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ACC 576 Final Exam Guide
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ACC 576 Final Exam Study
Question 1 (IFTC-0112)
Controls in the information technology area are classified into the
preventive, detective, and corrective categories. Which of the
following is a preventive control?
An organization relied heavily on e-commerce for its transactions.
Evidence of the organization’s security awareness manual would be
an example of which of the following types of controls?
Which of the following types of control plans is particular to a specific
process or subsystem, rather than related to the timing of its
occurrence?
Question 4 (CGIC-0032)
Which of the following is true about the Sarbanes-Oxley requirements
regarding the audit committee financial expert?

Which of the following is not a component of COSO’s enterprise risk
management framework?
Which of the following is not required by the Sarbanes-Oxley Act of
2002?
Which of the following is not an advantage of the employment of an
enterprise risk management (ERM) system?
A financial statement audit performed under the requirements of the
Sarbanes-Oxley Act of 2002 must include an examination and report
upon
An important benefit of an enterprise risk management system is
Which of the following bodies has developed a framework for
enterprise risk management?
Which of the following executives of an issuer corporation must certify
to the accuracy and truthfulness of financial reports filed with the
SEC?
Which of the following is not a responsibility that should be assigned
to the audit committee of the board of directors?

Which of the following components of internal control are
characterized by ongoing activities and separate evaluations?
Which of the following can be the most effective monitoring device for
effective corporate governance?
From a corporate governance standpoint which of the following best
describes the main goal of a form of executive compensation?
Which of the following components of internal control encompass
policies and procedures that ensure that management’s directives are
carried out?
Which of the following forms of compensation is more likely to result
in shirking by management?
In the COSO framework, individuals within the company that monitor
internal controls are referred to as
The COSO definition of internal control considers control activities
a(n):

If internal control is properly designed, the same employee should not
be permitted to
Question 1 (ECON-0036)
If a government were to use only fiscal policy to stimulate the economy
from a recession, it would
Disposable income is calculated as
Which of the following changes would create pressure for the
Japanese yen to appreciate relative to the U.S. dollar?
If a group of consumers decide to boycott a particular product, the
expected result would be
The movement along the demand curve from one price-quantity
combination to another is called a(n)
In the long run, a firm may experience increasing returns due to
Which of the following is not accurate about product differentiation?
Which of the following segments of the economy will be least affected
by the business cycle?

What is the effect when a foreign competitor’s currency becomes
weaker compared to the U.S. dollar?
Some economic indicators lead the economy into a recovery or
recession, and some lag it. An example of a lag variable would be
If the U.S. dollar declines in value relative to the currencies of many of
its trading partners, the likely result is that
The rate of unemployment caused by changes in the composition of
employment opportunities over time is referred to as the
To address the problem of a recession, the Federal Reserve Bank most
likely would take which of the following actions?
Which of the following is a direct effect of imposing a protective tariff
on an imported product?
What does the consumer price index measure?
The discount rate of the Federal Reserve System is

Which of the following individuals would be most hurt by an
unanticipated increase in inflation?
Question 1 (FINM-0082)
Which of the following statements is correct regarding the weighted-
average cost of capital (WACC)?
The benefits of debt financing over equity financing are likely to be
highest in which of the following situations?
Question 3 (RMCB-0027)
Which of the following describes an option?
A company has $1,500,000 of outstanding debt and $1,000,000 of
outstanding common equity. Management plans to maintain the same
proportions of financing from each source if additional projects are
undertaken. If the company expects to have $60,000 of retained
earnings available for reinvestment in new projects in the coming year,
what dollar amount of new investments can be undertaken without
issuing new equity?
Value of equity
Value of debt + Value of equity
Since the question states that the firm will maintain the same weight of
each financing source, each dollar invested is composed of 40 cents of
equity and 60 cents of debt. The first $60,000 of equity used in
financing new projects is sourced from retained earnings. This source
of equity is exhausted when the firm reaches an investment level of

$60,000 / .4 = $150,000.When the level of investment exceeds this
amount, equity financing must be raised externally.
DQZ Telecom is considering a project for the coming year that will
cost $50,000,000. DQZ plans to use the following combination of debt
and equity to finance the investment:
Which of the following describes a normal yield curve?
Which of the following types of bonds is most likely to maintain a
constant market value?
Which of the following is an advantage of net present value modeling?
The calculation of depreciation is used in the determination of the net
present value of an investment for which of the following reasons?
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ACC 576 Week 1 Quiz (All Possible Questions)
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This Tutorial contains More than 150 Question Test Bank (we have
listed some of the Questions below)
Week 1 Quiz
Question 1
The first general standard requires that an audit of financial
statements is to be performed by a person or persons having
Question 2
Which of the following standards requires a critical review of the work
done and the judgment exercised by those assisting in an audit at every
level of supervision?
Question 3
An auditor uses the knowledge provided by the understanding of the
internal control structure and the final assessed level of control risk
primarily to determine the nature, timing, and extent of the
Question 4
An auditor's primary consideration regarding an entity's internal
control structure policies and procedures is whether the policies and
procedures
Question 5
To obtain evidential matter about control risk, an auditor selects tests
from a variety of techniques including

Question 6
Prior to commencing fieldwork, an auditor usually discusses the
general audit strategy with the client's management. Which of the
following matters does the auditor and management agree upon at this
time?
Question 7
Which of the following factors most likely would cause a CPA to
decline to accept a new audit engagement?
Question 8
Which of the following factors would least influence an auditor's
consideration of the reliability of data for purposes of analytical
procedures?
Question 9
A previously communicated significant deficiency ordinarily should be
communicated again if
Question 10
Which of the following statements concerning analytical procedures is
correct?
Question 11
Which of the following is the authoritative body designated to
promulgate attestation standards?
Question 12
As the acceptable level of detection risk decreases, an auditor may
change the

Question 13
A CPA in public practice must be independent in fact and appearance
when providing which of the following services?
Question 14
The primary objective of procedures performed to obtain an
understanding of the internal control structure is to provide an auditor
with
Question 15
Which of the following statements is correct concerning an auditor's
required communication of significant deficiencies?
Question 16
Which of the following procedures would an auditor most likely
perform in planning a financial statement audit?
Question 17
When an auditor increases the planned assessed level of control risk
because certain control procedures were determined to be ineffective,
the auditor would most likely increase the
Question 18
An auditor concludes that a client has committed an illegal act that
has not been properly accounted for or disclosed. The auditor should
withdraw from the engagement if the
Question 19
In performing an attestation engagement, a CPA typically
Question 20

Which of the following characteristics most likely would heighten an
auditor's concern about the risk of material misstatement arising from
fraudulent financial reporting?
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Week 2 Quiz
Question 1
The most likely result of ineffective internal control policies and
procedures in the revenue cycle is that
Question 2
An entity with a large volume of customer remittances by mail could
most likely reduce the risk of employee misappropriation of cash by
using
Question 3

