BEC - Missed Questions

A firm with a higher degree of operating leverage when compare to the industry average implies that the: A) Firm's profits are more sensitive to changes in sales volume. B) Firm uses a significant amount of debt financing. C) Firm has higher variable costs. D) Firm is more profitable.

A)

According to the Committee of Sponsoring Organizations (COSO) of the Treadway Commission, which of the following components of the internal control integrated framework addresses an entity's financial reporting competencies? A. Control Environment. B. Risk Assessment. C. Control Activities. D. Information and communication.

A.

Bruell Electronics Co. is developing a new product, surge protectors for high-voltage electrical flows. The following cost information relates to the product. Direct materials 3.25 Direct labor 4.00 Distribution 0.75 The company will also be absorbing 120,000 of additional fixed-costs associated with this new product. A corporate fixed charge of 20,000 currently absorbed by other products will be allocated to this new product. If the selling price is 14 per unit, the breakeven point in units for surge protectors is: A. 20,000 B. 23,300 C. 15,000 D. 10,000

A.

In which of the following situations would it be advantageous for a country to export a manufactured product? A. The country has a comparative advantage in the production of the item. B. The country has a higher opportunity cost for production of the item. C. The country has an absolutes advantage in the production of a complementary product. D. The country's government prefers to be self-sufficient.

A.

According to the Committee of Sponsoring Organizations (COSO) of the Treadway commission, which of the following components of enterprise risk management addresses an entity's human resource standards? A. Performance. B. Governance and culture. C. Information, communication, and reporting. D. Review and revision.

B.

Alex Company had the following inventories at the beginning and end of the month of January. Finished Goods 125,000/117,000 WIP 235,000/251,000 Direct Materials 134,000/124,000 The following additional manufacturing data was available for the month of January. Direct materials purchase 189,000 Purchase returns and allowances 1,000 Transportation in 3,000 Direct labor 300,000 Actual factory overhead 175,000 Alex Company applies factory overhead at a rate 60 percent of direct labor cost, and any overapplied or underapplied factory overhead is deferred until the end of the year, December 31. Alex Company's total manufacturing cost for January was: A. 679,000 B. 681,000 C. 669,000 D. 671,000

B.

The imputed interest rate used in the residual income approach to performance evaluation can best be described as the: A. Historical weighted average cost of capital for the company. B. Target return on investment set by the company's management. C. Average return on investment for the company over the last several year. D. Marginal after-tax cost of capital on new equity capital.

B. Target return on investment set by the company's management.

The Carters signed an agreement with an effective annual interest rate of 7.74%. Interest is payable semi-annually. What was stated rate? A) 7.70 B) 15.48 C) 7.60 D) 7.50

C) Step 1 - Add 1 to 0.0774 Step 2 - Take the square root of 1.0774 to get 1.0380 Step 3 - Multiply 1.0380 by 2 to get the answer Remember Effective Interest Rate = (1+(Stated interest rate/2))^2

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: A) Sudden deterioration in cash results from requirements to pre-pay annual insurance premiums; however, the trend will reverse over the course of the year. B) Deterioration in cash reserves results from increased investments in inventory, which will be turned over soon. C) Declining cash balances result from aggressive liquidation of accounts payable to capitalize on discounts, as evidenced by an increase in the current ratio. D) 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.

C) Banks like it when you pay off your debt fast.

Clay Co. has considerable excess manufacturing capacity. A special job order's cost sheet includes the following applied manufacturing overhead costs: Fixed costs 21,000 Variable costs 33,000 The fixed costs include a normal $3,700 allocation for in-house design costs. although no in-house design will be done. Instead the job will require the use of external designers costing $7,750. What is the total amount to be included in the calculation to determine the minimum acceptable price for the job? A. 36,700 B. 58,050 C. 40,750 D. 54,000

C.

Which of the following steps in the development of a business continuity plan should a company initiate first? A. Develop an emergency contact list. B. Prepare recovery procedures. C. Conduct a business-impact analysis. D. identify critical personnel.

C.

