desired minimum return.

Question: 14After investing in a new project, a company discovered that its residual income remained unchanged. Which one of the following must be true about the new project? A. The net present value of the new project must have been negative. B. The return on investment of the new project must have been less than the firm’s cost of capital. C. The return on investment of the new project must have been equal to the firm’s cost of capital. D. The net present value of the new project must have been positive.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 15When comparing the residual income of several investment centers, the validity of comparisons may be destroyed by A. Peculiarities of each investment center. B. Consistent use of an imputed interest rate. C. Common amounts of invested capital for each investment center. D. None of the answers is correct.

Question: 16The following forecasted information is available for a manufacturing division for next year: Amount Category

(thousands)

Working capital

$ 1,800

Revenue

30,000

Plant and equipment

17,200

To establish a standard of performance for the division’s manager using the residual income approach, four scenarios are being considered. Target Imputed Interest

Residual Income

1

15%

$2,000,000

2

12%

1,500,000

3

18%

1,250,000

4

10%

2,500,000

Which scenario assumes the lowest maximum cost? A. Scenario 1. B. Scenario 2. C. Scenario 3. D. Scenario 4.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 17The following information relates to the Northeast Division: Sales

$600,000

Variable costs

360,000

Traceable fixed costs

60,000

Average invested capital

120,000

Imputed interest rate

8%

Residual income was A. $170,400 B. $180,000 C. $189,600 D. $230,400

Question: 18Performance results for four geographic divisions of a manufacturing company are shown below.

Division

Target Return

Actual Return

Return

on Investment

on Investment

on Sales

A

18%

18.1%

8%

B

16

20.0

8

C

14

15.8

6

D

12

11.0

9

The division with the best performance is A. Division A. B. Division B. C. Division C. D. Division D.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 19A multidivisional firm evaluates its managers based on the return on investment (ROI) earned by their divisions. The evaluation and compensation plans use a targeted ROI of 15% (equal to the cost of capital), and managers receive a bonus of 5% of basic compensation for every one-percentage point that the division’s ROI exceeds 15%. The manager of the Consumer Products Division has made a forecast of the division’s operations and finances for next year that indicates the ROI would be 24%. In addition, new short-term programs were identified by the Consumer Products Division and evaluated by the finance staff as follows: Program

Projected ROI

A

13%

B

19%

C

22%

D

31%

Assuming no restrictions on expenditures, what is the optimal mix of new programs that would add value to the firm?

A. A, B, C, and D. B. B, C, and D only. C. C and D only. D. D only.

Question: 20A company has four regional divisions. A summary of financial results for the company is shown below. North Operating income Assets Liabilities Total equity

East

South

West

$1,000

$ 5,000

$4,000

$ 7,500

2,500

15,000

8,000

25,000

500

7,000

1,000

5,000

2,000

8,000

7,000

20,000

Which division has the highest return on investment? A. North. B. East. C. South.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. West.

Question: 21The following is an excerpt from a corporation’s most recent financial statements. Current assets

$ 120,000

Total operating assets

1,750,000

Current liabilities

85,000

Total liabilities

985,000

Sales

1,240,000

Operating income

$ 365,000

The corporation’s required rate of return is 12%. What is its residual income? A. $155,000 B. $126,800 C. $123,600 D. $113,800

Question: 22A company is considering the addition of a new product line. The new product line is expected to generate a return higher than the cost of capital but lower than the current overall return on investment (ROI). If the company decides to add the potential new product line, residual income will A. Increase. B. Remain unchanged. C. Decrease. D. Become higher than the firm’s return on investment.

Question: 23A firm opens a new retail store every 2 years and currently operates in 24 different locations. The firm uses return on investment (ROI) to evaluate store performance. The best comparison among stores will be achieved if the firm values long-term assets by A. Book value. B. Current value.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Historical cost. D. Historical cost adjusted for inflation.

Question: 24The headquarters of a national restaurant chain is trying to better understand the profitability of the Savannah location. Savannah’s total assets are $3,500,000, consisting of $1,000,000 land, $2,000,000 buildings and equipment, and $500,000 intangibles. The net profit is $475,000, and the required rate of return is 12%. Savannah’s return on investment (ROI) is A. 23.7% B. 19.0% C. 15.8% D. 13.6%

Question: 25A company uses return on investment (ROI) to evaluate year-end divisional performance. Which one of the following inventory practices would most reduce comparability among two similar divisions? A. One division uses a perpetual inventory system, and the other division uses a periodic inventory system. B. One division uses the net method to record purchases, and the other division uses the gross method to record purchases. C. One division uses LIFO, and the other division uses FIFO. D. One division places goods for sale on consignment, and the other division does not.

Question: 26A company uses return on investment (ROI) to measure the performance of its business units. The company manufactures and distributes consumer goods. Last year, management identified a possible shortage of raw materials. To mitigate this risk, a large amount of raw material was bought in advance and stored in the manufacturing plant inventory. As a result of this decision, ROI will A. Increase. B. Decrease. C. Not change. D. Have an unpredictable change.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 27A merchandising company is considering a $1,000,000 upgrade to its retail and warehousing facilities that will allow the company to handle more products and attract more customers. The company anticipates that sales will increase by $500,000 and operating income will increase by $200,000 per year. If the company has a minimum required return on investment of 15%, what would be the residual income resulting from the upgrade? A. $800,000 B. $500,000 C. $75,000 D. $50,000

Question: 28A corporation has set a goal to increase its return on investment (ROI). To facilitate this goal, the corporation has set up an incentive program that rewards each division for increasing its ROI. One possible downfall of this incentive program is that it will A. Cause division managers to compete for the corporation’s investment funds. B. Cause the corporation to select high-risk investments. C. Cause the corporation to pay out incentives if goals are achieved. D. Result in managers rejecting profitable projects.

Question: 29Which statement below best represents a benefit of residual income (RI) as a performance measure? A. RI blends all ingredients of profitability into one percentage that is easily comparable. B. RI is more likely to promote goal congruence in a low-profit location versus return on investment. C. Managers can increase their RI by decreasing the internal rate of return. D. Managers maximize an absolute amount and invest as long as the required return is earned.

Question: 30Based on the following information and a required rate of return of 12%, which location has the best residual income? Operating Income Investment Intangibles Depreciation Madison

$300,000

$1,000,000 $200,000

$120,000

Denver

$490,000

$2,750,000 $600,000

$270,000

A. Denver at $160,000.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Madison at $180,000. C. Madison at $204,000. D. Denver at $232,000.

Question: 31Business unit A has a return on investment of 10%, with a net profit for the year of $40,000. The opportunity cost for the business unit investments has been calculated at 8%. The company plans to purchase a new machine worth $100,000 and expects the net profit to rise by an additional $15,000. The new purchase decision will increase the return on investment A. By 1% and increase the residual income by $8,000. B. By 1% and increase the residual income by $15,000. C. To 11% and increase the residual income by $7,000. D. To 11% and increase the residual income by $15,000.

Question: 32A company’s management is planning on making an investment of $800,000 to launch a new product. In the first year, the new product is expected to generate sales of $200,000 and a contribution margin of $175,000. Incremental fixed costs are $50,000. The company’s expected return on investment in the first year is closest to A. 6%. B. 16%. C. 22%. D. 25%.

Question: 33A company has an 8% required rate of return. It is evaluating the following four mutually exclusive projects as possible investments. Estimated Operating Income

Assets

Project A

$1,250,000

$ 5,000,000

Project B

1,500,000

7,500,000

Project C

850,000

1,500,000

Project D

750,000

10,000,000

Using the residual income method, which one of the four projects should the company accept?

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. Project A. B. Project B. C. Project C. D. Project D.

Question: 34A company is considering three independent projects. Projected financial information is shown below. Project A Sales

$5,000,000

Project B

Project C

$ 7,000,000 $10,000,000

Contribution margin

1,440,000

1,700,000

3,500,000

Operating income

1,000,000

1,650,000

2,520,000

Investment

9,000,000

10,000,000

14,000,000

The company’s minimum rate of return for accepting projects is 15% and the total investment for new projects is a maximum of $20,000,000. The company’s goal is to maximize its return on investment. Which project(s) should be accepted if the company uses return on investment to measure investment projects? A. Project A only. B. Project B only. C. Projects B and C only. D. Project C only.

Question: 35A company’s recent operating results are shown below. Sales Expenses

$4,370,000 2,728,000

Operating income 1,642,000 Total assets

9,818,000

Total liabilities

7,663,000

The company has set a target return on investment (ROI) of 18%. Management is evaluating the following two plans.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Plan 1: Invest $1,200,000 in a new location that will produce $3,000,000 in sales each year. Operating expenses will increase $2,781,600 each year. Plan 2: Reduce company costs by improving technology in the manufacturing process. An equipment investment of $730,000 will reduce annual operating costs by $315,000. Which plan, if implemented, would result in the company having an ROI at or above the targeted ROI? A. Plan 1, since it will increase the company’s ROI to 18.2%. B. Plan 1, since it will increase the company’s ROI to 42.1%. C. Plan 2, since it will increase the company’s ROI to 18.6%. D. Plan 2, since it will increase the company’s ROI to 43.2%.

Subunit 4: Comparing Performance Measures for Investment Centers Question: 1A computer service center had the following operating statistics for the month: Sales

$450,000

Operating income

25,000

Net profit after taxes

8,000

Total assets

500,000

Shareholders’ equity

200,000

Cost of capital

6%

Based on the above information, which one of the following statements is true? The computer service center has a A. Return on investment of 4%. B. Residual income of $(5,000). C. Return on investment of 1.6%. D. Residual income of $(22,000).

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 2For the year just ended, a service center had the following operating statistics: Sales

$750,000

Operating income

25,000

Net profit after taxes

8,000

Total assets available

500,000

Shareholders’ equity

200,000

Cost of capital

6%

The service center has a A. Return on investment of 3.33%. B. Residual income of $(5,000). C. Return on investment of 6%. D. Residual income of $(20,000).

Question: 3Managerial performance can be measured in many different ways, including return on investment (ROI) and residual income. A good reason for using residual income instead of ROI is that A. Residual income can be computed without regard to identifying an investment base. B. Goal congruence is more likely to be promoted by using residual income. C. Residual income is well understood and often used in the financial press. D. ROI does not take into consideration both the investment turnover ratio and return-on-sales percentage.

Question: 4Residual income is a better measure for performance evaluation of an investment center manager than return on investment because A. The problems associated with measuring the asset base are eliminated. B. Desirable investment decisions will not be neglected by high-return divisions. C. Only the gross book value of assets needs to be calculated. D. The arguments about the implicit cost of interest are eliminated.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Edith Carolina, president of the Deed Corporation, requires a minimum return on investment of 8% for any project to be undertaken by her company. The company is decentralized, and leaves investment decisions up to the discretion of the division managers as long as the 8% return is expected to be realized. Michael Sanders, manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past 3 years and expects the division to have the same return in the coming year. Sanders has the opportunity to invest in a new line of cosmetics that is expected to have a return on investment of 12%. Question: 5If the Deed Corporation evaluates managerial performance using residual income based on the corporate minimum required rate of return, what will be the preference for taking on the proposed cosmetics line by Edith Carolina and Michael Sanders? Carolina Sanders A. Accept Reject B. Reject Accept C. Accept Accept D. Reject Reject

Fact Pattern: Edith Carolina, president of the Deed Corporation, requires a minimum return on investment of 8% for any project to be undertaken by her company. The company is decentralized, and leaves investment decisions up to the discretion of the division managers as long as the 8% return is expected to be realized. Michael Sanders, manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past 3 years and expects the division to have the same return in the coming year. Sanders has the opportunity to invest in a new line of cosmetics that is expected to have a return on investment of 12%. Question: 6If the Deed Corporation evaluates managerial performance using return on investment, what will be the preference for taking on the proposed cosmetics line by Edith Carolina and Michael Sanders? Carolina Sanders A. Accept Reject B. Reject Accept C. Accept Accept D. Reject Reject

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 7To ensure that a divisional vice president places appropriate focus on both the short-term and the long-term objectives of the division, the best approach would be to evaluate the vice president’s performance by using A. Return on investment (ROI), which permits easy and quick comparisons to other similar divisions. B. Residual income since it will eliminate the rejection of capital investments that have a return less than ROI but greater than the cost of capital. C. Division segment margin or profit margin. D. Financial and nonfinancial measures, including the evaluation of quality, customer satisfaction, and market performance.

Question: 8A company evaluates its managers using management by objectives (MBO). All of the following are considered appropriate goals for measuring a division manager’s efficiency for a budgeting period except A. Budgeted operating income. B. A targeted share of the market. C. Earnings per share projections. D. A reduction in the organizational structure (fewer employees doing a given amount of work).

Question: 9For several years, Northern Division of a company has maintained a positive residual income. Northern is currently considering investing in a new project that will lower the division’s overall return on investment (ROI) but increase its residual income. What is the relationship between the expected rate of return on the new project, the firm’s cost of capital, and the division’s current ROI? A. The expected rate of return on the new project is higher than the division’s current return on investment, but lower than the firm’s cost of capital. B. The firm’s cost of capital is higher than the expected rate of return on the new project, but lower than the division’s current return on investment. C. The division’s current return on investment is higher than the expected rate of return on the new project, but lower than the firm’s cost of capital. D. The expected rate of return on the new project is higher than the firm’s cost of capital, but lower than the division’s current return on investment.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 10A company has two divisions, Household Appliances and Construction Equipment. The manager of the Household Appliances Division is evaluated on the basis of return on investment (ROI). The manager of the Construction Equipment Division is evaluated on the basis of residual income. The cost of capital has been 12%, and the return on investment has been 16% for the two divisions. Each manager is currently considering a project with a 14% rate of return. According to the current evaluation system for managers, which manager(s) would have incentive to undertake the project? A. Both managers would have incentive to undertake the project. B. Neither manager would have incentive to undertake the project. C. The manager of the Household Appliances Division would have incentive to undertake the project, while the manager of the Construction Equipment Division would not have incentive to undertake the project. D. The manager of the Construction Equipment Division would have incentive to undertake the project, while the manager of the Household Appliances Division would not have incentive to undertake the project.

Question: 11A company is concerned that its divisional managers are not making decisions that are in the best interests of the overall corporation. In order to prevent this, the company should use a performance evaluation system that focuses on A. Flexible budget variances. B. Operating income. C. Controllable costs. D. Residual income.

Question: 12The following selected information is from the financial statements for the last fiscal year. Current assets

$

500,000

Fixed assets

250,000

Current liabilities

100,000

Long-term debt

300,000

Stockholders’ equity

350,000

Operating profit

1,000,000

Income taxes

400,000

Net income

600,000

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

The company has a cost of capital of 10%. Balance sheet amounts remained constant throughout the year. The company’s residual income for last year was A. $525,000 B. $575,000 C. $925,000 D. $975,000

Question: 13The financial results for the four regional divisions are shown below.

Net profit Assets

North

South

East

West

$1,000

$ 5,000

$4,000

$ 7,500

2,500

15,000

8,000

25,000

500

7,000

1,000

5,000

2,000

8,000

7,000

20,000

Liabilities Total equity

Which division has the lowest return on investment? A. North. B. South. C. East. D. West.

Question: 14A manufacturer of value-priced clothing measures the performance of its divisions based upon return on investment. If investment is defined as the book value of all assets recorded on a division’s balance sheet, the manufacturer will have the most difficulty in comparing divisions that vary significantly in A. Age. B. Geographic location. C. Managerial style. D. Sales volume.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 15A firm has four branch offices throughout the state. Following are the operating results from last year. K City

G City

W City

S City

Branch office sales $300,000 $420,000 $ 540,000 $606,000 Branch office profit 120,000 294,000

318,000 104,000

Average total assets 805,000 914,000 1,650,000 745,000 Which branch had the highest return on investment? A. K City. B. G City. C. W City. D. S City.

Question: 16When using return on investment (ROI) in local currency to evaluate divisional performance, valuing assets at net book value would result in the highest ROI for A. International divisions in countries with high inflation. B. International divisions in countries with high deflation. C. Retail divisions purchasing goods from manufacturing divisions at fixed prices. D. Retail divisions purchasing goods from manufacturing divisions at negotiated prices.

Question: 17Residual income is often preferred over return on investment (ROI) as a performance evaluation measure because A. The imputed interest rate used in calculating residual income is more easily derived than the target rate that is compared to the calculated ROI. B. Average investment is employed with residual income while year-end investment is employed with ROI. C. Residual income concentrates on maximizing the amount of income rather than a percentage return as with ROI. D. Residual income is a measure over time while ROI represents the results for a single time period.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 18Return on investment focuses on income as a percentage of investment, while residual income focuses on A. The capital charge. B. Operating income less a capital charge. C. Management decisions. D. Cost of capital times the amount of investment.

Subunit 5: Allocating Common Costs Question: 1Which one of the following companies is likely to experience dysfunctional motivation on the part of its managers due to its allocation methods? A. To allocate depreciation of forklifts used by workers at its central warehouse, Company A uses predetermined amounts calculated on the basis of the long-term average use of the services provided. B. Company B uses the sales revenue of its various divisions to allocate costs connected with the upkeep of its headquarters building. It also uses ROI to evaluate the divisional performances. C. Company C does not allow its service departments to pass on their cost overruns to the production departments. D. Company D’s MIS is operated out of headquarters and serves its various divisions. The allocation of the MIS-related costs to its divisions is limited to costs the divisions will incur if they were to outsource their MIS needs.

Question: 2Common costs are A. Direct costs. B. Current costs. C. Controllable costs. D. Indirect costs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 3Managers are most likely to accept allocations of common costs based on A. Cause and effect. B. Ability to bear. C. Fairness. D. Benefits received.

Question: 4A large corporation allocates the costs of its headquarters staff to its decentralized divisions. The best reason for this allocation is to A. More accurately measure divisional operating results. B. Improve divisional management’s morale. C. Remind divisional managers that common costs exist. D. Discourage any use of central support services.

Question: 5Most firms allocate corporate and other support costs to divisions and departments for all of the following reasons except to A. Remind profit-center managers that earnings must be adequate to cover some share of the indirect costs. B. Stimulate profit-center managers to put pressure on central managers to control service costs. C. Create competition between divisions and departments, and their managers. D. Fix accountability and evaluate profit centers.

Question: 6Which one of the following allocation approaches will ensure that the production departments do not underestimate their planned usage of service at the start of the budget period as well as make the service departments cost efficient? A. The use of actual rates and actual hours for both fixed and variable costs. B. Budgeted rates and standard hours allowed for output attained for variable costs and budgeted rates and capacity available for fixed costs. C. The use of rates and quantities based on long-term historical averages for both variable and fixed costs. D. The use of a budgeted lump-sum amount based on estimates provided by the production departments for both variable and fixed costs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 7A hospital has installed a new computer system. The system was designed and constructed based on the anticipated number of hours of usage required by the various hospital departments according to projections made by the departmental managers. Virtually all of the operating costs of the system are fixed. What would be the most systematic and rational manner in which to allocate the new computer system costs to the various hospital departments? A. To each department equally. B. By the anticipated number of hours of usage. C. By actual usage by each department. D. By the revenue generated in each department.

Question: 8The Finance Department has purchased a new color copier system for $10,000 that will help with required reporting. The IT Department was planning to purchase a similar system for an additional $10,000 but has realized that there are enough system resources from the Finance Department’s purchase that both groups can share the new equipment equally. In order to fairly allocate the common cost of the equipment, the controller should use the A. Incremental cost method and allocate $10,000 to the Finance Department. B. Stand-alone cost method and allocate $5,000 to each department. C. Constant gross profit method and allocate $5,000 to each department. D. Net realizable value method and allocate $10,000 to the Finance Department.

Question: 9A finance group purchased a new project management software package costing $100,000. For an additional $10,000, the tax reporting team purchased a smaller application that would have cost $40,000 to buy separately. The controller will allocate the costs mainly to the finance group, the primary users, and should use the A. Incremental cost allocation method, allocating $10,000 to the tax reporting team and $100,000 to the finance group. B. Stand-alone cost allocation method, allocating $40,000 to the tax reporting team and $70,000 to the finance group. C. Dual costing method and allocate $55,000 to both user groups. D. Method which best reflects the usage of the software package.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 10If a company allocates common costs by weighting the costs of each user as a separate entity, it is using which one of the following cost allocation methods? A. Incremental. B. Reciprocal. C. Stand-alone. D. Step-down.

Question: 11All of the following are issues that should be considered in evaluating performance when common costs are allocated to business segments except that A. Cost allocations are not included in the calculation of long-term cost per unit. B. Common costs are not controllable by segment managers. C. The allocation can be affected by the cost drivers used by other segments. D. There may be no cause-and-effect relationship between an allocated cost and the segment’s operations.

Question: 12A corporation operates three distinct profit centers, each of which sells a unique product. Each division currently rents its own warehouse with the following characteristics. Annual Cost

Square Footage Required

Division 1

$325,000

65,000

Division 2

145,000

30,000

Division 3

30,000

5,000

The corporation has the opportunity to rent a warehouse containing 110,000 square feet for $480,700 per year. This facility would be shared by all three divisions with the additional unused space reserved for the anticipated growth of Division 3. If the corporation uses the incremental cost allocation method to assign the $480,700 cost of the large warehouse, the amount allocated to Division 3 would be

A. $10,700 B. $24,035 C. $28,842

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. $65,550

Subunit 6: Transfer Pricing Fact Pattern: Parkside, Inc., has several divisions that operate as decentralized profit centers. Parkside’s Entertainment Division manufactures video arcade equipment using the products of two of Parkside’s other divisions. The Plastics Division manufactures plastic components, one type that is made exclusively for the Entertainment Division, while other less complex components are sold to outside markets. The products of the Video Cards Division are sold in a competitive market; however, one video card model is also used by the Entertainment Division.

The actual costs per unit used by the Entertainment Division are presented below.

Direct material

Video

Components

Cards

$1.25

$2.40

2.35

3.00

Variable overhead 1.00

1.50

Fixed overhead

.40

2.25

$5.00

$9.15

Direct labor

Total cost

Question:

Plastic

The Plastics Division sells its commercial products at full cost plus a 25% markup and believes the proprietary plastic component made for the Entertainment Division would sell for $6.25 per unit on the open market. The market price of the video card used by the Entertainment Division is $10.98 per unit. 1A per-unit transfer price from the Video Cards Division to the Entertainment Division at full cost,

$9.15, would A. Allow evaluation of both divisions on a competitive basis. B. Satisfy the Video Cards Division’s profit desire by allowing recovery of opportunity costs. C. Provide no profit incentive for the Video Cards Division to control or reduce costs. D. Encourage the Entertainment Division to purchase video cards from an outside source.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Parkside, Inc., has several divisions that operate as decentralized profit centers. Parkside’s Entertainment Division manufactures video arcade equipment using the products of two of Parkside’s other divisions. The Plastics Division manufactures plastic components, one type that is made exclusively for the Entertainment Division, while other less complex components are sold to outside markets. The products of the Video Cards Division are sold in a competitive market; however, one video card model is also used by the Entertainment Division.

The actual costs per unit used by the Entertainment Division are presented below.

Direct material

Plastic

Video

Components

Cards

$1.25

$2.40

2.35

3.00

Variable overhead 1.00

1.50

Fixed overhead

.40

2.25

$5.00

$9.15

Direct labor

Total cost

The Plastics Division sells its commercial products at full cost plus a 25% markup and believes the proprietary plastic component made for the Entertainment Division would sell for $6.25 per unit on the open market. The market price of the video card used by the Entertainment Division is $10.98 per unit. Question: 2Assume that the Entertainment Division is able to purchase a large quantity of video cards from an outside source at $8.70 per unit. The Video Cards Division, having excess capacity, agrees to lower its transfer price to $8.70 per unit. This action would A. Optimize the profit goals of the Entertainment Division while subverting the profit goals of Parkside, Inc. B. Allow evaluation of both divisions on the same basis. C. Subvert the profit goals of the Video Cards Division while optimizing the profit goals of the Entertainment Division. D. Optimize the overall profit goals of Parkside, Inc.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Fact Pattern: Parkside, Inc., has several divisions that operate as decentralized profit centers. Parkside’s Entertainment Division manufactures video arcade equipment using the products of two of Parkside’s other divisions. The Plastics Division manufactures plastic components, one type that is made exclusively for the Entertainment Division, while other less complex components are sold to outside markets. The products of the Video Cards Division are sold in a competitive market; however, one video card model is also used by the Entertainment Division.

The actual costs per unit used by the Entertainment Division are presented below.

Direct material

Plastic

Video

Components

Cards

$1.25

$2.40

2.35

3.00

Variable overhead 1.00

1.50

Fixed overhead

.40

2.25

$5.00

$9.15

Direct labor

Total cost

The Plastics Division sells its commercial products at full cost plus a 25% markup and believes the proprietary plastic component made for the Entertainment Division would sell for $6.25 per unit on the open market. The market price of the video card used by the Entertainment Division is $10.98 per unit. Question: 3Assume that the Plastics Division has excess capacity and it has negotiated a transfer price of $5.60 per plastic component with the Entertainment Division. This price will A. Cause the Plastics Division to reduce the number of commercial plastic components it manufactures. B. Motivate both divisions as estimated profits are shared. C. Encourage the Entertainment Division to seek an outside source for plastic components. D. Demotivate the Plastics Division causing mediocre performance.