Which of the following statements is generally correct about the
reliability ofaudit evidence?
Question 4
Which of the following audit procedures would an auditor most likely
perform to test controls relating to management's assertion concerning
the completeness of sales transactions?
Question 5
The audit working paper that reflects the major components of an
amount reported in the financial statements is the
Question 6
Which of the following most likely would indicate the existence of
related parties?
Question 7
Which of the following procedures would an auditor most likely
perform during an audit engagement's overall review stage in
formulating an opinion on an entity's financial statements?
Question 8
In auditing accounts receivable the negative form of confirmation
request most likely would be used when
Question 9
Before applying substantive tests to the details of asset accounts at an
interim date, an auditor should assess:
Question 10

"There have been no communications from regulatory agencies
concerning noncompliance with, or deficiencies in, financial reporting
practices that could have a material effect on the financial
statements." The foregoing passage is most likely from a
Question 11
"We have disclosed to you all known instances of noncompliance or
suspected noncompliance with laws and regulations whose effects
should be considered when preparing financial statements." The
foregoing passage most likely is from a(n)
Question 12
Which of the following controls would be most effective in assuring
that recorded purchases are free of material errors?
Question 13
An auditor should request that an audit client send a letter of inquiry
to those attorneys who have been consulted concerning litigation,
claims, or assessments. The primary reason for this request is to
provide
Question 14
To which of the following matters would materiality limits not apply in
obtaining written management representations?
Question 15
In which of the following circumstances is substantive testing of
accounts receivable before the balance sheet date most appropriate?
Question 16
The purpose of segregating the duties of hiring personnel and
distributing payroll checks is to separate the

Question 17
An auditor's purpose in reviewing credit ratings of customers with
delinquent accounts receivable most likely is to obtain evidence
concerning management's assertions about
Question 18
The objective of tests of details of transactions performed as
substantive tests is to
Question 19
Which of the following documentation is not required for an audit in
accordance with generally accepted auditing standards?
Question 20
An auditor should design the written audit program so that
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ACC 576 Week 3 Quiz
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Week 3 Quiz
Question 1
In designing written audit programs, an auditor should establish
specific audit objectives that relate primarily to the
Question 2
Which of the following procedures is least likely to be performed
before the balance sheet date?
Question 3
In determining whether transactions have been recorded, the direction
of the audit testing should be from the
Question 4
Which of the following combination of procedures would an auditor
most likely perform to obtain evidence about fixed asset additions?
Question 5
An auditor may achieve audit objectives related to particular assertions
by
Question 6
The sampling unit in a test of controls pertaining to the existence of
payroll transactions ordinarily is a(an)
Question 7
The risk of incorrect acceptance and the likelihood of assessing
control risk too low relate to the

Question 8
Which of the following audit procedures probably would provide the
most reliable evidence concerning the entity's assertion of rights and
obligations related to inventories?
Question 9
When an auditor tests a computerized accounting system, which of the
following is true of the test data approach?
Question 10
An auditor is determining the sample size for an inventory observation
using mean-per-unit estimation, which is a variables sampling plan.
To calculate the required sample size, the auditor usually determines
the
Question 11
Processing data through the use of simulated files provides an auditor
with information about the operating effectiveness of control policies
and procedures.
One of the techniques involved in this approach makes use of
Question 12
An auditor should trace bank transfers for the last part of the audit
period and first part of the subsequent period to detect whether
Question 13
The primary responsibility of a bank acting as registrar of capital
stock is to
Question 14

An auditor most likely would perform substantive tests of details on
payroll transactions and balances when
Question 15
Cutoff tests designed to detect credit sales made before the end of the
year that have been recorded in the subsequent year provide assurance
about management's assertion of
Question 16
In performing tests of controls over authorization of cash
disbursements, which of the following sampling methods would be
most appropriate?
Question 17
In evaluating the adequacy of the allowance for doubtful accounts, an
auditor most likely reviews the entity's aging of receivables to support
management's financial statement assertion of
Question 18
Which of the following courses of action would an auditor most likely
follow in planning a sample of cash disbursements if the auditor is
aware of several unusually large cash disbursements?
Question 19
Which of the following characteristics most likely would be an
advantage of using classical variables sampling rather than
probability-proportional-to-size (PPS) sampling?
Question 20
Which of the following statements is correct concerning statistical
sampling in tests of controls?

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Week 4 Quiz
Question 1
Comfort letters ordinarily are addressed to
Question 2
When compiling a nonpublic entity's financial statements, an
accountant would be least likely to
Question 3
Comfort letters ordinarily are signed by the entity's
Question 4
Which of the following matters is covered in a typical comfort letter?

Question 5
Green, CPA, was engaged to audit the financial statements of Essex
Co. after its fiscal year had ended. The timing of Green's appointment
as auditor and the start of field work made confirmation of accounts
receivable by direct communication with the debtors ineffective.
However, Green applied other procedures and was satisfied as to the
reasonableness of the account balances.
Green's auditor's report most likely contained a(an)
Question 6
When engaged to audit a not-for-profit organization in accordance
with Government Auditing Standards, an auditor is required to
prepare a written report on compliance with laws and regulations that
includes
Question 7
(NOTE: This is a CPAexcel simulated Exam Question, not AICPA
licensed Material)
The effects of financial leverage result when a firm finances assets
using:
Question 8
Which of the following statements is correct concerning both an
engagement to compile and an engagement to review a nonpublic
entity's financial statements?
Question 9
Which of the following representations does an accountant make
implicitly when issuing the standard report for the compilation of a
nonpublic entity's financial statements?

Question 10
Which of the following statements is correct regarding a review
engagement of a nonpublic company's financial statements performed
in accordance with the Statements on Standards for Accounting and
Review Services (SSARs)?
Question 11
In which of the following situations would an auditor ordinarily
choose between expressing an "except for" qualified opinion or an
adverse opinion?
Question 12
When engaged to compile the financial statements of a nonpublic
entity, an accountant is required to possess a level of knowledge of the
entity's accounting principles and practices.
This requirement most likely will include obtaining a general
understanding of the
Question 13
When a qualified opinion results from a limitation on the scope of the
audit, the situation should be described in an explanatory paragraph
Question 14
The standard report issued by an accountant after reviewing the
financial statements of a nonpublic entity states that
Question 15
Which of the following phrases would an auditor most likely include
in the auditor's report when expressing a qualified opinion because of
inadequate disclosure?