Whatney Co. is considering the acquisition of a new, more efficient press. The cost of the press is 360,000, and the press has an estimated six-year life with zero salvage value. Whatney uses straight-line depreciation for both financial reporting and income tax reporting purposes and has a 40 percent corporate income tax rate. In evaluating equipment acquisitions of the type, Whatney uses a goal of a four-year payback period. To meet Whatley's desired payback period, the press must produce a minimum annual before-tax, operating cash savings of: A. 114,000 B. 90,000 C. 110,000 D. 150,000

C. I am not entirely sure how to solve this question.

A perfectly inelastic supply curve in a competitive market: A. Means the equilibrium price must be zero. B. Says the market supply curve is horizontal. C. Implies a vertical demand curve. D. Exists when firms cannot vary input usage.

D.

Hardwood Manufacturing has outgrown its current facility and must relocate to an expanded plant. Hardwood's management is evaluating whether to lease or buy the facility to which they will move. All of the following costs are relevant to this decision, except: A. Common area maintenance charges applicable to the leased facility. B. Annual rental expense associated with the new facility in the event a lease option is selected. C. Anticipated disposal value of the new facility in the event a purchase option is selected. D. Anticipated proceeds from the sale of current facilities to be used as a down payment for the purchase of a new plant in the event a purchase option is selected.

D. Relevant costs are those costs that change as a result of a decision.

Siaggas Corporation, a Greek shipping company, will need to purchase 1,000,000 in United States dollars with euros in six months. The risk exposure faced by the company that the value of the euro will fall in relation to the United States dollar is most precisely referred to as: A. Translation exposure B. Economic exposure C. Purchasing power risk D. Transaction exposure

D. Transaction risk

The variance in an absorption costing system that measures the departure form the denominator level of activity that was used to set the fixed overhead rate is the: A. Production volume variance. B. Flexible budget variance. C. Efficiency variance. D. Sales volume variance.

A. Production volume variance it the variance in an absorption costing system.

Corporate officers of issuers make a number of assertions regarding internal controls under the provisions of the Sarbanes-Oxley Act of 2002. Among those assertions is that internal controls are evaluated: A) Within 90 days after year end. B) Within 90 days prior to the report. C) Throughout the audit process. D) 180 days after the prior year's balance sheet date.

B)

One short-term financing technique that effectively guarantees payment to creditors and is available to entities trying to access trade credit is: A) Subordinated debentures. B) A letter of credit C) Debentures D) A line of credit

B)

Bendernet Corporation budgeted production at 6,000 units and charged 42,000 to its factory overhead account. Bendernet applies variable overhead at 3.00 per direct labor hour and assumes that each unit takes one direct labor hour to produce. The company applied 40,000 of its overhead to work-in-process based on 5,000 hours. If the company actually required 5,500 hours to produce 5,000 units, what was the total overhead variance and to what extent did volume variances contribute to or offset that variance. Total overhead variance / Volume variance A. (2,000) / (1,500) B. (2,000) / (5,000) C. (2,000) / (2,000) D. (2,000) / 4,500

B.

Government price regulations in competitive markets that set maximum or ceiling prices below the equilibrium price will in the short run: A. Cause supply to increase. B. Create shortages of that product. C. Produce a surplus of the product. D. Cause demand to increase.

B.

Hi Tech Corporation is California based company that has contracted with a sperate company in India to handle its customer service center. Hi Tech Corporation's practice is most accurately described using the term: A. Globalization B. Offshore operations C. Shared services D. Outsourcing

B.

Jose Para is an application programmer employed by the law firm of Am, Bulance, & Chasr. AB&C is a relatively small firm with a small number of application programmers for it's mainframe computer system, so Jose also acts as the system programmer for that system. Which of the following statements is correct for AB&C? A. AB&C's accounting system logs all access attempts to application programs. This feature is a compensating strength for the weakness that Jose is both an application programmer and a system programmer and will provide sufficient security. B. Since Jose is the system programmer, Jose can more than likely override any system security and provide himself with unlimited access to application programs and data. C. Since Jose already has write access to application programs in his function as application programmer, his function as system programmer will more than likely provide him no additional access. D. AB&C's accounting system logs all transactions that are entered. This feature is a compensating strength for the weakness that Jose is both an application programmer and a system programmer and will provide sufficient security.