Question: 4A limitation of transfer prices based on actual cost is that they A. Charge inefficiencies to the department that is transferring the goods. B. Can lead to suboptimal decisions for the company as a whole. C. Must be adjusted by some markup. D. Lack clarity and administrative convenience.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 5The most fundamental responsibility center affected by the use of market-based transfer prices is a(n) A. Production center. B. Investment center. C. Cost center. D. Profit center.

Question: 6An appropriate transfer price between two divisions of a manufacturer can be determined from the following data: Fabricating Division: Market price of subassembly

$50

Variable cost of subassembly

$20

Excess capacity (in units)

1,000

Assembling Division: Number of units needed 900 What is the natural bargaining range for the two divisions? A. Between $20 and $50. B. Between $50 and $70. C. Any amount less than $50. D. $50 is the only acceptable price.

Question: 7A proposed transfer price may be based upon the full-cost price. Full-cost price is the price A. On the open market. B. Representing the cash outflows of the supplying division plus the contribution to the supplying division from an outside sale. C. Usually set by an absorption-costing calculation. D. Set by charging for variable costs plus a lump sum or an additional markup, but less than full markup.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 8Division Z of a company produces a component that it currently sells to outside customers for $20 per unit. At its current level of production, which is 60% of capacity, Division Z’s fixed cost of producing this component is $5 per unit and its variable cost is $12 per unit. Division Y of the same company would like to purchase this component from Division Z for $10. Division Z has enough excess capacity to fill Division Y’s requirements. The managers of both divisions are compensated based upon reported profits. Which of the following transfer prices will maximize total company profits and be most equitable to the managers of Division Y and Division Z? A. $12 per unit. B. $18 per unit. C. $20 per unit. D. $22 per unit.

Question: 9Division A of a company is currently operating at 50% capacity. It produces a single product and sells all its production to outside customers for $13 per unit. Variable costs are $7 per unit, and fixed costs are $6 per unit at the current production level. Division B, which currently purchases this product from an outside supplier for $12 per unit, would like to purchase the product from Division A. Division A will operate at 80% capacity to meet outside customers’ and Division B’s demand. What is the minimum price that Division A should charge Division B for this product? A. $7.00 per unit. B. $9.60 per unit. C. $12.00 per unit. D. $13.00 per unit.

Question: 10Which of the following is not true about international transfer prices for a multinational firm? A. Allows firms to attempt to minimize worldwide taxes. B. Allows the firm to evaluate each division. C. Provides each division with a profit-making orientation. D. Allows firms to correctly price products in each country in which it operates.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 11Which one of the following is an incorrect description of transfer pricing? A. It measures the value of goods or services furnished by a profit center to other responsibility centers within a company. B. If a market price exists, this price may be used as a transfer price. C. It measures exchanges between a company and external customers. D. If no market price exists, the transfer price may be based on cost.

Fact Pattern: Manhattan Corporation has several divisions that operate as decentralized profit centers. At the present time, the Fabrication Division has excess capacity of 5,000 units with respect to the UT-371 circuit board, a popular item in many digital applications. Information about the circuit board follows. Market price

$48

Variable selling/distribution costs on external sales

5

Variable manufacturing cost

21

Fixed manufacturing cost

10

Manhattan’s Electronic Assembly Division wants to purchase 4,500 circuit boards either internally, or else use a similar board in the marketplace that sells for $46. The Electronic Assembly Division’s management feels that if the first alternative is pursued, a price concession is justified, given that both divisions are part of the same firm. Question: 12To optimize the overall goals of Manhattan, the minimum price to be charged for the board from the Fabrication Division to the Electronic Assembly Division should be A. $21 B. $26 C. $31 D. $46

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 13With respect to a firm’s transfer pricing policy, an advantage of using a dual pricing arrangement is that it A. Provides an incentive for the supplying subunit to control costs. B. Exposes the supplying subunit to the discipline of market prices. C. Promotes goal congruence between the supplying and buying subunits of the firm. D. Simplifies tax calculations when the buying and supplying subunits are taxed in different jurisdictions.

Question: 14Multinational transfer prices are sometimes influenced by restrictions that some countries place on the repatriation of profits to the parent firm. Companies can minimize the effect of such restrictions by A. Decreasing the prices of goods transferred into divisions in these countries. B. Increasing the prices of goods transferred into divisions in these countries. C. Charging less than the price that would be charged by an unrelated third party for goods transferred into divisions in these countries. D. Keeping prices uniform throughout all domestic and foreign units within the company.

Question: 15Division A produces a product that can be sold to outside customers or sold to Division B for further processing. If the performance of managers is evaluated based on division profitability, what transfer pricing method will the manager of Division A request? A. Hybrid transfer pricing. B. Cost-based transfer pricing. C. Market-based transfer pricing. D. Standard transfer pricing.

Question: 16The price that one division of a company charges another division for goods or services provided is called the A. Market price. B. Transfer price. C. Outlay price. D. Distress price.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 17In theory, the optimal method for establishing a transfer price is A. Flexible budget cost. B. Incremental cost. C. Budgeted cost with or without a markup. D. Market price.

Question: 18A carpet manufacturer maintains a retail division consisting of stores stocking its brand and other brands and a manufacturing division that makes carpets and pads. An outside market exists for carpet padding material in which all padding produced can be sold. The proper transfer price for padding transferred from the manufacturing division to the retail division is A. Variable manufacturing division production cost. B. Variable manufacturing division production cost plus allocated fixed factory overhead. C. Variable manufacturing division production cost plus variable selling and administrative cost. D. The market price at which the retail division could purchase padding.

Question: 19One department of an organization, Final Assembly, is purchasing subcomponents from another department, Materials Fabrication. The price that will be charged to Final Assembly by Materials Fabrication is to be determined. Outside market prices for the subcomponents are available. Which of the following is the most correct statement regarding a market-based transfer price? A. Marginal production cost transfer prices provide incentives to use otherwise idle capacity. B. Market transfer prices provide an incentive to use otherwise idle capacity. C. Overall long term competitiveness is enhanced with a market-based transfer price. D. Corporate politics is more of a factor in a market-based transfer price than with other methods.

Question: 20The Eastern division sells goods internally to the Western division of the same company. The quoted external price in industry publications from a supplier near Eastern is $200 per ton plus transportation. It costs $20 per ton to transport the goods to Western. Eastern’s actual market cost per ton to buy the direct materials to make the transferred product is $100. Actual per ton direct labor is $50. Other actual costs of storage and handling are $40. The company president selects a $220 transfer price. This is an example of A. Market-based transfer pricing. B. Cost-based transfer pricing.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Negotiated transfer pricing. D. Cost plus 20% transfer pricing.

Question: 21Companies with decentralized, autonomous divisions that sell their goods and services internally to other divisions of the company as well as externally in competitive markets have to establish transfer prices for the goods and services transferred internally among divisions. Generally, upper management has established such operating criteria for managing the divisions as goal congruence, subunit autonomy, and a sustained high level of management effort. An approach consistent with the above criteria would be to set the transfer price equal to the A. Additional outlay cost per unit incurred to the point of transfer plus the opportunity cost per unit to the supplying division. B. Additional outlay cost per unit incurred to the point of transfer plus the opportunity cost per unit to the buying division. C. Full cost per unit incurred to the point of transfer plus a percentage markup on the full cost per unit. D. Variable cost per unit incurred to the point of transfer.

Fact Pattern: Manhattan Corporation has several divisions that operate as decentralized profit centers. At the present time, the Fabrication Division has excess capacity of 5,000 units with respect to the UT-371 circuit board, a popular item in many digital applications. Information about the circuit board follows. Market price

$48

Variable selling/distribution costs on external sales

5

Variable manufacturing cost

21

Fixed manufacturing cost

10

Manhattan’s Electronic Assembly Division wants to purchase 4,500 circuit boards either internally, or else use a similar board in the marketplace that sells for $46. The Electronic Assembly Division’s management feels that if the first alternative is pursued, a price concession is justified, given that both divisions are part of the same firm. Question: 22The best process for Manhattan to determine the price ultimately charged by the Fabrication Division to the Assembly Division for the circuit board is to A. Establish the price by top management.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Establish the price by an arbitration committee. C. Establish the price through negotiations between the Fabrication’s and Electronic Assembly’s division management. D. Set the price equal to the price that would be charged if the Fabrication Department had no excess capacity.

Question: 23A manufacturer has several divisions and evaluates performance using segment income. Since sales include transfers to other divisions, the manufacturer has established a price for internal sales as cost plus 10%. Red Division has requested 10,000 units of Green Division’s product. Green Division is selling its product externally at a 60% markup over cost. The corporate policy will encourage the Green Division to A. Transfer the product to the Red Division because all costs are being covered and the division will earn a 10% profit. B. Reject the sale to the Red Division because it does not provide the same markup as external sales. C. Accept the sale to the Red Division if it is operating at full capacity and the sale will contribute to fixed costs. D. Transfer the product to the Red Division if it does not require the Green Division to give up any external sales.

Question: 24A company uses segment reporting for all of its decentralized divisions. It has several products that are transferred from one division to other divisions. The company wants to motivate the manager of the selling division to produce efficiently. Assuming the following methods are available, the optimal transfer pricing method should be a A. Cost-based transfer price that uses actual amounts. B. Cost-based transfer price that uses budgeted amounts. C. Variable cost-based transfer price that uses actual amounts. D. Market-based transfer price.

Question: 25A Plastics Division, a profit center, sells its products to external customers as well as to other internal profit centers. Which one of the following circumstances would justify the Plastics Division selling a product internally to another profit center at a price that is below the market-based transfer price? A. The buying unit has excess capacity. B. The selling unit is operating at full capacity.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Routine sales commissions and collection costs would be avoided. D. The profit centers’ managers are evaluated on the basis of unit operating income.

Question: 26Advantages of the full-cost method for determining transfer prices include all of the following except that it A. Leads to goal congruence among departments. B. Leads to better external pricing based on cost behaviors. C. Is the least costly method to administer. D. Represents relevant costs for long-run decisions.

Question: 27An advantage of using a cost-based transfer price is that it A. Is useful for evaluating subunit performance. B. Preserves subunit autonomy. C. Achieves goal congruence. D. Is easy to implement.

Question: 28A company operates under a decentralized structure. The company’s Western Division plans to purchase a needed component from the Eastern Division that is operating at capacity. Eastern incurs relevant costs of $4 to manufacture the component and $1 to ship each unit, and it can sell the unit externally at a price of $8 per unit. The Western Division incurs costs of $9 per unit and sells the finished goods for $18 each. According to the general guideline for transfer-pricing situations, the minimum transfer price per unit should be A. The Eastern Division’s manufacturing cost of $4. B. The Eastern Division’s manufacturing and shipping costs of $5. C. $7 to equally divide profits between the two divisions. D. The external selling price of $8.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 29A company’s senior management has determined that the actual full cost will be used to determine the transfer price for goods sold from one division to another division. The selling division has excess capacity and can sell goods to other divisions or to outside customers at a higher price. An advantage of this transfer pricing model is that it A. Achieves goal congruence within the company. B. Is effective for performance evaluation. C. Motivates management to achieve cost-effectiveness. D. Preserves each division’s autonomy.

Question: 30A corporation maintains a manufacturing division that manufactures printed circuit boards and an assembly division that produces final products. Currently, the manufacturing division has sufficient capacity to manufacture an additional 5,000 circuit boards. An external market exists for circuit boards. The market price for one circuit board is $80 and the cost to sell is $10. The fixed manufacturing cost per circuit board is $15 and the unit variable cost is $50. The assembly division plans to purchase 4,500 circuit boards. Management of the assembly division thinks that it can purchase from the manufacturing division at a lower price since both divisions are under common control of the corporation. What is the minimum transfer price between the manufacturing division and the assembly division? A. $50 B. $65 C. $70 D. $80

Question: 31A company has two operating segments. Segment A of the company has been operating at 70% capacity for the last two years. It produces a single product, which it sells to external customers for $17 per unit. Variable costs to produce one unit are $11 and the allocated fixed overhead costs are $3 per unit. Segment B purchases the same product produced by Segment A from an outside vendor for $15. Management is considering obtaining the product from Segment A. If Segment A begins to manufacture enough product to sell to its external customers, as well as to Segment B, Segment A will be operating at 94% capacity. What is the minimum price that Segment A should charge Segment B? A. $11 per unit. B. $14 per unit. C. $15 per unit. D. $17 per unit.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 32A proposed transfer price may be based upon the outlay cost. Outlay cost plus opportunity cost is the A. Retail price. B. Price representing the cash outflows of the supplying division plus the contribution to the supplying division from an outside sale. C. Price usually set by an absorption-costing calculation. D. Price set by charging for variable costs plus a lump sum or an additional markup, but less than full markup.

Question: 33A proposed transfer price may be a cost-plus price. Variable-cost-plus price is the price A. On the open market. B. Representing the cash outflows of the supplying division plus the contribution to the supplying division from an outside sale. C. Usually set by an absorption-costing calculation. D. Set by charging for variable costs plus a lump sum or an additional markup, but less than full markup.

Question: 34A firm 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? A. Actual cost. B. Standard variable cost. C. Actual cost plus markup. D. Negotiated price.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ ‫‪https://t.me/CMA_part2‬‬

‫‪https://t.me/CMA_part1‬‬

Study Unit 13: Internal Controls -- Corporate Governance 13: (102) Internal Controls -- Corporate Governance 1: (26) Corporate Governance and Regulations Relating to Internal Control 2: (44) Risk and Internal Control 3: (32) Internal Auditing ‫ﻣﻠﻐﺎﻩ ﻋﻥ ﻁﺭﻳﻖ ﻣﻌﻬﺩ ﺍﻝ‬IMA

Subunit 1: Corporate Governance and Regulations Relating to Internal Control Question: 1The requirement of the Foreign Corrupt Practices Act of 1977 to devise and maintain adequate internal control is assigned in the act to the A. Chief financial officer. B. Board of directors. C. Director of internal auditing. D. Company as a whole with no designation of specific persons or positions.

Question: 2The Sarbanes-Oxley Act has strengthened auditor independence by requiring that management A. Engage auditors to report in accordance with the Foreign Corrupt Practices Act. B. Report the nature of disagreements with former auditors. C. Select auditors through audit committees. D. Hire a different CPA firm from the one that performs the audit to perform the company’s tax work.

Question: 3A major impact of the Foreign Corrupt Practices Act of 1977 is that registrants subject to the Securities Exchange Act of 1934 are now required to A. Keep records that reflect the transactions and dispositions of assets and to maintain a system of internal accounting controls. B. Provide access to records by authorized agencies of the federal government. C. Prepare financial statements in accord with international accounting standards. D. Produce full, fair, and accurate periodic reports on foreign commerce and/or foreign political party affiliations.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 4Section 201 of the Sarbanes-Oxley Act of 2002 prohibits audit firms from performing certain engagements for audit clients. Which of the following services is permitted under Section 201? A. Preparation of tax returns. B. Bookkeeping services. C. Internal auditing outsourcing. D. Actuarial services.

Question: 5Section 404 of the Sarbanes-Oxley Act of 2002 requires management of publicly traded corporations to do all of the following except A. Establish and document internal control procedures and to include in their annual reports a report on the company’s internal control over financial reporting. B. Provide a report to include a statement of management’s responsibility for internal control and of management’s assessment of the effectiveness of internal control as of the end of the company’s most recent fiscal year. C. Provide an identification of the framework used to evaluate the effectiveness of internal control and a statement that the external auditor has issued an attestation report on management’s assessment. D. Provide a statement that the audit committee approves the choice of accounting policies and practices.

Question: 6What law prohibits U.S. companies from paying bribes to foreign officials for the purpose of obtaining or retaining business? A. Federal Ethical Standards Act. B. Robinson-Patman Act. C. Foreign Corrupt Practices Act. D. North American Free Trade Agreement.

Question: 7Which of the following is not an aspect of the Foreign Corrupt Practices Act of 1977? A. It subjects management to fines and imprisonment. B. It prohibits bribes to foreign officials. C. It requires the establishment of independent audit committees.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. It requires an internal control system to be developed and maintained.

Question: 8Which of the following corporations are subject to the accounting requirements of the Foreign Corrupt Practices Act (FCPA)? A. All corporations engaged in interstate commerce. B. All domestic corporations engaged in international trade. C. All corporations that have made a public offering under the Securities Act of 1933. D. All corporations whose securities are registered pursuant to the Securities Exchange Act of 1934.

Question: 9The Foreign Corrupt Practices Act of 1977 prohibits bribery of foreign officials. Which of the following statements correctly describes the act’s application to corporations engaging in such practices? A. It applies only to multinational corporations. B. It applies to all domestic corporations engaged in interstate commerce. C. It applies only to corporations whose securities are registered under the Securities Exchange Act of 1934. D. It applies only to corporations engaged in foreign commerce.

Question: 10Under the Foreign Corrupt Practices Act (FCPA), an action may be brought that seeks A. Treble damages by a private party. B. Injunctive relief by a private party. C. Criminal sanctions against both the corporation and its officers by the Department of Justice. D. Damages and injunctive relief by the Securities and Exchange Commission.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 11Which of the following provisions are covered in the U.S Foreign Corrupt Practices Act? I. Illegal payments to foreign officials to assist in obtaining business. II. Transparency of accounting records reflecting all transactions. III. Payments to agents for the purpose of influencing foreign officials. IV. Maintenance of an adequate system of internal controls. A. I only. B. I and III only. C. II, III, and IV only. D. I, II, III, and IV.

Question: 12Which one of the following is not a requirement of Section 404 of the Sarbanes-Oxley Act? A. Management is required to issue an internal control report that explicitly accepts responsibility for establishing and maintaining adequate internal control over financial reporting. B. Management is required to issue an assertion as to whether internal control over financial reporting is effective as of the end of the fiscal year. C. An entity’s auditor is required to audit management’s assertion about the effectiveness of internal control over financial reporting and express an opinion on its effectiveness. D. An entity’s auditor is required to perform a completely separate audit of internal control not related to the audit of the entity’s financial statements in order to achieve objectivity.

Question: 13The Foreign Corrupt Practices Act imposes which of the following requirements on companies whose securities are publicly traded in the U.S.? A. Devising and maintaining a system of internal accounting controls sufficient to provide reasonable assurance that transactions are executed in accordance with management’s authorization. B. Disclosure of information needed for informed investment decisions to potential investors of an initial public offering of the company’s securities. C. Periodic filing of SEC Form 8K whenever a significant event takes place affecting the company’s internal controls. D. Issuance of an assertion as to whether the company’s system of internal controls over financial reporting is effective as of the end of the fiscal year.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 14All of the following statements in regard to management’s report on internal controls over financial reporting in accordance with the Sarbanes-Oxley Act are true except that the report must A. Include a statement of management’s responsibility for establishing effective internal controls over financial reporting. B. Include a statement that the design of the internal controls is the responsibility of the company’s audit committee. C. Assess the effectiveness of the company’s internal controls over financial reporting, as of the end of the period. D. Be attested to by an independent auditor.

Question: 15An auditing firm is concluding its audit of a publicly-traded company in the U.S. After obtaining sufficient audit evidence, an external auditor concludes that misstatements in the aggregate are material but not pervasive to the financial statements. What type of opinion should the external auditor issue on the company’s financial statements? A. Unmodified opinion. B. Qualified opinion. C. Adverse opinion. D. Disclaimer of opinion.

Question: 16Audit committees have been identified as a major factor in promoting the independence of both internal and external auditors. Which of the following is the most important limitation on the effectiveness of audit committees? A. Audit committees may be composed of independent directors. However, those directors may have close personal and professional friendships with management. B. Audit committee members are compensated by the organization and thus favor an owner’s view. C. Audit committees devote most of their efforts to external audit concerns and do not pay much attention to the internal audit activity and the overall control environment. D. Audit committee members do not normally have degrees in the accounting or auditing fields.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 17The audit committee may serve several important purposes, some of which directly benefit the internal audit activity. The most significant benefit provided by the audit committee to the internal audit activity is A. Protecting the independence of the internal audit activity from undue management influence. B. Reviewing annual engagement work schedules and monitoring engagement results. C. Approving engagement work schedules, scheduling, staffing, and meeting with the internal auditors as needed. D. Reviewing copies of the procedures manuals for selected organizational operations and meeting with organizational officials to discuss them.

Question: 18Which of the following is an appropriate responsibility of an audit committee? A. Performing a review of the procurement function of the organization. B. Reviewing the internal audit activity’s (IAA’s) engagement work schedule submitted by the chief audit executive (CAE). C. Reviewing the engagement records of the public accounting firm to determine the firm’s competence. D. Recommending the assignment of specific internal auditing staff members for specific engagements.

Question: 19Which of the following actions is an appropriate response by organizations wishing to improve the public’s perception of their financial reporting? A. Increased adoption of audit committees composed of outside directors. B. Viewing internal auditing as a transient profession -- a stepping stone to managerial positions. C. Requiring internal auditors to report all significant observations of illegal activity to the chief executive officer. D. Keeping external and internal auditing work separated to maintain independence.

Question: 20Which of the following is not an appropriate member of an audit committee? A. The vice president of the local bank used by the organization. B. An academic specializing in business administration. C. A retired executive of a firm that had been associated with the organization. D. The organization’s vice president of operations.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 21All of the following are typically responsibilities of the board of directors except A. Setting corporate strategy, overall direction, and vision. B. Hiring and evaluating the performance of the CEO. C. Ensuring that the corporation is managed in accordance with applicable laws. D. Attesting to the effectiveness of the controls over financial reporting.

Question: 22Internal control can provide only reasonable assurance of achieving entity control objectives because A. Management monitors internal control. B. The cost of internal control should not exceed its benefits. C. The board of directors is active and independent. D. The auditor’s primary responsibility is the detection of fraud.

Question: 23All of the following are internal control provisions under the U.S. Foreign Corrupt Practices Act except a requirement that A. Transactions be recorded in a manner that permitted the financial statements to be prepared in conformity with generally accepted accounting principles. B. Transactions be recorded in such a way that the accountability of assets is maintained. C. Management does not allow the same accounting firm to complete its audit and tax compliance services. D. Access to assets is permitted only in accordance with management’s general or specific authorization.

Question: 24Which of the following features of a large manufacturer’s organizational structure is a control weakness? A. The information systems department is headed by a vice president who reports directly to the president. B. The chief financial officer is a vice president who reports to the chief executive officer. C. The audit committee of the board consists of the chief executive officer, the chief financial officer, and a major shareholder. D. The controller and treasurer report to the chief financial officer.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 25A reason to establish internal control is to A. Safeguard the resources of the organization. B. Provide reasonable assurance that the objectives of the organization are achieved. C. Encourage compliance with organizational objectives. D. Ensure the accuracy, reliability, and timeliness of information.

Question: 26When an organization has strong internal control, management can expect various benefits. The benefit least likely to occur is A. Reduced cost of an external audit. B. Elimination of employee fraud. C. Availability of reliable data for decision-making purposes. D. Some assurance of compliance with the Foreign Corrupt Practices Act of 1977.

Subunit 2: Risk and Internal Control Question: 1Risk assessment is a process A. Designed to identify potential events that may affect the entity. B. That establishes policies and procedures to accomplish internal control objectives. C. Of identifying and capturing information in a timely fashion. D. That assesses the quality of internal control throughout the year.

Question: 2There are three components of audit risk: inherent risk, control risk, and detection risk. Inherent risk is A. The susceptibility of an assertion to a material misstatement, assuming that there are no related internal control structure policies or procedures. B. The risk that the auditor may unknowingly fail to appropriately modify his or her opinion on financial statements that are materially misstated. C. The risk that a material misstatement that could occur in an assertion will not be prevented or detected on a timely basis by the entity’s internal control structure policies or procedures.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. The risk that the auditor will not detect a material misstatement that exists in an assertion.

Question: 3The primary responsibility for establishing and maintaining internal control rests with A. The external auditor. B. Management. C. The controller. D. The treasurer.

Question: 4Some account balances, such as those for pensions or leases, are the results of complex calculations. The susceptibility to material misstatements in these types of accounts is defined as A. Audit risk. B. Detection risk. C. Sampling risk. D. Inherent risk.

Question: 5The graphic portrayal of the flow of data and the information processing of a system, including computer hardware, is best displayed in a A. Data-flow diagram. B. System flowchart. C. Gantt chart. D. Program flowchart.

Question: 6Basic to a proper control environment are the quality and integrity of personnel who must perform the prescribed procedures. Which is not a factor in providing for competent personnel? A. Segregation of duties. B. Hiring practices. C. Training programs.

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D. Performance evaluations.

Question: 7When management of the sales department has the opportunity to override the system of internal controls of the accounting department, a weakness exists in A. Risk management. B. Information and communication. C. Monitoring. D. The control environment.

Question: 8The top-down approach to the audit of internal control over financial reporting can best be described as beginning A. At the financial statement level, focusing on entity-level controls, and working down to significant accounts and disclosures and their relevant assertions. B. With interviewing top management and observing the actions of top management with respect to the entity’s control environment. C. With considerations of the controls over assets and their related transactions, progressing to controls over liabilities and to controls over equities. D. By identifying significant accounts and disclosures for each assertion that has a reasonable possibility of containing a material misstatement.

Question: 9A director of a corporation is best characterized as a(n) A. Agent. B. Trustee. C. Fiduciary. D. Principal.