Question 16
A client has capitalizable leases but refuses to capitalize them in the
financial statements. Which of the following reporting options does an
auditor have if the amounts pervasively distort the financial
statements?
Question 17
Wolf is auditing an entity's compliance with requirements governing a
major federal financial assistance program in accordance with
Government Auditing Standards. Wolf detected noncompliance with
requirements that have a material effect on the program.
Wolf's report on compliance should express
Question 18
General Retailing, a nonissuer, has asked Ford, CPA, to compile its
financial statements that omit substantially all disclosures required by
GAAP. Ford may comply with General's request provided the omission
is clearly indicated in Ford's report and the
Question 19
Moore, CPA, has been asked to issue a review report on the balance
sheet of Dover Co., a nonpublic entity. Moore will not be reporting on
Dover's statements of income, retained earnings, and cash flows.
Moore may issue the review report provided the
Question 20
Reporting standards for financial audits under Government Auditing
Standards (the Yellow Book) differ from reporting under generally
accepted auditing standards in that Government Auditing Standards
require the auditor to

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Week 5 Quiz
Question 1
An accountant's compilation report on a financial forecast should
include a statement that the
Question 2
When a CPA examines a client's projected financial statements, the
CPA's report should
Question 3
At a confidential meeting, an audit client informed a CPA about the
client's illegal insider-trading actions. A year later, the CPA was
subpoenaed to appear in federal court to testify in a criminal trial

against the client. The CPA was asked to testify to the meeting between
the CPA and the client.
After receiving immunity, the CPA should do which of the following?
Question 4
licensed Material)
XYZ Corporation is having financial difficulties. Its CFO has ordered
subordinates to pump up revenues artificially and hide that fact from
the external auditor. If an internal auditor of XYZ intentionally
misleads XYZ's outsider auditor from the ABC Accounting firm, the
internal auditor has:
Question 5 (AICPA.080962REG-1B)
licensed Material)
Duncan, an accounting firm, is auditing Alchemy Inc. Regarding
commissions and referral fees, which of the following arrangements
would be permissible?
Question 6
A CPA who is not in public practice is obligated to follow which of the
following rules of conduct?
Question 7
Under the Statements on Standards for Consulting Services, which of
the following statements best reflects a CPA's responsibility when
undertaking a consulting services engagement?
The CPA must

Question 8
Under the Code of Professional Conduct of the AICPA, which of the
following is required to be independent in fact and appearance when
discharging professional responsibilities?
Question 9
Locke, CPA, was engaged to perform an audit for Vorst Co. During
the audit, Locke discovered that Vorst's inventory contained stolen
goods. Vorst was indicted and Locke was validly subpoenaed to testify
at the criminal trial. Vorst has claimed accountant-client privilege to
prevent Locke from testifying.
Locke may be compelled to testify
Question 10
licensed Material)
Ron is a partner in the Houston office of KPMG. A partner in Ron's
office is the lead partner on the team that audits Midstream Pipeline,
which operates intrastate oil and gas pipelines, but Ron is not on the
engagement team. Which of the following scenarios represents an
independence violation of the AICPA Code of Conduct?
Question 11
licensed Material)
The CPA firm, where Joanna is currently a tax partner, is auditing
Bubbles Corp. in Austin. Her mother, Teresa, has been working as a
receptionist for Bubbles for the last 30 years. Her best friend since
grade school, Maggie, is currently serving as CFO at Bubbles. Joanna
knows that her brother, Jonathan, sank most of his savings into a

purchase of 6% of Bubbles outstanding stock, which he currently
owns. Does Joanna have an independence issue?
Question 12
An accountant may accept an engagement to apply agreed-upon
procedures to prospective financial statements provided that
Question 13
licensed Material)
In order to preserve independence, the PCAOB requires:
Question 14
According to the standards of the profession, which of the following
activities would most likely not impair a CPA's independence?
Question 15
According to the standards of the profession, which of the following
circumstances will prevent a CPA performing audit engagements from
being independent?
Question 16
Which of the following is a term for an attest engagement in which a
CPA assesses a client's commercial Internet site for predefined criteria
that are designed to measure transaction integrity, information
protection, and disclosure of business practices?
Question 17

A CPA in public practice is required to comply with the provisions of
the Statements on Standards for Attestation Engagements (SSAE)
when
Question 18
An accountant's report expressing an opinion on a nonissuer's
internal control over financial reporting should state that
Question 19
In a state jurisdiction having an accountant-client privilege statute, to
whom may a CPA turn over work papers without a client's
permission?
Question 20
Mell Corp. engaged Davis & Co., CPAs. to audit Mell's financial
statements. Mell's management informed Davis it suspected that the
accounts receivable were materially overstated. Although the financial
statements did include a materially overstated accounts receivable
balance, Davis issued an unqualified opinion.Mell relied on the
financial statements in deciding to obtain a loan from County Bank to
expand its operations. County relied on the financial statements in
making the loan to Mell. As a result of the overstated accounts
receivable balance, Mell has defaulted on the loan and has incurred a
substantial loss.
If County sues Davis for fraud, must Davis furnish County with the
audit working papers?
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ACC 576 Study Week 6
1. Which of the following did SOX NOT do to protect
whistleblowers?
2. Dan provided original information to authorities regarding a
securities fraud in his company. It led the SEC to impose penalties of
$2 million. Which of the following is most likely to be Dan's award
under Dodd-Frank?
3. Which of the following is necessary to be an audit committee
financial expert, according to the criteria specified in the Sarbanes-
Oxley Act of 2002?
4. Which of the following did Dodd-Frank do regarding a
whistleblower's right to sue for retaliation accorded by SOX?
5. A public company audit committee's "financial expert" must
have all of the following except:
6. Fang provided original information to authorities regarding a
securities fraud in his company. The information led to an imposition

of penalties of $500,000. It also led to Fang being fired in retaliation
by his public company employer. Which of the following is true?
7. Public company audit committees must contain which of the
following?
8. Under SOX, it is a crime to punish a public company
whistleblower who provides truthful information relating to which of
the following:
9. Mar has been complicit in her public company's accounting
fraud. She consults a lawyer as the time comes to file her firm's 10-K
with the SEC. She is a little uncomfortable with what she might have
to do. The lawyer will likely tell her that she will have to certify (and be
potentially criminally liable for lying about) these matters:
10. Milo Corp. maintains daily backups of its accounting system in a
fireproof vault in the file library. Weekly, monthly, and annual
backups are stored in a secure, fireproof vault at an off-site location.
11. Maintenance of the backup files is an example of
12. Review of the audit (also called transaction) log is an example of
which of the following types of security control?
13. Which of the following statements presents an example of a
general control for a computerized system?
14. Controls in the information technology area are classified into the
categories of preventive, detective, and corrective. Which of the
following is a preventive control?
15. A company's new time clock process requires hourly employees to
select an identification number and then choose the clock-in or clock-
out button. A video camera captures an image of the employee using
the system. Which of the following exposures can the new system be
expected to change the least?

