CMA PART 1 REVISION

three objectives of a system of internal control.

A good system of internal control is designed to provide reasonable assurance regarding achievement of an entity's objectives involving effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.

Flexibility strategy

A strategy in which a company strives to adapt to changing market conditions by developing new products/services, markets, and technologies many diff products

centralized organization (ch12)

A structure in which top-level managers delegate little authority to lower levels

A 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

equity

validity check

an edit test that compares the ID code or account number in transaction data with similar data in the master file to verify that the account exists

A Pareto diagram displays the values of an independent variable such that managers can quickly identify the areas most in need of attention. The variables involved must be quantifiable.

pareto

UNFAV materials price

the actual price paid for materials is higher that the estimated standard price UNDESIRABLE MAy indicate higher prices

Which of the following parties is responsible for defining expectations regarding integrity, ethical values, and the accountability of the organization?

bod

NON CURRENT

bonds payable

static budget

budgeted inputs*standard price

avoidable

can be eliminated

Joint costs

cannot be ALLOCATED

capital expenditures

capitalized

PRODUCT COSTS

capitalized as part of FG inv eventually they become part of COGS

CURRENT ASSETS

cash AR NOTES REC Inventories Prepaid expenses

Which one of the following schedules would be the last item to be prepared in the normal budget preparation process?

cash budget

outlay

cash disbursements

Issuance of Stock

cash increases

If employee paychecks are distributed by hand to employees, which one of the following departments should be responsible for the safekeeping of unclaimed paychecks?

cashier department

Question: 2The physical reconfiguration of equipment that often accompanies the institution of a just-in-time manufacturing regime is described as the creation of

cells

What is the correct ascending hierarchy of data in a system?

character field record file

DISCRETIONARY

characterized by an uncertainty in the degree of causation between the level of putput and the quantity of resources consumed r&d

Input Controls

check digits, limit checks, and sihn tests

target

claculating the price for a product by adding the dired unti profit margin to the total unit cost

Mixed costs-semivariable costs

combine fixed and variable elements eg rental expense

Classes of Stock

common and preferred

A cost incurred for the benefit of more than one cost objective is

common cost

variable -(direct costing)

considers only variable mauf. costs to be rpoduct costs

statement of CI

consists of NI+ Other CI

STATIC BUDGET

consists of a flexible budget variance and a sales vol variance

rework

consists of end products that do not meet standards

A 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?

continuous( being revised monthly , quarterly etc)

The 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

control activities

What operations strategy is most likely to be adopted when the product sold by an organization is a commodity and the market is very large?

cost strategy

sunk

costs either already paid or irrevocably committed to incur

carrying costs

costs for holding and storing

upstream

costs incurred before productio n

discretionary costs

costs that organizations have discretion in deciding whether to fund them UNCERTAINTY

An 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?

creating the system module by module

ch15) 7 phases of data life cycle

data capture data maintenance data synthesis data usage data publicaation data archival data purging

data life cycle

data capture data maintenance data synthesis and analysis usage publication archival purging

A 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

data governance

What term is defined as the processing of data for the enterprise without deriving any value from it?

data maintenance

The issuance of monthly statements to customers is an example of which phase of the data life cycle?

data publicatiom

method

debraciable base= machine value-salvage depreciable( units/total units)

5 stages

define questions obtain relevant data clean /normalize data communicate results

EXTERNAL USERS

determine whether to do business with the company ARE: Creditors investors fin. advisors reg agencies stock exchanges

acceptance testing?

determines whether a system satisfies its acceptance criteria, enabling the customer to decide whether or not to accept a system. ready for release

total fc OH variance

diff between actual and product of budgeted application rate and standard input allowed for actual output

Spending variance

diff between actual oh and flexible budget

Price Variance

diff between amount paid for all units of msterials and the amount expected to be paid

Impairment lost

diff between carrying amount and FV

efficiency variance

diff between flexible budget and static budget

benefits of ABC

diff costs between value and non value activities all org exps as variable

differential

difference between 2 decisions

(ch11) variances

differences betwen actual and budgeted amounts managemnt needs to be notified so they can take corrective actions

Costs that arise from periodic budgeting decisions that have no strong input-output relationship are commonly called

discretionary

DIVIDENDS

distributions paid to owners

A company has recorded the following payments for the current period:Interest paid on bank loan$300,000Dividends paid to shareholders200,000Repurchase of company stock400,000The amount to be shown in the financing activities section of the statement of cash flows should be

dividends repurchase

financing

dividends paid

A systemized approach known as zero-based budgeting (ZBB)

divides the activities of individual resp. centers into a series of oacjages

When using throughput costing, inventoriable costs would include onlyA.Direct material and direct labor costs.

dm

logic bombs

do not replicate

3E's

efficiency effectiveness Economy

variance analysis

enables management by exception

Encoding electronic data through the use of an algorithm to make information unreadable to unauthorized individuals is identified as

encrytpiom

Which one of the following is usually not cited as being an advantage of a formal budgetary process?

ensures improved cost control and prevents ineficiencies

Going Concern Assumption

entity is assumed to continue operating undifintely

Which of the following is a challenge of adopting integrated reporting (IR)?

Filtering the increased information available to users.

indirect

Fin advisors stock amrkets reg authorities

Which of the following is least accurate in describing the functions that serve as the three lines of defense in an organization?

Functions that calculate and measure risk liability.

An objective of financial reporting is

Providing information useful to investors, creditors, donors, and other users for decision making.

A primary objective of external financial reporting is

Provision of information that is useful to present and potential investors, creditors, and others in making rational financial decisions regarding the enterprise.

INPUT METHOD

Recognizes revenue on the basis of the entity's inputs to the satisfaction of the performance obligation relative to the total expected inputs to the satisfaction of that performance obligation

DM Quantity Variance

SP(AQ-SQ)

DL Efficiency Variance

SR(AQ-SQ)

Proforma Statement

Sales -cogs =GM -Non man costs =OI

When preparing a master budget, which one of the following is the order in which the component budgets are commonly prepared?

Sales, production, direct materials purchased, cost of goods manufactured, income statement, capital, cash, and balance sheet.

ch8) throughput margin

Sales-DM

Fishbone diagram

See Cause and Effect Diagram. studying causation

three ways that the procedure for handling returned product violates the internal control system of segregation of duties.

Segregation of duties requires that no one person have control over the physical custody of an asset and the accounting for it. There is no evidence to suggest Smallparts makes any effort to account for the value of returned product, which may indeed be significant. The one salesperson seems to be in charge of all aspects related to returned product, including authorizing the returns, crediting the customers, receiving the returns, handling the physical custody, finding new customers, concluding sales, shipping, billing, and collecting. Most of these rules should be separated.

Which one of the following statements regarding selling and administrative budgets is most accurate?

Selling and administrative budgets need to be detailed in order that the key assumptions can be better understood.

Which of the following is a correct statement regarding volume-based value?

The more data businesses have on the customers, both recent and historical, the greater the insights.

flexible

the calculation of thwe quantity and cost of inputs that should have been consumed given the achieved level of production

Governance

the combination of people, policies, procedures and processes that help ensure that an entity effectively and efficiently direct its activities toward meeting the obj of its stakeholders

flexible

the diff between the actual results and the budgeted amount for the actual activity level

SALES MIX VARIANCE

the difference between budgeted contribution margin for the actual sales mix and budgeted contribution margin for the budgeted sales mix

Static Budget Variance

the difference between the actual result and the corresponding budgeted amount in the static budget Flexible budget var+sales volume var

Outcomes are an element of the value-creation process. They are

the effects of outputs on 6 capitals

cash

the last to be prepared

Shares Authorized

the maximum number of shares a corporation can issue

life cycle

the need to price products to cover all the costs incurred over the lifespan of product upstream/downstream

budgetary slack (ch10)

the practice of underestimating budgeted revenues or overestimating budgeted costs to make budgeted targets easier to achieve

data mining

the process of analyzing data to extract information not offered by the raw data alone

Which of the following considerations is least likely to affect how an organization implements a system of internal control?

the ratio of oart time to full timers

actual

the recording of product costs based on actual cost of materials , cost of labor and OH incurred most accurate method least timely most volatile

equity

the residual interest in the assets of the entity after subtracting all its liabilities exs common stock pref. stock RE

An investment in trading securities is measured on the statement of financial position at the

FV

Goodwill

FV of total assets -current liabilites

Capacity expansion is also referred to as

market penetration

Under a standard cost system, the materials efficiency variances are the responsibility of

Production and industrial engineering.

labor variances responsibility

Production department

A budget that expresses the operating and financial plans of management for a fiscal year is called a

master budget

CHALLENGES

materiality data quality assurAncce lack of standards tone @ the top

FOB shipping point

ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller

A typical life cycle progression for a successful firm within the Boston Consulting Group's growth-share matrix is

.Question mark, star, cash cow, dog.