Question: 10One of the financial statement auditor’s major concerns is to ascertain whether internal control is designed to provide reasonable assurance that A. Profit margins are maximized, and operational efficiency is optimized. B. The chief accounting officer reviews all accounting transactions.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Corporate morale problems are addressed immediately and effectively. D. Financial reporting is reliable.

Question: 11Directors, management, external auditors, and internal auditors all play important roles in creating proper control processes. Senior management is primarily responsible for A. Overseeing the establishment, administration, and assessment of control processes. B. Reviewing the reliability and integrity of financial and operational information. C. Ensuring that external and internal auditors oversee the administration of the system of risk management and control processes. D. Implementing and monitoring controls designed by the board of directors.

Question: 12In connection with the consideration of internal control, an auditor encounters the following flowcharting symbols:

The auditor should conclude that a A. Master file has been created by a manual operation. B. Master file has been created by a computer operation. C. Document has been generated by a computer operation. D. Document has been generated by a manual operation.

Question: 13The external auditor has been examining the operation for efficiency and control. The auditor has asked the accounting manager that oversees the payment process to provide documentation of the process to see how the payments move through the process. Which of the following statements represents the best documentation that the accounting manager could provide? A. A matrix analysis because it allows the auditor to see the operation and identify missing steps. B. A flowchart because it allows the auditor to see the operation and identify missing steps. C. A matrix analysis because it shows risks and controls to ensure that all risks are covered. D. A flowchart because it shows risks and controls to ensure that all risks are covered.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 14Of the techniques available to an auditor, which is the most valuable in providing a summary outline and overall description of the process of transactions in an information system? A. Transaction retrievals. B. Test decks. C. Software code comparisons. D. Flowcharts.

Question: 15When documenting the understanding of a client’s internal control, the independent auditor sometimes uses a systems flowchart, which can best be described as a A. Pictorial presentation of the flow of instructions in a client’s internal computer system. B. Diagram that clearly indicates an organization’s internal reporting structure. C. Graphic illustration of the flow of operations that is used to replace the auditor’s internal control questionnaire. D. Symbolic representation of a system or series of sequential processes.

Question: 16An advantage of using systems flowcharts to document information about internal control instead of using internal control questionnaires is that systems flowcharts A. Identify internal control weaknesses more prominently. B. Provide a visual depiction of clients’ activities. C. Indicate whether control procedures are operating effectively. D. Reduce the need to observe clients’ employees performing routine tasks.

Question: 17The diamond-shaped symbol is commonly used in flowcharting to show or represent a A. Process or a single step in a procedure or program. B. Terminal output display. C. Decision point, conditional testing, or branching. D. Predefined process.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 18The normal sequence of documents and operations on a well-prepared systems flowchart is A. Top to bottom and left to right. B. Bottom to top and left to right. C. Top to bottom and right to left. D. Bottom to top and right to left.

Question: 19Internal controls are designed to provide reasonable assurance that A. Material errors or fraud will be prevented or detected and corrected within a timely period by employees in the course of performing their assigned duties. B. Management’s plans have not been circumvented by worker collusion. C. The internal auditing department’s guidance and oversight of management’s performance is accomplished economically and efficiently. D. Management’s planning, organizing, and directing processes are properly evaluated.

Question: 20An auditor reviews and adapts a systems flowchart to understand the flow of information in the processing of cash receipts. The flowchart A. Depicts specific control procedures used, such as edit tests and batch control reconciliations. B. Is a good guide to potential segregation of duties. C. Is generally kept up to date for systems changes. D. Depicts only computer processing, not manual processing.

Question: 21Which of the following are considered control environment factors? Personnel Policies Detection Risk and Practices A. Yes Yes B. Yes No C. No Yes D. No No

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 22Corporate directors, management, external auditors, and internal auditors all play important roles in creating a proper control environment. Top management is primarily responsible for A. Establishing a proper environment and specifying an overall internal control structure. B. Reviewing the reliability and integrity of financial information and the means used to collect and report such information. C. Ensuring that external and internal auditors adequately monitor the control environment. D. Implementing and monitoring controls designed by the board of directors.

Question: 23Certain management characteristics may heighten the auditor’s concern about the risk of material misstatements. The characteristic that is least likely to cause concern is that management A. Operating and financing decisions are made by numerous individuals. B. Commits to unduly aggressive forecasts. C. Has an excessive interest in increasing the entity’s stock price through use of unduly aggressive accounting practices. D. Is interested in inappropriate methods of minimizing earnings for tax purposes.

Question: 24A restaurant food chain has over 680 restaurants. All food orders for each restaurant are required to be input into an electronic device which records all food orders by food servers and transmits the order to the kitchen for preparation. All food servers are responsible for collecting cash for all their orders and must turn in cash at the end of their shift equal to the sales value of food ordered for their I.D. number. The manager then reconciles the cash received for the day with the computerized record of food orders generated. All differences are investigated immediately by the restaurant. Corporate headquarters has established monitoring controls to determine when an individual restaurant might not be recording all its revenue and transmitting the applicable cash to the corporate headquarters. Which one of the following would be the best example of a monitoring control? A. The restaurant manager reconciles the cash received with the food orders recorded on the computer. B. All food orders must be entered on the computer, and segregation of duties is maintained between the food servers and the cooks. C. Management prepares a detailed analysis of gross margin per store and investigates any store that shows a significantly lower gross margin. D. Cash is transmitted to corporate headquarters on a daily basis.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 25Audit risk consists of inherent risk, control risk, and detection risk. Which of the following statements is true? A. Cash is more susceptible to theft than an inventory of coal because it has a greater inherent risk. B. The risk that material misstatement will not be prevented or detected on a timely basis by internal control can be reduced to zero by effective controls. C. Detection risk is a function of the efficiency of an auditing procedure. D. The existing levels of inherent risk, control risk, and detection risk can be changed at the discretion of the auditor.

Question: 26Audit risk is a combination of three separate risks at the account-balance or class-of-transactions level. The first risk is inherent risk. The second risk is that material misstatements will not be prevented or detected by internal control. The third risk is that A. The auditor will reject a correct account balance as incorrect. B. Material misstatements that occur will not be detected by the audit. C. The auditor will apply an inappropriate audit procedure. D. The auditor will apply an inappropriate measure of audit materiality.

Question: 27The basic concepts implicit in internal accounting controls include the following:  The cost of the system should not exceed benefits expected to be attained.  The overall impact of the control procedure should not hinder operating efficiency. Which one of the following internal accounting controls recognizes these two factors?

A. Limitations. B. Management responsibility. C. Methods of data processing. D. Reasonable assurance.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 28The COSO model component of Risk Assessment focuses on A. Identifying the risks in all areas and establishing the vulnerability of the organization. B. The attitude of management at all levels toward operations and the concept of risk. C. The controls such as approvals and documentation that addresses an organization’s risk. D. The timely communication of information relative to identified risks to management.

Question: 29The statement below that best illustrates the importance of personnel policies and procedures is that personnel policies and procedures A. Are integral to an efficient control environment. B. Should be implemented where it is cost beneficial. C. Should be evaluated for compliance by an external firm. D. Should be implemented where risks have been identified.

Question: 30Which one of the following statements about internal control risk is correct? A. The establishment and maintenance of an internal control system within a company can effectively eliminate internal control risk. B. The internal audit function is responsible for the establishment and maintenance of a company’s internal control system. C. Management has the responsibility to maintain controls that provide reasonable assurance that adequate control exists over the entity’s assets and records. D. Management’s responsibility regarding internal control risk is limited to controls that provide assurance regarding the reliability of financial reporting.

Question: 31Which one of the following statements is the best example of inherent risk? A. The risk that the auditor did not detect a material misstatement in the financial statements. B. The risk that a material misstatement could occur and will not be prevented. C. The risk that the auditor failed to modify his or her opinion on materially misstated information. D. The risk that there will be a material misstatement, assuming no related internal control strategy.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 32Which of the following characteristics related to an entity’s control environment best indicates a commitment to strong internal controls? A. A small group of top-level executives controls decisions. B. Management demonstrates independence from the board and exercises oversight of internal control. C. The performance of individuals and teams is evaluated based on the established standards of conduct. D. The board consists of competent, experienced former senior managers of the entity.

Question: 33Which method of evaluating internal controls during the preliminary review provides the auditor with the best visual grasp of a system and a means for analyzing complex operations? A. A flowcharting approach. B. A questionnaire approach. C. A matrix approach. D. A detailed narrative approach.

Question: 34The data entry staff has responsibility for converting all of a plant’s shipping information to computerized records. The information flow begins when the shipping department sends a copy of a shipping order to the data entry staff. A data entry operator scans the shipping order information onto a hand-held data storage device. Verification clerks then check the computerized record with the original shipping orders. When a given batch of files has been reviewed and corrected, as necessary, the information is uploaded to the company’s mainframe system at the home office. The most effective way to visualize and understand this set of activities would be through the use of a A. Program flowchart. B. Decision table. C. Document flowchart. D. Gantt chart.

Question: 35An external auditor’s primary consideration when assessing a company’s internal control structure policies and procedures is whether they A. Prevent management override. B. Relate to the control environment. C. Reflect management’s philosophy and operating style.

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D. Affect the financial statement assertions.

Question: 36All of the following statements regarding the top-down or risk-based approach to the audit of internal control over financial reporting are true except that A. It describes the order in which the audit procedures will be performed. B. The approach begins at the financial statement level. C. The approach focuses on entity-level controls before moving on to significant accounts and disclosures. D. The auditor should focus on accounts and disclosures that present a reasonable possibility of misstatement.

Question: 37A company has established policies that emphasize hiring competent people and providing them with professional training. This aligns most closely with which one of the five major components of COSO’s internal control framework? A. Risk assessment. B. Control environment. C. Monitoring. D. Information and communication.

Question: 38Accounting control should provide reasonable assurance about the achievement of management’s objectives. The concept of internal controls providing “reasonable assurance” recognizes that A. The auditor’s primary responsibility is the detection of fraud. B. Employee carelessness can weaken an internal accounting control system. C. Control procedures should not have an adverse effect on efficiency or profitability. D. Judgmentally selected samples do not meet the criteria for statistical validity.

Question: 39In the performance of an internal audit, audit risk is best defined as the risk that an auditor A. Might not select documents that are in error as part of the examination. B. May not be able to properly evaluate an activity because of its poor internal accounting controls. C. May fail to detect a significant error or weakness during an examination.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. May not have the expertise to adequately audit a specific activity.

Question: 40The reliability and integrity of all critical information of an organization, regardless of the media in which the information is stored, is the responsibility of A. Shareholders. B. IT department. C. Management. D. All employees.

Question: 41Which of the following factors are included in an entity’s control environment? A. Organizational structure, management philosophy, and monitoring. B. Integrity and ethical values, assignment of authority, and human resource practices. C. Competence of personnel, segregation of duties, and fraud risk assessment. D. Risk assessment, assignment of responsibility, and human resource practices.

Question: 42Which of the following is the control component that reflects the attitude and actions of the board and management regarding the significance of control within the organization? A. Risk assessment. B. Control activities. C. Control environment. D. Monitoring.

Question: 43The policies and procedures helping to ensure that management directives are executed and actions are taken to address risks to achievement of objectives are best described as A. Risk assessments. B. Control environments. C. Control activities.

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D. Monitoring activities.

Question: 44An organization’s directors, management, and internal auditors all have important roles in creating a proper control environment. Senior management is primarily responsible for A. Establishing a proper ethical culture. B. Designing and operating a control system that provides reasonable assurance that established objectives and goals will be achieved. C. Ensuring that external and internal auditors adequately monitor the control environment. D. Implementing and monitoring controls designed by the board of directors.

Subunit 3: Internal Auditing Question: 1Which of the following activities is outside the scope of internal auditing? A. Assessing an operating department’s effectiveness in achieving stated organizational goals. B. Safeguarding of assets. C. Evaluating controls over compliance with laws and regulations. D. Ascertaining the extent to which objectives and goals have been established.

Question: 2Internal auditing is a dynamic profession. Which of the following best describes the scope of internal auditing as it has developed to date? A. Internal auditing involves evaluating the effectiveness and efficiency with which resources are employed. B. Internal auditing involves evaluating compliance with laws, regulations, and contracts. C. Internal auditing has evolved to verifying the existence of assets and reviewing the means of safeguarding assets. D. Internal auditing has evolved to evaluating all risk management, control, and governance systems.

Question: 3The authority of the internal audit activity is limited to that granted by A. The board and the controller. B. Senior management and the Standards.

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C. Management and the board. D. The audit committee and the chief financial officer.

Question: 4The proper organizational role of internal auditing is to A. Assist the external auditor in order to reduce external audit fees. B. Perform studies to assist in the attainment of more efficient operations. C. Serve as the investigative arm of the board. D. Serve as an independent, objective assurance and consulting activity that adds value to operations.

Question: 5A charter is one of the more important factors positively affecting the internal audit activity’s independence. Which of the following is least likely to be part of the charter? A. Access to records within the organization. B. The scope of internal audit activities. C. The length of tenure of the chief audit executive. D. Access to personnel within the organization.

Question: 6The chief audit executive’s responsibility for assessing and reporting on control processes includes A. Communicating to senior management and the board an annual judgment about internal control. B. Overseeing the establishment of internal control processes. C. Implementing the organization’s governance processes. D. Arriving at a single assessment based solely on the work of the internal audit activity.

Question: 7An internal auditor fails to discover an employee fraud during an assurance engagement. The nondiscovery is most likely to suggest a violation of internal auditing standards if it was the result of a A. Failure to perform a detailed review of all transactions in the area. B. Determination that any possible fraud in the area would not involve a material amount. C. Determination that the cost of extending procedures in the area would exceed the potential benefits.

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D. Presumption that the internal controls in the area were adequate and effective.

Question: 8Which of the following is most likely to be regarded as a strength in internal control in a traditional external audit? A. The performance of financial audits by the internal audit activity. B. The performance of operational engagements by internal auditors. C. The routine supervisory review of production planning. D. The existence of a preventive maintenance program.

Question: 9In evaluating the effectiveness and efficiency with which resources are employed, an internal auditor is responsible for A. Determining the extent to which adequate operating criteria have been established. B. Verifying the existence of assets. C. Reviewing the reliability of operating information. D. Verifying the accuracy of asset valuation.

Question: 10For an internal audit department to be considered as a relevant internal control by the external auditor, the internal auditor must A. Be independent of the accounting function. B. Be cost effective. C. Perform operational audits. D. Use statistical sampling procedures.

Question: 11Which of the following best describes the internal audit activity’s purpose in evaluating the adequacy of risk management, control, and governance processes? A. To help determine the nature, timing, and extent of tests necessary to achieve engagement objectives. B. To ensure that material weaknesses in internal control are corrected. C. To determine whether the risk management, control, and governance processes provide reasonable assurance that the organization’s objectives and goals are achieved efficiently and economically.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. To determine whether the risk management, control, and governance processes ensure that the accounting records are correct and that financial statements are fairly stated.

Question: 12The status of the internal audit activity should be free from the effects of irresponsible policy changes by management. The most effective way to ensure that freedom is to A. Have the internal audit charter approved by the board. B. Adopt policies for the functioning of the internal audit activity. C. Establish an audit committee within the board. D. Develop written policies and procedures to serve as standards of performance for the internal audit activity.

Question: 13Independence and objectivity are most likely impaired by an internal auditor’s A. Continuation on an engagement at a division for which (s)he will soon be responsible as the result of a promotion. B. Reduction of the scope of an engagement due to budget restrictions. C. Participation on a task force that recommends standards for control of a new distribution system. D. Review of a purchasing agent’s contract drafts prior to their execution.

Question: 14Which of the following activities is not presumed to impair the objectivity of an internal auditor? I. Recommending standards of control for a new information system application. II. Drafting procedures for running a new computer application to ensure that proper controls are installed. III. Performing reviews of procedures for a new computer application before it is installed. A. I only. B. II only. C. III only. D. I and III.

Fact Pattern: A certified internal auditor is the chief audit executive for a large city and is planning the engagement work schedule for the next year. The city has a number of different funds, some that are restricted in use by government grants and some that require compliance ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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reports to the government. One of the programs for which the city has received a grant is job retraining and placement. The grant specifies certain conditions a participant in the program must meet to be eligible for the funding. Question: 15The internal auditors randomly select participants in the job retraining program for the past year to verify that they had met all the eligibility requirements. This type of engagement is concerned with A. Compliance. B. Operational effectiveness. C. Economy and efficiency. D. Program results.

Fact Pattern: A certified internal auditor is the chief audit executive for a large city and is planning the engagement work schedule for the next year. The city has a number of different funds, some that are restricted in use by government grants and some that require compliance reports to the government. One of the programs for which the city has received a grant is job retraining and placement. The grant specifies certain conditions a participant in the program must meet to be eligible for the funding. Question: 16The chief audit executive plans an engagement to verify that the job retraining program complies with applicable grant provisions. One of the provisions is that the city adopt a budget for the program and subsequently follow procedures to ensure that the budget is adhered to and that only allowable costs are charged to the program. In performing an engagement concerning compliance with this provision, the internal auditors should perform all of the following procedures except A. Determine that the budget was reviewed and approved by supervisory personnel within the city. B. Determine that the budget was reviewed and approved by supervisory personnel within the granting agency. C. Select a sample of expenditures to determine that the expenditures are (1) properly classified as to type, (2) appropriate to the program, and (3) designed to meet the program’s objectives. D. Compare actual results with budgeted results and determine the reason for deviations. Determine if such deviations have been approved by appropriate officials.

Question: 17The primary difference between operational engagements and financial engagements is that, in the former, the internal auditors A. Are not concerned with whether the client entity is generating information in compliance with financial accounting standards. B. Are seeking to help management use resources in the most effective manner possible. C. Start with the financial statements of the client entity and work backward to the basic processes involved in producing them.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Can use analytical skills and tools that are not necessary in financial engagements.

Question: 18A determination of cost savings is most likely to be an objective of a(n) A. Program-results engagement. B. Financial engagement. C. Compliance engagement. D. Operational engagement.

Question: 19Which one of the following forms of audit is most likely to involve a review of an entity’s performance of specific activities in comparison to organizational-specific objectives? A. Information system audit. B. Financial audit. C. Operational audit. D. Compliance audit.

Question: 20Which one of the following statements best describes the objective of an operational audit? A. To assess conformance with laws and regulations. B. To analyze the reported financial activity of an entity. C. To determine if the financial statements are fairly represented. D. To appraise the efficiency and effectiveness of a process.

Question: 21Which one of the following best represents an example of information that internal auditors should report to the board of directors? A. The decisions regarding actions that management should take to correct internal control deficiencies. B. Items that could adversely affect the organization. C. All audit findings that have been corrected. D. The cost of correcting the significant audit issues.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 22When determining which controls to audit, an internal auditor should focus primarily on the relevance of those controls to the A. Operating procedures of the company. B. Audit objectives that have been identified. C. Operating objectives of the company. D. Controls identified by the external auditor.

Question: 23In order to achieve independence, the internal audit function should A. Consist solely of external auditors from the same firm as the company’s independent accountants. B. Consist solely of external auditors from a firm different from the company’s independent accountants. C. Report to the audit committee of the board of directors or others charged with governance. D. Report to the engagement partner of the company’s independent accountant.

Question: 24An audit committee of the board of directors of an organization is being established. Which of the following is normally a responsibility of the committee with regard to the internal audit activity (IAA)? A. Approval of the selection and dismissal of the chief audit executive (CAE). B. Development of the annual engagement work schedule. C. Approval of engagement work programs. D. Determination of engagement observations appropriate for specific engagement communications.

Question: 25Which of the following is the most important for the internal auditor to examine in order to ascertain the quality of manufacturing operations? A. Current and historical outputs. B. Fulfillment of production quotas. C. Cost of material purchases. D. The related rework and scrap.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 26Which of the following audit committee activities is of the greatest benefit to the internal audit activity? A. Review and approval of engagement work programs. B. Assurance that the external auditor will rely on the work of the internal audit activity whenever possible. C. Review and endorsement of all internal auditing engagement communications prior to their release. D. Support for appropriate monitoring of the disposition of recommendations made by the internal audit activity.

Question: 27The audit committee strengthens the control processes of an organization by A. Assigning the internal audit activity responsibility for interaction with governmental agencies. B. Using the chief audit executive as a major resource in selecting the external auditors. C. Following up on recommendations made by the chief audit executive. D. Approving internal audit activity policies.

Question: 28Which of the following types of audits is used to determine if a company has met regulatory or legal obligations? A. Operational. B. Productivity. C. Performance. D. Compliance.

Question: 29The audit committee of an organization has charged the chief audit executive (CAE) with upgrading the internal audit function. The CAE has determined that the first step should be to develop a charter. Which one of the following should be included in the statement of objectives? A. Notify governmental regulatory agencies of unethical business practices undertaken by the organization. B. Evaluate the adequacy and effectiveness of the organization’s internal controls. C. Report all engagement results to the audit committee every quarter. D. Submit budget variance reports to management every month.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 30As part of borrowing money from Bank X, Company A’s CFO agreed that A’s debt-to-equity ratio would not increase beyond 2.0. Additionally, Bank X set forth further nonfinancial parameters that, if violated, would result in the entire debt becoming callable immediately. Which of the following internal audit types is most likely to determine whether A is operating in a way that does not violate any conditions set forth by Bank X? A. Compliance audit. B. Operational audit. C. Financial audit. D. Environmental audit.

Question: 31The newly hired CFO of Company P is in the process of learning the details of the company’s operations. The CFO is reviewing prior year financial statements and comparing them to the interim statements produced in the current year. After the review, the CFO decides that the internal audit function should perform an audit that determines which organizational objectives have been completed and which objectives have not. Which type of audit is best suited for this situation? A. Financial audit. B. Operational audit. C. Environmental audit. D. Compliance audit.

Question: 32Which of the following audit types is most closely related to a benchmarking activity whose results may be used for comparison by other interested parties? A. Financial audit. B. Compliance audit. C. Operational audit. D. Environmental audit.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ ‫‪https://t.me/CMA_part2‬‬

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Study Unit 14: Internal Controls -- Controls and Security Measures 14: (151) Internal Controls -- Controls and Security Measures 1: (77) Control Procedures 2: (54) Systems Controls and Information Security 3: (20) Security Measures and Business Continuity Planning

Subunit 1: Control Procedures Question: 1Internal controls may be preventive, detective, corrective, or directive. Which of the following is preventive? A. Requiring two persons to open mail. B. Reconciling the accounts receivable subsidiary file with the control account. C. Using batch totals. D. Preparing bank reconciliations.

Question: 2The procedure requiring preparation of a prelisting of incoming cash receipts, with copies of the prelist going to the cashier and to accounting, is an example of which type of control? A. Preventive. B. Corrective. C. Detective. D. Directive.

Question: 3A proper segregation of duties requires that an individual A. Authorizing a transaction records it. B. Authorizing a transaction maintain custody of the asset that resulted from the transaction. C. Maintaining custody of an asset be entitled to access the accounting records for the asset. D. Recording a transaction not compare the accounting record of the asset with the asset itself.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 4In a well-designed internal control structure in which the cashier receives remittances from the mail room, the cashier should not A. Endorse the checks. B. Prepare the bank deposit slip. C. Deposit remittances daily at a local bank. D. Post the receipts to the accounts receivable subsidiary ledger cards.

Question: 5Accounting controls are concerned with the safeguarding of assets and the reliability of financial records. Consequently, these controls are designed to provide reasonable assurance that all of the following take place except A. Permitting access to assets in accordance with management’s authorization. B. Executing transactions in accordance with management’s general or specific authorization. C. Compliance with methods and procedures ensuring operational efficiency and adherence to managerial policies. D. Comparing recorded assets with existing assets at periodic intervals and taking appropriate action with respect to differences.

Question: 6One characteristic of an effective internal control structure is the proper segregation of duties. The combination of responsibilities that would not be considered a violation of segregation of functional responsibilities is A. Signing of paychecks and custody of blank payroll checks. B. Preparation of paychecks and check distribution. C. Approval of time cards and preparation of paychecks. D. Timekeeping and preparation of payroll journal entries.

Question: 7Auditors document their understanding of internal control with questionnaires, flowcharts, and narrative descriptions. A questionnaire consists of a series of questions concerning controls that auditors consider necessary to prevent or detect errors and fraud. The most appropriate question designed to contribute to the auditors’ understanding of the completeness of the expenditure (purchases-payables) cycle concerns the A. Internal verification of quantities, prices, and mathematical accuracy of sales invoices. B. Use and accountability of prenumbered checks.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Disposition of cash receipts. D. Qualifications of accounting personnel.

Question: 8Organizational independence is required in the processing of customers’ orders in order to maintain an internal control structure. Which one of the following situations is not a proper separation of duties in the processing of orders from customers? A. Approval by Credit Department of a sales order prepared by the Sales Department. B. Shipping of goods by the Shipping Department that have been retrieved from stock by the Finished Goods Storeroom Department. C. Invoice preparation by the Billing Department and posting to customers’ accounts by the Accounts Receivable Department. D. Approval of a sales credit memo because of a product return by the Sales Department with subsequent posting to the customer’s account by the Accounts Receivable Department.

Question: 9Which one of the following situations represents an internal control weakness in the payroll department? A. Payroll department personnel are rotated in their duties. B. Paychecks are distributed by the employees’ immediate supervisor. C. Payroll records are reconciled with quarterly tax reports. D. The timekeeping function is independent of the payroll department.

