BEC Final Review
The Waller Walleye Plant is operating at capacity and currently generates revenue of $1,600,000 per year by processing stewed walleye for cat food. The plant currently has a 15% contribution margin. The company has been offered the opportunity to prepare stewed sturgeon for upscale cat food using one-quarter of the plant's capacity. The sturgeon job would take one year and pay $600,000 with a 25% contribution margin. The opportunity cost of not accepting the sturgeon project is: $90,000 $150,000 $600,000 $200,000
$150,000 is correct. The opportunity cost is the opportunity foregone, the $150,000 in lost contribution from not taking the new job. Sales 600k X 25%
A/R future or forward application. BUY/SELL Mitigate weak or strong domestic currency
A futures hedge contract to SELL the foreign currency received in satisfaction of the receivable at a specified price at the time the accounts receivable is due will mitigate the risk of a strengthening domestic currency FORWARD HEDGES ARE CONTRACTS BETWEEN BUSINESSES AND COMMERCIAL BANKS AND NORMALLY ARE LARGER TRANSACTIONS
A/P future or forward application. BUY/SELL Mitigate weak or strong domestic currency
A futures hedge is to BUY the foreign currency at a specific price at the time the account payable is due will mitigate the risk weakening domestic currency FORWARD HEDGES ARE CONTRACTS BETWEEN BUSINESSES AND COMMERCIAL BANKS AND NORMALLY ARE LARGER TRANSACTIONS
Contribution approach or Absorption approach yields higher NI when there is excess inventory
Absorption approach. This is because fixed manufacturing overhead is included in each unit of inventory. 360/ (Total pay period - Discount period) X Discount Percent / (100% - Discount %)
Differences between absorption and contribution
Absorption is used for IRS/Financial reporting. Fixed OH costs are included in absorption costing for product costs Contribution uses variable costing. Variable costing includes variable OH, but NOT fixed for product costs. Contribution/variable costing cannot be used for Financial reporting/IRS
LTRP is an external audit firm hired to audit the financial statements of the Craft Co. Craft recently implemented a new internal control system based on the components and principles of the Integrated Framework. The categories of deficiencies that LTRP may identify after evaluating Craft's internal controls include all of the following, except: Critical weaknesses Material weaknesses (Control) deficiencies Significant deficiencies
Choice "1" is correct. A "critical weakness" is not a defined deficiency category used by auditors when evaluating internal controls. Choices "2", "3", and "4" are incorrect. Material weaknesses, (control) deficiencies, and significant deficiencies are each categories of deficiencies used by auditors when evaluating internal controls.
A bond with face value of $10,000 maturing in two years pays annual interest of 6 percent. The market interest rate at the time of issuance is 5 percent. The bond's price at the time if issuance is closest to: $10,186 $9,817 $11,200 $10,000
Choice "1" is correct. Because the bond pays a higher coupon rate than market rate, it will be issued at a premium to par. The bond's price can be calculated as follows: Year 1 payment: 600/1.05 = $571.43 Year 2 payment: (600 + 10,000)/(1.05)2 = $9,614.51 Total value: $571.43 + $9,614.51 = $10,185.94 Choice "2" is incorrect. $9,817 is the price of a 5 percent bond issued when the market rate is 6 percent. Choice "3" is incorrect. $11,200 is the sum of the par value and the coupon payments. Choice "4" is incorrect. $10,000 is the par value of the bond.