B.

McLean Inc. is considering the purchase of a new machine that will cost 150,000. The machine has an estimated useful life of three years. Assume for simplicity that the equipment will be fully depreciated 30, 40, and 30 percent in each of the three years, respectively. The new machine will have a 10,000 resale value at the end of its estimated useful life. The machine is expected to save the company 85,000 per year in operating expenses. McLean uses a 40 percent estimated income tax rate and a 16 percent hurdle rate to evaluate capital projects. Discount rates for a 16 percent rate are as follows: Year 1: .862 Year 2: .743 Year 3: .641 The payback period for this investment would be: A. 2.94 B. 2.09 C. 1.76 D. 2.95

B.

Which of the following statements is (are) correct with respect to reporting risks? I. Strategic risk includes the risk of choosing inappropriate technology. II. Information risk includes the risk of loss of data integrity but not that of incomplete transactions. III. Financial risk includes the risk of having financial resources lost, wasted, or stolen. A. I, II and III are correct. B. I and III are correct. C. III only is correct. D. I and II only are correct.

B.

Which one of the following is correct regarding a relevant range? A. The relevant range will remain the same as long as prices do not change. B. Total fixed costs will not change. C. Total variable costs will not change. D. The relevant range cannot be changed after being established.

B.

Which of the following is incorrect with regard to government intervention in market operations? A. Rationing limits the availability of certain goods to a specified level, which lowers demand and prices for a given supply. B. A price ceiling is a price that is established above the equilibrium price, which causes a surplus to develop. C. Government intervention may create a price different from the market price, thus causing either a surplus or shortage. D. Price floors are minimum prices established by law, such as minimum wages and agricultural price supports.

B. A price ceiling is set above the equilibrium price, which causes a shortage.

Marston Enterprises sells three chemicals: petrol, septine, and tridol. Petrol is the company's most profitable product; tridol is the least profitable. Which one of the following events will definitely decrease the firm's overall breakeven point for the upcoming accounting period? A. An increase in petrol's raw material cost. B. An increase in anticipated sales of petrol relative to sales of septine and tridol. C. An increase in the overall market for septine. D. The installation of new computer-controlled machinery and subsequent layoff of assembly-line workers.

B. An increase in anticipated sales of petrol relative to sales will decrease the breakeven point.

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: A) Cost per purchase order. B) Annual sales revenue C) Insurance costs D) Carrying cost per unit

B. It is annual sales in units.

Which of the following internal control procedures would prevent an employee from being paid an inappropriate hourly wage? A. Using real-time posting of payroll so there can be no after-the-fact data manipulation of the payroll register. B. Limiting access to employee master files to authorized employees in the personnel department. C. Giving payroll data entry clerks the ability to change any suspicious hourly pay rates to a reasonable rate. D. Having the supervisor of the data entry clerk verify that each employee's hours worked are correctly entered into the system.

B. Limiting access to employee master files to authorized employees in the personnel department will minimize the entry of and thus the processing with an inappropriate hourly wage.

A controller is developing a disaster recovery plan for a corporation's computer systems. In the event of a disaster that makes the company's facilities unusable, the controller has arranged for the use of an alternate location and the delivery of duplicate computer hardware to their alternate location. Which of the following recovery plans would best describe this arrangement? A. Hot site B. Cold site C. Hot spare site agreement D. Back-up site procedures.

B. The need for equipment to be delivered makes it a cold site.

Corbin Corporation is evaluating the sample sizes associated with periodic tests of the existence of a fleet of taxis. Cash receipts associated with fares deposited daily are periodically reconciled to both the fares charged and the taxi's odometer readings. With respect to monitoring controls over cash vs. vehicles, Corbin will likely: A. Review cash and fixed assets on a periodic basis, not on a daily basis. B. Review cash on an ongoing basis and fixed assets on a less frequent periodic basis. C. Review fixed assets on an ongoing basis and cash on a less frequent periodic basis. D. Review cash and fixed assets on an ongoing basis.