Question: 10Proper segregation of duties reduces the opportunities for persons to be in positions to both A. Journalize entries and prepare financial statements. B. Record cash receipts and cash disbursements. C. Establish internal control and authorize transactions. D. Perpetrate and conceal errors or fraud.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 11Which one of the following situations represents a strength of internal control for purchasing and accounts payable? A. Prenumbered receiving reports are issued randomly. B. Invoices are approved for payment by the purchasing department. C. Unmatched receiving reports are reviewed on an annual basis. D. Vendors’ invoices are matched against purchase orders and receiving reports before a liability is recorded.

Question: 12The frequency of the comparison of recorded accountability with assets (for the purpose of safeguarding assets) should be determined by A. The amount of assets independent of the cost of the comparison. B. The nature and amount of the asset and the cost of making the comparison. C. The cost of the comparison and whether the susceptibility to loss results from errors or fraud. D. The auditor in consultation with client management.

Question: 13Which of the following questions would be inappropriate on an internal control questionnaire concerning purchase transactions? A. Are an approved purchase requisition and a signed purchase order required for each purchase? B. Are prenumbered purchase orders and receiving reports used and accounted for? C. Are all goods received in a centralized receiving department and counted, inspected, and compared with purchase orders on receipt? D. Are intact cash receipts deposited daily in the bank?

Question: 14When considering internal control over securities, the auditor is especially concerned about A. Access to stock certificates by the corporate controller. B. Access to stock certificates by the corporate treasurer. C. Preparation of accrual adjustments on bonds by the corporate controller. D. Approval of temporary stock investment purchases by the corporate treasurer or company president.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 15In a retail cash sales environment, which of the following controls is often absent? A. Competent personnel. B. Segregation of functions. C. Supervision. D. Asset access limited to authorized personnel.

Question: 16The procedure that would best discourage the resubmission of vendor invoices after they have been paid is A. A requirement for double endorsement of checks. B. The cancellation of vouchers by accounting personnel. C. The cancellation of vouchers by treasurer personnel. D. The mailing of payments directly to payees by accounting personnel.

Question: 17Organizational independence in the processing of payroll is achieved by functional separations that are built into the system. Which one of the following functional separations is not required for internal control purposes? A. Separation of timekeeping from payroll preparation. B. Separation of personnel function from payroll preparation. C. Separation of payroll preparation and paycheck distribution. D. Separation of payroll preparation and maintenance of year-to-date records.

Question: 18An employee should not be able to visit the corporate safe-deposit box containing investment securities without being accompanied by another corporate employee. What would be a possible consequence of an employee being able to visit the safe-deposit box unaccompanied? A. The employee could pledge corporate investments as security for a short-term personal bank loan. B. The employee could steal securities, and the theft would never be discovered. C. It would be impossible to obtain a fidelity bond on the employee. D. There would be no record of when company personnel visited the safe-deposit box.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 19Which control is not appropriate for property, plant, and equipment? A. Disposal of fully depreciated assets. B. Proper authority for acquisition and retirement of assets. C. Detailed property records and physical controls over assets. D. Written policies for capitalization and expenditure and review of application of depreciation methods.

Question: 20Internal control should follow certain basic principles to achieve its objectives. One of these principles is the segregation of functions. Which one of the following examples does not violate the principle of segregation of functions? A. The treasurer has the authority to sign checks but gives the signature block to the assistant treasurer to run the check-signing machine. B. The warehouse clerk, who has the custodial responsibility over inventory in the warehouse, may authorize disposal of damaged goods. C. The sales manager has the responsibility to approve credit and the authority to write off accounts. D. The department time clerk is given the undistributed payroll checks to mail to absent employees.

Question: 21If internal control is well designed, two tasks that should be performed by different persons are A. Approval of bad debt write-offs, and reconciliation of the accounts payable subsidiary ledger and controlling account. B. Distribution of payroll checks and approval of sales returns for credit. C. Posting of amounts from both the cash receipts journal and cash payments journal to the general ledger. D. Recording of cash receipts and preparation of bank reconciliations.

Question: 22Which of the following activities represents both an appropriate personnel department function and a deterrent to payroll fraud? A. Distribution of paychecks. B. Authorization of overtime. C. Authorization of additions and deletions from the payroll. D. Collection and retention of unclaimed paychecks.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 23A utility company with a large investment in repair vehicles would most likely implement which internal control to reduce the risk of vehicle theft or loss? A. Review insurance coverage for adequacy. B. Systematically account for all repair work orders. C. Physically inventory vehicles and reconcile the results with the accounting records. D. Maintain vehicles in a secured location with release and return subject to approval by a custodian.

Question: 24Which one of the following would not be considered an internal control structure policy or procedure relevant to a financial statement audit? A. Maintenance of control over unused checks. B. Periodic reconciliation of perpetual inventory records to the general ledger control account. C. Comparison of physical inventory counts to perpetual inventory records. D. Timely reporting and review of quality control results.

Question: 25To minimize the risk that agents in the purchasing department will use their positions for personal gain, the organization should A. Rotate purchasing agent assignments periodically. B. Request internal auditors to confirm selected purchases and accounts payable. C. Specify that all items purchased must pass value-per-unit-of-cost reviews. D. Direct the purchasing department to maintain records on purchase prices paid, with review of such being required each 6 months.

Question: 26Management can best strengthen internal control over the custody of inventory stored in an off-site warehouse by implementing A. Reconciliations of transfer slips to/from the warehouse with inventory records. B. Increases in insurance coverage. C. Regular reconciliation of physical inventories to accounting records. D. Regular confirmation of the amount on hand with the custodian of the warehouse.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 27Control procedures include physical controls over access to and use of assets and records. A departure from the purpose of such procedures is that A. Access to the safe-deposit box requires two officers. B. Only storeroom personnel and line supervisors have access to the raw materials storeroom. C. The mail clerk compiles a list of the checks received in the incoming mail. D. Only salespersons and sales supervisors use sales department vehicles.

Question: 28Which of the following controls could be used to detect bank deposits that are recorded but never made? A. Establishing accountability for receipts at the earliest possible time. B. Linking receipts to other internal accountabilities (i.e., collections to either accounts receivable or sales). C. Consolidating cash receiving points. D. Having bank reconciliations performed by a third party.

Question: 29An adequate system of internal controls is most likely to detect a fraud perpetrated by a A. Group of employees in collusion. B. Single employee. C. Group of managers in collusion. D. Single manager.

Question: 30One payroll audit objective is to determine if there is proper segregation of duties. Which of the following activities is incompatible? A. Hiring employees and authorizing changes to pay rates. B. Preparing the payroll and filing payroll tax forms. C. Signing and distributing payroll checks. D. Preparing attendance data and preparing the payroll.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 31Appropriate control over obsolete materials requires that they be A. Carried at cost in the accounting records until the actual disposition takes place. B. Sorted, treated, and packaged before disposition takes place, in order to obtain the best selling price. C. Determined by an approved authority to be lacking in regular usability. D. Retained within the regular storage area.

Question: 32An auditor noted that the accounts receivable department is separate from other accounting activities. Credit is approved by a separate credit department. Control accounts and subsidiary ledgers are balanced monthly. Similarly, accounts are aged monthly. The accounts receivable manager writes off delinquent accounts after 1 year, or sooner if a bankruptcy or other unusual circumstances are involved. Credit memoranda are prenumbered and must correlate with receiving reports. Which of the following areas could be viewed as an internal control weakness of the above organization? A. Write-offs of delinquent accounts. B. Credit approvals. C. Monthly aging of receivables. D. Handling of credit memos.

Question: 33One control objective of the financing/treasury cycle is the proper authorization of company transactions dealing with debt and equity instruments. Which of the following controls would best meet this objective? A. Separation of responsibility for custody of funds from recording of the transaction. B. Written company policies requiring review of major funding/repayment proposals by the board of directors. C. Use of an underwriter in all cases of new issue of debt or equity instruments. D. The company serves as its own registrar and transfer agent.

Question: 34The cash receipts function should be separated from the related recordkeeping in an organization to A. Physically safeguard the cash receipts. B. Establish accountability when the cash is first received. C. Prevent paying cash disbursements from cash receipts.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Minimize undetected misappropriations of cash receipts.

Question: 35In an audit of a purchasing department, which of the following ordinarily would be considered a risk factor? A. Purchase specifications are developed by the department requesting the material. B. Purchases are made against blanket or open purchase orders for certain types of items. C. Purchases are made from parties related to buyers or other company officials. D. There is a failure to rotate purchases among suppliers included on an approved vendor list.

Question: 36Management wishes to include in its internal controls over factory payroll a procedure to ensure that employees are paid only for work actually performed. To meet this objective, which of the following internal control actions would be most appropriate? A. Compare payments with inventory additions from production. B. Have supervisors distribute paychecks to employees in their sections. C. Use time cards. D. Keep unclaimed paychecks in a vault.

Question: 37Which of the following credit approval procedures would be the basis for developing a deficiency finding for a wholesaler? A. Trade-credit standards are reviewed and approved by the finance committee of the board of directors. B. Customers not meeting trade-credit standards are shipped merchandise on a cash-on-delivery (C.O.D.) basis only. C. Salespeople are responsible for evaluating and monitoring the financial condition of prospective and continuing customers. D. An authorized signature from the credit department, denoting approval of the customer’s credit, is to appear on all credit-sales orders.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 38A means of ensuring that payroll checks are drawn for properly authorized amounts is to A. Conduct periodic floor verification of employees on the payroll. B. Require that undelivered checks be returned to the cashier. C. Require supervisory approval of employee time cards. D. Witness the distribution of payroll checks.

Question: 39An internal auditor noted that several shipments were not billed. To prevent recurrence of such nonbilling, the organization should A. Numerically sequence and independently account for all controlling documents (such as packing slips and shipping orders) when sales journal entries are recorded. B. Undertake a validity check with customers as to orders placed. C. Release product for shipment only on the basis of credit approval by the credit manager or other authorized person. D. Undertake periodic tests of gross margin rates by product line and obtain explanations of significant departures from planned rates.

Question: 40Controls can be classified according to the function they are intended to perform; for example, to discover the occurrence of an unwanted event (detective), to avoid the occurrence of an unwanted event (preventive), or to ensure the occurrence of a desirable event (directive). Which of the following is a directive control? A. Monthly bank statement reconciliations. B. Dual signatures on all disbursements over a specific dollar amount. C. Recording every transaction on the day it occurs. D. Requiring all members of the internal auditing department to be Certified Internal Auditors (CIAs).

Question: 41An audit of the payroll function revealed several instances in which a payroll clerk had added fictitious employees to the payroll and deposited the checks in accounts of close relatives. What control should have prevented such actions? A. Using time cards and attendance records in the computation of employee gross earnings. B. Establishing a policy to deal with close relatives working in the same department. C. Having the treasurer’s office sign payroll checks.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Allowing changes to the payroll to be authorized only by the personnel department.

Question: 42An audit of the receiving function at the company’s distribution center revealed inadequate control over receipts. Which of the following controls would be appropriate for the receiving function? A. To ensure adequate separation of duties, the warehouse receiving clerk should work independently from the warehouse manager. B. Ensure that the warehouse receiving department has a purchase order copy with the units described, but both prices and quantities omitted. C. Require that all receipts receive the approval of the warehouse manager. D. Ensure that the warehouse receiving department has a true copy of the original purchase order.

Question: 43Which one of the following situations represents an internal control weakness in accounts receivable? A. Internal auditors confirm customer accounts periodically. B. Delinquent accounts are reviewed only by the sales manager. C. The cashier is denied access to customers’ records and monthly statements. D. Customers’ statements are mailed monthly by the accounts receivable department.

Question: 44Control risk is the risk that a material misstatement in an account will not be prevented or detected on a timely basis by the client’s internal control structure policies or procedures. The best control procedure to prevent or detect fictitious payroll transactions is A. To use and account for prenumbered payroll checks. B. Personnel department authorization for hiring, pay rate, job status, and termination. C. Internal verification of authorized pay rates, computations, and agreement with the payroll register. D. Periodic independent bank reconciliations of the payroll bank account.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 45An entity’s internal control structure (ICS) consists of the policies and procedures established to provide reasonable assurance that specific entity objectives will be achieved. Only some of these objectives, policies, and procedures are relevant to a financial statement audit. Which one of the following would most likely be considered in such an audit? A. Timely reporting and review of quality control results. B. Maintenance of control over unused checks. C. Marketing analysis of sales generated by advertising projects. D. Maintenance of statistical production analyses.

Question: 46Auditors regularly evaluate controls. Which of the following best describes the concept of control as recognized by internal auditors? A. Management regularly discharges personnel who do not perform up to expectations. B. Management takes action to enhance the likelihood that established goals and objectives will be achieved. C. Control represents specific procedures that accountants and auditors design to ensure the correctness of processing. D. Control procedures should be designed from the “bottom up” to ensure attention to detail.

Question: 47Which group has the primary responsibility for the establishment, implementation, and monitoring of adequate controls in the posting of accounts receivable? A. External auditors. B. Accounts receivable staff. C. Internal auditors. D. Accounting management.

Question: 48A retailer of high-priced durable goods operates a catalog-ordering division that accepts customer orders by telephone. The retailer runs frequent price promotions. During these times, the telephone operators enter the promotional prices. The risk of this practice is that A. Customers could systematically be charged lower prices. B. Frequent price changes could overload the order entry system. C. Operators could give competitors notice of the promotional prices.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Operators could collude with outsiders for unauthorized prices.

Question: 49The reporting of accounting information plays a central role in the regulation of business operations. The importance of sound internal control practices is underscored by the Foreign Corrupt Practices Act of 1977, which requires publicly owned U.S. corporations to maintain systems of internal control that meet certain minimum standards. Preventive controls are an integral part of virtually all accounting processing systems, and much of the information generated by the accounting system is used for preventive control purposes. Which one of the following is not an essential element of a sound preventive control system? A. Separation of responsibilities for the recording, custodial, and authorization functions. B. Sound personnel practices. C. Documentation of policies and procedures. D. Implementation of state-of-the-art software and hardware.

Question: 50If employee paychecks are distributed by hand to employees, which one of the following departments should be responsible for the safekeeping of unclaimed paychecks? A. Payroll Department. B. Timekeeping Department. C. Production Department in which the employee works or worked. D. Cashier or Treasurer’s Department.

Question: 51Internal control cannot be designed to provide reasonable assurance regarding the achievement of objectives related to A. Reliability of financial reporting. B. Elimination of all fraud. C. Compliance with applicable laws and regulations. D. Effectiveness and efficiency of operations.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 52Effective internal control A. Reduces the need for management to review exception reports on a day-to-day basis. B. Eliminates risk and potential loss to the organization. C. Cannot be circumvented by management. D. Is unaffected by changing circumstances and conditions encountered by the organization.

Question: 53The internal auditor recognizes that certain limitations are inherent in any internal control system. Which one of the following scenarios is the result of an inherent limitation of internal control? A. The comptroller both makes and records cash deposits. B. A security guard allows one of the warehouse employees to remove company assets from the premises without authorization. C. The firm sells to customers on account, without credit approval. D. An employee, who is unable to read, is assigned custody of the firm’s computer tape library and run manuals that are used during the third shift.

Question: 54The treasurer makes disbursements by check and reconciles the monthly bank statements to accounting records. Which of the following best describes the control impact of this arrangement? A. Internal control will be enhanced because these are duties that the treasurer should perform. B. The treasurer will be in a position to make and conceal unauthorized payments. C. The treasurer will be able to make unauthorized adjustments to the cash account. D. Controls will be enhanced because the treasurer will have two opportunities to discover inappropriate disbursements.

Question: 55A multinational corporation has an office in a foreign branch with a monetary transfer facility. Effective internal control requires that A. The person making wire transfers not reconcile the bank statement. B. The branch manager not deliver payroll checks to employees. C. Foreign currency translation rates be computed separately by two branch employees in the same department.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. The hiring of individual branch employees be approved by the headquarters office.

Question: 56Which of the following controls would be the most appropriate means to ensure that terminated employees had been removed from the payroll? A. Mailing checks to employees’ residences. B. Establishing direct-deposit procedures with employees’ banks. C. Reconciling payroll and time-keeping records. D. Establishing computerized limit checks on payroll rates.

Question: 57Which of the following observations, made during the preliminary survey of a local department store’s disbursement cycle, reflects a control strength? A. Individual department managers use prenumbered forms to order merchandise from vendors. B. The receiving department is given a copy of the purchase order complete with a description of goods, quantity ordered, and extended price for all merchandise ordered. C. The treasurer’s office prepares checks for suppliers based on vouchers prepared by the accounts payable department. D. Individual department managers are responsible for the movement of merchandise from the receiving dock to storage or sales areas as appropriate.

Question: 58An internal auditor found that employee time cards in one department are not properly approved by the supervisor. Which of the following could result? A. Duplicate paychecks might be issued. B. The wrong hourly rate could be used to calculate gross pay. C. Employees might be paid for hours they did not work. D. Payroll checks might not be distributed to the appropriate payees.

Question: 59Which of the following controls would most likely minimize defects in finished goods because of poor quality raw materials? A. Proper handling of work-in-process inventory to prevent damage. B. Implementation of specifications for purchases.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Timely follow-up on unfavorable usage variances. D. Determination of spoilage at the end of the manufacturing process.

Question: 60Segregation of duties is a fundamental concept in an effective system of internal control. Nevertheless, the internal auditor must be aware that this safeguard can be compromised through A. Lack of training of employees. B. Collusion among employees. C. Irregular employee reviews. D. Absence of internal auditing.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern:

Question: 61The initiation of the purchase of materials and supplies would be the responsibility of the A. Purchasing Department. B. Stores Control Department. C. Inventory Control Department. D. Production Department.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern:

Question: 62Multiple copies of the purchase order are prepared for recordkeeping and distribution with a copy of the purchase order sent to the vendor and one retained by the Purchasing Department. In addition, for proper informational flow and internal control purposes, a version of the purchase order would be distributed to the A. Accounts Payable, Receiving, and Stores Control Departments. B. Accounts Payable, Receiving, and Inventory Control Departments. C. Accounts Payable, Accounts Receivable, and Receiving Departments. D. Accounts Payable, Receiving, and Production Planning Departments.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern:

Question: 63Responsibility for following up on any problems regarding orders of production materials and supplies, such as orders for which no acknowledgment has been received, orders overdue, partial orders, damaged or substandard merchandise received on an order, etc., would be entrusted to the A. Inventory Control Department. B. Stores Control Department. C. Production Planning Department. D. Purchasing Department.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern:

Question: 64The documents that the Accounts Payable Department must review before it can properly authorize payment for the purchase of materials and supplies are A. Vendor’s invoice, purchase requisition, and acknowledgment purchase order. B. Vendor’s invoice, acknowledgment purchase order, and receiving report. C. Vendor’s monthly statement, purchase order, and voucher. D. Vendor’s invoice, purchase order, and receiving report.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 65To control purchasing and accounts payable, an information system must include certain source documents. For a manufacturing organization, these documents should include A. Purchase orders, receiving reports, and vendor invoices. B. Receiving reports and vendor invoices. C. Purchase requisitions, purchase orders, receiving reports, and vendor invoices. D. Purchase requisitions, purchase orders, inventory reports of goods needed, and vendor invoices.

Question: 66Which one of the following functions performed in an organization is a violation of sound principles of internal control? A. A mail clerk opening the mail compares the check received with the source document accompanying the payment, either confirming or noting the amount paid, then forwards the checks daily (along with a listing of the cash receipts) to the cashier for deposit. B. A mail clerk opening the mail compares the check received with the source document accompanying the payment, either confirming or noting the amount paid, then forwards the source documents that accompany the payments (along with a listing of the cash receipts) to Accounts Receivable, on a daily basis, for posting to the Subsidiary Ledger. C. At the end of the week, the cashier prepares a deposit slip for all of the cash receipts received during the week. D. The General Ledger Department compares the summary journal entry, received from the cashier for cash receipts applicable to outstanding accounts, with the batch total for the posting to the Subsidiary Ledger by the Accounts Receivable Department.

Question: 67Which one of the following methods for the distribution of employees’ pay would provide the best internal control for the organization? A. Delivery of paychecks to each department supervisor, who in turn would distribute paychecks directly to the employees in his or her department. B. Direct deposit in each employee’s personal bank account. C. Delivery of paychecks directly to each employee by a representative of the Human Resource Department. D. Delivery of paychecks directly to each employee by the payroll manager.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 68The new controller of a company is evaluating her department for proper segregation of duties. Evaluate the following statements and determine which set of duties is acceptable to be performed by the same employee while still maintaining proper segregation of duties. A. Receive the company’s deposits and record the transaction. B. Collect the cash and checks and take the deposit to the bank. C. Enter expenses into the general ledger and pay the credit card bills. D. Authorize cash disbursements and deliver the payments.

Question: 69Which one of the following represents a technique that is most appropriate for an internal auditor to use to test the effectiveness of accounting recordkeeping controls? A. Verify a receivable by comparing it to the accounting documentation. B. Test a loan amount by sending a confirmation to the bank. C. Perform an inquiry as to the timeliness of reconciliation completion. D. Analyze the actual results to the budget and identify variances.

Question: 70An Internet gaming company uses many laptops in its office and needs to ensure that they are adequately safeguarded. Which one of the following best represents a control that the company should use for its laptops? A. Bolt the laptops in place or attach them with strong adhesives. B. Keep a copy of all relevant details on the hard drives of the laptops. C. Be able to identify the model and serial number for the laptops. D. Ensure that any virus programs have been identified on the laptops.

Question: 71Proper segregation of functional responsibilities to achieve effective internal control calls for separation of the functions of A. Authorization, execution, and payment. B. Authorization, recording, and custody. C. Custody, execution, and reporting. D. Authorization, payment, and recording.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 72Which one of the following actions would most effectively address the issue of internal control risk related to the custody of cash receipts? A. Establishing a lockbox deposit system at a regional bank. B. Assigning a single employee to be responsible for the receipt and posting of cash receipts to customer accounts. C. Preparing a control total of cash receipts immediately upon opening incoming payments. D. Installing a surveillance system to monitor the processing of cash receipts and custody of cash.

Question: 73The accounting controls surrounding the revenue cycle should provide assurances of all of the following except the A. Accurate recording, shipping, and billing of all valid sales transactions. B. Approval of all credit sales transactions after they are processed. C. Proper authorization of all sales return and allowance transactions. D. Accurate recording of customer accounts and finished goods inventories.

Question: 74Which one of the following describes the most effective preventive control to ensure proper handling of cash transactions? A. The employee who receives deposits from customers via the mail prepares the daily bank deposit, which is deposited by another employee. B. Predetermined totals (hash totals) of cash receipts are used to control posting routines. C. Bank reconciliations are performed by employees not involved with cash collections and then are reviewed by a supervisor. D. One employee issues prenumbered receipts for all cash collections while another employee reconciles the daily total of the prenumbered receipts to the bank deposits.

Question: 75A company’s accounts payable supervisor assigned a vendor code to a storage facility owned by the supervisor, then instructed the company’s accounting system to pay monthly rent for a storage unit allegedly leased from the storage facility. This situation is an example of a failure of controls due to the lack of A. Commitment to competence in job skills and knowledge. B. An effective internal audit function.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Appropriate segregation of duties. D. Appropriate physical controls.

Question: 76Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle? A. Merchandise received is not promptly reconciled to the outstanding purchase order file. B. Obsolete items included in inventory balances are rarely reduced to the lower of cost or market value. C. The write-off of receivables by personnel who receive cash permits the misappropriation of cash. D. Fictitious transactions are recorded that cause an understatement of revenue and overstatement of receivables.

Question: 77Which of the following controls most likely would help ensure that all credit sales transactions of an entity are recorded? A. The billing department supervisor sends copies of approved sales orders to the credit department for comparison to authorized credit limits and current customer account balances. B. The accounting department supervisor independently reconciles the accounts receivable subsidiary ledger to the accounts receivable control account monthly. C. The accounting department supervisor controls the mailing of monthly statements to customers and investigates any differences they report. D. The billing department supervisor matches prenumbered shipping documents with entries in the sales journal.

Subunit 2: Systems Controls and Information Security Question: 1In an automated payroll processing environment, a department manager substituted the time card for a terminated employee with a time card for a fictitious employee. The fictitious employee had the same pay rate and hours worked as the terminated employee. The best control technique to detect this action using employee identification numbers would be a A. Batch total. B. Record count. C. Hash total. D. Subsequent check.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 2One of the steps in assessing control risk in a computerized information control system is identifying necessary controls to prevent data from being lost, added, duplicated, or altered during processing. An example of this type of control is the A. Authorization and approval of data in user departments and screening of data by data control groups. B. Review of data output by data control groups. C. Use of external and internal file labels. D. Use of control totals, limit and reasonableness checks, and sequence tests.

Question: 3Which of the following is not a threat to information systems? A. Trojan horses. B. Worms. C. Data theft. D. Serendipity.

Question: 4Data processed by a computer system are usually transferred to some form of output medium for storage. However, the presence of computerized output does not, in and of itself, ensure the output’s accuracy, completeness, or authenticity. For this assurance, various controls are needed. The major types of controls for this area include A. Physical controls, documentation controls, and print-out controls. B. Activity listings, echo checks, and pre-numbered forms. C. Disk output controls and printed output controls. D. Input controls and output controls.