An accounting system identification code that uses a sum-of-digits check digit will detect all of the following errors except

.Transposition errors.

When using fair value accounting, it would be to a firm's benefit to report the liability at fair value when it has

$28 million in outstanding bonds trading at 98.

A 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

$5

YIELD VARIANCE

(STQ-ATQ) *SMSP

secondary controls

- Compensatory - Complementary

A master budget was prepared based on the following projections:,, Sales $2,400,000 Decrease in inventories 60,000 Decrease in accounts payable 100,000 Gross margin 40% Estimated cash disbursements for inventories are

.6*2,400,000

The term "gross margin" for a manufacturing firm refers to excess of sales over

.Cost of goods sold, including fixed indirect manufacturing costs.

The principal disadvantage of using the physical quantity method of allocating joint costs is that

.Costs assigned to inventories may have no relationship to value.

The primary difference between absorption and variable costing is that variable costing treats

.Only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs.

The most critical aspect of the separation of duties within a mainframe information systems environment is between

.Programmers and computer operators.

COSO Framework

1. Control Environment 2. Risk Assessment 3. Control Activities 4. Information and Communication 5. Monitoring

In 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

110,000 The carrying amount of the PPE account, net of accumulated depreciation, is increased by the cost of purchases and decreased by the carrying amount of items of PPE sold and depreciation. The net PPE decreased by the carrying amount of items sold, or $20,000 ($50,000 cost - $30,000 accumulated depreciation), and by the $10,000 of depreciation. If PPE still increased by $80,000, $110,000 ($30,000 total decrease + $80,000 increase) of equipment must have been purchased.

SALES BUDGER

1st to be prepared

depreciation expense -DDB

25% 864-(864*.25)=648 648*.25=162

In 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?

30+80=110

SYD

36 machine value-salvage value=864-144=720 720*(7/36)

If 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

450000

SYD

5/15*cost

A 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

65000 Beginning work-in-process, being 90% complete, already had Material B added in the previous month, so it did not produce EUP for this month. By the same token, ending work-in-process, being only 60% complete, did not have Material B added this month so it did not produce EUP for this month. The EUP for Material B is therefore only the 65,000 units started and completed during the month.

What is the minimum length of time tax documents (no suspicion of fraud) must be kept?

7

A 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-of-production method of depreciation will be

80500 Depreciation expense equals cost minus residual value, times the estimated hours of use in Year 2 divided by the total estimated hours of use. Thus, depreciation expense is $80,500 [($300,000 - $70,000) × (700 hours ÷ 2,000 hours)].

A simple regression equation has an r 2 of 0.85. This means that

85% of the variation of the dependent variable is explained by the regression line.

each report should contain :

9 elements

A 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

90000 Cash dividends are only paid on outstanding shares. Thus, the dividend payable at December 31 is $90,000 (900,000 × $.10). Stock dividends distributable are reported in equity, not current liabilities.

stock dividend

<20-25

actual results

= AQ X AP(actaul inputs*actual price)

Goods Available for Sale

= BEG INV+NET PURCHASES+FREIGHT IN

Total DL Variance

= DL flexible budget variance

cost of goods sold

=goods avail 4 sale -end inv

stock split

>20-25 in a form of a dividend fair value

Using the two-variance method for analyzing factory overhead, which of the following is used to compute the controllable (budget) variance?

A budget allowance based on standard input but not a budget allowance based on actual input.

Which of the following changes in accounting policies resulting from a significant change in the expected pattern of economic benefit will increase profit?

A change from FIFO to weighted-average inventory valuation when costs are falling.

What is a miner?

A computer user who validates and processes blockchain transactions.

Which one of the following statements best demonstrates the concept of the learning curve?

A learning curve is a percentage by which average time per unit produced decreases as output doubles.

finance lease

A lessee must report a lease as a finance lease if the present value of the lease payments and any residual value guaranteed by the lessee is 90% or more of the fair value of the leased asset. If the lessor's implicit rate is known to the lessee, that is the appropriate discount rate. Dividing the present value by the list price of the automobile yields a result > 90% ($15,496 ÷ $17,000 = 91.2%). Thus, this lease must be classified by the corporation as a finance lease.

Average Method

A method to establish a case loss reserve by using an average amount for specific categories of claims.

On 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 patent is amortized over the shorter of its useful life or legal life, so annual amortization on this patent is $1,700 ($17,000 ÷ 10 years). The depreciation expense for the year of acquisition is $850 [$1,700 × (6 ÷ 12 months)]. The patent should therefore be reported at December 31 at $16,150 ($17,000 - $850).

integrated thinking is

A prerequisite to integrated reporting about performance.

impairment test

A qualitative assesment of whether an investment is impaired must be performed @ each reporting date investment is impaired IF FV< carrying am,ount

Which of the following statements is true regarding internal control objectives of information systems?

A secure system may have inherent risks due to management's analysis of trade-offs identified by cost-benefit studies.

A 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 + bMWhere: F=fixed costs L=labor rate per hour M=material cost per poundWhich of the following changes would most likely have the greatest impact on invalidating the results of this model?

A significant change in labor productivity.

Business Intelligence (BI)

A term combining aspects of reporting, data exploration and ad hoc queries, and sophisticated data modeling and analysis.

FACTORINF

A transfer of receivables to a third party (facotr) who assumes the responsibility of collection

Investments classified as held-to-maturity are measured at

Amortized cost, with no unrealized gains or losses reported.

weighted average

Average of data that takes other factors such as the number of incumbents into account. determined only @ the end of the period

A firm develops an annual cash budget in order to

Avoid the opportunity costs of noninvested excess cash and minimize the cost of interim financing

UN

ACTUAL GREATER Tahn standard

A 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

ADDED TO THE UNITS produced

Sales price variance

AP-SP) *AQ

Enterprise resource planning (ERP) belongs to which of the following categories of IT?

APPLICATIONS

Direct Labor Rate Variance

AQ *(AP-SP)

DM Price variance

AQ( AP-SP)

Mix Variance

ATQ ( SMSP-AMSP)

The 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

Absorbed as a corporate expense.

a decrease in income?

Accelerating purchases at the end of the year when using last-in, first-out inventory method in times of rising prices.

Which of the following controls is most effective in providing assurance that recorded purchases are free of material errors?

Accounts payable compares the receiving report to the purchase order.

Prime Cost

Direct Materials + Direct Labor

Cost drivers are

Activities that cause costs to increase as the activity increases

FAVORABLE ( COST side)

Actual LESS than standard

According to COSO, the proper tone at the top helps a company to do each of the following, except

Adhere to fiscal budgets and goals as outlined by the internal audit committee and board of directors.

two advantages and two limitations of activity-based costing.

Advantages: The ABC system better captures the resources needed for model M-11 and model R-24. It identifies all of the various activities undertaken when producing the products and recognizes that different products consume different amounts of activities. Hence, the ABC system generates more accurate product costs. Limitations: ABC requires continuously estimating cost drivers, updating and maintaining the system, which make the system relatively costly. A complicated system is sometimes confusing to the top management Estimation of cost of activities and selection of cost drivers sometime may cause estimation errors which could results in misleading cost information.

A.Attesting to the effectiveness of the controls over financial reporting.

All of the following are typically responsibilities of the board of directors except

All of the following are benefits of just-in-time manufacturing except that it

Allows for minor defects without shutting down operations.

Under IFRS, an entity that acquires an intangible asset may use the revaluation model for subsequent measurement only if

An active market exists for the intangible asset.

specific identification method

An actual physical-flow costing method in which particular items sold and items still in inventory are specifically costed to arrive at cost of goods sold and ending inventory.

decentralized organization

An organization in which lower-level managers make important decisions

How should the acquirer recognize a bargain purchase in a business acquisition?