Costs are allocated to cost objectives in many ways for many reasons. Which one of the following is a purpose of cost allocation? Measuring income and assets for external reporting Implementing activity-based costing Aiding in variable costing for internal reporting Evaluating revenue center performance
Choice 1 i correct. Cost allocation is essential for measuring income and assets for external reporting
Quantree Company is quoted credit terms of 3/15, net 60 (using a 360-day year). The effective cost of not taking this discount and paying on day 60 is (rounded to nearest hundredth) 24.74 % 18 % 18.56 % 24 %
Choice 1 is correct. The formula for computing the cost of credit discounts is
Each of the following should be considered in the selection of appropriate cost drivers for an activity based costing system, except: Volume-based production Behavioral effects Degree of Correlation Cost of measurement
Choice 1 is correct. Volume-based production (and the associated usage of each cost driver activity) will determine HOW you allocate costs once cost drivers have already been established; it will not be considered as a means for determining WHAT the appropriate cost drivers are for specific activities. Also, volume-based production is a hallmark of traditional costing where the volume alone is the essential driver of how costs are allocated.
A company has income after tax of $5.4 million, interest expense of $1 million for the year, depreciation expense of $1 million, and a 40% tax rate. What is the company's times-interest-earned ratio? 5.4 10.0 7.4 6.4
Choice 2 is correct. Times interest earned = EBIT/Total interest expense
Responsibility accounting defines an operating center that is responsible for revenue and costs as a(n): Operating Unit Profit center Revenue center Investment center
Choice 2 is correct. A profit center is responsible for revenue and costs choice 1 is incorrect. An operating unit is typically a division, which is not precisely defined.
The Sarbanes-Oxley Act of 2002 requires that the management report of internal control include all of the following, except: A conclusion about the effectiveness of the company's internal controls A statement of management's responsibilities for establishing and maintaining adequate internal controls A statement that the auditor has attested and reported on management's evaluation of internal controls A statement that there are no disagreements between management and the auditor as to the effectiveness of internal controls
Choice 4 is correct. Finanical statement disclosures include management's assumption of responsibility for internal control, management's assessment of internal control effectiveness and a statement that the auditor has reported on management's evaluation. Management does not describe disagreements, if any, between management and the auditor.
All of the following management activities of the Falco insurance group, inc. are evidence of the onging monitoring of internal controls built into the company's system, except: The CEO and CFO review monthly diaggregated gross margin and operating margin data by line of coverage The CEO and CFO are required to formally verify that all major disbursements such as for claims and reinsurance premiums fully comply with the planned program of insurance The CFO reviews changes in liability reserves in excess of a specified threshold The CFO updates the audit committee on status of internal control
Choice D is correct. Regular reporting to the audit committee represents reporting of deficiencies, not ongoing monitoring.
The following information was taken from the income statement of Hadley Co Beginning Inventory: 17,000 Purchases: 55,000 Ending Inventory: 13,000 What is Hadley Co.'s inventory turnover
Step 1. Calc COGS Beginning Inventory 17,000 + Purchases 56,000 Less: Ending Inventory (13,000) Cost of goods sold = 60,000 Step 2. calc avg inventory (17,000+13,000)/2 = 15,000 Step 3 calc inventory turnover 60,000/15,000 = 4
Several surveys point out that most managers use full product costs, including unit fixed-costs and unit variable costs, in developing cost based pricing. Which one of the following is least associated with cost-based pricing? Price justification Target pricing Price stability Fixed-cost recovery
Target pricing is least associated with (full) cost-based pricing Cost-based pricing is associated with: Price stability Price justification Fixed-cost recovery
The information contained in a COGS manufactured budget would most directly relate to the: Materials used, direct labor, overhead applied, and finished goods inventories budgets Materials used, direct labor, overhead applied, unit production, and raw materials inventories budgets Materials used, direct labor, overhead applied, work-in-process inventories, and finished goods inventories budgets Materials used, direct labor, overhead applied, and work-in-process inventories budgets
The last choice
Assumptions underlying cost-volume-profit analysis include all of the following, except: Selling prices are to be unchanged Volume is the only relevant factor affecting cost All costs can be divided into fixed and variable elements Total costs are directly proportional to volume over the relevant range.
The last choice is correct. Only total variable costs are directly proportional to volume over the relevant range.