Question: 5The use of a generalized audit software package A. Relieves an auditor of the typical tasks of investigating exceptions, verifying sources of information, and evaluating reports. B. Is a major aid in retrieving information from computerized files. C. Overcomes the need for an auditor to learn much about computers.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Is a form of auditing around the computer.

Question: 6To properly control access to accounting database files, the database administrator should ensure that database system features are in place to permit A. Read-only access to the database files. B. Updating from privileged utilities. C. Access only to authorized logical views. D. User updates of their access profiles.

Question: 7Data input validation routines for batch processing include A. Terminal logs. B. Passwords. C. Hash totals. D. Backup controls.

Question: 8An accounting system identification code that uses a sum-of-digits check digit will detect all of the following errors except A. Completeness errors. B. Transcription errors. C. Transposition errors. D. Validity errors.

Question: 9An employee in the receiving department keyed in a shipment from a remote terminal and inadvertently omitted the purchase order number. The best systems control to detect this error would be A. Batch total. B. Completeness test. C. Sequence check.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Reasonableness test.

Question: 10Which one of the following statements concerning concurrent auditing techniques is false? A. They allow monitoring a system on a continuous basis for fraudulent transactions. B. They are most useful in complex online systems in which audit trails have either become diminished or are very limited. C. They allow faster detection of unauthorized transactions. D. They are standard components of generic software packages.

Question: 11In auditing computer-based systems, the integrated test facility (ITF) A. Allows the auditor to assemble test transactions and run them through the computer system to test the integrity of controls on a sample data base. B. Is a set of specialized software routines that are designed to perform specialized audit tests and store audit evidence. C. Is a concurrent audit technique that establishes a special set of dummy master files and enters transactions to test the programs using the dummy files during regular processing runs. D. Uses an audit log to record transactions and data having special audit significance during regular processing runs.

Question: 12A company makes snapshot copies of some often-used data files and makes them available on the server. Authorized users can then download data subsets into spreadsheet programs. A risk associated with this means of providing data access is that data A. Replicas may not be synchronized. B. Fragments may lack integrity. C. Transactions may be committed prematurely. D. Currency may not be maintained.

Question: 13Which of the following is an example of an input control in a batch processing application? A. Run-to-run control totals. B. Error listings.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Dual write routines. D. Hash totals.

Question: 14Which one of the following input validation routines is not likely to be appropriate in a real-time operation? A. Field check. B. Reasonableness check. C. Sequence check. D. Prompting.

Question: 15The online data entry control called preformatting is A. A program initiated prior to regular input to discover errors in data before entry so that the errors can be corrected. B. A check to determine if all data items for a transaction have been entered by the terminal operator. C. A series of requests for required input data that requires an acceptable response to each request before a subsequent request is made. D. The display of a document with blanks for data items to be entered by the terminal operator.

Question: 16Which one of the following represents a lack of internal control in a computer-based system? A. Any and all changes in applications programs have the authorization and approval of management. B. Provisions exist to ensure the accuracy and integrity of computer processing of all files and reports. C. Provisions exist to protect data files from unauthorized access, modification, or destruction. D. Programmers have access to change programs and data files when an error is detected.

Question: 17Field checks in a computerized accounting system A. Are preventive controls. B. Should be performed on transactions prior to updating a master file.

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C. Must be installed for the system to be operational. D. Should be performed immediately prior to output distribution.

Question: 18Which one of the following is the best reason for developing a computer security plan? A. All possible threats associated with the data processing equipment are identified. B. Recovery from the damage associated with any identified threats can be assured. C. A company can select the set of control policies and procedures that optimize computer security relative to cost. D. The user departments can be assured that control policies are in place and their data files are secure.

Question: 19An online data entry technique that can be employed when inexperienced personnel enter data is the use of A. Overflow procedures. B. Prompting. C. Compatibility tests. D. Checkpoints.

Question: 20An example of an internal validation check is A. Making sure that output is distributed to the proper people. B. Monitoring the work of programmers. C. Collecting accurate statistics of historical transactions while gathering data. D. Recalculating an amount to ensure its accuracy.

Question: 21A control designed to catch errors at the point of data entry is A. A batch total. B. A record count. C. A self-checking digit.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Checkpoints.

Question: 22Program documentation is a control designed primarily to ensure that A. Programmers have access to the tape library or information on disk files. B. Programs do not make mathematical errors. C. Programs are kept up to date and perform as intended. D. Data have been entered and processed.

Question: 23Logical computer controls are needed to determine whether an acceptable user is allowed to proceed. The one item that is not part of this control process is a A. List of all authorized user code numbers and passwords. B. List of all files maintained on the system. C. List of all programs maintained on the system. D. Limit on the number of transaction inquiries that can be made by each user in a specified time period.

Question: 24Whether or not a real-time program contains adequate controls is most effectively determined by the use of A. Audit software. B. An integrated test facility. C. A tagging routine. D. A tracing routine.

Question: 25The most critical aspect of the separation of duties within a mainframe information systems environment is between A. Programmers and project leaders. B. Programmers and systems analysts. C. Programmers and users.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Programmers and computer operators.

Question: 26A company employing an online computer system has terminals located in all operating departments for inquiry and updating purposes. Many of the company’s employees have access to and are required to use the terminals. A control the company should incorporate to prevent an employee from making an unauthorized change in computer records unrelated to that employee’s job is to A. Restrict the physical access to terminals. B. Establish user codes and passwords. C. Use validity checks. D. Apply logical controls to transactions or inquiries entered by the user.

Question: 27In entering the billing address for a new client in a company’s computerized database, a clerk erroneously entered a nonexistent zip code. As a result, the first month’s bill mailed to the new client was returned to the company. Which one of the following would most likely have led to discovery of the error at the time of entry into the company’s computerized database? A. Limit test. B. Validity test. C. Parity test. D. Record count test.

Question: 28In the organization of the information systems function, the most important segregation of duties is A. Not allowing the data librarian to assist in data processing operations. B. Assuring that those responsible for programming the system do not have access to data processing operations. C. Having a separate information officer at the top level of the organization outside of the accounting function. D. Using different programming personnel to maintain utility programs from those who maintain the application programs.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 29Some of the more important controls that relate to automated accounting information systems are check digits, limit checks, field checks, and sign tests. These are classified as A. Control total validation controls. B. Hash totaling. C. Data access validation controls. D. Input controls.

Question: 30A computer virus is different from a “Trojan horse” because the virus can A. Corrupt data. B. Alter programming instructions. C. Replicate itself. D. Erase executable files.

Question: 31An internal information systems control questionnaire that includes computer input controls, the distribution of output, and record-retention procedures is designed to review and assess which one of the following? A. Facility security. B. Organization of duties. C. Computer operations. D. Computer systems.

Question: 32Which one of the following procedures functions primarily as an output control over a company’s payroll processing? A. The payroll process assigns each batch of timesheets a unique number recorded in a batch register. B. The payroll application program performs a limit test that subjects any transaction involving more than 80 hours worked to review before processing. C. The payroll files are assigned internal and external file labels that are checked by the application program before processing. D. The payroll distribution log contains a schedule of when checks and reports are prepared with the names of individuals who are to receive the report.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 33The director in charge of a company’s data center is reviewing the controls surrounding the access to the hardware in the data center, which is located offsite. The control below that best identifies what the director should consider in order to protect access to the hardware is A. Limitation of physical access. B. Logical access controls. C. Application controls. D. Authentication controls.

Question: 34A payroll accountant for a company checked the most recent payroll records and discovered that the company had accidentally paid an employee for 400 hours instead of 40 hours. Which one of the controls below would be the best control to prevent an error such as this one? A. A processing control that highlighted the unusually high amount. B. A transaction control that would create an error report. C. An input control that looked for unreasonable amounts. D. An output control that would not print a check over a certain amount.

Question: 35To prevent or detect potential fraudulent actions that could result from unexecuted computer program code designed to be activated if an unscrupulous programmer becomes dissatisfied or is terminated, auditors seek to identify and review unexecuted program codes. Auditors can accomplish this through the use of which one of the following methods? A. Regression testing. B. Mapping programs. C. Scanning routines. D. Test data processing.

Question: 36Which of the following represents a weakness in the internal control system of an electronic data processing system? A. The data control group reviews and tests procedures and handles the reprocessing of errors detected by the computer. B. The accounts receivable clerk prepares and enters data into the computer system and reviews the output for errors.

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C. The systems analyst designs new systems and supervises testing of the system. D. The computer operator executes programs according to operating instructions and maintains custody of programs and data files.

Question: 37A company has designed its accounting system to have an automated reconciliation between its payroll and general ledger systems. Which type of control has the company implemented? A. Output control. B. Input control. C. Processing control. D. Transaction control.

Question: 38A company has just completed construction of a new computer facility. To limit unauthorized access to this facility, which one of the following is the most effective procedure that the company can implement? A. Data encryption. B. Access control software. C. Input controls. D. Biometric identification system.

Question: 39A processing control helps to provide reasonable assurance that A. Data is entered properly into a computer system. B. Only authorized users have access to completed data projects. C. Proper computer programs are used to make data calculations. D. Finished data products are available on schedule.

Question: 40In an attempt to remain competitive and be more responsive to customers, a company has connected its internal computer networks to outside networks via a host computer. One significant risk of this practice is that A. Uploaded files may not be properly edited. B. Data downloaded to the personal computers may not be sufficiently timely.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Viruses may gain entry to one or more of the company’s systems. D. Software maintenance on the personal computers may become more costly.

Question: 41Which of the following is an indication that a computer virus is present? A. Frequent power surges that harm computer equipment. B. Unexplainable losses of or changes to data. C. Inadequate backup, recovery, and contingency plans. D. Numerous copyright violations due to unauthorized use of purchased software.

Question: 42The internal auditors of a company are assessing controls over network access. The best source of evidence to determine that terminated employees do not continue to have access to the company’s network is to A. Discuss password removal procedures with the database administrator. B. Review access control software to determine whether the most current version is implemented. C. Review computer logs for access attempts. D. Reconcile current payroll lists with database access lists.

Question: 43The best preventive measure against a computer virus is to A. Compare software in use with authorized versions of the software. B. Execute virus exterminator programs periodically on the system. C. Allow only authorized software from known sources to be used on the system. D. Prepare and test a plan for recovering from the incidence of a virus.

Question: 44Which of the following operating procedures increases an organization’s exposure to computer viruses? A. Encryption of data files. B. Frequent backup of files. C. Downloading public-domain software from websites.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Installing original copies of purchased software on hard disk drives.

Question: 45An organization installed antivirus software on all its personal computers. The software was designed to prevent initial infections, stop replication attempts, detect infections after their occurrence, mark affected system components, and remove viruses from infected components. The major risk in relying on antivirus software is that antivirus software may A. Not detect certain viruses. B. Make software installation overly complex. C. Interfere with system operations. D. Consume too many system resources.

Question: 46What is the best course of action to take if a program takes longer than usual to load or execute? A. Test the system by running a different application program. B. Reboot the system. C. Run antivirus software. D. Back up the hard disk files.

Question: 47Six months after a disgruntled systems programmer was fired and passwords disabled, the company’s largest server was brought to a halt when it suddenly erased all of its own files and software. The most likely way the programmer accomplished this was by A. Returning to the computer center after 6 months. B. Planting a computer virus through the use of telephone access. C. Having an accomplice in the computer center. D. Implanting a virus in the operating system and executing it via a back door.

Question: 48Which of the following statements is not indicative of governance, risk, and compliance (GRC) systems? A. GRC systems are associated with monitoring controls. B. Federal and local government rules are considered when implementing GRC systems.

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C. GRC systems are not tasked with identifying the source of risks. D. GRC systems enable organizations to manage the governance program strategy.

Question: 49Select the cyberattack which is best associated with extorting an individual or an organization. A. Ransomware. B. Phishing. C. Software piracy. D. Hacking.

Question: 50An auditor would least likely use computer software to A. Construct parallel simulations. B. Access data files. C. Prepare spreadsheets. D. Assess risk.

Question: 51A primary advantage of using generalized audit software packages to audit the financial statements of a client that uses a computer system is that the auditor may A. Consider increasing the use of substantive tests of transactions in place of analytical procedures. B. Substantiate the accuracy of data through self-checking digits and hash totals. C. Reduce the level of required tests of controls to a relatively small amount. D. Access information stored on computer files while having a limited understanding of the client’s hardware and software features.

Question: 52An auditor is in the middle of reviewing a significant client’s data. Due to the size of the client’s operations, the auditor has decided that a computer must be used to audit the information in a cost-effective manner while still meeting all other objectives of the engagement. After reviewing the client’s computer applications in which the relevant data is processed, the auditor has doubts as to whether the client’s applications work in the manner purported by the client. Which of the following methods is best suited to determine the actual functions of the client’s computer applications? A. Parallel simulation.

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B. Generalized audit software (GAS). C. Validity checks. D. Spreadsheet analysis.

Question: 53A client uses a real-time computer system to process all of its transactions. However, after reviewing the data that was output by the system, the auditor has serious concerns regarding the controls within the real-time system. Which of the following approaches will best determine the adequacy of controls within the realtime system? A. Spreadsheet analysis. B. Integrated Test Facility (ITF). C. Generalized Audit Software (GAS). D. Dual write routine.

Question: 54Parallel simulation A. Subjects auditor-created data to the client’s programs. B. Is a useful technique when auditing around the computer. C. Subjects client data to auditor-created programs. D. Allows the auditor to load a copy of the client’s production data onto his or her computer.

Subunit 3: Security Measures and Business Continuity Planning Question: 1Which of the following is a computer program that appears to be legitimate but performs some illicit activity when it is run? A. Hoax virus. B. Web crawler. C. Trojan horse. D. Killer application.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 2Which of the following is used for Internet security as opposed to data transmissions over secured transmission lines? A. Firewalls. B. Mapping. C. Parallel simulation. D. Concurrency controls.

Question: 3A company’s management is concerned about computer data eavesdropping and wants to maintain the confidentiality of its information as it is transmitted. The company should utilize A. Data encryption. B. Dial back systems. C. Message acknowledgment procedures. D. Password codes.

Question: 4Which one of the following most compromises file retention as protection against loss or damage of master files? A. Use of magnetic tape. B. Inadequate ventilation. C. Storing of all files in one location. D. Failure to encrypt data.

Question: 5A critical aspect of a disaster recovery plan is to be able to regain operational capability as soon as possible. In order to accomplish this, an organization can have an arrangement with its computer hardware vendor to have a fully operational facility available that is configured to the user’s specific needs. This is best known as a(n) A. Uninterruptible power system. B. Parallel system. C. Cold site. D. Hot site.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 6Confidential data can be securely transmitted over the Internet by using A. Single-use passwords. B. Firewalls. C. Encryption. D. Digital signatures.

Question: 7Managers at a consumer products company purchased personal computer software from only recognized vendors, and prohibited employees from installing nonauthorized software on their personal computers. To minimize the likelihood of computer viruses infecting any of its systems, the company should also A. Restore infected systems with authorized versions. B. Recompile infected programs from source code backups. C. Institute program change control procedures. D. Test all new software on a stand-alone personal computer.

Question: 8An Internet firewall is designed to provide adequate protection against which of the following? A. A computer virus. B. Unauthenticated logins from outside users. C. Insider leaking of confidential information. D. A Trojan horse application.

Question: 9The encryption technique that requires two keys, a public key that is available to anyone for encrypting messages and a private key that is known only to the recipient for decrypting messages, is A. Rivest, Shamir, and Adelman (RSA). B. Data encryption standard (DES). C. Modulator-demodulator. D. A cypher lock.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 10Spoofing is one type of online activity used to launch malicious attacks. Spoofing is A. Trying large numbers of letter and number combinations to access a network. B. Eavesdropping on information sent by a user to the host computer of a website. C. Accessing packets flowing through a network. D. Identity misrepresentation in cyberspace.

Question: 11Attacks on computer networks may take many forms. Which of the following uses the computers of innocent parties infected with Trojan horse programs? A. A distributed denial-of-service attack. B. A man-in-the-middle attack. C. A brute-force attack. D. A password-cracking attack.

Question: 12Which of the following is not an important aspect of a disaster recovery plan? A. A hot-site recovery system. B. Automatic failover. C. Focus on disaster prevention. D. Data conversion operators.

Question: 13All of the following are examples of encryption techniques used for computer security except A. Public key. B. Private key. C. Primary key. D. Authentication key.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 14When attempting to restore computing facilities at an alternate site following a disaster, which one of the following should be restored first? A. Online system. B. Batch system. C. Operating system. D. Decision support system.

Question: 15The IT team of a company created a disaster recovery plan for their employer. The plan includes several versions of backups of data and systems, including at least one copy kept off site. The plan also includes an off-site location selected for its reduced chance of natural disasters like floods and hurricanes. This location is guarded by a security service. The IT manager has a copy of the plan at home, and the plan is regularly tested. Select the statement below that best describes the plan. A. The disaster recovery plan has everything required because the company can access the data backups and continue processing. B. The disaster plan needs to ensure that there are copies of the disaster recovery plan accessible on the computer system. C. The disaster recovery plan needs to include a disaster recovery site that is a hot or cold site with necessary capabilities. D. The disaster recovery plan needs to include instructions for appointing a recovery team when a disaster occurs.

Question: 16A company’s IT manager has been asked to ensure that the company’s data are protected in the event they are intercepted during transmission. Which one of the following is the best control to implement from the selection below? A. Sequencing of messages. B. Encryption. C. Self-checking algorithms. D. Dedicated lines.

Question: 17An airline is about to create an Internet site to capture the flight reservations and ticket payments. Which one of the following best demonstrates the inherent risks of the Internet? A. Dependency on Internet service providers.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Confidential information can be intercepted. C. Data formats are not typically standardized. D. The limited controls available to mitigate risks.

Question: 18A company has in its disaster recovery plan a process to store in a secure, offsite warehouse building a back-up of its current financial operating systems. What type of back-up location is the company most likely using? A. A hot site. B. A cold site. C. A mirrored data center. D. A recovery operations center.

Question: 19Encoding electronic data through the use of an algorithm to make information unreadable to unauthorized individuals is identified as A. A firewall. B. A worm. C. A virus. D. Encryption.

Question: 20After a systems programmer was terminated and passwords were disabled, the company’s server crashed and it erased all of its files and software. The terminated employee had installed a virus in the operating system and executed it via a back door. Which one of the following measures would most likely have prevented this occurrence? A. A policy to encrypt all data and files maintained on its server. B. Daily backup of all data on the server. C. An intrusion detection system used to create logs of network traffic. D. An advanced firewall used to detect intrusions.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Study Unit 15: Information Systems and Data Governance 15: (183) Information Systems and Data Governance 1: (68) Accounting Information Systems 2: (51) Data Governance and Risk 3: (64) COSO Framework -- Internal Control for Data Governance

Subunit 1: Accounting Information Systems Question: 1An accounting information system (AIS) must include certain source documents in order to control purchasing and accounts payable. For a manufacturing organization, the best set of documents should include A. Purchase requisitions, purchase orders, inventory reports of goods needed, and vendor invoices. B. Purchase orders, receiving reports, and inventory reports of goods needed. C. Purchase orders, receiving reports, and vendor invoices. D. Purchase requisitions, purchase orders, receiving reports, and vendor invoices.

Question: 2Which one of the following statements about an accounting information system (AIS) is false? A. An AIS supports day-to-day operations by collecting and sorting data about an organization’s transactions. B. The information produced by an AIS is made available to all levels of management for use in planning and controlling an organization’s activities. C. An AIS is best suited to solve problems when there is great uncertainty and ill-defined reporting requirements. D. An AIS is often referred to as a transaction processing system.

Question: 3In an inventory system on a database management system (DBMS), one stored record contains part number, part name, part color, and part weight. These individual items are called A. Fields. B. Stored files. C. Bytes. D. Occurrences.

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Question: 4Of the following, the greatest advantage of a database (server) architecture is A. Data redundancy can be reduced. B. Conversion to a database system is inexpensive and can be accomplished quickly. C. Multiple occurrences of data items are useful for consistency checking. D. Data security procedures are minimized.

Question: 5Which of the following should not be the responsibility of a database administrator? A. Design the content and organization of the database. B. Develop applications to access the database. C. Protect the database and its software. D. Monitor and improve the efficiency of the database.

Question: 6Which of the following is a primary function of a database management system (DBMS)? A. Report customization. B. Capability to create and modify the database. C. Financial transactions input. D. Database access authorizations.

Question: 7Which of the following outcomes is a likely benefit of information technology used for internal control? A. Processing of unusual or nonrecurring transactions. B. Enhanced timeliness of information. C. Potential loss of data. D. Recording of unauthorized transactions.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 8Which of the following terms best describes a payroll system? A. Database management system (DBMS). B. Transaction processing system (TPS). C. Decision support system (DSS). D. Enterprise resource planning (ERP) system.

Question: 9How is an accounting information system (AIS) distinguished from a management information system (MIS)? A. An AIS deals with financial information; a MIS handles all other information. B. An AIS may be either manual or computer based; a MIS is computer based. C. An AIS is a subsystem within a MIS. D. An AIS is control oriented; a MIS is used exclusively for planning.

Question: 10Which one of the following features is least likely to apply to the transaction processing cycle of an accounting information system? A. Data records are chiefly historical in nature. B. Most of the sources of data are an organization’s recurring transactions. C. Data are usually financial in nature. D. Data records are the basis of predictive systems.

Question: 11Which one of the following distinguishes a management information system from a transaction processing system? A. Maintenance of a structured database. B. Capability to provide data for decision-making support. C. Automation of routine transaction processing. D. Production of reports to support operations.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 12Management information systems represent a significant investment by most businesses. A primary concern of management is that the system A. Meet the business needs of the organization. B. Employ the latest technology. C. Might consume too much time and money during testing. D. Was designed using CASE (Computer-Aided Software Engineering) tools rather than traditional methods.

Question: 13Which one of the following statements about a management information system (MIS) is false? A. A MIS supports day-to-day operations by aggregating and formatting data about an organization’s transactions. B. The information produced by a MIS is made available to middle management for use in controlling an organization’s activities. C. A MIS is best suited to solve problems when uncertainty is great and reporting requirements are illdefined. D. A MIS is often fed with input by a transaction processing system.

Question: 14A database is A. Essential for the storage of large data sets. B. A collection of related files. C. A real-time system. D. A network of computer terminals.

Question: 15The primary purpose of a database system is to have a single storage location for each A. File. B. Record. C. Database. D. Item of data.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 16All of the following are methods for distributing a relational database across multiple servers except A. Snapshot (making a copy of the database for distribution). B. Replication (creating and maintaining replica copies at multiple locations). C. Normalization (separating the database into logical tables for easier user processing). D. Fragmentation (separating the database into parts and distributing where they are needed).

Question: 17One advantage of a database management system (DBMS) is A. Each organizational unit takes responsibility and control for its own data. B. The cost of the data processing department decreases as users are now responsible for establishing their own data handling techniques. C. A decreased vulnerability as the database management system has numerous security controls to prevent disasters. D. The independence of the data from the application programs, which allows the programs to be developed for the user’s specific needs without concern for data capture problems.

Question: 18Which of the following factors has the greatest impact on the design of an effective management reporting system? A. Number of transactions to be processed. B. Types of decisions to be made. C. Number of authorized users. D. Number of regulatory agencies to be satisfied.

Question: 19One of the principal objectives of a database system is to A. Reduce the overall complexity of data processing and data storage. B. Provide application programs with their own separate data files. C. Employ physical rather than logical data organization concepts. D. Improve data consistency by reducing data redundancy.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 20Enabling users to have different views of the same data is a function of A. The operating system. B. A program library management system. C. The database management system. D. A utility program.

Question: 21An important function of a database administrator is A. Reviewing database output for errors and omissions. B. Scheduling daily database operations. C. Redefining and restructuring the database. D. Evaluating internal controls for hardware.

Question: 22The increased use of database processing systems makes managing data and information a major information service function. Because the databases of an organization are used for many different applications, they are coordinated and controlled by a database administrator. The functions of a database administrator are A. Data input preparation, database design, and database operations. B. Database design, database operation, and database security. C. Database design, database operation, and equipment operations. D. Database design, software support, and database security.

Question: 23DB2, Oracle, SQL Server, and Access are A. Library systems. B. Access control systems. C. Programming languages. D. Database management systems.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 24Which of the following structures refers to the collection of data for all vendors in a relational database? A. Record. B. Field. C. File. D. Byte.

Question: 25What is the correct ascending hierarchy of data in a system? A. Character, record, file, field. B. Field, character, file, record. C. Character, field, record, file. D. Field, record, file, character.

Question: 26Which one of the following correctly depicts the hierarchy of storage commonly found in computerized databases, from least complex to most complex? A. Byte, field, file, record. B. Byte, field, record, file. C. Field, byte, record, file. D. Field, byte, file, record.

Question: 27An inventory clerk, using a computer terminal, views the following on screen: part number, part description, quantity on hand, quantity on order, order quantity, and reorder point for a particular inventory item. Collectively, these data make up a A. Field. B. File. C. Database. D. Record.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 28Which of the following is the elementary unit of data storage used to represent individual attributes of an entity? A. Database. B. Data field. C. File. D. Record.

Question: 29The function of a data dictionary is to A. Mark the boundary between two consecutive transactions. B. Describe and share information about objects and resources. C. Specify systems users. D. Specify privileges and security rules for objects and resources.

Question: 30In a database, there are often conditions that constrain database records. For example, a sales order cannot exist unless the corresponding customer exists. This kind of constraint is an example of A. Normalization. B. Entity integrity. C. Internal schema. D. Referential integrity.