As a gain in earnings at the acquisition date.

three benefits of using a flexible budget

As a planning tool, the flexible budget allows management to estimate income at more than one level of output. This aids in allocating resources and allowing management to plan for sufficient resources to meet its needs. b. As an evaluation tool, actual results are compared with standard costs for actual output. This provides for a fairer comparison and allows for variance computations to better assess performance. c. Make better use of historical budget information to improve future planning. d. As an evaluation tool, comparing actual results to the flexible budget will not hide poor performance. If output is less than budgeted, comparing actual costs for a lower number of units with master-budgeted costs for a greater number of units will most likely yield favorable variances even though cost inefficiencies may have existed.

A 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?

As progress is made toward completion of the contract.

Which of the following is a best practice for visualization tools to avoid distortion in the communication of complex information?

Ask others for feedback before finalizing the design to ensure understandability.

Internal auditors are responsible for

Assessing the risk exposures in relation to the organization's operations regarding the safeguarding of assets.

A segment of an organization is referred to as a profit center if it has

Authority to make decisions affecting the major determinants of profit including the power to choose its markets and sources of supply.

Segregation 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

Collusion among employees.

abnormal spoilage

Beginning inventory 2,200 Add: Started and completed 4,000 Less: Transferred out (3,000) Less: Ending inventory (1,500) Total spoilage for period 1,700 Less: Normal spoilage (1,000) Abnormal spoilage for period 700

st of changes of equity has

BEG inv

A 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?

BENCHMARKING shpuld perform between same level companies

Percentage-of-receivables method

BS APPROACH

ROI

BUSS.unit profit/assets

EFFICIENCY VARIANCE

BUdgeted application rate *(actual input-standard input allowed for actual output)

An 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?

Be able to identify the model and serial number for the laptops.

The firm should emphasize customer retention

Because the customer base is an intangible asset.

budgetary slack

Budgetary slack is the practice of underestimating budgeted revenues, or overestimating budgeted costs, to make budgeted targets more easily achievable. Budgetary slack misleads top management about the true profit potential of the company, which leads to inefficient resource planning and allocation as well as poor coordination of activities across different parts of the company.

Which of the following is normally included in the financial budget of a firm?

Budgeted balance sheet.

An advantage of using a flexible budget compared to a static budget is that, in a flexible budget,

Budgeted costs for a given output level can be compared with actual costs for the same level of output.

What amount of revenue on this contract is recognized by Big in its Year 1 income statement?

By the end of Year 1, 35% [$700,000 ÷ ($700,000 + $1,300,000)] of total expected costs have been incurred. Using the input method based on costs incurred, 35% of the revenue from the contract is recognized in Year 1. Thus, $875,000 ($2,500,000 × 35%) of revenue from this contract is recognized in Year 1.

A 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

CM per machine hour

allowance for uncollectible accounts

CONTRA

Management 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?

Compare payments with inventory additions from production.

At 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?

Conceptual systems design.

An 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?

Confidential information can be intercepted.

Independence and objectivity are most likely impaired by an internal auditor's

Continuation on an engagement at a division for which (s)he will soon be responsible as the result of a promotion.

CM

Contribution margin is the difference between total revenues and operations costs. It explains why operating income changes as the number of units sold changes. It helps to evaluate if sales volume is sufficient to insure profitability. Contribution margin contributes to covering fixed costs and it is a critical component in breakeven (cost/volume/profit analysis) to determine if sales are sufficient.

A flexible budget is appropriate for

Control of direct labor and direct materials but not fixed factory overhead.

Which one of the following is not an advantage of a participatory budgeting process?

Control of uncertainties.

COST CLASSIFICATION

Controllable/non controlable avoidable /committed incremental/differential engineered /discretionary outlay/opportunity relevant/sunk joint/separable normal/abnormal rework/scrap /waste other

According to IFRS, which accounting policy may an entity apply to measure investment property in periods subsequent to initial recognition?

Cost model or fair value model.

cogs

Cost of goods sold = Beginning inventory + Cost of goods manufactured - Ending inventory

Under the Foreign Corrupt Practices Act (FCPA), an action may be brought that seeks

Criminal sanctions against both the corporation and its officers by the Department of Justice.

A corporation has determined that when the quantity produced in units doubles from x to 2x, the average time per unit for 2x units is 90% of the average time per unit for x units. The decline in time per unit as production doubles is an example of

Cumulative average-time learning model.

A 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)

Decrease in the deferred tax liability account.

When the allowance method of recognizing uncollectible accounts is used, the entry to record the write-off of a specific account

Decreases both accounts receivable and the allowance for uncollectible accounts.

Which of the following is the elementary unit of data storage used to represent individual attributes of an entity?

DATA FIELD

an UNFAV variance

DECREASES Income

Sales Volume Variance

DIFF between actual and budgeted unit sales (AQ-SQ)*SCM

converions costs

DL+MAN OH

Conversion costs do not include

DM

Flexible Budget Variance components

DM DL MAN OH

DM VARIANCE

DM PRICE VAR DM QUANTITY VARIANCE

A processing control helps to provide reasonable assurance that

Data is entered properly into a computer system.

big data?

Data of untapped markets is often not collected.

The advantages of using variable costing are:

Data required for cost-volume-profit analysis can be taken directly from the statement. The profit for a period is not affected by changes in inventories. Unit product costs do not contain fixed costs that are often unitized, a practice that could result in poor decision-making. The impact of fixed costs on profits is emphasized. It is easier to estimate a product's profitability. It ties in with cost control measures such as flexible budgets.

DB2, Oracle, SQL Server, and Access are

Database Management Systems

The greatest challenge for an organization that adopts integrated reporting (IR) is

Defining materiality for providers of financial capital.Answer (C) is correct.

According to COSO, which of the following is the most effective method to transmit a message of ethical behavior throughout an organization?

Demonstrating appropriate behavior by example.

Appropriate control over obsolete materials requires that they beAppropriate control over obsolete materials requires that they be

Determined by an approved authority to be lacking in regular usability.

A 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

Direct materials and cash flow.

current assets have

END inv

In Mint's December 31, Year 6, balance sheet, what amount should be reported as total retained earnings?1

Earnings before taxes equals $1,500,000 ($6,680,000 revenues - $5,180,000 expenses). Income tax expense is thus $450,000 ($1,500,000 × 30%) and net income $1,050,000 ($1,500,000 - $450,000). Year-end retained earnings is therefore $2,110,000 ($900,000 unappropriated RE + $160,000 restricted RE + $1,050,000 net income).

A 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

Earnings per share projections.

Activities, 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?

FACILITY LEVEL

spoilage

Ending inventory =Beginning inventory + Units started and completed - Units transferred out - Normal spoilage - Abnormal spoilage

Advantages of life cycle methodologies are

Enhanced management and control of the development process.

the challenge for adopters of integrated reporting (IR) is

Enhancing the quality of integrated reports by providing assurance on nonfinancial information.

Which one of the following is usually not cited as being an advantage of a formal budgetary process?

Ensures improved cost control within the organization and prevents inefficiencies.

Which one of the following duties assigned to the cashier exposes the organization to a control risk in terms of segregation of duties?

Entering information in the accounts receivable subsidiary ledger.

The amount recorded initially by the lessee as a lease liability should normally

Equal the present value of the lease payments at the beginning of the lease.

Proprietary Method

Equity is what remains after the econ oblig are deducted

A sound disaster recovery plan contains the following components:

Establish priorities for recovery process Identification of software and hardware needed for critical processes Identify all data files and program files required for recovery Store files in off-site storage Identify who has responsibility for various activities, which activities are needed first Set up and check arrangements for backup facilities Test and review recovery plan

A 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?

Establish separate pools for variable and fixed costs.

Which one of the following actions would most effectively address the issue of internal control risk related to the custody of cash receipts?

Establishing a lockbox deposit system at a regional bank.

An organization's directors, management, and internal auditors all have important roles in creating a proper control environment. Senior management is primarily responsible for

Establishing a proper ethical culture.

The expected monetary value of an act is the

Expected value analysis estimates future monetary value based on forecasts and their related probabilities of occurrence. The expected value under uncertainty is found by multiplying the probability of each outcome (event) by its payoff (conditional profit or loss) and summing the products.

PERIOD COSTS

Expensed as incurred , excluded from COGS

Exploratory data analysis

Exploratory data analysis seeks to maximize insight into a data set, uncover an underlying structure, and check for outliers and anomalies. The main role of exploratory data analysis is to open-mindedly explore in order to gain some new, often unexpected, insight into the data.

he starting point for creating a master budget for a proprietary secretarial school would be

Forecasting enrollment.