Domestic Currency Appreciate. Net Outflow
Gain
Domestic Currency Depreciate. Net Inflow
Gain
Foreign Currency Appreciate. Net Inflow
Gain
Foreign Currency Depreciate. Net Outflow
Gain
Domestic Currency Appreciate. Net Inflow
Loss
Domestic Currency Depreciate. Net Outflow
Loss
A U.S. parent company is reviewing the cash flows from its international subsidiaries. In addition to exchange rate risk, which of the following items would be a primary consideration in the company's cash flow analysis? Repatriation restrictions American depository receipts Default risk premium Foreign trade deficit
Choice "1" is correct. Repatriation restrictions exist when a company invests money in a foreign company but is restricted from bringing that money back to its home country. These restrictions would affect the cash inflows expected from the investment. Choice "2" is incorrect. American depository receipts (ADRs) are securities of non-U.S. companies that trade in U.S. financial markets. Because they trade like regular shares of stock on U.S. exchanges and are denominated in U.S. dollars, they carry lower levels of risk than direct investments in foreign entities. Choice "3" is incorrect. The default risk premium is the additional return that a lender requires from a borrower to compensate for the risk that the borrower may not be able to make interest or principal payments. This exists in most lending arrangements and is not specific to international transactions. Choice "4" is incorrect. A foreign trade deficit is relevant at a macro level and occurs when imports exceed exports.
Which of the following steps in the development of a business continuity plan should a company initiate first? Conduct a business-impact analysis Identify critical personnel Develop an emergency contact list Prepare recovery procedures
Choice "1" is correct. The appropriate order for developing a business continuity plan for disaster recovery is as follows: Assess the key risks, identify mission-critical applications and data, develop a plan for handling these applications, determine responsibilities for parties involved in disaster recovery, and test the recovery plan. Of the choices given above, the business-impact analysis has to happen before identifying critical and emergency personnel and preparing recovery procedures themselves. Choice "2" is incorrect. Critical personnel will be identified after the business-impact analysis is performed. Choice "3" is incorrect. The emergency contact list will be developed after the impact analysis is performed. Choice "4" is incorrect. The recovery procedures are based on the business-impact analysis.
In a competitive market an increase in the minimum wage will likely have the following effects: The general (or aggregate) demand for labor will remain unchanged, however, the quantity demanded will decrease The general (or aggregate) demand for labor will increase; however, the quantity demanded will remain unchanged The general (or aggregate) supply of labor will remain unchanged; however, the quantity supplied will decrease The general (or aggregate) supply of labor will increase; however, the quantity supplied will remain unchanged.
Choice "1" is correct. The general (or aggregate) demand for labor will remain unchanged; however, the quantity demanded will decrease. Choice "2" is incorrect, per explanation for choice "1" above. Choices "4" and "3" are incorrect. The general (or aggregate) supply of labor will remain unchanged; however, the quantity supplied will increase.
Jade Imports, a U.S. company, owes significant payables denominated in Mexican pesos. Jade has noted the interest rates in Mexico are increasing and is fearful that investment in Mexico will increase the value of the peso and reduce the value of the dollar. Jade owes 300,000 pesos in 90 days, the spot rate is $0.11 to 1 peso, the yield on Mexican investments for 90 days is 12.5 percent, and domestic U.S. financing is available for 90 days at 5 percent. If Jade uses a money market hedge to capitalize on foreign and domestic rate differentials, what would be the present value of the savings on the transaction assuming a 360 day year? 1,000 600 3,000 400
Choice "2" is correct. Jade Imports is able to capitalize on savings equal to the difference between the net amount of its foreign investment and the cost of domestic borrowings, which is computed as follows: Compute the amount needed to invest at Mexican interest rates: Debt denominated in pesos 300,000 Spot rate $ 0.11 Settlement amount in dollars $ 33,000 Compute the amount that must be invested to yield the settlement amount required in 90 days at 12.5%: Required maturity amount $ 33,000 Interest rate (annual) 12.5% Period (days) 90 Days per year 360 Interest rate attributable to period 3.125% Factor 1.03125 Amount of investment $ 32,000 In order to have $32,000 to invest, the company can borrow in the US at 5% for 90 days (1.25%); this will cost Jade $400 ($32,000 x 1.25%). The total investment including financing costs will be $32,400. Compared to the settlement of $33,000, the net savings will be equal to $600 ($33,000 - $32,400).