16. Which of the following is an example of a detective control?
17. In the COSO "cube" model, each of the following is a control
objective except
18. In the COSO "cube" model, this component of internal control
enables an organization's people to identify, process, and exchange the
information needed to manage and control operations.
19. This component of internal control concerns the policies and
procedures that ensure that actions are taken to address the risks
related to the achievement of management's objectives.
20. This fundamental component of internal control is the core or
foundation of any system of internal control.
21. This component of internal control concerns testing the system
and its data.
22. According to COSO, which of the following is a compliance
objective?
23. This is the process of identifying, analyzing, and managing the
risks involved in achieving the organization's objectives.
24. In the COSO (2011) "cube" model, each of the following are
components of internal control except
25. According to the 17 COSO control principles, risk reduction
primarily relates to which fundamental component of internal control:
26. According to the 17 COSO control principles, establishing a
whistle-blower hot line contributes to:
27. According to the 17 COSO control principles, information quality
primarily relates to which fundamental component of internal control:

28. According to the 17 COSO control principles, organizational
objectives primarily relate to which fundamental component of
internal control:
29. According to the 17 COSO control principles, addressing control
deficiencies primarily relates to which fundamental component of
internal control:
30. According to the 17 COSO control principles, change
management primarily relates to which fundamental component of
internal control:
31. According to the 17 COSO control principles, fraud primarily
relates to which fundamental component of internal control:
32. The original COSO model has _____ control components, while
the COSO ERM model has _____ control components.
33. Strategic, operations, reporting, and compliance objectives are a
part of which of the following models of internal control?
34. Which of the following items is one of the eight components of
COSO's enterprise risk management framework?
35. Which component of the COSO ERM framework is concerned
with management's decision to avoid, accept, reduce, or share risk and
to develop a set of actions to align risk with the entity's risk
preferences?
36. Activities that can be useful in monitoring control system
effectiveness include all of the following except
37. The goals of risk management include:
38. According to COSO, which of the following is the most effective
method to transmit a message of ethical behavior throughout an
organization?

39. Each of the following is a limitation of enterprise risk
management (ERM) except
40. Which of the following control activities should be taken to reduce
the risk of incorrect processing in a newly installed computerized
accounting system?
41. Recognizing potential impediments to communication between
system user and system designer can be useful in
42. A senior executive of an international organization who wishes to
demonstrate the importance of the security of company information to
all team members should
43. In which of the following organizations might segregation of
duties be easiest to achieve?
44. A manufacturing firm noted that it would have difficulty sourcing
raw materials locally, so it decided to relocate its production facilities.
According to COSO, this decision represents which of the following
responses to the risk?
45. Which of the following is most useful when risk is being
prioritized?
46. According to COSO, the two primary attributes of effective
evaluators are
47. Which of the following are reasons that internal controls need to
be monitored?
48. Which of the following is the best definition of a compensating
control?
49. Within the COSO Internal Control-Integrated Framework, which
of the following components is designed to ensure that internal
controls continue to operate effectively?

50. According to COSO, an effective approach to monitoring internal
control involves each of the following steps,except
51. According to COSO, the use of ongoing and separate evaluations
to identify and address changes in internal control effectiveness can
best be accomplished in which of the following stages of the
monitoring-for-change continuum?
52. Internal control monitoring is considered
53. Which of the following is not a major step in the COSO model of
control monitoring?
54. In a large public corporation, evaluating internal control
procedures should be the responsibility of
55. The system of internal control begins with
56. The IIA's International Professional Practices Framework
includes among its "mandatory" guidance each of the following
elements except
57. One of the Rules of Conduct in the IIA's Code of Ethics states,
"Internal auditors shall perform internal audit services in accordance
with the International Standards for the Professional Practice of
Internal Auditing." To which Principle of the Code of Ethics does this
Rule of Conduct relate?
58. The IIA's Code of Ethics identifies four "Principles" around
which the 12 Rules of Conduct are organized. Each of the following
key words or phrases is associated with these Principles except
59. What term identifies the type of internal auditing standards used
to measure the quality of the internal auditor's conduct in delivering
internal audit services?

60. What term identifies the type of internal auditing standards used
to describe the characteristics associated with organizations and
individuals who provide internal audit services?
61. The IIA's Definition of Internal Auditing specifically mentions
each of the following terms among the organizational objectives to be
improved by internal auditing except
62. What term is used in the IIA's International Standards to identify
the person responsible for managing an organization's internal audit
activity?
63. The Attribute Standards related to an internal audit activity's
Quality Assurance and Improvement Program must include periodic
external assessments. How often is an external assessment required?
64. The Attribute Standards focus on four primary themes around
which the remaining Attribute Standards are organized. Each of the
following key words or phrases is associated with those four primary
themes except
65. Standard 1300, "Quality Assurance and Improvement Program,"
states, "The chief audit executive must develop and maintain a quality
assurance and improvement program that covers all aspects of the
internal audit activity." Six additional Attribute Standards provide
further requirements on that topic. Which of the following is an
accurate statement regarding the standards applicable to the required
Quality Assurance Improvement Program?
66. The Performance Standards focus on seven primary themes
around which the remaining Performance Standards are organized.
Each of the following key words or phrases is associated with these
seven primary themes except
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ACC 576 Week 7 Assignment 1 Economic and Monetary
Policy
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ACC 576 Week 7 Assignment 1
Assignment 1: Economic and Monetary Policy
Using the Internet and Library, research the economies and monetary
policies of two (2) countries.
Write a four to five (4-5) page paper in which you:
Choose one (1) of the two (2) countries that you have researched, and
give your opinion on the degree to which the chosen country manages
its economy and monetary policy well. Provide support for your
opinion.
Compare and contrast the economies and monetary policies of the two
(2) countries that you have researched. Make at least two (2)
recommendations as to the primary manner in which both countries
could improve their economy and / or monetary policies.

Analyze the impact that economic and monetary policies of one (1) of
the chosen countries currently exerts upon its trade with other
countries. Make at least two (2) recommendations as to changes that
the chosen country should make to its policies to benefit its foreign
trade.
Propose one (1) alternative economic and monetary policy that would
make one (1) of the chosen countries stronger over the longer term.
Support your proposal with anticipated outcomes related to the
selected alternative policy.
Use at least three (3) quality academic resources in this assignment.
Note: Wikipedia and other Websites do not quality as academic
resources.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with
one-inch margins on all sides; citations and references must follow
APA or school-specific format. Check with your professor for any
additional instructions.
Include a cover page containing the title of the assignment, your
name, the professor’s name, the course title, and the date. The cover
page and the reference page are not included in the required
assignment page length.
The specific course learning outcomes associated with this assignment
are:

Analyze domestic microeconomic and macroeconomic principles that
impact businesses.
Analyze international economics and its impact on businesses,
globalization, and business strategy.
Use technology and information resources to research issues in
business law and tax.
Write clearly and concisely about business law and tax using proper
writing mechanics.
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listed all Questions below)
ACC 576 Week 7 Study
1. A management accountant performed a linear regression of
maintenance cost vs. production using a computer spreadsheet. The
regression output shows an "intercept" value of $322,897. How
should the accountant interpret this information?

2. The equation for the graphic plot of a linear economic variable is
D = b + m(a). Which of the following represents the value of the
"intercept"?
3. Which of the following statements regarding the use of graphs to
depict economic relationships is not correct?
4. Graphs are a means of depicting the relationship between two
variables. These variables are usually identified as
5. The equation for the graphic plot of a linear economic variable is
D = b + m(a), where m > 0. Which of the following is the slope of the
economic "curve" represented by this equation?
6. Measures of the economic activity of an entire nation would be
included in the study of
7. The free-market economy flow model depicts four major
interrelated flows:I . Individuals provide economic resources to
business firms.II. Firms provide payment to individuals for economic
resources.III. Firms provide goods and services to individuals.IV.
Individuals provide payment to firms for goods and services.
8. If the cost of imported oil declined suddenly and significantly,
which one of the above flows would be most likely to be the first
impacted?
9. The free-market economy flow model depicts four major
interrelated flows:I . Individuals provide economic resources to
business firms.II. Firms provide payment to individuals for economic
resources.III. Firms provide goods and services to individuals.IV.
Individuals provide payment to firms for goods and services.
10. If financial institutions and businesses suddenly and severely
restrict the availability of consumer credit, which one of the above
flows would be most likely to be the first to be impacted adversely?