FOB destination

Freight terms indicating that ownership of goods remains with the seller until the goods reach the buyer.

Which of the following statements is not indicative of governance, risk, and compliance (GRC) systems?

GRC systems are not tasked with identifying the source of risks.

In 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

Gain immediately in the income statement.

The 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

Have the internal audit charter approved by the board.

PERCEMTAGE OF SALES METHOD

INCOME ST. APPROACH

A FAV variance

INCREASES income

Sales type lease

INTerest revenue should be recognized over the period of the lease using the effective interest

TOTAL RISK

IR*CR*DR

(ch4) 3 major concepts of IR

IT IR value creation

ideal standards

Ideal standards, also known as theoretical standards

Biometric identification system

Identify authorized personnel through unique physical traits such as fingers, hands, voice, eyes, face, writing dynamics, and the like.

The COSO model component of Risk Assessment focuses on

Identifying the risks in all areas and establishing the vulnerability of the organization.

In a production process where joint products are produced, the primary factor that will distinguish a joint product from a by-product is the

If production results in joint products, the primary factor that distinguishes a joint product from a by-product is the relative total sales value of the products.

The major disadvantage of a budget produced by means of a top-down process is

Impairment of goal congruence.

Which of the following controls would most likely minimize defects in finished goods because of poor quality raw materials?

Implementation of specifications for purchases.

Integrated reports

Include financial and nonfinancial information.

RI

Income from ops-min return

The basic objective of the residual income approach to performance measurement and evaluation is to have a division maximize its

Income in excess of a desired minimum return.

RI

Income of business unit - (Assets of business unit × Required rate of return)= Residual income 250,000 - (1,000,000 × 0.10) = 150,000

ROI

Income/assets

An 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

Increased by its share of the earnings of the investee, and is decreased by its share of the losses of the investee.

gains

Increases in equity from peripheral or incidental transactions of an entity

The U.S. Public Company Accounting Oversight Board (PCAOB) seeks to protect investors by requiring public companies t

Integrate an internal control audit with the financial statement audit.

A 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 real-time system?

Integrated Test Facility (ITF).

Under IFRS, what amount should Stockholm Co. compare with historical cost to measure the amount at which the wickets should be measured?

Inventory is recorded at cost. However, inventory must be written down if its utility is no longer as great as its cost. To make this determination under IFRS, historical cost is compared with the inventory's net realizable value (NRV). NRV is the estimated selling price in the ordinary course of business minus estimated costs of completion and sale. NRV for the wickets is $71.25 ($73.75 selling price - $2.50 estimated costs of completion and sale). selling-cost to complete and sell

FINANCING

Involve cash effects of transactions that relate to the issuance , settlement and reacquisition of entity's debt and equity instruments egs: cash proceeds from issuing shares and other equity

life cycle costing

Is sometimes used as a basis for cost planning and product pricing.

Which of the following is a primary advantage of a what-if analysis?

It enables users to evaluate their outcomes by applying a goal seeking approach.

Which one of the following statements regarding treasury stock is correct?

It is reflected in shareholders' equity as a contra account.

The advantages of using absorption costing are:

It is required for external reporting. It matches all manufacturing costs with revenues.

Noncurrent debt should be included in the current section of the statement of financial position if

It matures within the year and will be retired through the use of current assets.

Which one of the following best represents an example of information that internal auditors should report to the board of directors?

Items that could adversely affect the organization.

prohibited unde4r IFRS

LIF

Quick 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

Lease payment minus the portion of the lease payment allocable to interest.

In a well-designed internal control system, the same employee may be permitted to

Locate authorized vendors and prepare purchase orders.

In the value creation chain model, the primary activities include

Logistics, operations, marketing and sales, and service.

In theory, the optimal method for establishing a transfer price is

MARKET price

LIFO

MEASUREd @

A 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)

Noncash financing and investing activity.

FIN REPORTING

MUST BE PREPARED IN COMFORMITY WITH ACC PRINCIPLES ACCEPTED UNDER GAAP

Porter's Five Forces

Model developed by strategy expert Michael Porter that identifies five competitive forces that influence planning strategies. Threat of new entry threat of substitutes bargain power of suplliers bargain power of customers main: intensity of rivalry among established firms

spoilage

Normal spoilage cost should be charged to good units and abnormal spoilage cost should be charged to a separate expense account.

The three main ways to determine transfer prices are as follows

Market based transfer prices - top management may choose to use the price of a similar product or service publicly listed, for example in a trade association web site. Also, top management may select, for the internal price, the external price that a subunit charges to outside customers. Cost based transfer prices - top management may choose a transfer price based on the cost of producing the product in question. Examples include variable production cost, variable and fixed production costs, and full cost of the product. Full cost of the product includes all production costs plus costs from other business functions (R&D, design, marketing, distribution, and customer service). The cost used in cost-based transfer prices can be actual cost or budgeted cost. Sometimes, the cost-based transfer price includes a markup or profit margin that represents a return on subunit investment. Negotiated transfer prices. In some cases, the subunits of a company are free to negotiate the transfer price between themselves and then to decide whether to buy and sell internally or deal with external parties. Subunits may use information about costs and market prices in these negotiations, but there is no requirement that the chosen transfer price bear any specific relationship to either cost or market price data. Negotiated transfer prices are often employed when market prices are volatile and change constantly. The negotiated transfer price is the outcome of a bargaining process between selling and buying subunits.

The manufacturing concept that relates demand forecasts to specific dates for completion is

Master production schedule.

The immediate goal of a theory of constraints (TOC) analysis is to

Maximize contribution margin through the constraint.

Management information systems represent a significant investment by most businesses. A primary concern of management is that the system

Meet the business needs of the organization.

The second line of defense for effective management of risk and control

Monitors emerging issues affecting the entity's controls and risks.

The business case for integrated reporting (IR) most likely includes

More committed customers and more engaged employees.

Net cash flow from operating activities for the current year is

Net income $ 82,000 Add: Decrease in receivables 6,000 Add: Depreciation expense 20,000 Minus: Increase in inventories (12,000) Minus: Decrease in payables (3,000) Minus: Gain on sale of equipment (10,000) Net cash provided by operating activities $ 83,000

operating

Net income Amortization Gain on sale of equipment Increase in WIP inventory

A promised asset is transferred in full satisfaction of a performance obligation in a contract when the customer

Obtains control of the asset.

If a manufacturing company uses variable costing to cost inventories, which of the following costs are considered inventoriable costs?

Only raw material, direct labor, and variable manufacturing overhead costs.

Operating profit margin percentage

Operating Income/ Net Revenue

Rosecrans 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

Operation 2 is the bottleneck because it is functioning at its capacity. The incremental annual throughput contribution (revenues - direct materials costs) from adding workers to Operation 2 is $36,000 [500 units × ($120 unit price - $48 DM per unit)]. Because the cost of the additional workers is $50,000, the change in operating income is $(14,000).

NON CURRENT assets

PPE INtangible assets

DM Variance includes

PRICE QUANTITY

DM Quantity Variance-REsponsibility

PRODUCTION

DM MAterials price variance-responsibilty

PURCHASING department

Budgeting problems where departmental managers are repeatedly achieving easy goals or failing to achieve demanding goals can be best minimized by establishing

Participative budgeting where managers pursue objectives consistent with those set by top management.

When comparing the residual income of several investment centers, the validity of comparisons may be destroyed by

Peculiarities of each investment center.

Proper segregation of duties reduces the opportunities for persons to be in positions to both

Perpetrate and conceal errors or fraud.

Which one of the following statements is correct regarding the effect preferred stock has on a company?

Preferred shareholders' claims take precedence over the claims of common shareholders in the event of liquidation.

Static Budget

Prepared before the period NOT changed reflects best estimates of budgeted amounts SQ*SP

zero-based budgeting

Preparing a budget from the ground up, as though the budget were being prepared for the first time. Alternative means of conducting activities and alternative budget amounts are evaluated. Also, all expenses are justified and fully explained. Every line of item must be approved.

Vertical Flowchart

Present successive steps in a top-to-bottom format.

Depreciation

RECOGNIZED in the IS

Income Equation

REV+GAINS-EXPS -LOSSES

ASSETS

REsources as a result of past evnts

The segment margin of an investment center after deducting the imputed interest on the assets used by the investment center is known as

RI

A 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

ROI is calculated by dividing business unit profit by invested capital. The new investment will make a profit of $125,000 ($175,000 contribution margin - $50,000 incremental fixed costs). Hence, ROI = $125,000 ÷ $800,000 = 16%.