Raven Corporation has sales of $1,500,000, an asset turnover of 3.0, and residual income of $10,000, with a hurdle rate of 8%. What is Raven's return on investment. 12% 10% 6% 2%
Choice "2" is correct. The return on investment is derived from the computation of assets from the asset turnover ratio and the computation of net income from the residual income computation as follows (numbers given in the fact pattern are shown in bold): Sales $ 1,500,000 Asset Turnover Sales 1,500,000 Investments 500,000 Asset turnover 3.00 Residual Income Investment 500,000 Required rate of return 8% Residual income threshold 40,000 Residual income 10,000 Net income 50,000 Net income 50,000 Total assets 500,000 Return on investment 10% Choices "4", "3", and "1" are incorrect, per the above calculation.
Eco Corporation wants to use the Economic Order Quantity to determine its optimal inventory order amount. To compute this measure, Eco will need to know each of the following, except: Insurance costs Annual sales revenue Cost per purchase order Carrying cost per unit
Choice "2" is correct. To compute the economic order quantity, take the square root of two times the annual sales (in units) times the cost per purchase order divided by the carrying cost per unit (an amount that frequently includes insurance costs). There is no need to know the annual sales revenue.
Corporate officers of issuers make an number of assertions regarding internal controls under the provisions of the Sarbanes Oxley Act of 2002. Among these assertions is that internal controls are evaluated Within 90 days after year end Within 90 days prior to the report Throughout the audit process 180 days after the prior year's balance sheet date
Choice "2" is correct. Under the Sarbanes-Oxley Act of 2002, internal controls must be evaluated within 90 days prior to the issuer's report.
An investor with risk-averse behavior will seek to reduce risk by mixing investments in a portfolio with different or offsetting risks. This technique is most effective to reduce: Non-diversifiable risk Unsystematic risk Market risk Systematic risk
Choice "2" is correct. Unsystematic risk is also referred to as firm-specific or non-market risk. Unsystematic risk can be reduced by diversification, investing in other companies.
Which of the following are not considered in the group of internal factors of strengths and weaknesses of a firm? Competence of management Marketing effectiveness Bargaining power of the suppliers Clarity of the strategic mission
Choice "3" is correct. Bargaining power of suppliers is considered in the group of external factors or "opportunities and threats" facing the firm and/or industry, not in the group of internal factors of strengths and weaknesses of the firm. The following are internal factors of strengths and weaknesses of the firm: Innovation of product lines Competence of management Core competencies Influence of high-level managers Capital improvements Leadership in research and development Cohesiveness of the values of the organization Marketing effectiveness Effectiveness of communication Clarity of the strategic mission The following are the external factors of opportunities and threats facing a firm/industry: Affecting overall industry and competitive environment The economy Regulations and laws Demographics of the population Technological advances and existing technology Social values Political values Affecting the competitive environment of the firm Barriers to market entry Market competitiveness Existence of substitute products Bargaining power of the customers Bargaining power of the suppliers Choices "2", "1", or "4" are incorrect, based on the above information. All of these choices are included in the list of internal factors of strengths and weaknesses within a firm.
Osteen Industries has experienced a significant drop in its cash reserves. The company is attempting to secure a line of credit from its bank as a precaution. Osteen's most effective argument on its own behalf would be: Deterioration in cash reserves results from increased investments in inventory, which will be turned over soon. Deterioration in cash reserves is tied directly to slower collections of receivables; however, the current ratio is unchanged, indicating liabilities are paid as they come due. Declining cash balances result from aggressive liquidation of accounts payable to capitalize on discount, as evidenced by an increase in the current ratio. Sudden deterioration in cash results from requirements to pre-pay annual insurance premiums; however, the trend will reverse over the course of the year.