Question: 31One of the five cycles in the accounting process includes both sales to customers on credit and A. Recognition of receivables. B. Disbursement of cash for capitalized transactions. C. Allocation of employee costs. D. Collection of cash from customers.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 32Upon receipt of customers’ checks in the mail room, a responsible employee prepares a remittance listing of all checks received and forwards it with the checks to cash receipts. The remittance listing and remittance advices should then be sent to the A. Internal auditor to investigate the listing for unusual transactions. B. CFO to compare the listing with the monthly bank statement. C. Accounts receivable department for updating customer accounts. D. Entity’s bank to compare the listing with the cashier’s deposit slip.

Question: 33

In the credit sales and cash receipts system flowchart above, symbol A represents A. Auditors’ test data. B. Remittance advices. C. Acknowledgment. D. Credit authorization forms.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 34

In the credit sales and cash receipts system flowchart above, symbol B represents A. Remittance advices. B. Customer credit applications. C. Keying and verifying. D. Account statements.

Question: 35Which of the following describes the most effective control to ensure proper handling of cash receipt transactions? A. Checks received are forwarded to accounts receivable for deposit daily. B. A remittance listing of all checks received during the day is prepared by the mail room and forwarded with the checks to cash receipts. C. Remittance advices are separated from the checks and sent to the general ledger for posting to the customer accounts.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. The employees who receive the customer mail prepare the daily bank deposit.

Question: 36Checks from customers are received in the organization’s mail room each day. What controls should be in place to safeguard the checks? A. Checks should be taken by the mail clerk to the bank for deposit daily. B. Checks should be forwarded intact to the controller for processing. C. A mail clerk should restrictively endorse each check and prepare a remittance listing of all checks received. D. Bond protection should be provided for mail clerks.

Question: 37In a well-designed internal control structure in which cash receipts receives custody of checks from the mail room, the custodial function should not include A. Endorsement of the checks. B. Preparation of the bank deposit slip. C. Deposit of checks daily at a local bank. D. Posting the receipts to the accounts receivable subsidiary ledger.

Question: 38Which of the following observations made during the preliminary survey of a local department store’s cash disbursement cycle reflects a control strength? A. The treasurer prepares checks for vendors based on payment vouchers prepared by accounts payable. B. Individual department managers use prenumbered forms to order merchandise from vendors. C. A liability is recorded by accounts payable once a purchase order has been sent. D. Payments for capital expenditures are handled by the controller.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 39

In the cash payments flowchart above, symbol A represents A. Remittance listing. B. Acknowledgment. C. Payment voucher. D. Receiving report.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 40

In the cash payments flowchart above, symbol B represents A. Packing slip. B. Remittance advice. C. Bill of lading. D. Job time ticket.

Question: 41Which of the following describes the least effective control to ensure payments are made only when goods have actually been received? A. After matching the approved vendor invoice with the accounts payable file, accounts payable issues a payment voucher. B. Cash payments issues a check and forwards it to purchasing after receiving a payment voucher and approved vendor invoice. C. Purchasing sends the remittance advice to vendor.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

D. The remittance advice is matched with the purchase order and approved for payment.

Question: 42To ensure the cash payments journal is updated for the total of checks requested, A. Cash payments prepares a check register of all checks issued during the day. B. Accounts payable posts a journal entry to the cash payments journal from the remittance listing. C. The check register is forwarded to general ledger for posting of the total to the cash payments journal. D. Once purchasing approves the liability with the vendor, a check is prepared, and the check is sent to cash payments for signing and mailing.

Question: 43Terry processes cash payments at a car dealership. Which of the following operations should be included in Terry’s job responsibilities? A. Forwarding the check register to accounts payable for posting. B. Ensuring the cash payments journal is updated for the total of checks requested. C. Preparing account statements to send to vendors to show all purchase and payment activity. D. Reconciling the bank statement to confirm all cash disbursements have been processed.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 44

In the payroll cycle flowchart above, symbol A represents A. General ledger. B. Cash payments. C. Accounts payable. D. Cost accounting.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 45

In the payroll cycle flowchart above, symbol B represents A. Bank transfer orders. B. Job cost records. C. Employee pay rate changes. D. Summaries of hours worked.

Question: 46One characteristic of an effective internal control structure is the proper segregation of duties. Which of the following is a violation of segregation of functional responsibilities? A. Hiring employees and authorizing changes in pay rates. B. Approval of clock cards and job time tickets by a production supervisor.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. Signing and distributing payroll checks. D. Preparation of paychecks and check distribution.

Question: 47An employee in payroll is contemplating a fraud involving the addition of a fictitious employee and an entry of fictitious hours worked. The paycheck of this fictitious employee would then be sent to the payroll employee’s home address. The most effective control procedure to prevent this type of fraud is to require that A. All new employees added are approved by someone outside of payroll. B. All new employees and their hours worked are entered by human resources. C. All changes to employee records are approved by supervisors outside of payroll. D. Employees use direct deposit for paychecks.

Question: 48Human resources and payroll are separate departments. Which of the following combinations provides the best segregation of duties? A. Human resources reviews and submits payroll hours to payroll for processing. Payroll updates the payroll records. B. Human resources adds employees. Payroll processes hours and enters employee bank account numbers. Paychecks are automatically deposited in employees’ bank accounts. C. Human resources is responsible for hiring, firing, and changing pay rates and deductions. Payroll approves hours worked and authorizes overtime. D. Payroll adds employees and enters employees’ bank account numbers, but processes hours only as approved by human resources. Paychecks are automatically deposited in employees’ bank accounts.

Question: 49Management is concerned about the potential for unauthorized changes in the payroll. Which of the following is the proper organizational procedure to prevent such unauthorized changes? A. Payroll reconciles clock cards and job time tickets. B. Paychecks are distributed by human resources. C. Human resources authorizes the hiring and pay rates of all employees. D. Bank transfers for payroll and payroll taxes are executed by accounts payable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 50Organizational independence in the processing of payroll is achieved by segregating functions that are built into the system. Which one of the following functional segregations is not required for internal control purposes? A. Segregation of timekeeping and payroll preparation. B. Segregation of payroll preparation and paycheck distribution. C. Segregation of payment voucher preparation and cash disbursement. D. Segregation of initiation and execution of bank transfers for payroll.

Question: 51Clock cards and job time tickets are reconciled before a summary of hours worked by job and hours worked by employees are forwarded to payroll. What control is embedded in the reconciliation process? A. The process ensures that employees are paid only for actual hours worked. B. The process ensures that employees are paid the proper amount. C. The process ensures that employees worked only authorized hours. D. The process ensures that employees are authorized to work.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 52

In the purchases-payables cycle flowchart above, symbol A represents A. Inventory reorder report. B. Purchase requisition. C. Packing slip. D. Payroll register.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 53

In the purchases-payables cycle flowchart above, symbol B represents A. The accounts payable file. B. A remittance advice. C. A receiving report. D. A packing slip.

Question: 54Which of the following controls is most effective in providing assurance that recorded purchases are free of material errors? A. Receiving compares the quantity ordered on purchase orders with the quantity received on the packing slip. B. Purchases are approved before ordering from the vendor. C. Receiving reports require the signature of the individual who authorized the purchase. D. Accounts payable compares the receiving report to the purchase order.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 55In a well-designed internal control system, the same employee may be permitted to A. Locate authorized vendors and prepare purchase orders. B. Prepare receiving reports and approve purchase orders. C. Approve vouchers for payment and access unused purchase orders. D. Prepare purchase requisitions and update general ledger.

Question: 56The manager of a production line has the authority to order and receive replacement parts for all machinery that requires periodic maintenance. The internal auditor received an anonymous tip that the manager ordered substantially more parts than were necessary from a family member in the parts supply business. The unneeded parts were never delivered. Instead, the manager processed receiving documents and charged the parts to machinery maintenance accounts. The payments for the undelivered parts were sent to the supplier and then divided between the manager and the family member. Which of the following internal controls would have most likely prevented this fraud from occurring? A. Establishing predefined spending levels for all vendors during the bidding process. B. Segregating the receiving function from the authorization of parts purchases. C. Internal verification of quantities, prices, and the mathematical accuracy of vendor invoices. D. Receiving reports are forwarded to purchasing, where they are matched with purchase orders, and then sent to accounts payable.

Question: 57The initiation of the purchase of materials and supplies is the responsibility of A. Purchasing. B. Accounts payable. C. Inventory control. D. Warehouse.

Question: 58Multiple copies of the purchase order are prepared for recordkeeping and distribution with a copy of the purchase order sent to the vendor and one retained by purchasing. In addition, for proper informational flow and internal control purposes, a version of the purchase order would be distributed to all of the following except A. Accounts payable. B. Receiving.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

C. Inventory control. D. Warehouse.

Question: 59A preliminary survey of the purchasing function for an entity indicates that  Department managers initiate purchase requests that must be approved by the plant superintendent,  Purchase orders are typed by the purchasing department using prenumbered and controlled forms,  Buyers regularly update the official vendor listing as new sources of supply become known,  Rush orders can be placed with a vendor by telephone but must be followed by a written purchase order before delivery can be accepted, and  Receiving sends the receiving report and packing slip to inventory control before updating inventory records. One possible fault of this system is that A. Purchases could be made from a vendor controlled by a buyer at prices higher than normal. B. Unauthorized purchases can be made by department managers. C. Inventory may be updated before goods are actually received. D. Goods may be received before a purchase order is prepared.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 60

In the sales-receivables cycle flowchart above, symbol A represents A. Invoice. B. Acknowledgment. C. Inventory. D. Remittance advice.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

https://t.me/CMA_part2

Question: 61

In the sales-receivables cycle flowchart above, symbol B represents A. Acknowledgment. B. Summary of invoices. C. Invoice. D. Check.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 62Before goods can be shipped, which of the following steps in the sales-receivables process must occur? A. Billing completes an invoice for the goods and mails it to the customer. B. Accounts receivable posts the transaction to the accounts receivable subsidiary ledger. C. Inventory control updates inventory records for the goods to be shipped. D. The shipping copy of the sales order is matched to the packing slip.

Question: 63An auditor wants to confirm that every item shipped has an associated sales order. From what source will the auditor take his or her sample? A. Packing slips. B. Accounts receivable subsidiary ledger. C. Invoices. D. Sales orders.

Question: 64Billing matches the sales order to the shipping copy it holds. This procedure ensures that all A. Goods shipped are charged to the proper customer account. B. Goods shipped are invoiced to customers. C. Shipments are made only to customers with sufficient credit. D. Shipments contain the correct goods.

Question: 65Organizational independence is required in the processing of customers’ orders in order to maintain an internal control structure. Which one of the following situations is not a proper segregation of duties in the processing of orders from customers? A. Approval by credit of a sales order prepared by sales. B. Shipping of goods by shipping that have been retrieved from stock by the warehouse. C. Approval of a sales credit memo because of a product return by sales and with subsequent posting to the customer’s account by accounts receivable. D. Invoice preparation by billing and posting to customers’ accounts by accounts receivable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 66Which of the following procedures ensures that all inventory shipments are billed to customers? A. Duties for recording sales transactions and maintaining customer account balances are separated. B. Sales invoices are prenumbered and are independently accounted for and traced to the sales journal. C. An acknowledgment is matched against the packing slip before the merchandise is pulled by the warehouse. D. Shipping documents are prenumbered and are independently accounted for and matched with sales invoices.

Question: 67Upon the receipt of the packing slip from , inventory control should match it with the approved sales order and . List A List B A. Shipping Update the inventory records B. Sales Prepare the acknowledgment C. Billing Forward it to billing D. Warehouse Send the invoice to the customer

Question: 68A database management system can best be defined as a A. Management system that controls disconnected master files. B. Very large database that is used for analysis and not transactional processing. C. Conceptual level schema that maps the relationships between all data elements. D. Program that manages a set of interrelated, centrally coordinated data files.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Subunit 2: Data Governance and Risk Question: 1Which of the following statements is true concerning the COBIT 5 framework? A. Governance and management are synonyms for the activities of upper management. B. Information technology controls are most effectively designed and executed in isolation from other business processes. C. Minimization of risk and resource use are among the major goals of COBIT 5. D. Information and organizational structures are among the enablers identified in COBIT 5.

Question: 2Which of the following statements is true regarding internal control objectives of information systems? A. Primary responsibility of viable internal control rests with the internal audit division. B. A secure system may have inherent risks due to management’s analysis of trade-offs identified by costbenefit studies. C. Control objectives primarily emphasize output distribution issues. D. An entity’s corporate culture is irrelevant to the objectives.

Question: 3Which of the following statements is inconsistent with the key principles of the COBIT 5 framework? A. Enterprise governance and management are treated as the same activity. B. The needs of stakeholders are the focus of all organizational activities. C. Information technology controls are considered to be intertwined with those of the organization’s everyday operations. D. COBIT 5 can be applied even when other IT-related standards have been adopted.

Question: 4Which of the following control activities should be taken to reduce the risk of incorrect processing in a newly installed computerized accounting system? A. Segregation of duties. B. Ensure proper authorization of transactions. C. Adequately safeguard assets.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Independently verify the transactions.

Question: 5Matthews Corp. has changed from a system of recording time worked on clock cards to a computerized payroll system in which employees record time in and out with magnetic cards. The computer system automatically updates all payroll records. Because of this change, A. A generalized computer audit program must be used. B. Part of the audit trail is altered. C. The potential for payroll-related fraud is diminished. D. Transactions must be processed in batches.

Question: 6Which of the following is an advantage of a computer-based system for transaction processing over a manual system? A computer-based system A. Does not require as stringent a set of internal controls. B. Will produce a more accurate set of financial statements. C. Will be more efficient at producing financial statements. D. Eliminates the need to reconcile control accounts and subsidiary ledgers.

Question: 7Which of the following is most likely a disadvantage for an entity that keeps data files prepared by personal computers rather than manually prepared files? A. Attention is focused on the accuracy of the programming process rather than errors in individual transactions. B. It is usually easier for unauthorized persons to access and alter the files. C. Random error associated with processing similar transactions in different ways is usually greater. D. It is usually more difficult to compare recorded accountability with physical count of assets.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 8Which of the following risks are greater in computerized systems than in manual systems? I. Erroneous data conversion II. Erroneous source document preparation III. Repetition of errors IV. Concentration of data A. I and II. B. II and III. C. I, III, and IV. D. I, II, III, and IV.

Question: 9Your firm has recently converted its purchasing cycle from a manual process to an online computer system. Which of the following is a probable result associated with conversion to the new automatic system? A. Processing errors are increased. B. The firm’s risk exposures are reduced. C. Processing time is increased. D. Traditional duties are less segregated.

Question: 10Which of the following statements most accurately describes the impact that automation has on the controls normally present in a manual system? A. Transaction trails are more extensive in a computer-based system than in a manual system because a onefor-one correspondence always exists between data entry and output. B. Responsibility for custody of information assets is more concentrated in user departments in a computerbased system than it is in a manual system. C. Controls must be more explicit in a computer-based system because many processing points that present opportunities for human judgment in a manual system are eliminated. D. The quality of documentation becomes less critical in a computer-based system than it is in a manual system because data records are stored in machine-readable files.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 11Which of the following is a key difference in controls when changing from a manual system to a computer system? A. Internal control principles change. B. Internal control objectives differ. C. Control objectives are more difficult to achieve. D. Methodologies for implementing controls change.

Question: 12Innovations in IT increase the importance of risk management because A. The objective of complete security is becoming more attainable. B. Information system security is continually subject to new threats. C. Closed private systems have proliferated. D. Privacy is a concern for only a very few users.

Question: 13Which of the following characteristics distinguishes computer processing from manual processing? A. Computer processing virtually eliminates the occurrence of computational error normally associated with manual processing. B. Errors or fraud in computer processing will be detected soon after their occurrence. C. The potential for systematic error is ordinarily greater in manual processing than in computerized processing. D. Most computer systems are designed so that transaction trails useful for audit purposes do not exist.

Question: 14As a result of technological developments facing businesses and CPAs, A. System boundaries are becoming less distinct. B. Computer programmers and operators have eliminated the need for accountants. C. Internet use has spread, and e-business control over user interaction has been simplified. D. Better controls have resulted in a reduction in threats.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 15A small client recently put its cash disbursements system on a server. About which of the following internal control features would an auditor most likely be concerned? A. Programming of the applications is in BASIC, although C++ is a more up-to-date, flexible programming language. B. The server is operated by employees who have cash custody responsibilities. C. Only one employee has the password to gain access to the cash disbursement system. D. There are restrictions on the amount of data that can be stored and on the length of time that data can be stored.

Question: 16Which of the following is the best policy for the protection of a company’s vital information resources from computer viruses? A. Stringent corporate hiring policies for staff working with computerized functions. B. Existence of a software program for virus prevention. C. Prudent management procedures instituted in conjunction with technological safeguards. D. Physical protection devices in use for hardware, software, and library facilities.

Question: 17A company permits employees to work from home using company-owned laptops. Which of the following competitive advantages does the company most likely obtain as a result of this decision? A. Integrity. B. Reliability. C. Availability. D. Confidentiality.

Question: 18Under the COBIT 2019 framework, which of the following statements is true? A. A focus area includes the threat landscape, technology adoption strategy, and enterprise strategy and goals. B. Providing stakeholder value is a governance framework principle. C. A governance system should focus on covering the IT function end to end. D. Variant components for a governance system are designed for a specific context within a focus area.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 19Which of the following is a false statement about the COBIT 2019 framework? A. A governance framework should reflect relevant compliance standards. B. Governance and management activities and structures can be combined to support a holistic approach. C. The COBIT Performance Management model uses capability levels and maturity levels to measure performance. D. A governance system design may be unique to a particular organization.

Question: 20What is the first phase of the data life cycle? A. Data publication. B. Data maintenance. C. Data capture. D. Data synthesis.

Question: 21Which one of the following data life cycle phases is defined as the act of creating information that does not yet exist in the organization? A. Data analytics. B. Data synthesis. C. Data usage. D. Data capture.

Question: 22A company obtained property tax reports from the county assessor’s office to prepare survey reports for a developer. Acquisition of data from outside the organization is included in which phase of the data life cycle? A. Data capture. B. Data set. C. Data publication. D. Data synthesis.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 23Upon her arrival at a medical practice, a patient was given an electronic notepad. Through this notepad, she confirmed her contact and insurance information. She also completed her medical and family history. This way to capture data is referred to as A. Value delivery. B. Signal reception. C. Cardinality. D. Utilization of data.

Question: 24The data maintenance phase of the data life cycle can be defined as the A. Periodic destruction of documents and other records. B. Inclusion of activities outside the regular data life cycle. C. Supplying of data to the points at which data synthesis and data usage occur. D. Optimization of resource allocations.

Question: 25What term is defined as the processing of data for the enterprise without deriving any value from it? A. Data functioning. B. Data capture. C. Data entry. D. Data maintenance.

Question: 26Which of the following best characterizes data maintenance in the data life cycle? A. The cleansing and enrichment of the data. B. Actually processing all data submitted for processing. C. Keeping data away from unauthorized access. D. Keeping old data in a storage location.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 27Data synthesis can best be defined as the A. Evolution of data under both internal and external factors. B. Creation of data values using inductive logic. C. Process of analyzing data from different perspectives and summarizing it into useful information. D. Application of data to tasks of the enterprise.

Question: 28Risk modeling, actuarial modeling, and modeling for investment decisions are all examples of A. Data usage. B. Parallel simulation. C. Data analytics. D. Enrichment of the data.

Question: 29The data usage phase of the data life cycle can be characterized as the A. Inclusion of data in monthly statements to customers. B. Processing of data in a logical order. C. Process of supplying the data to the points where they are analyzed. D. Application of data to tasks the enterprise needs to run and manage itself.

Question: 30Which of the following is a data governance challenge? A. Regulatory or contractual constraints. B. Overseeing the system of internal control. C. Achieving an entity’s objectives relating to operations, reporting, and compliance. D. Preparing an integrated report.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 31A new contract was signed between ABC Corporation and XYZ Software. The contract had several contractual constraints regarding how data are used. Ensuring legalities are observed in this contract is the role of A. Senior management. B. Data governance. C. Outsourced service providers. D. Resource management.

Question: 32Which of the following is the best example of data publication? A. Releasing the cost report to employees. B. Preparing financial statements for the use of senior management. C. Making the research data available on a company website for use by others. D. Making the data available on the intranet to the actuarial department to process.

Question: 33The issuance of monthly statements to customers is an example of which phase of the data life cycle? A. Formal contract. B. Data activity. C. Value delivery. D. Data publication.

Question: 34Which of the following best underlines the need for data archival? A. Eventually, the end of lifetime usefulness for the data will be encountered. B. Keeping and maintaining records for a long time is costly. C. Constant changes in technology require constant replenishment. D. Data factors affect the ability of the organization to create value over time.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 35The stage of copying data to a location where they are stored in case they are ever needed again in the data life cycle is called A. Data maintenance. B. Data archival. C. Data storage. D. Data purging.

Question: 36Storing a data item in a location where there is no regular maintenance or usage indicates that the A. Data is at the end of its data life cycle. B. Data has been purged from the enterprise. C. Data has been removed from all active environments. D. Data is at the beginning of its data life cycle.

Question: 37Which of the following phases refers to the end of the data life cycle, when data copies are entirely removed from an enterprise? A. Data archival. B. Data deletion. C. Data elimination. D. Data purging.

Question: 38Disposing of all copies of data is difficult and results in a challenge for A. Data governance. B. Data publication. C. Data archival. D. Data maintenance.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 39Twice a year, a company holds “office cleaning” days; employees use the time to purge old and unneeded files and to archive records and send them to storage. This is an example of the organization’s A. Data maintenance. B. Internal control environment. C. Database management system. D. Record retention policy.

Question: 40Which of the following is the least likely explanation for having a formal record retention policy? A. To control costs of storing records. B. To comply with minimum retention periods imposed by law. C. To destroy evidence of noncompliance and fraud. D. To periodically destroy documents.

Question: 41An organization’s policy regarding the retention and periodic destruction of documents and other records is the definition of A. Records compliance. B. Cleansing of records. C. Record archival. D. Records management.

Question: 42All of the following are correct statements associated with keeping and maintaining records for an organization except A. Tax records are available to prove lack of fraud. B. Unneeded record retention costs are created. C. Records that may be needed for a future legal case are retained. D. It complies with data purging requirements.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 43Storing records longer than needed can create an enormous challenge when a company A. Is suspected of having filed a fraudulent tax return. B. Needs to find relevant records for a legal dispute. C. Is not part of a regulated industry. D. Periodically destroys old documents.

Question: 44An employee was in her third week of searching through 10 years of records to find supporting documents for meal expenses deducted on last year’s tax return. Which of the following policies would most likely have prevented this situation from occurring? A. Database management policy. B. Data maintenance policy. C. Formal record retention policy. D. Information security policy.

Question: 45Which of the following is not a reason to have a formal record retention policy? A. To meet minimum holding periods imposed by law. B. To protect sensitive information from unauthorized disclosure. C. To lower costs for an organization. D. To enhance the usefulness of records.

Question: 46What is the minimum length of time tax documents (no suspicion of fraud) must be kept? A. 10 years. B. 4 years. C. 7 years. D. 8 years.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 47A taxpayer is purging old tax returns and related records. Five years ago, he filed a fraudulent return. What is the length of time the taxpayer’s tax returns and related records should be kept? A. 3 years. B. 4 years. C. 7 years. D. No minimum.

Question: 48It is too late for an organization to establish a records retention policy A. Once litigation is likely. B. When a new regulation is enacted. C. Upon relocation to a new building. D. When minimum retention periods are imposed by law.

Question: 49When company documents are destroyed after a legal case pursuant to a well-established records retention policy, that is the best defense for the A. Keeping and maintaining of too many records. B. Assumption the organization complied with its duty. C. Unauthorized access by parties both internal and external to the organization. D. Return of client files.

Question: 50A corporation recently destroyed thousands of documents after receiving an email from headquarters reminding the organization of the document disposal policy. Yesterday, the corporation received a subpoena issued by the SEC for documents that had been destroyed. A court may assume the corporation complied with its duty in destroying the documents under which of the following circumstances? A. Every year in May, the corporation destroys documents pursuant to the document disposal policy after receiving an email from headquarters. B. Receiving a reminder email to destroy documents from headquarters was unprecedented. C. Operations were shut down while documents were destroyed. After 20 years, the corporation had never done anything like this.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Headquarters regularly destroys documents every 3 years during the slow season. However, the recent destruction of documents occurred during peak season and was out of the ordinary.

Question: 51Which one of the following best defines COBIT? A. A set of guidelines to assist in implementing adequate controls over IT processes. B. A control framework published by the Committee of Sponsoring Organizations. C. A set of guidelines intended to help shareholders understand the IT systems utilized by management. D. A set of risks and responses to technology challenges.

Subunit 3: COSO Framework -- Internal Control for Data Governance Question: 1Internal control is a process designed to provide reasonable assurance regarding the achievement of objectives related to A. Reporting. B. Operations. C. Compliance. D. All of the answers are correct.