ROI

ROI tends to emphasize short-run performance at the possible expense of long-run profitability. ROI is not consistent with cash flow models used for capital expenditure analysis. ROI frequently is not controllable by the division manager because many components included in the computation are committed in amount or are the responsibility of others. Reliance on ROI as the only measurement indicator could lead to an inaccurate decision or investment at either the divisional or corporate level.

A primary reason for a company to change from traditional costing to activity-based costing (ABC) is that ABC

Reduces product undercosting or overcosting.

Effective internal control

Reduces the need for management to review exception reports on a day-to-day basis.

All of the following are disadvantages of top-down budgeting as opposed to participatory budgeting, except that it

Reduces the time required for budgeting.

objective of financial reporting (ch1)

Report fin info that is useful to make DECISIONS about providing resources to the reporting entity

One of the primary advantages of budgeting is that it

Requires departmental managers to make plans in conjunction with the plans of other interdependent departments.

Residual income is often preferred over return on investment (ROI) as a performance evaluation measure because

Residual income concentrates on maximizing absolute dollars of income rather than a percentage return as with ROI.

cost center

Responsible for costs only

Logical 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

Restricting access to the computer system requires determining whether access by a given user (or device) is compatible with the nature of the attempted use. A series of passwords or identification numbers may be required to gain access to the system, to examine data files, and to perform processing using particular programs. Thus, a clerk might be authorized only to read the data in a given file while using a specified terminal, but his or her superior might be able to update the file. Logical controls require online storage of authorization tables or matrices that specify the access permitted to specified codes and devices. The number of authorized inquiries per user is not included in such a table.

Based on the information provided, if the company treats Segment W as an investment center, what is the return on investment for the last quarter?

Return on investment is equal to the income of the business unit divided by the assets of the business unit. Income of Segment W is $1,470,000 ($8,000,000 revenue - $6,350,000 cost of sales - $180,000 general and administrative expenses). Assets of Segment W equal $4,375,000 ($1,200,000 net working capital + $3,175,000 PPE). Thus, return on investment is 33.6% ($1,470,000 ÷ $4,375,000).

The 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

Rivest, Shamir, and Adelman (RSA).

All of the following are characteristics associated with direct cutover conversion except

SAFE

(ch7) costs after the split off==>

SEPARABLE

NRV

Selling price-add process costs-selling costs

Which of the following statements regarding sensitivity analysis is true?

Sensitivity analysis is useful in justifying the additional expenditure of resources in order to obtain better forecasts.

Through 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

Sensiytivity analysis

In 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?

Separable costs after the split-off point.

All of the following are methods of allocating joint costs to joint products except

Separable production cost method.

three ways that SmallParts can provide for better internal control over its inventory of returned product.

Separate responsibilities and duties. While the salesman may be assigned to work with customers who return products, and find other customers for these products, other staff should post credits to customer accounts following written policy. The products should be received, inventoried, booked and shipped just like regular products.

In a lease that is recorded as a sales-type lease by the lessor, interest revenue

Should be recognized over the period of the lease using the effective-interest method.

access control software

Software for securing information systems that allows only specific users access to specific computers, applications, or data.

If 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?

Stand alone

All of the following statements concerning standard costs are correct except that

Standard costs are usually stated in total, while budgeted costs are usually stated on a per-unit basis.

A standard cost system uses

Standard prime costs with overhead applied based upon the standard cost driver units allowed.

A 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

Statistical quality control chart.

SCM

Stnadard CM(budGeted CM)

Parallel simulation

Subjects client data to auditor-created programs.

The use of activity-based costing (ABC) normally results in

Substantially greater unit costs for low-volume products than is reported by traditional product costing.

When documenting the understanding of a client's internal control, the independent auditor sometimes uses a systems flowchart, which can best be described as a

Symbolic representation of a system or series of sequential processes.

The 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

Systems analysis

A primary goal of IT governance is to balance risk versus return over IT and its processes.

TRUE

A major advantage of the first-in, first-out (FIFO) process-costing method over the weighted-average process-costing method i

That current-period cost per unit is highlighted under the FIFO method.

Which of the following represents an example of an inherent limitation of internal controls?

The CEO can override a control and request a check with no purchase order.

What is the joint cost assigned to Ajac if costs are assigned using the relative net realizable value?

The NRV of Ajac is $72,000 ($80,000 - $8,000), and the NRV of Bjac is $18,000 ($40,000 - $22,000). Thus, the joint cost assigned to Ajac if costs are assigned based on relative NRV is $48,000 {$60,000 × [$72,000 ÷ ($72,000 + $18,000)]}.

Zero-based budgeting (ZBB)

The ZBB process evaluates all proposed operating and administrative expenses as if they were being initiated for the first time. Each expenditure is justified, ranked, and prioritized according to its order of importance to the overall corporation, not just its role in one department. The focus is on evaluation of all activities rather than just incremental changes from the prior year. This allows addressing activities which have been ongoing to determine if they are still useful in the current environment. The objectives, operations, and costs of all activities are evaluated, and alternative means of accomplishing the objectives are more likely to be identified.

Comprehensive income is best defined as

The change in net assets for the period excluding owner transactions.

After completing the first unit, the estimated total direct labor hours Aerosub will require to produce the seven additional units will be

The cumulative total hours spent on the units can be calculated as follows: Cumulative Cumulative Cumulative Units Average Total Batch Produced Labor Hours Labor Hours 1 1 10,000 10,000 2 2 8,000 (10,000 × 80%) 16,000 3 4 6,400 (8,000 × 80%) 25,600 4 8 5,120 (6,400 × 80%) 40,960 Since it took a total of 40,960 hours to complete all eight units and 10,000 to complete the first one, units 2 through 8 took 30,960 hours (40,960 - 10,000).

The sales volume variance is partly a function of the unit contribution margin (UCM). For a single-product company, it is

The difference between flexible budget and master budget sales volume, times master budget UCM.

If 29,000 machine hours were budgeted for the next period, estimated semi-variable costs would total

The difference in cost between the highest and lowest levels of activity for a group of periods is divided by the difference in the cost drivers (activity level) at the two levels. The highest level of activity is 30,000 machine hours, and the lowest level is 22,000 machine hours. Therefore, the variable rate for the variable portion is calculated as follows: (€120,000 - €100,000) ÷ (30,000 - 22,000) = €2.50 per machine hour. The fixed portion is then calculated as follows: €120,000 = Fixed + 30,000 × €2.50 Fixed = €45,000 Now the answer can be calculated as follows: Total costs = €45,000 + 29,000 × €2.50 = €45,000 + €72,500 = €117,500

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?

The estimated net realizable value method allocates joint costs based on the relative market values of the products after additional processing is performed to make them salable. Net realizable value at split-off is equal to the sales price at the point of sale minus costs to complete after split-off (separable costs). Accordingly, the $18,000 of joint costs allocated to M is calculated as follows: Step 1: Determine NRV at split-off for both L and M L: $80,000 (10,000 units × $8) - $20,000 = $60,000 M: $100,000 (5,000 units × $20) - $40,000 = $60,000 Step 2: Determine the proportion of joint costs allocated to M $60,000 ÷ $120,000 = 50% Step 3: Multiply the proportion by the amount of joint costs $36,000 × 50% = $18,000 allocated to M

the process of creating a flexible budget

The flexible budget revenues are calculated by multiplying the actual billed hours by the budgeted amount per billed hour. Then the budgeted variable expense per billed hour is multiplied by the actual billed hours. The flexible budget variable expense is subtracted from the flexible budget revenue. The results are compared to the actual results from last year.

Under IFRS, an asset is impaired when its carrying amount exceeds its recoverable amount. The recoverable amount of an asset is

The greater of its fair value minus cost to sell or value in use.

The most important factor in the introduction of integrated reporting is

The increased recognition of intangible assets in corporate balance sheets.

One advantage of a database management system (DBMS) is

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.

The primary purpose for allocating common costs to joint products is to determine

The inventory cost of joint products for financial reporting.

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

The lease contains a purchase option that the lessee is reasonably certain to exercise.

In target costing

The market price of the product is taken as a given.

The 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?