Choice "3" is correct. The deterioration of a cash position that increases the current ratio indicates that Osteen is aggressively managing payables and actually improving its liquid position. Choice "1" is incorrect. The transfer of cash to less liquid current assets weakens the argument that line of credit indebtedness will be paid timely. Choice "2" is incorrect. Sluggish receivable collections could be indicative of continued deterioration in the quality (nearness to cash) of current assets. Choice "4" is incorrect. Dedication of cash to prepaid expenses ties up cash for the entire year. Although the cash position will rebound, it will take at least one year.
To meet its monthly budgeted production goals, Acme Mfg. Co. planned a need for 10,000 widgets at a price of $20 per widget. Acme's actual units were 11,200 at a price of $18.50 per widget. What amount reflected Acme's price variance? $24,000 unfavorable $7,200 unfavorable. $15,000 favorable $16,800 favorable
Choice "4" is correct. Price variance is computed as follows: Price variance = (Standard price - Actual price) x Actual units Price variance = ($20 - $18.50) x 11,200 Price variance = $1.50 x 11,200 = $16,800 favorable The price variance is favorable because the actual price is less than the standard price. Choice "1" is incorrect. The price variance cannot be unfavorable because the actual price is less than the standard price. It is difficult to determine, however, where the $24,000 came from; the price difference would have to be $2.14, and there is nothing in the question that clearly generates that difference. Choice "2" is incorrect. The price variance cannot be unfavorable because the actual price is less than the standard price. It is difficult to determine, however, where the $7,200 came from since there are 11,200 actual units; the price difference would have to be $.64 instead of $1.50, and there is nothing in the question that clearly generates that difference. Choice "3" is incorrect. In this answer, it seems that the price difference of $1.50 is incorrectly multiplied by the 10,000 budgeted units rather than the 11,200 actual units.
Evermore Corporation is computing its cost of using retained earnings for long-term financing under the CAPM model. The risk-free rate of return is 2%, and the market rate of return is 9%. Evermore's stock fluctuated 3% at the same time the market fluctuated 5%. The cost of retained earnings computed using the CAPM is: 8.2% 9% 7.4% 6.2%
Choice "4" is correct. The CAPM is used to compute the cost of retained earnings (kre) using the following formula: kre = Risk-free rate + Risk premium kre = krf +[beta × (km − krf)] krf = the risk-free rate of return beta = a measure of volatility equal to the change in market values to individual stock value km = the market rate of return required for investments of similar risk The facts of the problem, placed in the formula in columnar format, are as follows: Risk-free rate of return 2.00% Risk premium: Change in stock value 3.00% ÷ Change in market 5.00% Beta .6 Market rate 9.00% Less Risk-free rate (2.00%) Rate differential × 7.00% Risk premium 4.2% Total cost of retained earnings (CAPM) 6.2% Choices "2", "1", and "3" are incorrect, per the above calculations.
Consider the market for sport utility vehicles. Suppose there is a large increase in the price of gasoline as well as an increase in the price of steel (an input in the production of sports utility vehicles) What is the predicted effect of these events on the equilibrium quantity and price of sport utility vehicles? Equilibrium quantity will fall and equilibrium price will rise Equilibrium quantity will rise and equilibrium price will fall Equilibrium quantity may rise, fall, or stay the same and equilibrium price will rise. Equilibrium quantity will fall and equilibrium price may rise, fall, or stay the same.
Choice "4" is correct. To answer this question, examine how each of the events affects the demand for and supply of sport utility vehicles. Gasoline is a complement (they go together) to sport utility vehicles. As a result, a large increase in the price of gasoline would cause the demand curve for sport utility vehicles to shift left, leading to a decrease in both the quantity and price of sport utility vehicles. Steel is an input in the production of sport utility vehicles. An increase in input costs would cause the supply curve for sport utility vehicles to shift left, leading to a decrease in quantity and an increase in price. Thus, combined, the two events have an unambiguous effect on the equilibrium quantity of sport utility vehicles. Both events cause equilibrium quantity to fall. However, the two events have an ambiguous effect on price. The first causes price to fall, and the second causes price to rise. Choices "1", "2", or "3" are incorrect, based on the above explanation.