B. Think more general here.

When a firm finances each asset with a financial instrument of the same approximate maturity as the life of the asset it is applying: A. Operating leverage. B. Working capital management. C. Financial leverage. D. Return maximization.

B. Working capital management matches the maturity life of each asset with the length of the financial instrument used to finance that asset.

Lafayette Company is a corporation that conducts international trade between the U.S. and France. It operates several computer systems to account for and control its business. As a matter of corporate policy, it insists that all data entered into its systems pass rigorous dat validation tests. Its accounting systems process their transactions in batch although the transactions themselves are actually entered and validated online. Which of the following statements with respect to such date validation is correct? A. Valid code tests are tests where codes entered are checked against valid values in a master file. Lafayette utilizes valid code tests on the dollar amounts in its transaction since it thinks that such test are an effective control on the entry of the dollar amounts in its transactions. B. Batch totals are used for the account numbers in all batches of transactions as they are entered. Lafayette thinks that such batch totals are an effective control on the entry of the account numbers in its transactions. C. None of the statements are correct. D. Lafayette uses check digits on all numeric fields when the data is initially entered. Lafayette thinks that check digits on all numeric fields are an effective control on the entry of the numeric fields in these transactions.

C.

In using a process cost system, a production report is usually generated that fully accounts for all units and costs. The physical flow of units is fully accounted for by: A. Determining that the equivalent units transferred in are equal to the equivalent units transferred out. B. Determining that the units in process at the beginning of the period plus the units transferred out are equal to ending inventory plus the units transferred in. C. Determining that the units in process at the beginning of the period plus the units transferred in are equal to the units transferred out plus ending inventory. D. Determining the equivalent units in ending inventory by physical count.

C. A production report is normally formatted to prove units at the beginning of the period plus units transferred in are equal to the units transferred out plus ending inventory.

Jacobs Inc. raises the sales price of its only product from 50 to 60 and as a result, the quantity demanded falls from 80 units to 60 units. Using the midpoint method for calculating price elasticity of demand, which of the following statements is correct? A. There are fewer substitutes for Jacobs' product. B. The price for Jacob's product inelastic. C. Price elasticity is equal to 1.57. D. Price elasticity is equal to 1.25.

C. It is calculated as such: (60-80)/(60+80) divided by (60-50)/(60+50) = -1.57

If Friday's file is destroyed, a new Friday file can be reproduced by using the Friday transaction file (which is stored separately) and Thursday's file. The backup concept that serves as the foundation for this process is often called: A. Critical Application Backup. B. Disk Only Backup. C. Son-Father-Grandfather Concept. D. Backups of Systems That Do Not Shut Down.

C. The Son-Father-Grandfather concept describes this backup system. The most recent file is called the son, the second most recent file is called the father, and the preceding file is called the grandfather. The process includes reading the previous file, recording transactions being processed, and then creating a new updated master file.

The primary benefit of having a financial expert on a company's audit committee is: A. The financial expert certifies compliance with SEC requirements and thereby reduces audit fees. B. The expert designation conveys a higher level of due diligence on the expert and shields audit committee members and the corporation from most liabilities. C. The enhanced level of financial sophistication of the financial expert can serve as a resource for the audit committee. D. The financial expert checks the auditor's work and verifies the appropriateness of the audit opinion.

C. The benefits of a financial expert on the audit committee relate to the expertise that the board can bring to its oversight function.

Deflation will be most beneficial for individuals who: A. Owe mortgages on residential real estate. B. Hold monetary liabilities. C. Hold monetary assets. D. Own residential real estate.