The percentage of orders filled on time; the percentage of orders filled accurately; average cost to fill and deliver an order.

Which one of the following statements best describes budgetary slack?

The practice of understating budgeted revenues or overestimating budgeted costs to make budgeted targets more achievable.

The predetermined overhead application rate for Nanjones Company is

The predetermined overhead application rate is $15 [($1,200,000 FOH + $2,400,000 VOH) ÷ 240,000 machine hours].

Reciprocal method.

The reciprocal method uses simultaneous equations to allocate costs by explicitly recognizing the mutual services rendered among all departments. Because it acknowledges all sources of cost, it should be used when management is using the results of allocations to make decisions on pricing products.

Which of the following is the most important for the internal auditor to examine in order to ascertain the quality of manufacturing operations?

The related rework and scrap.

Which 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?

The response time and degree of satisfaction among the production departments.

An 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

The selling price minus the carrying amount of the machine equals the gain or loss on disposal. The carrying amount equals $205,000 ($700,000 historical cost - $495,000 accumulated depreciation). Thus, the selling price was $280,000 ($205,000 + $75,000 gain).

A company planned to produce 50,000 units with $500,000 of manufacturing overhead. The budgeted machine hours per unit is 2 hours. The company's actual results indicated it spent $505,000 for manufacturing overhead, produced 49,000 units, and used 99,000 machine hours. Under a standard cost system that allocates overhead based upon machine hours, the manufacturing overhead traced to the products would tota

The standard cost of manufacturing overhead applied to each machine hour is $5 [$500,000 ÷ (50,000 units × 2 machine hours per unit)]. The company actually created 49,000 units. The standard cost of manufacturing overhead applied to each unit is based on the standard cost per machine hour and the standard number of machine hours per unit. Thus, the manufacturing overhead traced to the products is $490,000 (49,000 units × $5 per machine hour × 2 machine hours per unit).

If Rochester uses the step-down method of allocating service costs beginning with quality control, the maintenance costs allocated to the assembly department would be

The step-down method allocates service costs to both service and production departments but does not involve reciprocal allocations among service departments. Accordingly, Quality Control will receive no allocation of maintenance costs. The first step is to allocate quality control costs to the Maintenance Department. Maintenance is expected to use 20% (7,000 ÷ 35,000) of the available quality control hours and will be allocated $70,000 ($350,000 × 20%) of quality control costs. Thus, total allocable maintenance costs equal $270,000 ($70,000 + $200,000). The Assembly Department is estimated to use 40% (12,000 ÷ 30,000) of the available maintenance hours. Consequently, it will be allocated maintenance costs of $108,000 ($270,000 × 40%).

There are three components of audit risk: inherent risk, control risk, and detection risk. Inherent risk is

The susceptibility of an assertion to a material misstatement, assuming that there are no related internal control structure policies or procedures.

Atlas Foods produces the following three supplemental food products simultaneously through a refining process costing $93,000. The joint products, Alfa and Betters, have a final selling price of $4 per pound and $10 per pound, respectively, after additional processing costs of $2 per pound of each product are incurred after the split-off point. Morefeed, a by-product, is sold at the split-off point for $3 per pound. Alfa 10,000 pounds of Alfa, a popular but relatively rare grain supplement having a caloric value of 4,400 calories per pound Betters 5,000 pounds of Betters, a flavoring material high in carbohydrates with a caloric value of 11,200 calories per pound Morefeed 1,000 pounds of Morefeed, used as a cattle feed supplement with a caloric value of 1,000 calories per pound Assuming Atlas Foods does not inventory Morefeed, the by-product, the joint cost to be allocated to Betters using the net realizable value method is

The treasurer has the authority to sign checks but gives the signature block to the assistant treasurer to run the check-signing machine.

In 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?

The unrealized loss should be credited to the other comprehensive income account.

Which one of the following statements best describes the objective of an operational audit?

To appraise the efficiency and effectiveness of a process.

Which one of the following statements concerning concurrent auditing techniques is false?

They are standard components of generic software packages.

throughput costing.

Throughput costing is known as an extreme version of variable costing. It is also known as super-variable costing. Under throughput costing, direct material is the only inventoriable cost. Direct labor and variable manufacturing overhead are treated as period costs. Fixed manufacturing overhead is treated as a period cost, the same as under variable costing.

Glade 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?

To earn 8% interest over the lease term, the annual payment must be $75,000 ($323,400 fair value at the inception of the lease ÷ 4.312 annuity factor). Given no residual value and no purchase option, total lease payments over the lease term will be $375,000 ($75,000 payment × 5 years). The entire difference between the gross lease payments received ($375,000) and their present value ($323,400 net investment in the lease) is the interest revenue recognized over the entire lease term ($375,000 - $323,400 = $51,600).

Which of the following best describes the purpose of the three lines of defense?

To enhance communications on risk management and control by clarifying how specific duties should be assigned and coordinated within the organization.

total equity

Total credits to equity equal $1,750,000 ($600,000 common stock at par + $800,000 additional paid-in capital + $350,000 retained earnings). The treasury stock recorded at cost is subtracted from (debited to) total equity, and the unrealized holding loss on available-for-sale securities is debited to other comprehensive income, a component of equity. Because total debits equal $70,000 ($50,000 cost of treasury stock + $20,000 unrealized loss on available-for-sale securities), total equity equals $1,680,000 ($1,750,000 - $70,000).

Integrated reporting is a new reporting concept. Integrated reporting was introduced because

Traditional financial reporting increasingly did not provide adequate nonfinancial information about value creation.

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

Under IFRS, inventories are measured subsequent to acquisition at the lower of cost or net realizable value (NRV). NRV equals selling price minus estimated completion and selling costs. Given that historical cost is $91 and NRV is $85 ($100 selling price - $10 completion cost - $5 selling cost), the effect on per-unit gross profit is a reduction of $6. This amount is expensed.

What is the annual amortization expense that Neary will record on the leased computers?

Under a finance lease, the lessee recognizes a right-of-use asset and lease liability at an amount equal to the present value of the lease payments ($100,000) given no initial direct costs. Because the lease provides for the transfer of ownership, the lease is a finance lease, and the lessee should amortize the right-of-use asset using the straight-line method over the estimated useful life (5 years). Annual expense is $20,000 ($100,000 ÷ 5 years).

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 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. Question: 8Using the FIFO method, Kimbeth's equivalent unit cost of materials for May is

Under the FIFO method, EUP for materials equal 104,000 [(16,000 units in BWIP × 40%) + (76,000 units started and completed × 100%) + (24,000 units in EWIP × 90%)]. Consequently, the equivalent unit cost of materials is $4.50 ($468,000 total materials cost in May ÷ 104,000 EUP).

Under the direct method, what amount of IT department costs will be allocated to Department Y?

Under the direct method, service department costs are allocated directly to the producing departments without regard for services rendered by service departments to each other. Thus, the $200,000 costs of the IT department must be allocated between operating departments X and Y. IT department costs are allocated based on the budgeted IT hours for the department. Department Y is budgeted 300 hours out of 750 total hours budgeted to operating departments, or 40%. Thus, the IT costs allocated to Department Y will equal $80,000 ($200,000 × 40%).

Comparability

Understands similarities

A company's inventory is overstated at December 31 of this year. The result will be

Understated income next year.

Learning curves are best used to predict

Unit DL costs

Which of the following is the final step before placing the system in live operation?

User acceptance testing.

Which one of the following refers to a cost that remains the same as the volume of activity decreases within the relevant range?

Variable cost per unit.

Which one of the following is an advantage of using variable costing?

Variable costing makes cost-volume relationships more easily apparent.

The difference between variable costs and fixed costs is

Variable costs per unit are fixed over the relevant range and fixed costs per unit are variable.

Under the COBIT 2019 framework, which of the following statements is true?

Variant components for a governance system are designed for a specific context within a focus area.

In decision making under conditions of uncertainty, expected value refers to the

Weighted average of probable outcomes of an action.

If Weisman uses absorption costing, its operating income earned in the last fiscal year was

Weisman's absorption-basis operating income can be calculated as follows: Sales 900 units at $ 100 = $90,000 Beginning inventory $ 0 Variable production costs 1,000 units at $ 60 = 60,000 Fixed production costs 1,000 units at $ 5 = 5,000 Goods available for sale $65,000 Less: Ending inventory 100 units at $ 65 = (6,500) Abs. cost of goods sold (58,500) Gross margin $31,500 Variable S&A expenses 900 units at $ 12 = (10,800) Fixed S&A expenses 900 units at $ 6 = (5,400) Operating income $15,300

A company is considering the implementation of an activity-based costing and management program. The company

Would normally gain added insights into causes of cost.