11. Which of the following are considered economic resources?
12. In a free-market economy, which of the following should be the
least significant factor in determining resource allocation and use?
13. Which of the following is not a characteristic of a free-market
economy?
14. The demand for a commodity would increase when the price of a
15. When a demand schedule is plotted on a graph, the resulting
demand curve will be
16. In the statement "quantity demanded is a function of price," are
the variables quantity and price dependent or independent variables?
17. The demand curve for a product reflects which of the following?
18. If there is an increase in the income of market participants, which
of the following is most likely to happen to the demand for normal
goods?
19. Which one of the following would not cause an increase in
demand for a commodity?
20. Concurrent with a significant downturn in the economy, the sale
of Scope's high-end electronics decreased dramatically. Which of the
following is the most likely direct cause of the decline in demand for
Scope's products?
21. Which one of the following factors would not cause an increase in
the supply curve of a commodity?
22. A supply schedule (or supply curve) shows the relationship
between the quantity of a commodity that will be supplied during a
period of time and

23. If a change in market variables causes a supply curve to shift
inward, which one of the following will occur?
24. When the cost of input factors to the production process increases,
which one of the following will occur?
25. In the statement "quantity supplied is a function of price," are the
variables quantity and price dependent or independent variables?
26. An increase in taxes on cigarette production would cause which
one of the following to occur?
27. What is the effect on the quantity of a commodity supplied relative
to demand as a result of a government-mandated price ceiling or price
floor?
28. A city ordinance that establishes a price ceiling on rent may cause
29. If both demand and supply have traditional curves, a higher
equilibrium price may be caused by which one of the following?
30. If the price for a good is fixed by government fiat below market
equilibrium price, which one of the following will occur?
31. A price ceiling that is below the market equilibrium price would be
expected to result in which one of the following sets of effects on
demand and supply?
32. Which of the following characteristics would indicate that an item
sold would have a high price elasticity of demand?
33. An increase in the price of Commodity Y from $50 to $60 resulted
in an increase in the quantity supplied, from 80 units to 88 units.
Which one of the following is the price elasticity of supply?

34. A company has a policy of frequently cutting prices to increase
sales. Product demand is significantly elastic. What impact would this
have on the company's situation?
35. If demand for a product is elastic, what would be the effect of a
price increase and a price decrease on total revenue (TR) generated?
36. In which of the following situations would there be inelastic
demand?
37. The elasticity of demand is measured by
38. A 4% increase in the market price of Commodity X resulted in an
8% increase in the quantity of Commodity X supplied. Which one of
the following statements is correct?
39. As an individual acquires (or consumes) more units of a
commodity over a given time period, what is the effect on the
individual's total utility and marginal utility?
40. The following graph shows four curves: A-A, B-B, C-C, and D-D.
Which one of these curves could depict a total utility curve?
41. Allen buys only beer and pizza. When the price of beer is $2.00 per
bottle and the price of pizza is $10.00, Allen maximizes his total utility
(satisfaction) by buying 5 beers and 4 pizzas. If the marginal utility of
the 5th beer is 100 utils, which one of the following would be the
marginal utility of the 4th pizza?
42. The following graph shows four curves: A-A, B-B, C-C, and D-D.
Which of these curves depict variables that are not interdependent?
43. Allen has the following schedule of marginal utility for slices of
pizza and bottles of beer: If Allen maximizes his total utility by
consuming 3 slices of pizza and 3 bottles of beer, which one of the
following is the ratio of the price of a slice of pizza to the price of a
bottle of beer?

44. Which one of the following cost curves does not have a general
"U-shape"?
45. In the long run, if all input factors to a production process are
increased by 100%, but total output increases by only 75%, this
indicates
46. Which one of the following statements regarding periods of
analysis is correct?
47. According to the law of diminishing returns, which one of the
following is correct?
48. In a macroeconomic free-market flow model, which of the
following would be considered leakages?
49. Which of the following forms of economic activity is considered in
macroeconomics, but not in microeconomics?
50. In a macroeconomic free-market flow model, which one of the
following would not be considered an "injection?"
51. Which of the following issues is least likely to be relevant to the
study of macroeconomics?
52. The foreign sector plays a role in a macroeconomic free-market
flow model because of
53. Which of the following sectors is most likely to be relevant in both
microeconomic and macroeconomic models of free-market flows?
54. Potential GDP is a measure of an economy's ability to produce
goods and services. Which of the following is assumed in estimating
potential GDP?

55. Which of the following graphs shows the maximum combination
of goods and services that can be produced at a given time, if all
available resources are used efficiently?
56. A positive gross domestic product (GDP) gap exists when
57. Gross domestic product (GDP) is a measure of
58. Adjustment from gross national product (GNP) to net national
product (NNP) would require which one of the following?
59. A good produced in 2008 that was in the finished goods inventory
on December 31, 2008, and was sold in January 2009 would be
included in whole or in part in the GDP of which year(s)?
60. The following information is available for economic activity for
year 1: What amount is the gross domestic product for year 1?
61. Which of the following indicates that the economy is in a
recessionary phase?
62. If the U.S. economy is experiencing a 9% total unemployment rate
and the natural rate of unemployment is 5.5%, which of the following
is the cyclical rate of unemployment?
63. Jason, 14 years old, has been working delivering newspapers for
the past two years. Because he just entered high school, he has had to
give up his newspaper delivery job. Although he has been seeking a
new job, he has not been able to find one. Jason would be considered
64. There can be official full employment when there is which of the
following kinds of unemployment? I. Structural unemployment.II.
Frictional unemployment.III. Seasonal unemployment.
65. As a result of the recession in 2009 and the related decline in
tourism, several thousand hospitality industry workers in Florida
became unemployed. These workers were

66. Which of the following changes in unemployment is most likely to
be associated with a period of economic contraction?
67. Which of the following types of unemployment typically results
from technological advances?
68. Which of the following is not included in what is considered the
natural rate of unemployment?
69. Which of the following is most likely to decrease aggregate
demand?
70. In macroeconomics, which one of the following would not be
considered investment spendin
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1. Regarding financial resources, financial management is
concerned with the efficiency and effectiveness of which of the
following?
2. Which of the following financial management-related areas are
considered long-term issues?
3. Which one of the following would be considered a long-term
financial management activity or concern?
4. Financial management involves decisions and activities that deal
with
5. Which of the following "tools" are likely to be used in financial
management?
6. A company has the following target capital structure and
costs:The company's marginal tax rate is 30%. What is the company's
weighted-average cost of capital?
7. A company has the following financial information: To
maximize shareholder wealth, the company should accept projects
with returns greater than what percent?
8. The measurement of the benefit lost by using resources for one
purpose and not another is
9. Which of the following statements is correct regarding the
weighted-average cost of capital (WACC)?
10. Carter Co. paid $1,000,000 for land three years ago. Carter
estimates it can sell the land for $1,200,000, net of selling costs. If the
land is not sold, Carter plans to develop the land at a cost of
$1,500,000. Carter estimates net cash flow from the development in the
first year of operations would be $500,000. What is Carter's
opportunity cost of the development?