C. Think about this.

Nadaf Exports trades exclusively in luxury Persian rugs that are shipped from the Middle East and sold throughout Europe and North America. The company is trying to mitigate the transaction risks associated with settling transactions in United States dollars, Canadian dollars, and euros. Nadaf Exports would likely use any of the following transaction risk mitigation techniques except: A. Entering into currency option hedge contracts. B. Entering into futures hedge contracts. C. Strategically adjusting the sales mix between North America and Europe upon the exchange rate. D. Entering into forward hedge contracts.

C. This mitigates Economic risk not transaction risk.

Select the option below which describes a competitive strategy for an oligopolistic market structure: A. Ignore market share and focus on profitability from production levels that maximize profits. B. Pursue market differentiation by allocating resources to advertising, product enhancements, and product research. C. Allocate the proper amount of resources to advertising to ensure product differentiation and adapt to market price and/or volume changes. D. Maintain market share by frequently adjusting sales prices to the changing market price.

C. participants in an oligopolistic market structure should focus on effective advertising to differentiate their products from competitor's with similar products and to react to changes in market price and/or volumes produced.

Jade Imports, a United States company, owes significant payables denominated in Mexican pesos. Jade has noted that 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? A) 600 B) 3000 C) 1000 D) 400

D) This question is very intense.

At the beginning of the year, it was announced that Henry Pulp & Paper Co. was merging with Temple Pen & Paper Inc. If Henry is a manufacturer of paper and cardboard materials and Temple is a retailer of fine writing products, the merger would most likely be classified as a: A. Circular combination B. Diagonal combination C. Horizontal combination D. Vertical combination

D.

Extra Edge Sporting Goods has set a strategy of being in the upper quartile of sporting goods retailers. The company identified a business objective of increasing its sales force by 50 new staff members while maintaining staff cost at 0.194 cents per sales dollar. Events identified by the management of Extra Edge that might interfere with achievement of its business objective would include all of the following, except: A. Job markets may heat up and cause fewer offers to be accepted for the expanded sales force. B. Inadequate needs assessments may result in bad staffing decisions. C. Job markets may slow down and result in more staff accepting positions than there are available positions. D. Product demand may fall if sporting goods become less popular.

D. Although product demand is a legitmate concern, the business objective is associated with staffing levels.

In order to increase production capacity, Gunning industries is considering replacing an existing production machine with a new technologically improved machine effective January 1, 20X4. The following information is being considered by Gunning industries. - The new machine would be purchased in cash for 160,000. Shipping, installation, and testing would cost an additional 30,000. - The new machine is expected to increase annual sales by 20,000 units at a sales price of 40 per unit. Incremental operating costs are comprised of 30 per unit in variable costs and total fixed costs of 40,000 per year. -The investment in the new machine will require an immediate increase in working capital of 35,000. - Gunning uses straight-line depreciation for financial reporting and tax reporting purposes. The new machine has an estimated useful life of five years and zero salvage value. - Gunning is subject to a 40 percent corporate income tax rate. Gunning Industries' net cash outflow in a capital budgeting decision would be: A. 190,000 B. 204,525 C. 195,000 D. 225,000

D. Do not forget to include the working capital requirement increase.

Management has carefully evaluated the likelihood and impact of events on its foreign operations. In the event of a 3% variation in exchange rate, the impact is estimated at 10 million without any action taken by management and 4 million if the company purchases a hedge instrument. The impact of the inherent risk of changes in foreign currency exchange on achieving company's business objectives is: A. 14 million B. 4 million C. 6 million D. 10 million

D. Inherent risk is the risk to an entity in the absence of any actions management might take.

American Coat Company estimates that 60,000 special zippers will be used in the manufacture of men's jackets during the next year. Reese Zipper Company has quoted a price of .60 per zipper. American would prefer to purchase 5,000 units per month, but Reese is unable to guarantee this delivery schedule. In order to ensure availability of these zippers, American in considering the purchase of all 60,000 units at the beginning of the year. Assuming American can invest cash at eight percent, the company's opportunity cost of purchasing the 60,000 units at the beginning of the year is: A. 1,440 B. 1,500 C. 2,460 D. 1,320

D. You got this one right but forget it is the average balance so you need to divide by 2.