Participative budgeting

a bottom up approach that involves the people affected by the budget, including lower level employees in the budgeting process. It is a good communications device. The process of preparing a budget often gives top management a better grasp of the problems their employees face and provides the employees a better understanding of the dilemmas that the top management deals with. A participative budget is more likely to gain employee commitment to fulfill the budgetary goal unless controlled, though; it can lead to easy budget targets or targets not in compliance with the organization's strategy or budget. Effective budgeting processes often combine both approaches.

Which of the following is an example of an outcome of strategic planning?

a broad statement that emphasizes the implementation of org obj over long term

(CH5) COMMON COSTS

a cost incurred for the benefit of more than 1 object eg depreciation /cost

four functional responsibilities within an organization that should be separated. Explain why these responsibilities should be separated.

a good system of internal control suggests that four functional responsibilities be separated, and handled by different individuals: (i) authority to execute transactions, (ii) recording transactions, (iii) custody of assets involved in the transactions, and (iv) periodic reconciliations of the existing assets to recorded amounts. Smallparts might improve its control over the inventory of returned product by separating these responsibilities among four different individuals.

Data Encryption

a method to prevent unathorized access to the data and not to the facility

In preparing a statement of cash flows, an item included in determining net cash flow from operating activities is the

amortixzation of a bond premium

Issued Stock

amount actually issued

Moving Average Method

a new average is computed after each purchase, by dividing the cost of goods available for sale by the units on hand perpetual

integrated thinking

a process of decision making , mng & reporting

Trojan Horse

a program that appears desirable but actually contains something harmful

the statement of changes in equity presents

a reconciliation for the accounting period of beg balance for each component of equity to the end bal each change is diclosed separately in the statement

standard

a sysstem to alert management

Authoritative budgeting

a top-down budgeting process where top management prepares the budget for the entire organization, including lower level operations. It provides better decisionmaking control than participative budgets. Top management sets overall goals and prepares a budget for operations to attain the goals. However, this type of budget often lacks the commitment of lower level managers and employees responsible for implementing. Also, it doesn't communicate, is dictates and people are more likely to resent orders and are more willing to work to attain goals they perceive as their own.

ending inv will ALWAYS be higher under

absorption costing

Flexible budgets

accommodate changes in activity levels

CURRENT LIABILITIES

accounts paybale notes payable

Favorable ( revenue side)

actual GREATER than standard

un

actual revenues LESS than budg. rev

engineered

additional cost inherent in a given decision

Exploratory data analysis

aims to reveal patterns

fav

almost always desirable less time than usual

substantive procedures approach

applies audit resources to large volume of transactions without any focus on specified areas

discontinued ops

are presented separetely between income from continuing ops and NI

horizontal flowcharts

areas of responsibility

commited

arising from PPE LONG TERM

A 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

assets will be lower

FULL SET OF FIN ST/S

balance sheet income st cash flow stat. of changes in equity st of CI

PERIODIC

based on physical count simpler homogenous

why the increase in the OH rate should not have a negative financial impact on the company

because the increase in indirect costs was offset by a decrease in DL

Prepare a cash budget

beg cash balance+receipts-payments

COGS

beg inv+purchases-end inv

END WIP

beg wip+units started out-units transferred oud

A 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?

biometric

The numerator of the overhead application rate equals

estimated OH costs

SALES VARIANCES

evaluates the SELLING function

UNFAV

excessive use of materials or unskilled labor or ;lower quality material

other expenses

expensed the period incurred

The 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)

expert system

The primary purpose of integrated reporting is to

explain to providers of fin capital how value is created over time

extended normal

extends the use of normalized rates to DM and DL

FACTORS

external environment governance mission and vision strategy & resource allocation performance outlook

The 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?

fifo

6 capitals

financial manuf. intellectual human natural social & relationship

The chief information technology officer introduced a technology to prevent unauthorized external access to its client's network. The technology described by the chief information officer is most likely

firewall

ABC

first assigns resource costs to acivities

sales

first budget to be repared

a 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

flexible

A standard costing system is most often used by a firm in conjunction with

flexible budgets

objectives of transfer pricing

focus managers' attention on their own subunits and to plan and coordinate actions across different subunits to maximize operating income for the company as a whole. Transfer prices should help achieve a company's strategies and goals and fit its organizational structure. They should promote goal congruence and a sustained high level of management effort. The transfer price should also help top management evaluate the performance of individual subunits and their managers.

The sales budget has three components

forecasted sales volume, forecasted sales mix, and budgeted selling prices.

The budgeting processes should include

formation of a budget committee, determination of the budget period, specification of budget guidelines, preparation of the initial budget proposal, budget negotiation, review, and approval and budget revisions.

The major objectives of budgeting are to

foster the planning of ops provide a framework for perf. evaluation promote communication

financial budget

funds

content elements

governance buss model org overview risks/opport. performancce outlook strategy and resource allocation basis of preparation /presentation general reporting guidance

GROOS PROFIT MARGIN

gp/sales

While 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?

growth stage

enginnered

have a direct, observable quantifiable casue and effect relationship between the level of output and the quantity of resources consumed egs DM, DL

Factory OH variances

have variable and fc components 4way analysis

PERPETUAL SYSTEM

heterogenous items expensive items record each time of a sale (-)complex eg: auto dealers

(ch3) tangible property more than 1year

historical cost

asset's carrying amount

historical cost-acc depr. -imp losses

Management 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?

hr hiring

Which of the following factors would most likely be considered an inherent limitation to an entity's internal control?

human judgement

the five step model for recognizing revenue from customers

identifies contracts with custoemrs identifies the perf obligation determines the tansaction price allocates the transaction price to the performance obligations recognizes revenue when/as a perf obligation is satisfied

One of the principal objectives of a database system is to

improve data consistency

ROI

income from ops/ average op assets

Residual Income

income of buss unit assets of buss unit*req rate

Income Statement

income= rev+gains-exps-losses

gain

increase in equity

issuance of common stock

increases the common stock balance and add paid in capital bal

A firm earning a profit can increase its return on investment by

increasing sales revenue and op expenses by the same percentge

separable

incurred beyond the split off point

normal

incurs under normal operating

revenue

inflows of asstes or of liabilities from del or producing goods

Controllable

influnced by the manager

statement of cash flow

info about the cash receipts and cash payments of an entiyt during the period

Some 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

input controls

VARIABLE COSTING -direct costing

internal reporting more informative acc treatment is often to capitalize only variable man costs as product costs and all the rest as period.

LIFO

inventory accounting in which the most recently acquired items are assumed to be the first sold; method is supposed to create the lowest ending inventory in a period of rising prices. Also create a lower taxable income, lower gross profit.

FIFO

inventory accounting in which the oldest items (those first acquired) are assumed to be the first sold; creates a higher ending inventory and lower cost of goods sold, higher gross profit and higher taxable income.

DIRECT INTERESTS

investors suppliers creditors employees management

in the sales-receivables cycle flowchart above, symbol B represents

invoice

To 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?

mapping

Intraperiod income tax allocation arises because

items included in diff sections

In a period of rising prices, which one of the following inventory methods usually provides the best matching of expenses against revenues?

lifo

A 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

linear regression

What is the most likely benefit of adopting integrated reporting (IR)?

lower long term costs

Which one of the following is not an expected benefit of implementing a just-in-time (JIT) production system?

lower total set up costs

INTERNAL USERS

make decisions

In a responsibility accounting system, a feedback report that focuses on the difference between budgeted amounts and actual amounts is an example of

managemnt by exception

A 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

materials requirements planning.

The number of competing firms is highest at which stage in the product life cycle?

maturity

opportunity

maximum benefit forgone by using a scarce resource for a given purpose

favorable

may indicate quality issues

Management by exception

means management focuses attention on areas that are not performing or meeting expectations. Management spends less time on areas that are operating effectively. Maxwell can use management by exception by focusing on the unfavorable direct materials usage variance. It could also look at units serviced or total labor costs if they varied significantly from budget or planned results.