11. A company with a combined federal and state tax rate of 30% has
the following capital structure:What is the weighted-average after-tax
cost of capital for this company?
12. Which of the following is assigned to goods that were either
purchased or manufactured for resale?
13. Management at MDK Corp. is deciding whether to replace a
delivery van. A new delivery van costing $40,000 can be purchased to
replace the existing delivery van, which cost the company $30,000 and
has accumulated depreciation of $20,000. An employee of MDK has
offered $12,000 for the old delivery van. Ignoring income taxes, which
of the following correctly states relevant costs when making the
decision whether to replace the delivery vehicle?
14. Alpha Corporation has the following capital structure and related
cost of capital for each source: Which one of the following is Alpha's
weighted average cost of capital?
15. A company uses its company-wide cost of capital to evaluate new
capital investments. What is the implication of this policy when the
company has multiple operating divisions, each having unique risk
attributes and capital costs?
16. Which one of the following costs, if any, is relevant in making
financial decisions?
17. Buff Co. is considering replacing an old machine with a new
machine. Which of the following items is economically relevant to
Buff's decision? (Ignore income tax considerations.)
18. The ABC Company is trying to decide between keeping an existing
machine and replacing it with a new machine. The old machine was
purchased just two years ago for $50,000 and had an expected life of
10 years. It now costs $1,000 a month for maintenance and repairs,
due to a mechanical problem. A new replacement machine is being

considered, with a cost of $60,000. The new machine is more efficient
and it will only cost $200 a month for maintenance and repairs. The
new machine has an expected life of 10 years. In deciding to replace
the old machine, which of the following factors, ignoring income
taxes, should ABC not consider?
19. Egan Co. owns land that could be developed in the future. Egan
estimates it can sell the land for $1,200,000, net of all selling costs. If it
is not sold, Egan will continue with its plans to develop the land. As
Egan evaluates it options for development or sale of the property, what
type of cost would the potential selling price represent in Egan's
decision?
20. Which of the following statements is true regarding opportunity
cost?
21. For the year ended December 31, 2004, Abel Co. incurred direct
costs of $500,000 based on a particular course of action during the
year. If a different course of action had been taken, direct costs would
have been $400,000. In addition, Abel's 2004 fixed costs were $90,000.
The incremental cost was
22. Pole Co. is investing in a machine with a 3-year life. The machine
is expected to reduce annual cash operating costs by $30,000 in each
of the first 2 years and by $20,000 in year 3. Present values of an
annuity of $1 at 14% are:Using a 14% cost of capital, what is the
present value of these future savings?
23. Which one of the following kinds of tables most likely would be
used to determine the current worth of five equal amounts to be
received at the end of each of the next five years.
24. Which of the following changes would result in the highest
present value?

25. On August 31, 2004, Ashe Corp. adopted a plan to accumulate
$1,000,000 by September 1, 2008. Ashe plans to make four equal
annual deposits to a fund that will earn interest at 10% compounded
annually. Ashe will make the first deposit on September 1, 2004.
Future value and future amount factors are as follows: Which one of
the following would be the amount of annual deposits Ashe should
make (rounded)?
26. Which one of the following sets of interest (or discount) rates will
give the greater present value of $1.00 and greater future value of
$1.00?
27. On November 1, 2005, a company purchased a new machine that
it does not have to pay for until November 1, 2007. The total payment
on November 1, 2007 will include both principal and interest.
Assuming interest at a 10% rate, the cost of the machine would be the
total payment multiplied by what time value of money concept?
28. A corporation obtains a loan of $200,000 at an annual rate of
12%. The corporation must keep a compensating balance of 20% of
any amount borrowed on deposit at the bank, but it normally does not
have a cash balance account with the bank. What is the effective cost
of the loan?
29. A company has an outstanding one-year bank loan of $500,000 at
a stated interest rate of 8%. The company is required to maintain a
20% compensating balance in its checking account. The company
would maintain a zero balance in this account if the requirement did
not exist. What is the effective interest rate of the loan?
30. Josey maintained a $10,000 balance in his savings account
throughout 2008, the first year of the account. The savings account
paid 2% interest compounded annually. For 2008, the inflation rate
was 3%. For 2008, what is Josey's real interest rate on the savings
account?

31. Which one of the following is interest earned on both an initial
principal and the unpaid accrued interest that accumulated on that
principal from prior periods?
32. Beta Company has arranged to borrow $10,000 for 180 days. Beta
will repay the principal amount plus $600 in interest at the maturity of
the note.Which one of the following is the annual percentage rate
(APR) of interest that Beta is paying on the loan?
33. Which one of the following is the annual rate of interest
applicable when not taking trade credit terms of "2/10, net 30?"
34. The following information is available on market interest rates:
What is the market rate of interest on a one-year U.S. Treasury bill?
35. Which one of the following U.S. GAAP approaches to determining
fair value converts future amounts to current amounts?
36. Which of the following U.S. GAAP levels of inputs for valuation
purposes is/are based on observable inputs?
37. Conceptually, which one of the following U.S. GAAP approaches
for determining value is most likely to provide the best evidence of fair
value?
38. Which of the following characteristics, if any, should be taken into
account in valuing a specific item?
39. Under U.S. GAAP requirements, valuation may be based on an
40. Which of the following level(s) of input in the U.S. GAAP
hierarchy of inputs for fair value determination is/are likely to be most
appropriate for valuing basic agricultural commodities?
41. Assuming they are traded in an active market, which of the
following types of investments, if any, could be valued using level 1

inputs of the U.S. GAAP hierarchy of inputs for determining fair
value?
42. Quoted prices in which of the following types of markets could be
level 2 inputs in determining fair value under the U.S. GAAP
hierarchy of inputs for fair value determination?
43. Which of the following levels of the U.S. GAAP hierarchy of
inputs used for determining fair value can be based on inputs not
directly observable for the item being valued?
44. Which of the following types of active markets, if any, would be
considered as providing level 1 inputs under the U.S. GAAP hierarchy
of inputs for fair value determination?
45. Which one of the following beta values indicates the least
volatility?
46. Which one of the following is not a limitation of the capital asset
pricing model?
47. Assume the following rates exist in the U.S.: Prime interest rate
= 6%
48. Fed discount rate = 4% U.S. Treasury Bond rate = 2%
Inflation rate = 1% which one of the following is most likely the
nominal risk-free rate of return in the U.S.?
49. Assume the following values for an investment: Risk-free rate of
return = 2% Expected rate of return = 9% Beta = 1.4 which one of the
following is the required rate of return for the investment?
50. Which one of the following is not an element in the capital asset
pricing model formula?
51. A graph that plots beta would show the relationship between