Question: 2An internal auditor is evaluating the internal control system in place for an organization’s cashreceipts cycle. According to the existing controls in place, the credit manager is responsible for authorizing the write-off of any debt that is deemed to be uncollectible. However, the auditor notices that two of the credit manager’s assistants have been authorizing the write-off of bad debt without the credit manager’s knowledge. Upon further investigation, the auditor discovers that the assistants have been authorizing the write-off of bad debt in a manner that benefits them personally. The inherent limitation of internal control best illustrated by this scenario is A. Human error. B. Collusion. C. Management override. D. External events.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 3Which of the following considerations is least likely to affect how an organization implements a system of internal control? A. The ratio of full-time employees to part-time employees. B. The size of the organization. C. Technology innovation. D. The use of outsourced service providers.

Question: 4Which of the following is not a component of internal control? A. Control risk. B. Monitoring. C. Information and communication. D. The control environment.

Question: 5Which of the following parties is responsible for defining expectations regarding integrity, ethical values, and the accountability of the organization? A. Senior management. B. Operational management. C. Internal audit function. D. Board of directors.

Question: 6Which of the following accurately matches the role and responsibility with respect to a system of internal control? Responsibility Role A. Oversees the system of internal control Senior management B. Establishes proper ethical culture Board of directors C. Designs, implements, and operates an effective system of internal control Senior management D. Evaluates the adequacy and effectiveness of controls Operational management

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 7Which of the following statements is correct regarding information technology (IT) governance? A. A primary goal of IT governance is to balance risk versus return over IT and its processes. B. IT governance is an appropriate issue for organizations at the level of the board of directors only. C. IT goals should be independent of strategic goals. D. IT governance requires that the Control Objectives for Information and Related Technology (COBIT) framework be adopted and implemented.

Question: 8An entity requires all employees to submit expense reports before reimbursement of their expenses. The CEO submits receipts to the accounts payable clerk who prepares a payment voucher and a check. This clerk uses the CEO’s check-signing machine to sign the check. The voucher and the check are then sent to the CFO’s office. The CEO and CFO can post adjusting entries to the accounts payable, cash payments, and general journals. Which of the following is the most likely inherent limitation of the company’s internal controls? A. Collusion. B. Management override. C. Unsuitable objectives for internal control. D. External events beyond the organization’s control.

Question: 9Jim opens the mail in the mailroom and records all checks received on the daily remittance list. He then gives the list and the checks to Sally, the accounts receivable clerk, so she can record the payments in the accounts receivable subsidiary ledger. Jim and Sally agreed to follow this procedure to streamline the controls over cash receipts. Which of the following is the most likely inherent limitation of the company’s internal controls? A. External events beyond the organization’s control. B. Management override. C. Collusion. D. Unsuitable objectives for internal control.

Question: 10Y Corporation’s password protection policy requires all employees to change their passwords every month. Because of this requirement, technical support spends a significant amount of time assisting employees who forget their passwords. To increase efficiency, the CEO of Y canceled the policy and subsequently requires employees to change their passwords every six months. Which of the following is the most likely inherent limitation of Y’s internal controls? A. Breakdowns.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Management override. C. External events beyond the organization’s control. D. Unsuitable objectives for internal control.

Question: 11A computer system’s encryption protocol requires staff members to enter a different random set of letters, numbers, and other symbols every morning. Employees often use easily memorable sets of symbols, such as their birth dates and phone numbers. Which of the following is the most likely inherent limitation of the company’s internal controls? A. Management override. B. Breakdowns. C. External events beyond an organization’s control. D. Unsuitable objectives for internal control.

Question: 12The COO negotiated a significant sales transaction outside the ordinary course of the entity’s business with a corporation in a different industry. The COO is a director of the other entity. The terms and conditions of the undisclosed agreement differed from the entity’s standard sales contracts. Which of the following is the most likely inherent limitation of the company’s internal controls? A. Breakdowns. B. Management override. C. External events beyond the organization’s control. D. Unsuitable objectives for internal control.

Question: 13Which of the following statements regarding the COSO Internal Control – Integrated Framework is correct? A. The framework was published by ISACA. B. The COSO Enterprise Risk Management framework was updated to become the COSO Internal Control – Integrated Framework. C. Publicly-listed companies are required by regulation to apply the framework in designing their internal control systems. D. The framework includes objectives, components, and related principles.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 14The COSO Internal Control – Integrated Framework includes a definition of A. Internal control and requirements of an efficient internal control system. B. Data governance and requirements of an effective IT control system. C. Internal auditing and requirements of an effective internal control system. D. Internal control and requirements of an effective internal control system.

Question: 15Which of the following is a component of internal control according to the COSO Internal Control – Integrated Framework? A. Performance. B. Review and revision. C. Information and communication. D. Governance and culture.

Question: 16Which of the following are components of internal control according to the COSO Internal Control – Integrated Framework? A. Compliance, operations, and reporting. B. Principles, framework, and process. C. Monitoring, control activities, and risk assessment. D. Function, division, and operating unit.

Question: 17A system of internal control is effective if it provides reasonable assurance of achieving an entity’s objectives. Which of the following is an objective specified in the COSO Internal Control – Integrated Framework? A. Innovation. B. Operations. C. Risk assessment. D. Productivity.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 18A system of internal control is effective if it provides reasonable assurance of achieving an entity’s objectives. Which of the following are objectives specified in the COSO Internal Control – Integrated Framework? A. Internal, external, and overall. B. Specific, measurable, and obtainable. C. Compliance, operations, and reporting. D. Strategic, compliance, and operations.

Question: 19Which of the following are included in an entity’s organizational structure according to the COSO Internal Control – Integrated Framework cube? A. Operations, reporting, and compliance. B. Compliance, risk management, and internal audit. C. Entity level, division, and operating unit. D. Function, department, and subsidiary.

Question: 20Which of the following is part of an entity’s organizational structure according to the COSO Internal Control – Integrated Framework cube? A. Process. B. Function. C. Activity. D. Transaction.

Question: 21According to the COSO Internal Control – Integrated Framework, which of the following lists an example of a component, entity structure, and objective, respectively? A. Risk assessment, operations, and reporting. B. Monitoring, entity level, and compliance. C. Capability, operating unit, and control. D. Control environment, function, and learning.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 22According to the COSO Internal Control – Integrated Framework, compliance, information and communication, and function, respectively, are examples of what aspects of the COSO cube? A. Objective, component, and entity structure. B. Entity structure, component, and division. C. Component, principle, and entity structure. D. Objective, objective, and entity structure.

Question: 23According to the COSO Internal Control – Integrated Framework, which of the following terms refers to the determination that internal control components and relevant principles exist in the design and implementation of the internal control system? A. Present. B. Efficient. C. Functioning. D. Operating together.

Question: 24According to the COSO Internal Control – Integrated Framework, which of the following terms refers to the determination that internal control components and relevant principles continue to exist in the operation of an internal control system? A. Effective. B. Functioning. C. Operating together. D. Present.

Question: 25According to the COSO Internal Control – Integrated Framework, which of the following terms refers to the determination that all internal control components collectively reduce the risk of not achieving an objective to an acceptable level? A. Present. B. Operating together. C. Adequate.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Functioning.

Question: 26According to the COSO Internal Control – Integrated Framework, an effective internal control system requires that A. Internal control components collectively eliminate the risk of not achieving an objective. B. Each of the internal control components and corresponding objectives is present and functioning. C. Each of the internal control components is operating independently. D. Each of the internal control components and relevant principles is present and functioning.

Question: 27Which of the following parties is among the three lines of defense for effective management of risk and control in an organization? A. Senior management. B. External auditors. C. The board of directors. D. Internal auditors.

Question: 28Which of the following parties is among the three lines of defense for effective management of risk and control in an organization? A. The audit committee. B. Regulators. C. Outsourced service providers. D. Compliance.

Question: 29Which of the following parties is among the three lines of defense for effective management of risk and control in an organization? A. Customers. B. The governance committee. C. Risk management.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Bond-rating agencies.

Question: 30Which of the following parties is among the three lines of defense for effective management of risk and control in an organization? A. The risk committee. B. Operational management. C. Senior management. D. Consultants.

Question: 31Which of the following parties are among the three lines of defense for effective management of risk and control in an organization? I. Audit committee II. Internal auditors III. Compliance IV. Board of directors V. Senior management VI. External auditors A. II and III. B. I, II, III, and IV. C. I, II, and VI. D. I, II, III, IV, V, and VI.

Question: 32Which of the following parties have roles or responsibilities in the internal control of an organization? I. Compensation committee II. Customers and suppliers III. Employees IV. Regulators V. Senior management VI. Outsourced IT functions

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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A. I and V. B. II, IV, and VI. C. I, III, V, and VI. D. I, II, III, IV, V, and VI.

Question: 33Which of the following parties is the first line of defense for an organization? A. Internal auditors. B. News media. C. Operational management. D. Compliance.

Question: 34Which of the following parties provides the second line of defense for an organization? A. Senior management. B. External auditors. C. Risk management. D. Board of directors.

Question: 35Which of the following parties is the third line of defense for an organization? A. Internal auditors. B. Audit committee. C. External auditors. D. Compliance.

Question: 36The first line of defense for effective management of risk and control A. Sets the tone at the top for establishing ethical cultures. B. Oversees the internal control system.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Develops and implements risk management processes. D. Assigns responsibility for establishing specific internal controls.

Question: 37The second line of defense for effective management of risk and control A. Directs the performance of control activities at the entity level. B. Implements controls to support the entity. C. Monitors emerging issues affecting the entity’s controls and risks. D. Evaluates the effectiveness of controls in responding to risks.

Question: 38The third line of defense for effective management of risk and control A. Selects and executes controls. B. Examines and reports on internal control as required by the PCAOB. C. Defines and communicates expectations regarding integrity, ethical values, transparency, and accountability. D. Provides assurance about the effectiveness of controls.

Question: 39Senior management is primarily responsible for A. Ensuring that the internal and external auditors oversee the internal control system. B. Implementing and monitoring controls designed by the internal auditors. C. Designing and operating a control system that provides reasonable assurance that established objectives and goals will be achieved. D. Establishing a proper ethical culture.

Question: 40The board of directors is responsible for A. Providing the first line of defense for effective risk management. B. Defining expectations about transparency and accountability. C. Evaluating the adequacy and effectiveness of controls.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Examining and reporting on internal control.

Question: 41Internal auditors are responsible for A. Safeguarding assets. B. Designing or drafting procedures for information systems. C. Assessing the risk exposures in relation to the organization’s operations regarding the safeguarding of assets. D. Operating a control system that provides reasonable assurance that objectives will be achieved.

Question: 42What are the three lines of defense for effective management of risk and control? First line of defense Second line of defense Third line of defense A. Operational management Compliance Internal auditors B. Internal auditors Compliance Operational management C. The board of directors Senior management Internal auditors D. Senior management Internal auditors External auditors

Question: 43According to the COSO Internal Control – Integrated Framework, which of the following statements is correct? A. The principles in the framework change with the application of emerging technology. B. The use of outsourced service providers relieves the organization’s responsibility for its internal control. C. The framework requires judgment in designing and conducting internal control. D. The framework is designed for larger, not smaller, organizations.

Question: 44To which of the three lines of defense for effective management of risk and control do the following entities belong? Risk management Internal auditors Operational management A. Second line of defense First line of defense Third line of defense B. Second line of defense Third line of defense First line of defense

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Third line of defense First line of defense Second line of defense D. Second line of defense First line of defense First line of defense

Question: 45Which of the following is a component of internal control defined by the COSO Internal Control – Integrated Framework? A. Internal environment. B. Control environment. C. Objective setting. D. Strategy.

Question: 46Which of the following are components of internal control defined by the COSO Internal Control – Integrated Framework? A. Event identification, information and communication, and risk assessment. B. Internal environment, control activities, and monitoring. C. Information and communication, control environment, and control activities. D. Governance, risk appetite, and control environment.

Question: 47According to the COSO Internal Control – Integrated Framework, which of the following lists provides an example of an objective, component, and entity structure? Objectives Components Entity structure A. Customization Risk assessment Entity level B. Operations Monitoring and review Function C. Reporting Control activities Division D. Compliance Value creation Division

Question: 48In a small public company that has few levels of management with wide spans of control, each of the following mitigates management override of controls, except A. Establishing an effective and anonymous whistleblower program with which employees can feel comfortable reporting any irregularities.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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B. Establishing a corporate culture in which integrity and ethical values are highly appreciated. C. Having two officers who significantly influence management and operations. D. Having an effective internal auditor function.

Question: 49Of the following reasons to establish internal control, which is the most comprehensive? A. Safeguard the resources of the organization. B. Provide reasonable assurance that the objectives of the organization are achieved. C. Encourage compliance with organizational objectives. D. Ensure the accuracy, reliability, and timeliness of information.

Question: 50Which of the following represents an example of an inherent limitation of internal controls? A. Bank reconciliations are not performed on a timely basis. B. The CEO can override a control and request a check with no purchase order. C. Customer credit checks are not performed. D. Shipping documents are not matched to sales invoices.

Question: 51Which of the following is an inherent limitation in internal control? A. Incompatible duties. B. Lack of segregation of duties. C. Faulty human judgment. D. Lack of an audit committee.

Question: 52Which of the following is an inherent limitation of internal control? A. Judgmental sampling. B. Collusion. C. Segregation of duties.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Employee peer review.

Question: 53Which of the following would not be considered an inherent limitation of the potential effectiveness of an entity’s internal control? A. Incompatible duties. B. Management override. C. Faulty judgment. D. Collusion among employees.

Question: 54Which of the following best describes an inherent limitation that should be recognized by an auditor when considering the potential effectiveness of internal control? A. Controls, whether manual or automated, whose effectiveness depends on segregation of duties can be circumvented by collusion. B. The competence and integrity of client personnel provides an environment conducive to control and provides assurance that effective control will be achieved. C. Procedures designed to assure the execution and recording of transactions in accordance with proper authorizations are effective against fraud perpetrated by management. D. The benefits expected to be derived from effective internal control usually do not exceed the costs of such control.

Question: 55Management’s aggressive attitude toward financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence an entity’s control environment when A. The audit committee is active in overseeing the entity’s financial reporting policies. B. External policies established by parties outside the entity affect its accounting practices. C. Management is dominated by one individual who is also a shareholder. D. Internal auditors have direct access to the board of directors and entity management.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 56According to COSO, which of the following is the most effective method to transmit a message of ethical behavior throughout an organization? A. Demonstrating appropriate behavior by example. B. Strengthening internal audit’s ability to deter and report improper behavior. C. Removing pressures to meet unrealistic targets, particularly for short-term results. D. Specifying the competence levels for every job in an organization and translating those levels to requisite knowledge and skills.

Question: 57A senior executive of an international organization who wishes to demonstrate the importance of the security of company information to all team members should A. Visibly participate in a global information security campaign. B. Allocate additional budget resources for external audit services. C. Review and accept the information security risk assessments in a staff meeting. D. Refer to the organization’s U.S. human resources policies on privacy in a company newsletter.

Question: 58Internal controls are likely to fail for any of the following reasons, except A. They are not designed and implemented properly at the outset. B. They are designed and implemented properly as static controls, but the environment in which they operate changes. C. They are designed and implemented properly, but their operation changes in some way. D. They are designed and implemented properly, and their design changes as processes change.

Question: 59The primary responsibility for establishing and maintaining internal control rests with A. The external auditor. B. Management. C. The controller. D. The treasurer.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 60Which of the following best describes the purpose of the three lines of defense? A. To improve stakeholder relationships between the board of directors and senior management and to clarify the organization’s risk management and control processes. B. To support the organization through the utilization of specialized skills in monitoring of noncompliance with applicable laws and regulations. C. To enhance communications on risk management and control by clarifying how specific duties should be assigned and coordinated within the organization. D. To define operational management’s responsibility in the execution of risk and control procedures for the organization on a day-to-day basis.

Question: 61Which of the following is least accurate in describing the functions that serve as the three lines of defense in an organization? A. Functions that calculate and measure risk liability. B. Functions that monitor control and risk continuously. C. Functions that evaluate control adequacy and effectiveness in responding to risks. D. Functions that develop and implement controls and risk management processes.

Question: 62Which of the following factors would most likely be considered an inherent limitation to an entity’s internal control? A. The complexity of the information processing system. B. Human judgment in the decision making process. C. The ineffectiveness of the board of directors. D. The lack of management incentives to improve the control environment.

Question: 63Which of the following items is an example of an inherent limitation in an internal control system? A. Segregation of employee duties. B. Human error in decision making. C. Ineffective board of directors. D. Understaffed internal audit functions.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 64According to COSO, the proper tone at the top helps a company to do each of the following, except A. Create a compliance-supporting culture that is committed to enterprise risk management. B. Navigate gray areas where no specific compliance rules or guidelines exist. C. Adhere to fiscal budgets and goals as outlined by the internal audit committee and board of directors. D. Promote a willingness to seek assistance and report problems before it is too late for corrective action.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Study Unit 16: Systems Development and Data Analytics 16: (115) Systems Development and Data Analytics 1: (51) Technology-Enabled Finance Transformation 2: (64) Analytics and Big Data

Subunit 1: Technology-Enabled Finance Transformation Question: 1All of the following are correct statements regarding the use of cloud computing for big data projects except A. Businesses are hesitant to invest in an extensive server and storage infrastructure that might only be used occasionally to complete big data tasks. B. Businesses only pay for the storage and computing time actually used. C. An advantage of using cloud computing includes fast access to software. D. Analysts are not required to have a detailed understanding of the available data and possess some sense of what answer(s) they’re looking for.

Question: 2Software-as-a-service can best be defined as a(n) A. On-premises ERP system installed and serviced locally. B. Type of cloud computing in which applications are hosted by a third party for a monthly fee. C. Type of database management system serviced by a third party for an annual fee. D. Infrastructure platform that replaces complex individual computers within a business.

Question: 3An analyst prepared a forecast using newly developed system features. The analyst recently left the company and her replacement was unable to understand how to use these system functionalities. In accordance with systems development life-cycle best practices, which one of the following controls would have prevented this situation from occurring? A. End-user computing efforts are outlined. B. Documentation standards and procedures are developed. C. Backup activities and requirements are put into place. D. Changes made to the system are monitored and evaluated.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 4An IT manager has only enough resources to install either a new payroll system or a new data security system, but not both. Which of the following actions is most appropriate? A. Giving priority to the security system. B. Leaving the decision to the IT manager. C. Increasing IT staff output in order for both systems to be installed. D. Having the information systems steering committee set the priority.

Question: 5An insurance firm that follows the systems development life cycle concept for all major information system projects is preparing to start a feasibility study for a proposed underwriting system. Some of the primary factors the feasibility study should include are A. Possible vendors for the system and their reputation for quality. B. Exposure to computer viruses and other intrusions. C. Methods of implementation, such as parallel or cutover. D. Technology and related costs.

Question: 6Which of the following should be reviewed before designing any system elements in a top-down approach to new systems development? A. Types of processing systems used by competitors. B. Computer equipment needed by the system. C. Information needs of managers for planning and control. D. Controls in place over the current system.

Question: 7In which of the following phases of computer system development would training occur? A. Planning phase. B. Analysis phase. C. Design phase. D. Implementation phase.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 8The process of learning how the current system functions, determining the needs of users, and developing the logical requirements of a proposed system is referred to as A. Systems maintenance. B. Systems analysis. C. Systems feasibility study. D. Systems design.

Question: 9The process of developing specifications for hardware, software, manpower, data resources, and information products required to develop a system is referred to as A. Systems analysis. B. Systems feasibility study. C. Systems maintenance. D. Systems design.

Question: 10The least risky strategy for converting from a manual to a computerized accounts receivable system would be a A. Direct conversion. B. Parallel conversion. C. Pilot conversion. D. Database conversion.

Question: 11Workwell Company operates in several regions, with each region performing its data processing in a regional data center. The corporate management information systems (MIS) staff has developed a database management system to handle customer service and billing. The director of MIS recommended that the new system be implemented in the Southwestern Region to ascertain if the system operates in a satisfactory manner. This type of conversion is called a A. Parallel conversion. B. Direct conversion. C. Prototype conversion.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Pilot conversion.

Question: 12Errors are most costly to correct during A. Programming. B. Conceptual design. C. Analysis. D. Implementation.

Question: 13The process of monitoring, evaluating, and modifying a system as needed is referred to as A. Systems analysis. B. Systems feasibility study. C. Systems maintenance. D. Systems implementation.

Question: 14An information system (IS) project manager is currently in the process of adding a systems analyst to the IS staff. The new systems analyst will be involved with testing the new computerized system. At which stage of the systems development life cycle will the analyst be primarily used? A. Cost-benefit analysis. B. Requirements definition. C. Flowcharting. D. Development.

Question: 15A major disadvantage of the life cycle approach to system development is that it is not well-suited for projects that are A. Structured. B. Large. C. Complex.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Unstructured.

Question: 16Advantages of life cycle methodologies are A. Lower overall development costs when requirements change frequently. B. Ability to give users a functioning system quickly. C. Reduced application development time to achieve a functioning system. D. Enhanced management and control of the development process.

Question: 17After reviewing the end-user computing (EUC) policy of an organization, an internal auditor audits the actuarial function and notices that some minimum control requirements are missing. Which of the following is a risk of using potentially incorrect end-user developed files? A. Management places the same degree of reliance on the files as they do on files generated from mainframe systems. B. Management receives limited information for decision making due to a lack of flexibility in EUC files. C. Management is unable to respond to competitive pressures quickly. D. Management continues to incur additional cost because it takes more hours to do the tasks using EUC.

Question: 18Which of the following is the final step before placing the system in live operation? A. Phased conversion. B. User acceptance testing. C. Dynamic testing. D. Static testing.

Question: 19All of the following are strategies for converting to a new system except A. Parallel operation. B. Direct cutover conversion. C. Pilot conversion.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. White-box testing.

Question: 20Which of the following are objectives for performing tests during system development? I. System responds correctly to all kinds of inputs II. System achieves the general result its stakeholders desire III. System meets the requirements that guided its design and development IV. System performs its functions within an acceptable time A. I and III only. B. II, III, and IV only. C. I, II, and IV only. D. I, II, III, and IV.

Question: 21Effective internal control for application development should provide for which of the following? I. A project steering committee to initiate and oversee the system II. A technical systems programmer to evaluate systems software III. Feasibility studies to evaluate existing systems IV. The establishment of standards for systems design and programming A. I and III only. B. I, II, and IV only. C. I, III, and IV only. D. II, III, and IV only.

Question: 22ABC, Inc., assessed overall risks of IT systems projects on two standard criteria: technology used and design structure. The following systems projects have been assessed on these risk criteria. Which of the following projects holds the highest risk to ABC? Technology Structure A. Current Sketchy B. New Sketchy

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Current Well defined D. New Well defined

Question: 23Gray-box testing involves A. Testing internal structures or workings of a program. B. Executing programmed code with a given set of test cases. C. Having knowledge of internal data structures and algorithms for purposes of designing tests. D. Examining functionality without any knowledge of the source code.

Question: 24Which of the following is a correct statement regarding combinatorial test design? A. Identifies the number of tests needed to get the coverage developers want. B. Seeks to verify the interfaces between components against a software design. C. Tests a completely integrated system to verify that the system meets its requirements. D. Determines whether the system meets the organization’s needs and is ready for release.

Question: 25Which of the following best describes acceptance testing? A. Determines whether the system meets the organization’s needs and is ready for release. B. Tests a completely integrated system to verify that the system meets its requirements. C. Seeks to verify the interfaces between components against software design. D. Verifies the functionality of a specific section of code and the handling of data passed between various units.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 26Which of the following statements is true regarding unit testing? I. Verifies the functionality of a specific section of code II. Checks the handling of data passed between various units or subsystem components A. I only. B. II only. C. Neither. D. I and II.

Question: 27Which of the following testing methods examines the program’s code and its associated documentation through reviews, walkthroughs, or inspections but does not require the program be executed? A. Dynamic testing. B. Static testing. C. Gray-box testing. D. Black-box testing.

Question: 28During a post implementation review of an accounting information system (AIS), an accountant learned that an AIS with few customized features had been budgeted and scheduled to be installed over 9 months for $3 million (including hardware, software, and consulting fees). An in-house programmer was assigned as the project manager and had difficulty keeping the project on schedule. The implementation took 18 months, and actual costs were 30% over budget. Many features were added to the system on an ad-hoc basis, with the project manager’s authorization. The end-users are very satisfied with the new system. The steering committee, however, is dissatisfied about the scope creep and would like a recommendation to consider before approving initiation of another large project. Based on those findings, the accountant should recommend implementing a A. Change control system. B. Contract management system. C. Budgeting system. D. Project timekeeping system.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 29A bank was considering its first use of computer-aided software engineering (CASE) to develop an inquiry system for account representatives to access consolidated profiles of customers’ accounts. A benefit of using CASE in this situation is that A. No new software development tools would be needed. B. No training of programmers would be required. C. Management of the development process would be improved. D. The need for testing would be reduced.

Question: 30Which of the following should be reviewed before designing any system elements in a top-down approach to new systems development? A. Types of processing systems used by competitors. B. Computer equipment needed by the system. C. Information needs of managers for planning and control. D. Controls in place over the current system.

Question: 31Ordinarily, the analysis tool for the systems analyst and steering committee to use in selecting the best system alternative is A. Pilot testing. B. User selection. C. Decision tree analysis. D. Cost-benefit analysis.