FIFO

measured @ Lower cost or NRV

unfavorable

misallocation of labor or increased wages

purchases

monthly/weekly

During the growth stage of a product's life cycle,

new products are introduced

waste

no further use

A 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?

no minimum

preferred stock

no voting risks less risks

GAAP==>

not cash basis accepted

abnormal

not expected to occur under normal

OPERATING ACTIVITIES

not fin or investing activities derived from the principal revenue producing activities of the entity activities from determination of income egs: cash receipts cash outflows to suppliers etc

non recourse

notification basis payments by debitors on the transferred assets are made to the factor eg: credit card

diab back systems

old style

It is too late for an organization to establish a records retention policy

once litigation is likely

A budget committee

oversees all budget matters and usually consists of at least one senior manager. The committee issues budget guidelines based on plans emanating from the reviews of the firm's strategy, external and internal factors goals and objectives of the budget period, and experience gained from implementing the current budget. Based on the budget guidelines, managers prepare initial budgets and discuss and negotiate their budget proposal with superiors. The budget committee or the chief executive officer gives the final approval of the budget.

A 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?

ownership of processed data

The 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

practical capacity as the denominator level produces lower income than maste rbudget

DM variance includes

price variance quantity or suage varianbce

A 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?

processing control

The 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

prod. vol var

normal spoilage

product cost

Input Controls

provide reasonable issurance that data submitted for processing are authorized , complete and accurate

financing activity

purchase of treasury stock

FAVORABLE MATERIALS PRICE

purchasing function performed well by finding a lower source for materials but prices may have fallen , the purchasing function simply bought at the market price and stnadard costs should be updated

An 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?

qualified opinion

data analytics (da)

qualitative and quantitative methodologies and procedures to retrieve data out of data sources and then inspect the data

5 phases of life

r&D INTROduction growth maturity decline

DL Variance

rate efficiency

DL Variance

rate variance efficiency variance

scrap

raw materials left over but still usuable

Which one of the following input validation routines is not likely to be appropriate in a real-time operation?

sequence check

The two methods for allocating the balance of manufacturing overhead

re pro-rata (also known as proration) and writing off directly to cost of goods sold. Under proration, the under or over allocated overhead is allocated between the ending balances of work-in-process inventory, finished goods inventory and cost of goods sold on a pro-rata basis using ending balances. The final balance of manufacturing overhead is zero after the entire amount is transferred proportionately to these accounts. Note you do NOT include raw materials in the allocation since no overhead is assigned to raw materials inventory. Under the write off to cost of goods sold method, the total of the under or over applied overhead is all transferred to cost of goods sold.

(ch2) mathing principle

recognition of revenue and related expense in the SAME accounting period

output method

recognizes rev based on direct measurement of the calue of goods/services transferred to date relative to the remaining goods/services promised

OUTPUT METHOD

recognizes revenue based on direct measurement of the value of goods trnasferred to the customer to date relative to the remaining goods

input method

recognizes revenue on the basis of the entity s inputs to the satisfaction of the perf obligation relative to the total expected inputs

An 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

record

Accelerated method

reduces carrying amount

A large corporation allocates the costs of its headquarters staff to its decentralized divisions. The best reason for this allocation is to

remind regional managers that common costs exist

how can a company change its OH acc system to eliminate confusion over product costs

replace plant wide OH rate with separtae OH pools to activities create indirect cost pools for each production & service department individual machines could be treated as separate cost centers

INVESTING

represent the extent to which expenduitures have been made for resources intended to geenrate future income and cash flows egs : cash payments to acquire PPE INTANGIBLE assets loans

Committed Costs

required to maintain the organization (rent, administration, clerical salaries)

A 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?

responsibility acc

profit

responsible for costs and revenues

revenue center(sales department)

responsible for revenues only

investment center

responsible for revenues, costs, and investments

ACCRUAL BASIS

revenues are recognized when earned(when they occur) and expenses are recognized when incurred- not when cash is received

In evaluating an investment center, top management should concentrate on

roi

The 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)

rolling

production

sales+-des. inv

NRV

selling price - costs to sell

The 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?

sensitivity analysis

When compared with ideal standards, practical standards

serve as better motivating target for personnel

types of stocks

shares authorised issued outstanding

shares outstanding

shares issued and held

Upon 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

signal reception

process

similar

An adequate system of internal controls is most likely to detect a fraud perpetrated by a

single employee

by products

small value

includes

spending variance production volume variance

COBIT 2019

stake holder value holistic approach dynamic distinct ( from mngt) enterprise needs end to end coverage conceptual method open and flexible aligned with major standards

IDEAL Standards

standard costs under OPTIMAL conditions

flexible budget

standard inputs allowed for actual output*standard price

A 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?

standard variable cost

Practical Standards

standards that allow for NORMAL machine downtime and other work interruptions and that can be attained through reasonable, though highly efficient, efforts by the average worker

ch) methods to test systems

static dynamic white box black box gray box

The use of the master budget throughout the year as a constant comparison with actual results signifies that the master budget is also a

static budget

<20%

stock dividend

>20-25%

stock split

PLans

strategic intermediate operational

Guiding principles

strategic focus and future orinetation connectivity of info materiality conciseness stakeholder relationships reliaboility /completeness consistency /comparability

Which one of the following would not be an appropriate cost allocation base for an organization?

supervisor salaries

service centers

support to other organizational subunits operated as cost centers

The graphic portrayal of the flow of data and the information processing of a system, including computer hardware, is best displayed in a

system flowchart

SDLC (Systems Development Life Cycle)

systems strategy project initiation in house development commercial development commercial packages maintenance and support

rev/exps/gains/losses recorded in

temp accounts. these accounts are closed (reduced to 0) at the end of each acc period and the balances are transferred to BS(real) accounts.

joint

those costs incurred before the split off

relevant

those future costs that will vary depending on the action taken

imputed

those that should be involved indecision making

One 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

timekeeping and preparation of payroll journal entries.

normal

to a specific product

The Board of Directors' responsibilities include the following:

to be a review organ - without such an organ, top management has no way to control itself. To remove top management when it fails to perform. A board capable of removing nonperforming top management has real power. To be a public relations and community relations organ. The board needs easy and direct access to the various publics and constituents. To develop policy and implement procedures necessary to limit conflicts of interest and to ensure compliance with both the law and ethical principles at all levels of the enterprise. To ensure that the corporate compliance programs are in place.

Explain why companies develop factory overhead rates.

to facilitate the costing of products as they are completed and shipped rather than waiting until actual costs are accumulated for the period of production

Characteristics that define successful budgeting processes include:

top management involvement participative or bottom-up approach which allows employees throughout the organization to have input on the budget-setting process promoting coordination between functional areas of the organization providing communication and feedback throughout the process using different budgets for planning than for performance evaluations to help alleviate some of the behavioral issues with the budgeting process using budgeting to motivate employees setting clear goals and expectations at the beginning of a process

Breakeven

total fixed costs/unit contribution margin

Cash flows from transactions in which of the following securities are most likely to be considered cash flows from operating activities?

trading debt securities

Which one of the following is most likely considered a processing control for an entity's accounting application system?

transaction log

The price that one division of a company charges another division for goods or services provided is called the

transfer price

absorption (full costing)

treats all mauf. costs as nproduct costs

Ideal standards, also known as theoretical standards, can only be achieved under perfect conditions. Currently attainable standards, also known as practical standards, can be achieved under normal conditions. Normal conditions allow for reasonable downtime such as shift changes, machinery maintenance, and employee training.

true

cardinality

unique

JOB ORDER

unique product or group of products being manufactured

levels of tests

unit integration system acceptance

OCI

unrealized holding gains /losses on available for sale debt securities certain items in relation to defined benefit pension plans trnaslation gains and losses

fav

unusual efficiency or lower quality

3 FUND. concepts

value creation 6 capitals value creation process

An advantage of using systems flowcharts to document information about internal control instead of using internal control questionnaires is that systems flowcharts

visual depiction

common stock

voting rights high risk

The amount of raw materials left over from a production process or production cycle for which there is no further use is

waste

goal congruence

when a subsystem achieves its goals while contributing to the organization's overall goal

Under the lower-of-cost-or-market method, the replacement cost of an inventory item would be used as the designated market value

when it is below than the NRV and above the NRV less the normal profit margin

a long lived asset is IMPAIRED

when its carrying amount is greater than its FV

expenses capitalised

when they improve the asset

unfavorable

workers are spending too much time on a production process

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

ολα

In decision theory, those uncontrollable future events that can affect the outcome of a decision are

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