52. Which one of the following is not a factor routinely considered in
valuing a stock option?
53. Charles Allen was granted options to buy 100 shares of Dean
Company stock. The options expire in one year and have an exercise
price of $60.00 per share. An analysis determines that the stock has an
80% probability of selling for $72.50 at the end of the one-year option
period and a 20% probability of selling for $65.00 at the end of the
year. Dean Company's cost of funds is 10%. Which one of the
following is most likely the current value of the 100 stock options?
54. Which one of the following is not a limitation of the basic Black-
Scholes option pricing model?
55. Which one of the following characteristics is not an advantage of
the Black-Scholes option pricing model?
56. Which one of the following options, A through D, is most likely to
have the greatest value (all other things being equal)?
57. Assume the following abbreviated Income Statement: In a
common-size income statement, which one of the following
percentages would be shown for Finance Expense?
58. Which one of the following approaches to valuing a business is
most likely to be appropriate when the business has been losing money
and is going to be sold in a distressed sale?
59. Which one of the following is least likely to be the reason an entity
would seek a valuation of the entity as a going concern?
60. Assume the following abbreviated Balance Sheet: In a common-
sized balance sheet, which one of the following percentages would be
shown for current liabilities?
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1. Checkpoint auto leasing is a small company with six employees.
The best action that it can take to increase its internal control
effectiveness is
2. Morgan Property Management, Inc. recently switched from a
manual accounting system to a computerized accounting system. The
system supports online real-time processing in a networked
environment, and six employees have been granted access to various
parts of the system in order to perform their jobs. Relative to the
manual system, Morgan can expect to see
3. Which of the following statements is (are) true. I.A greater level
of control is necessary in automated than manual systems. II. The
uniformity of transaction processing is higher in automated than
manual systems.

4. In COBIT, the process of identifying automated solutions falls
within the ________ control process domain.
5. In COBIT, the process of reviewing system response time logs
falls within the _______ control process domain.
6. In COBIT, the process of developing tactics to realize the
strategic vision for IT falls within the _________ control process
domain.
7. In COBIT, the process of ensuring security and continuous
service falls within the _______ control process domain.
8. One important purpose of COBIT is to
9. Which of the following is true of enterprise resource planning
(ERP) systems? I. The online analytical processing system (OLAP)
provides data warehouse capabilities for the ERP system. II. The
ability of an ERP system to provide an integrated view of transactions
in all parts of the system is a function of the online transaction
processing (OLTP) system.
10. An enterprise resource planning (ERP) system has which of the
following advantages over multiple independent functional systems?
11. The fixed assets and related depreciation of a company are
currently tracked on a password-protected spreadsheet. The
information technology governance committee is designing a new
enterprise-wide system and needs to determine whether the current
fixed asset process should be included because the current system
seems to be working properly. What long-term solution should the
committee recommend?
12. What is an example of the use of the cloud to access software and
programs?

13. Credit Card International developed a management reporting
software package that enables members interactively to query a data
warehouse and drill down into transaction and trend information via
various network set-ups. What type of management reporting system
has Credit Card International developed?
14. A client would like to implement a management information
system that integrates all functional areas within an organization to
allow information exchange and collaboration among all parties
involved in business operations. Which of the following systems is
most effective for this application?
15. What is an example of the use of the cloud to create software and
programs?
16. An enterprise resource planning system is designed to
17. Which of the following risks increases the least with cloud-based
computing compared with local server storage for an organization that
implements cloud-based computing?
18. What is an example of the use of the cloud to access hardware?
19. An information technology director collected the names and
locations of key vendors, current hardware configuration, names of
team members, and an alternative processing location. What is the
director most likely preparing?
20. Bacchus, Inc. is a large multinational corporation with various
business units around the world. After a fire destroyed the corporate
headquarters and largest manufacturing site, plans for which of the
following would help Bacchus ensure a timely recovery?
21. In an e-commerce environment that requires that the information
technology (IT) system be available on a continuous basis, more
emphasis will be placed on which of the following aspects of the
planning than in a traditional organization?

22. A controller is developing a disaster recovery plan for a
corporation's computer systems. In the event of a disaster that makes
the company's facilities unusable, the controller has arranged for the
use of an alternate location and the delivery of duplicate computer
hardware to this alternate location. Which of the following recovery
plans would best describe this arrangement?
23. The performance audit report of an information technology
department indicated that the department lacked a disaster recovery
plan. Which of the following steps should management take first to
correct this condition?
24. Which of the following tasks comes first in business continuity
management (BCM)?
25. In DRP, the lowest priority is given to which activities?
26. Which of the following terms refers to a site that has been
identified and maintained by the organization as a data processing
disaster recovery site, but has not been stocked with equipment?
27. In DRP, top priority is given to which activities?
28. To maintain effective segregation of duties within the information
technology function, an application programmer should have which of
the following responsibilities?
29. In business information systems, the term "stakeholder" refers to
which of the following parties?
30. In a large multinational organization, which of the following job
responsibilities should be assigned to the network administrator?
31. IT people controls are mostly
32. What is the role of the systems analyst in an IT environment?

33. The position responsible for managing the flow of documents and
reports in and out of the computer operations department is the
34. Which of the following information technology (IT) departmental
responsibilities should be delegated to separate individuals?
35. Who is responsible for granting users access to specific data
resources?
36. When a client's accounts payable computer system was relocated,
the administrator provided support through a dial-up connection to a
server. Subsequently, the administrator left the company. No changes
were made to the accounts payable system at that time. Which of the
following situations represents the greatest security risk?
37. In a large firm, the custody of an entity's data is most
appropriately maintained by which of the following personnel?
38. In which of the following stages of computer system development
would training occur?
39. Which of the following roles is responsible for prioritizing systems
development proposals?
40. At this stage, we purchase hardware:
41. Which of the following is responsible for overall program logic
and functionality?
42. Data conversion occurs at this stage:
43. Which of the following implementation approaches has been
described as "sink or swim?"
44. Which of the following is responsible for identifying problems and
proposing initial solutions?