Foreign Currency Appreciate. Net Outflow
Loss
Foreign Currency Depreciate. Net Inflow.
Loss
As an organization commits to attracting, developing, and retaining capable individuals, it is supporting which of the following component of COSO's Enterprise Risk Management framework? Strategy and objective-setting Governance and culture Review and revision Performance
Choice 2 is correct. Attracting, developing, and retaining capable employees is a principle that supports the governance and culture component of COSO'S ERM framework. The governance and culture component of the framework is supported by five principles summarized by the DOVES mnemonic. Those five principles include: defines Desired culture, exercises board Oversight, demonstrates commitment to core Values, attracts capable Employees, and establishes operating Structure. Choice 4 is incorrect. The performance component of the framework is supported by five principles summarized by the VAPIR mnemonic. Those five principles include: develops portfolio View, Assesses severity of risk, Prioritizes risks, Identifies, risks, and implements risk Responses.
If an investor's certainty equivalent is greater than the expected value of an investment alternative, the investor is said to be: Risk indifferent Risk seeking Risk averse Cautious
Choice 2 is correct. If an investor's certainty equivalent, the point at which the investor is indifferent to risk, exceeds the expected return on an investment, then the investor is actually seeking lower return for higher risk. This behavior represents risk seeking behavior.
According to COSO, which of the following components of ERM addresses an entity's control over information systems? Performance Information, communication, and reporting Governance and culture Review and revision
Choice 2 is correct. The information, communication, and reporting component of the ERM framework includes principles associated with leveraging information and technology, which cover modern issues of data overload and, by extension, controls over information systems.
A working capital technique, which delays the outflow of cash, is: Factoring A draft A lock-box system Compensating balances
Choice 2 is correct. The use of a draft delays a cash disbursement and increases payable float Choice 1 is incorrect. Factoring is the sale of accounts receivable to a factor. This has no effect on cash disbursements
Which of the following factors is inherent in a firm's operations if it utilizes only equity financing? Marginal risk Financial risk Business risk Interest rate risk
Choice 3 is correct. Business risk represents the risk associated with the unique circumstances of a particular company, as they might affect the shareholder value of that company. If an entity purely uses its own cumulative earnings in capitalizing its operations, it is exposed to the risks of its own unique circumstances. Choice 1 is incorrect. Incremental changes in risk would be limited if a firm exclusively used its own equity financing to capitalize its operations Choice B is incorrect. Financial risk, also called default risk, relates to the exposure of lenders to the failure of borrowers to repay principle and interest on debt. An entity using its own cumulative earnings in capitalizing its operations is not exposed to default risk Choice D is incorrect. A business that exclusively uses equity capitalization would not be exposed to the risk that the value of its financial instruments will change as a result of changes in interest rates.
Which of the following is most likely to lead to cost-push inflation? A decline in real interest rates A sharp rise in consumer wealth A sharp rise in nominal wages A rise in consumer confidence
Choice 3 is correct. Cost-push inflation is caused by a shift left in aggregate supply. Of the answers provided, only a sharp rise in nominal wages would result in a shift left in aggregate supply.
The required rate of return is generally computed as the risk-free rate of return plus a number risk premium adjustments. All of the following risk adjustments are used to compute the required rate of return, except: Purchasing power risk premium Default risk premium Credit risk premium Maturity risk premium
Choice 3 is correct. Credit risk relates to the ability of a firm to obtain, not grant, credit. Require rate of return adjustments do not include a credit risk adjustment.