Question: 32Two phases of systems planning are project definition and project initiation. All of the following are steps in the project initiation phase except A. Preparing the project proposal. B. Informing managers and employees of the project. C. Assembling the project team. D. Training selected personnel.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 33The process of developing specifications for hardware, software, manpower, data resources, and information products required to develop a system is referred to as A. Systems analysis. B. Systems feasibility study. C. Systems maintenance. D. Systems design.

Question: 34A systems development approach used to quickly produce a model of user interfaces, user interactions with the system, and process logic is called A. Neural networking. B. Prototyping. C. Reengineering. D. Application generation.

Question: 35At what phase in the systems development process is a report generated that describes the content, processing flows, resource requirements, and procedures of a preliminary system design? A. File and database design. B. Conceptual systems design. C. Physical systems design. D. Procedures design.

Question: 36After using the report writer for several months, the marketing analysts gained confidence in using it, but the marketing department manager became concerned. Whenever analysts revised reports they had written earlier, the coding errors kept reappearing in their command sequences. The manager was sure that all the analysts knew what the errors were and how to avoid them. The most likely cause of the reappearance of the same coding errors is inadequate A. Backups. B. Change control. C. Access control.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Testing.

Question: 37An electronics company has decided to implement a new system through the use of rapid application development techniques. Which of the following would be included in the development of the new system? A. Deferring the need for system documentation until the final modules are completed. B. Removing project management responsibilities from the development teams. C. Creating the system module by module until completed. D. Using object development techniques to minimize the use of previous code.

Question: 38Management 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? A. Change control. B. Management override. C. Data integrity. D. Computer operations.

Question: 39Which of the following is a correct statement regarding phased conversion? A. The old system is shut down, and the new one takes over processing immediately. B. The old and new systems both run at full capacity for a given period. C. One function at a time of the new system is placed in operation. D. One branch, department, or division at a time is fully converted to the new system.

Question: 40All of the following are characteristics associated with direct cutover conversion except A. Time-saving. B. Risky. C. Inexpensive.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Safe.

Question: 41What should a company do when seeking competitive advantages in planning for the implementation of a new software system? A. Design an optimal process and then align the software. B. Design the software to fit the existing processes. C. Direct manpower to the nonbottleneck process areas. D. Allow management to dictate processes.

Question: 42Which of the following conversion strategies is characterized by a manager removing the old system and installing the new system without the possibility of reverting to the original? A. Direct changeover. B. Phased implementation. C. Parallel conversion. D. Integrated test facility.

Question: 43Which of the following large-scale conversion approaches to system implementation presents the greatest risk to an organization? A. Parallel. B. Direct. C. Phase-in. D. Pilot.

Question: 44Which of the following features is classified as part of an expert system? A. Use of electronic mail to route and approve purchase requisitions. B. Automatic obligation of budget funds as soon as an order is issued. C. Issuance of purchase requisition notices as soon as the on-hand balance reaches the reorder point.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Automatic placement of orders with suppliers who currently offer the best combination of price, freight cost, and delivery time.

Question: 45The purchasing department buys cleaning compound from four different companies. The computerized purchasing system uses a decision table to select a vendor based on continually changing costs, delivery dates, and past experience. This is an example of a(n) A. Base case system evaluation. B. Expert system. C. Parallel simulation. D. Chargeback system.

Question: 46Which of the following artificial intelligence information systems cannot learn from experience? A. Neural networks. B. Case-based reasoning systems. C. Rule-based expert systems. D. Intelligent agents.

Question: 47Which one of the following incorporates making the best decisions possible, using a logical approach by asking a series of questions, by using reasoning, and by allowing subjective inputs and outputs? A. Decision support systems. B. Expert systems. C. Multi-networking. D. Teleprocessing.

Question: 48In an effort to recognize improvement opportunities, a company is reviewing its in-house systems. The best reason for the company to consider switching to cloud computing as a solution is that it A. Is the best way to secure sensitive corporate information. B. Is accessible only from within the company on its intranet. C. Usually has lower upfront costs for equipment and maintenance.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Provides better program modification options.

Question: 49Cloud computing can best be defined as a model that A. Streamlines business processes onto a well-secured and highly available in-house e-commerce platform to optimize customers’ online experience. B. Is designed for rapid application deployment by making several virtual servers run on one physical host. C. Allows users to access network resources from remote locations through a virtual private network. D. Allows organizations to use the Internet to access and use services and applications that run on remote third-party technology infrastructure.

Question: 50A company has abandoned the large array of dedicated servers it formerly used to store and provide access to its database. The company has entered into a contract with a provider who will guarantee storage of the database at its own location along with access over the Internet. This arrangement is an example of A. Distributed computing. B. Cloud computing. C. Wide area network. D. Ethernet.

Question: 51A company is considering a move to a Software-as-a-Service (SaaS) offering instead of a traditional in-house application. Which of the following concerns is unique to SaaS? A. Disaster recovery capabilities and documented recovery procedures. B. User credential setup and control over the actions that employees can perform. C. Allocation of software expenses and overhead charged to departments. D. Ownership of processed data and costs of data migrations.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Subunit 2: Analytics and Big Data Question: 1What is a miner? A. A type of blockchain. B. An algorithm that predicts the next step in a blockchain. C. A person who is authorized to delete blocks from a blockchain. D. A computer user who validates and processes blockchain transactions.

Question: 2Which one of the following statements defines data mining? A. A process of using statistical techniques to extract and analyze data from large databases to discern patterns and trends. B. A system used to develop a firm’s performance metrics. C. A process of using algorithms that serve to facilitate efficient communication within a firm. D. A system used to organize and interpret complex data to ensure the data has been accurately recorded in the database.

Question: 3All of the following are correct statements regarding big data except A. Big data is an evolving term that describes any voluminous amount of structured, semi-structured, and unstructured data that has the potential to be mined for information. B. Big data includes information collected from social media, data from Internet-enabled devices, machine data, video, and voice recordings. The information collected is converted from high-density data into low-density data. C. Big data is often characterized by the “4 Vs”: volume, variety, velocity, and veracity. D. Big data involves processing data with analytic and algorithmic tools to reveal meaningful information.

Question: 4Which of the following is included in the Four Vs of big data? A. Volume. B. Velocity. C. Variety.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. All of the answers are correct.

Question: 5The type of data analytics that is most likely to yield the most impact for an organization but is also the most complex is called A. Diagnostic analysis. B. Predictive analysis. C. Descriptive analysis. D. Prescriptive analysis.

Question: 6In a regression analysis, the coefficient of determination (r 2) A. Identifies the causal factor in a linear model. B. Tests that the independent variable has no correlation with the dependent variable. C. Assesses how well a model can predict an outcome. D. Is the proportion of the variance in the independent variable that is predictable from the dependent variable.

Question: 7A company developed the following multiple regression equation, utilizing 10 years of data, and uses it to estimate the cost of its product. Total cost = F + aL + bM Where: F = fixed costs L = labor rate per hour M = material cost per pound Which of the following changes would most likely have the greatest impact on invalidating the results of this model? A. Changing the source of material to a low-cost foreign source. B. A significant reduction in factory overhead. C. A significant change in labor productivity. D. Renegotiation of the union contract resulting in a higher wage rate.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 8A simple regression equation has an r 2 of 0.85. This means that A. 85% of the variation of the dependent variable is explained by the regression line. B. 85% of the variation of the independent variable is explained by the regression line. C. The dependent and independent variables have a correlation coefficient of 0.85. D. The dependent variable does not have a strong correlation with the independent variable.

Question: 9An organization wants to utilize business intelligence (BI) to assist in the evaluation of key metrics. The IT manager has suggested incorporating a dashboard feature in its BI tool. Which one of the following is the main reason that management should implement the dashboard feature? A. It allows management to have as many different charts as possible. B. It shows patterns and trends in data across the organization. C. It is designed to focus on metrics that have not been met. D. It can automatically generate reorders of important materials for production.

Question: 10A hospital has observed an increase in the number of cases of a disease and has asked an analyst to collect data on the cases over the last 3 years. The analyst noted that the disease appeared 3 years ago during the second quarter of the year. Since then, the third and fourth quarters of each year showed significant spikes in the number of cases when compared to the first two quarters. What is the best way to present these findings? A. Table, showing the number of cases in each month for the last 3 years. B. Pie chart, showing the number of cases in each quarter for the last 3 years. C. Scatter plot, showing the change in the number of cases for each quarter for the last 3 years. D. Bar graph, showing the number of cases in each quarter for the last 3 years.

Question: 11Business intelligence (BI) has all of the following characteristics except A. Focusing on strategic objectives. B. Giving immediate information about an organization’s critical success factors. C. Displaying information in graphical format. D. Providing advice and answers to top management from a knowledge-based system.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 12Cook 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 number of sales offices can be used as the bases for predicting annual costs. What would be the budgeted cost for the coming year if Cook were to operate seven sales offices? A. $700,000 B. $672,000 C. $602,000 D. $586,000

Question: 13Box 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? A. y. B. x. C. bx. D. a.

Question: 14A regression equation A. Estimates the dependent variable(s). B. Encompasses factors outside the relevant range. C. Is based on objective and constraint functions. D. Estimates the independent variable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 15Mat Co. estimated its materials handling costs at two activity levels as follows: Kilos Handled Cost 80,000

$160,000

60,000

132,000

What is Mat’s estimated cost for handling 75,000 kilos? A. $150,000 B. $153,000 C. $157,500 D. $165,000

Question: 16Multiple regression differs from simple regression in that it A. Provides an estimated constant term. B. Has more dependent variables. C. Allows the computation of the coefficient of determination. D. Has more independent variables.

Question: 17Multiple regression analysis involves the use of Dependent Variables

Independent Variables

A. One More than one B. More than one More than one C. More than one One D. One One

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 18In order to analyze sales as a function of advertising expenses, the sales manager of Smith Company developed a simple regression model. The model included the following equation, which was based on 32 monthly observations of sales and advertising expenses with a related coefficient of determination of .90. Sales = $10,000 + (2.5 × Advertising expenses) If Smith Company’s advertising expenses in 1 month amounted to $1,000, the related point estimate of sales would be A. $2,500 B. $11,250 C. $12,250 D. $12,500

Question: 19The results of regressing y against x are as follows: Coefficient Intercept

5.23

Slope

1.54

When the value of x is 10, the estimated value of y is A. 6.78 B. 8.05 C. 20.63 D. 53.84

Question: 20For cost estimation, simple regression differs from multiple regression in that simple regression uses only A. One dependent variable, while multiple regression uses all available data to estimate the cost function. B. Dependent variables, while multiple regression can use both dependent and independent variables. C. One independent variable, while multiple regression uses more than one independent variable. D. One dependent variable, while multiple regression uses more than one dependent variable.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 21In preparing the annual profit plan for the coming year, Fine Company wants to determine the cost behavior pattern of the maintenance costs. Fine has decided to use linear regression by employing the equation y = a + bx for maintenance costs. The results of the regression analysis are given below. a 684.65 b 7.2884 Based upon the data derived from the regression analysis, 420 maintenance hours in a month would mean that Fine Co.’s maintenance costs (rounded to the nearest dollar) would be budgeted at A. $3,780 B. $3,600 C. $3,790 D. $3,746

Question: 22The letter x in the standard regression equation is best described as a(n) A. Independent variable. B. Dependent variable. C. Constant coefficient. D. Coefficient of determination.

Question: 23In the standard regression equation y = a + bx, the letter b is best described as a(n) A. Independent variable. B. Dependent variable. C. Y intercept. D. Slope of the regression line.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Fact Pattern: Hours of Maintenance In preparing the annual profit plan for the coming year, Wilkens Company Activity Costs wants to determine the cost behavior pattern of the maintenance costs. Wilkens has decided to use linear regression by employing the equation y = January 480 $ 4,200 a + bx for maintenance costs. The prior year’s data regarding maintenance February 320 3,000 hours and costs, and the results of the regression analysis, are given below March 400 3,600 and in the opposite column. April 300 2,820 May 500 4,350 Average cost per hour $9.00 June 310 2,960 a 684.65 July 320 3,030 August 520 4,470 b 7.2884 September 490 4,260 Standard error of a 49.515 October 470 4,050 November 350 3,300 Standard error of b .12126 December 340 3,160 Standard error of the estimate 34.469 Sum 4,800 $43,200 r2 .99724 Average 400 $ 3,600 Question: 24If Wilkens Company uses the high-low method of analysis, the equation for the relationship between hours of activity and maintenance cost would be A. y = 400 + 9.0x B. y = 570 + 7.5x C. y = 3,600 + 400x D. y = 570 + 9.0x

Question: 25Which of the following best describes unstructured data? A. Data with a high level of organization. B. Data systematically stored with markers to enforce hierarchies of records and fields within the data. C. Information that is not organized in a pre-defined manner (e.g., text-heavy facts, dates, numbers, and images). D. Conforms with the organization of data models associated with relational databases.

Question: 26Each of the following represents a characteristic of big data except A. Size. B. Mixture.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Speed. D. Uniformity.

Question: 27Which of the following are key technologies of big data? I. In-memory analytics II. Data mining III. Text mining A. I only. B. II only. C. I and III only. D. I, II, and III.

Question: 28Which of the following is a correct statement regarding Hadoop? A. It is open source software framework that stores large amounts of data and runs applications on clusters of commodity hardware. B. It analyzes data from system memory instead of hard drives. C. It is a technology that uses data, statistical algorithms, and machine-learning techniques to identify the likelihood of future outcomes based on historical data. D. It analyzes text data from the web, comment fields, books, and other text-based sources through the use of machine learning or natural language processing technology.

Question: 29Which of the following is a correct statement regarding in-memory analytics? A. It is an open source software framework that stores large amounts of data and runs applications on clusters of commodity hardware. B. It analyzes data from system memory instead of hard drives. C. It is a technology that uses data, statistical algorithms, and machine-learning techniques to identify the likelihood of future outcomes based on historical data. D. It examines large amounts of data to discover patterns in the data.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 30Which of the following is a correct statement regarding volume-based value? A. The faster businesses can inject data into their data and analytics platform, the more time they will have to ask the right questions and seek answers. B. Rapid analysis capabilities provide businesses with the right decision in time to achieve their customer relationship management objectives. C. The more data businesses have on the customers, both recent and historical, the greater the insights. D. In the digital era, capability to acquire and analyze varied data is extremely valuable.

Question: 31All of the following are correct statements regarding velocity-based value except A. The faster businesses can inject data into their data and analytics platform, the more time they will have to ask the right questions and seek answers. B. Rapid analysis capabilities provide businesses with the right decision in time to achieve their customer relationship management objectives. C. The computing power required to quickly process huge volumes and varieties of data can overwhelm a single server or multiple servers. Organizations must apply adequate computer power to big data tasks to achieve the desired velocity. D. The more data businesses have on the customers, both recent and historical, the greater the insights.

Question: 32An automobile parts manufacturer has received complaints from customers about declining quality. After a quick review, management realizes the problem has no single source. To perform a thorough process of problem identification, the most appropriate tool is a(n) A. Fishbone diagram. B. Histogram. C. Pareto diagram. D. Statistical control charts.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 33The new purchasing director is analyzing purchase orders for the organization. Which of the following analyses would best be displayed on a histogram? A. In the past year the organization placed 10,000 purchase orders. Organize the number of orders placed with each supplier, sorted in descending order. B. The average turnaround time from issuing a purchase order to receiving the merchandise is 7 days. Review the last 2,000 purchase orders, and using 10 days as the upper control limit and 4 days as the lower control limit, graph the turnaround time for each order. C. The organization purchased US $27 million worth of inventory in the past year. Distribute by value, using US $500 increments, the quantity of purchase orders that fall within each range. D. Identify and organize the reasons the average turnaround time for purchase orders falls outside the control parameters of 4-10 days.

Question: 34The director of sales asks for a count of customers grouped in descending numerical rank by (1) the number of orders they place during a single year and (2) the dollar amounts of the average order. The visual format of these two pieces of information is most likely to be a A. Fishbone diagram. B. Cost of quality report. C. Kaizen diagram. D. Pareto diagram.

Question: 35A health insurer uses a computer application to monitor physician bill amounts for various surgical procedures. This program allows the organization to better control reimbursement rates. The X-bar chart below is an example of the output from this application.

Select the interpretation that best explains the data plotted on the chart. A. Positive correlation. B. Abnormal variation. C. Normal variation.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Cyclic variation.

Question: 36Statistical quality control often involves the use of control charts whose basic purpose is to A. Determine when accounting control procedures are not working. B. Control labor costs in production operations. C. Detect performance trends away from normal operations. D. Monitor internal control applications of information technology.

Question: 37A manufacturer mass produces nuts and bolts on its assembly line. The line supervisors sample every nth unit for conformance with specifications. Once a nonconforming part is detected, the machinery is shut down and adjusted. The most appropriate tool for this process is a A. Fishbone diagram. B. Cost of quality report. C. Regression analysis. D. Statistical quality control chart.

Question: 38A chief executive officer (CEO) believes that a major competitor may be planning a new campaign. The CEO sends a questionnaire to key personnel asking for original thinking concerning what the new campaign may be. The CEO selects the best possibilities and then sends another questionnaire asking for the most likely option. The process employed by the CEO is called the A. Least squares technique. B. Delphi technique. C. Simulation technique. D. Simple regression.

Question: 39A cost-volume-profit model developed in a dynamic environment determined that the estimated parameters used may vary between limits. Subsequent testing of the model with respect to all possible values of the estimated parameters is termed A. A sensitivity analysis. B. Learning curve analysis.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. Expected value analysis. D. A time-series study.

Question: 40A cereal producer often receives complaints that boxes are underweight. To gather data on the extent of this problem, the producer should develop which of the following? A. Fishbone diagram. B. Statistical control chart. C. Cost-of-quality analysis. D. Pareto chart.

Question: 41Which of the following can be discovered using a data-mining process? A. Data structure. B. Previously unknown information. C. Artificial intelligence. D. Standard query reporting.

Question: 42Which of the following forecasting methods relies mostly on judgment? A. Time series models. B. Sensitivity analysis. C. Delphi. D. Regression.

Question: 43Which of the following is a critical success factor in data mining a large data store? A. Pattern recognition. B. Effective search engines. C. Image processing systems.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Accurate universal resource locator (URL).

Question: 44Which of the following best describes a characteristic of big data? A. Collected data often provides straightforward answers to users. B. Data collected are free from useless information or incorrect variables. C. Big data is in a visual context, such as a graph or chart, rather than a text format. D. Data of untapped markets is often not collected.

Question: 45A company uses big data analytics in marketing. Which of the following is a limitation of using big data? A. The company can use big data to predict customer behaviors. B. Data results cannot be visualized to identify and forecast customer trends. C. Big data cannot explain why customers behave in certain ways. D. Data collected only represent untapped customers but not tapped customers.

Question: 46Data visualization A. Includes visualization tools such as bubble charts, pareto diagrams, boxplots, and what-if analyses. B. Ensures the presentation of trends and correlations are understood by a wider audience without bias. C. Assists with big data analytics to display data results in a visual context. D. Is most useful to an audience when visualization tools present various items in different scales and skip values to highlight items emphasized by the presenter.

Question: 47Which of the following is a best practice for visualization tools to avoid distortion in the communication of complex information? A. Exclude calculations from the design to ensure the user can interpret data in their own way. B. Present various items in different scales and skip values to highlight items emphasized by the presenter. C. Use variant shades of the same color to present subgroups classified under one group.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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D. Ask others for feedback before finalizing the design to ensure understandability.

Question: 48A car insurance company is considering opening branches in a foreign country. The country’s population has been growing rapidly for the last 5 years. The company wants to know whether the number of car accidents are correlated with the recent population growth. Which of the following charts prepared by an analyst would be most helpful to the company? A. A line chart showing each month on the x-axis and the number of car accidents on the y-axis. B. A scatter plot showing the number of car accidents on the y-axis and the population size on the x-axis. C. A table showing the number of car accidents in rows and the population size in columns. D. A pie chart showing the number of car accidents in each city for the last 5 years.

Question: 49Corporation B recently hired a financial analyst to improve its financial results. The analyst is interested in implementing a new type of project analysis that will help evaluate the effects of small changes in advertising expenses on sales. The analyst believes that this form of analysis will be useful in forecasting the impacts of resource allocation decisions. What type of analysis is the analyst attempting to implement? A. Delphi approach. B. What-if analysis. C. The goodness-of-fit test. D. Fishbone diagrams.

Question: 50Which of the following is a primary advantage of a what-if analysis? A. It allows users to determine the effects of outcomes in all scenarios. B. It summarizes opinions from many experts and feeds the summaries back to the experts without revealing participants to each other. C. It enables users to evaluate their outcomes by applying a goal seeking approach. D. It results in a reduction of data and strengthened data integrity.

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Question: 51A cost accountant is updating its fourth quarter budget. The annual goal of cost savings is $56,000. The cost savings for the first, second, and third quarters are $12,000, $6,700, and $9,200. The accountant performed an analysis to determine the cost savings required for the fourth quarter to achieve the annual goal. This is an example of A. Monte Carlo simulation. B. What-if analysis. C. Predictive analytics. D. Time series analysis.

Question: 52What-if analysis is also known as A. Goal seeking analysis. B. Trend analysis. C. Regression analysis. D. Horizontal analysis.

Question: 53Which of the following best represents the application of predictive analytics? A. The human resource manager prepares an analysis to show which departments have the highest employee turnover. B. The website recommends pet toys and bedding after the customer purchases pet food. C. A consultant organizes an analysis of causation for dissatisfied workers and possible interactions among causes. D. A cost accountant monitors whether direct materials used are within the acceptable variations for the last 6 months.

Question: 54Which of the following techniques are most effective in identifying trends and patterns? A. Time series analysis, exploratory data analysis, predictive analytics. B. Fishbone diagrams, time series analysis, predictive analytics. C. Exploratory data analysis, Pareto diagrams, scatter plots. D. Line charts, scatter plots, Delphi approach.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 55Exploratory data analysis A. Rarely uses graphical tools in order to avoid bias generated from manipulating visualization tools. B. Aims to reveal patterns and discover insights by uncovering the underlying structure of data. C. Is often used as the last step of the data analysis process to gain new insight into the data. D. Often develops assumptions at an early stage so that anomalies can be identified sooner than traditional techniques.

Question: 56A consultant is analyzing Company A’s sales report on pants. The consultant has found that there are several unique patterns in the data. He noticed that there is a set of customers who purchased mainly one to two different types of pants in a year. This customer segment is the largest and is constantly growing. After further analyses he found that the pants purchased by each of these customers have different sizes. More analyses revealed that these customers are small clothing retail stores. The consultant then started to analyze how the company can improve supply chain management and business relationships with this specific customer segment to improve profitability. The method used in analyzing the problem is best described as a(n) A. Monte Carlo simulation. B. Regression analysis. C. Sensitivity analysis. D. Exploratory data analysis.

Question: 57An analyst is preparing a time series analysis for the sales of swimwear. He notices that, for the last 3 years, the swimwear sales rise during May and August and fall during November and February. Which of the following patterns best describes this scenario? A. Irregular pattern. B. Cyclical pattern. C. Chronological pattern. D. Seasonal pattern.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 58Which of the following most likely shows a cyclical pattern? A. Traffic peaks in the morning and evening hours. B. An increase in sales of gloves in the winter. C. Economic data affected by recession. D. An increase in oil prices due to an oil workers’ strike.

Question: 59Which of the following most likely shows an irregular pattern? A. Increase in GDP during expansion. B. Decrease in the number of tourists due to an earthquake. C. Decrease in the sales of ice cream during winter. D. Increase in the number of tourists during weekends and holidays.

Question: 60Time series analysis A. Uses trial and error to determine the effects of changes in assumptions on outcome. B. Analyzes current results against past activity to determine shifts in trends. C. Solicits opinions from experts, summarizes the opinions, and feeds the summaries back to the experts without revealing participants to each other. D. Assists with determining whether a sample is representative of the population.

Question: 61Which is the correct order of the steps in the data mining process? I. Perform regression analysis to generate an equation that models the data. II. Identify anomalies and unusual data records. III. Prepare visual presentations and reports. IV. Generalize the relationships among data. V. Find relationships between variables and group the relationships. A. I, V, IV, II, III. B. II, V, IV, I, III.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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C. II, I, IV, V, III. D. II, IV, V, III, I.

Question: 62The goal of structured query language (SQL) is to A. Evaluate and document the structure of the database. B. Clean up incorrect, incomplete, or duplicated data before uploading it into the database. C. Create, update, retrieve, and manage data within a database. D. Provide detailed information about the size, format, usage, meaning, and ownership of every data element.

Question: 63An analyst is performing a sensitivity analysis on how changes in the inflation rate and the interest rate can affect bond prices. Which of the following most likely causes the sensitivity analysis to be inaccurate? A. The interest rate changes affect bond prices to a greater extent than the inflation rate. B. Inflation is expected to increase in the next year. C. Bond prices are extremely volatile to both changes in inflation and interest rates. D. Interest rates are affected by changes in the inflation rate.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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Question: 64An analyst completed a sensitivity analysis for sales and prepared the following graph:

Based on the graph, which of the following is the most appropriate conclusion? A. If the company has less than $2,000 to spend, advertising expenses has the lowest impact on sales compared to packaging expenses and R&D expenses. B. If the company has $2,000 to spend on one of the listed cost categories it should spend it on packaging to maximize sales. C. R&D expenses has the highest impact on sales compared to packaging expenses and advertising expenses. D. If the company has $6,500 to spend on one of the listed cost categories it should spend it on R&D to maximize sales.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1

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