Which of the following is not a basic approach to allocating costs for costing inventory in joint-cost situations? Physical measures such as weights or volume Constant gross margin percentage net realizable value method Flexible budget amounts Sales value at split-off
Choice 3 is correct. Flexible budget amounts are not used to allocate joint costs.
A company evaluating the advantages and disadvantages of short-term and long-term financing options would note which of the following two characteristics to be true? Short Term/Longer Term Decreased Interest rate risk / Increased credit risk Increased interest rate risk / Increased credit risk Increased interest rate risk / Decreased credit risk Decreased interest rate risk / Decreased credit risk
Choice 3 is correct. Short-term financing options result in lower interest rates but higher interest rates interest rate risks because rates will fluctuate more dramatically for short-term issues than long-term issues. On the other hand, with long-term financing, credit risk will decrease because the company will seek refinancing less frequently and thereby have less credit risk or opportunity that the rates associated with debt will be changed unfavorably or that financing will be denied altogether.
The Gotham Corp regularly produces budget vs actual data for its managers. The company is particularly sensitive to personnel costs, and division variances of greater than five percent for any period are promptly investigated to determine if budgeted positions have not been filled or if there has been extraordinary overtime. Timely exception resolution of this character illustrates the information and communication principles typically associated with: Internal Communication External Communication Obtain and Use Information Financial Reporting Information
Choice 3 is correct. The principle of obtain and use information is applied when the organization obtains or generates and uses relevant, high-quality info to support the functioning of the control. In this case, management is using the exception report (information) to support the control of monitoring overtime costs. Choice 1 is incorrect. Internal communications anticipate that communications enable and support understanding and execution of internal control objectives, processes, and individual responsibilities. Variance analysis specifically supports internal control, not simply internal communications generally.
APR
Represents a noncompounded version of the EAR. Computed using the EAR interest rate times the number of periods in a year.
EAR
Represents the actual finance charge associated with borrowing after reducing loan proceeds for charges and fees related to a loan origination. Divide the amount of interest paid based on the loan agreement by the net proceeds received
What falls under prime cost?
Direct Labor + Direct Material
What falls under conversion cost?
Direct Labor + Manufacturing overhead
Money Market Hedge RECEIVABLES
Firms that do not have excess cash first borrow funds domestically and invest them internationally to satisfy the payable denominated in a foreign currency.
Money Market Hedge PAYABLES
Firms with excess cash use money market hedges to lock in the exchange rate associated with the foreign currency needed to satisfy payable when they come due
According to COSO which of the following components of the internal control integrated framework addresses an entity's financial reporting objectives? Control Environment Control Activities Information and Communication Risk Assessment
The last choice is correct. The risk assessment component of the internal control integrated framework includes principles such as financial reporting objectives risks and fraud risk The first choice is incorrect. The control environment component of the internal control integrated framework includes principles such as financial reporting COMPETENCIES, not objectives, human resources, organizational structure, etc The second choice is incorrect. The control activities component of internal control integrated framework includes principles such as policies and procedures and information and technology Choice 3 is incorrect. The information and communication component of internal control integrated framework includes principles such as internal and external communication as well as financial reporting and internal control information
Budgeted sales and budgeted COGS for the upcoming year are $212,000,000 and $132,500,000 respectively. Short-term interest rates are expected to average 5 percent. If Spotech could increase inventory turnover from its current 8 times per year to 10 times per year, its expected cost savings in the current year would be: 331,250 250,000 165,625 81,812
The third answer is correct. 132,500,000 / 8 = 16,562,500 132,500,000 / 10 = 13,250,000 16,562,500 - 13,250,000 = 3,312,500 * .05 = 165,625
Which of the following costing methods will yield the lowest inventory value? Absorption Process Variable Hybrid
Variable. Variable costing typically produces the lowest inventory values since only variable costs are capitalized. Other methodologies of inventory accounting will account for fixed costs in inventory and result in greater values than variable costing.
Effective APR
[ 1+(i/p) ]*p - 1