45. Which of the following is responsible for designing, creating, and
testing programs?
46. In which of the following implementation approaches is the
system divided into modules for implementation?
47. In which of the following implementation approaches do the new
and old systems run concurrently until it is clear that the new system is
working properly?
48. In which of the following implementation approaches are users
divided into smaller groups and trained on the new system, one group
at a time?
49. The requirements definition document is signed at this stage:
50. In a small business with only microcomputers, which
documentation would be most useful to an untrained user to learn how
to correct data errors in a database application?
51. Rose and McMullin, a regional public accounting firm, has
recently accepted a contract to audit On-the-Spot, Inc., a mobile
vending service that provides vending machines for large events. On-
the-Spot uses a computerized accounting system, portions of which
were developed internally to integrate with a standard financial
reporting system that was purchased from a consultant. What type of
documentation will be most useful to Rose and McMullin in
determining how the system as a whole is constructed?
52. Which of the following types of documentation would a computer
operator use to determine how to set up and run a specific computer
application.
53. Management of a company has a lack of segregation of duties
within the application environment, with programmers having access
to development and production. The programmers have the ability to
implement application code changes into production without

monitoring or a quality assurance function. This is considered a
deficiency in which of the following areas?
54. After changes to a source program have been made and verified, it
moves to
55. Which of the following controls in not usually found in batch
processing systems?
56. Which of the following is considered an application input control?
57. An employee mistakenly enters April 31 in the date field. Which of
the following programmed edit checks offers the best solution for
detecting this error?
58. Which of the following input controls would prevent an incorrect
state abbreviation from being accepted as legitimate data?
59. Which of the following techniques would be used to verify that a
program was free of unauthorized changes?
60. An entity has the following sales orders in a batch: Which of the
following numbers represents the record count?
61. Mark Chen was recently hired by the Rollins Company at a
monthly salary of $1,800. When his employee information was entered
into the company's personnel system, his monthly salary amount was
entered correctly, but he was inadvertently classified as an hourly
employee. Which of the following controls would be most likely to
detect this error?
62. A poor quality connection caused extensive line noise, resulting in
faulty data transmission. Which of the following controls is most likely
to detect this condition?
63. The distribution of reports is considered what type of control?

64. An audit trail is considered what type of control?
65. An auditor was examining a client's network and discovered that
the users did not have any password protection. Which of the following
would be the best example of the type of network password the users
should have?
66. What is the primary objective of data security controls?
67. Which of the following is the strongest password?
68. Problems associated with e-commerce in general include all of the
following except
69. Which of the following is not a risk of e-commerce?
70. Which of the following is not a risk of e-commerce?
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1. Wages earned by machine operators in producing the firm's
product should be categorized as
2. Which of the following is assigned to goods that were either
purchased or manufactured for resale?
3. In a traditional job order cost system, the issue of indirect
materials to a production department increases
4. The accountant for Champion Brake, Inc. applies overhead
based on machine hours. The budgeted overhead and machine hours
for the year are $260,000 and 16,000, respectively. The actual
overhead and machine hours incurred were $275,000 and 20,000. The
cost of goods sold and inventory data compiled for the year is as
follows: Direct Materials $ 50,000, COGS 450,000, WIP (units)
100,000, Finished Goods (units) 150,000. What is the amount of
over/under applied overhead for the year?
5. If a product required a great deal of electricity to produce, and
crude oil prices increased, which of the following costs most likely
increased?
6. Fab Co. manufactures textiles. Among Fab's 2004
manufacturing costs were the following salaries and wages: Loom
operators $120,000, Factory foremen 45,000, Machine mechanics
30,000. What was the amount of Fab's 2004 direct labor?
7. In a process cost system, the application of factory overhead
usually would be recorded as an increase in
8. Jonathan Mfg. adopted a job-costing system. For the current
year, budgeted cost driver activity levels for direct labor hours and
direct labor costs were 20,000 and $100,000, respectively. In addition,

budgeted variable and fixed factory overheads were $50,000 and
$25,000, respectively. The actual costs and hours for the year were as
follows: Direct labor hours 21,000, Direct labor costs $110,000,
Machine hours 35,000. For a particular job, 1,500 direct labor hours
were used. Using direct labor hours as the cost driver, what amount of
overhead should be applied to this job?
9. Indirect labor is a
10. Hoyt Co. manufactured the following units: Saleable 5,000,
Unsalable (normal spoilage) 200, Unsalable (abnormal spoilage)
300, the manufacturing cost totaled $99,000. What amount should
Hoyt debit to finished goods?
11. In the past, four direct labor hours were required to produce each
unit of product Y. Material costs were $200 per unit, the direct labor
rate was $20 per hour, and factory overhead was three times the direct
labor cost. In budgeting for next year, management is planning to
outsource some manufacturing activities and to further automate
others. Management estimates that these plans will reduce labor hours
by 25%, increase the factory overhead rate to 3.6 times the direct labor
costs, and increase material costs by $30 per unit. Management plans
to manufacture 10,000 units. What amount should management
budget for the cost of goods manufactured?
12. During the month of March 2005, Nale Co. used $300,000 of
direct materials. On March 31, 2005, Nale's direct materials inventory
was $50,000 more than it was on March 1, 2005. Direct material
purchases during the month of March 2005 amounted to
13. Based on the following data, what is the gross profit for the
company? Sales $1,000,000, Net purchases of raw materials 600,000,
Cost of goods manufactured 800,000, Marketing and administrative
expenses 250,000, Indirect manufacturing costs 500,000.

14. On January 1 Maples had two jobs in process: #506 with assigned
costs of $10,500 and #507 with assigned costs of $14,250. During
January three new jobs, #508 through #510, were started and three
jobs, #506, #507, and #508, were completed. Materials and labor costs
added during January were as follows: Manufacturing overhead is
assigned at the rate of 200 percent of labor. What is the January cost
of goods manufactured and transferred from work-in-process?
15. In June, Delta Co. experienced scrap, normal spoilage, and
abnormal spoilage in its manufacturing process. The cost of units
produced includes
16. In its April 2005 production, Hern Corp., which does not use a
standard cost system, incurred total production costs of $900,000, of
which Hern attributed $60,000 to normal spoilage and $30,000 to
abnormal spoilage. Hern should account for this spoilage as
17. Mat Co. estimated its material handling costs at two activity levels
as follows: What is Mat's estimated cost for handling 75,000 kilos?
18. When using a flexible budget, a decrease in production levels
within a relevant range
19. A delivery company is implementing a system to compare the costs
of purchasing and operating different vehicles in its fleet. Truck 415 is
driven 125,000 miles per year at a variable cost of $0.13 per mile.
Truck 415 has a capacity of 28,000 pounds and delivers 250 full loads
per year. What amount is the truck's delivery cost per pound?
20. Sender, Inc. estimates parcel mailing costs using the data shown
on the chart below. What is Sender's estimated cost for mailing 12,000
parcels?
21. When production levels are expected to increase within a relevant
range, and a flexible budget is used, what effect would be anticipated
with respect to each of the following costs?

22. Day Mail Order Co. applied the high-low method of cost
estimation to customer order data for the first 4 months of 2005. What
is the estimated variable order filling cost component per order?
23. When production levels are expected to decline within a relevant
range, and a flexible budget is used, what effect would be anticipated
with respect to each of the following?
24. In an activity-based costing system, cost reduction is accomplished
by identifying and eliminating
25. Book Co. uses the activity-based costing approach for cost
allocation and product costing purposes. Printing, cutting, and
binding functions make up the manufacturing process. Machinery and
equipment are arranged in operating cells that produce a complete
product starting with raw materials. Which of the following are
characteristic of Book's activity-based costing approach? I. Cost
drivers are used as a basis for cost allocation. II. Costs are
accumulated by department or function for the purposes of product
costing. III. Activities that do not add value to the product are
identified and reduced to the extent possible.
26. What is the normal effect on the numbers of cost pools and
allocation bases when an activity-based cost (ABC) system replaces a
traditional cost system?
27. In an activity-based costing system, what should be used to assign
a department's manufacturing overhead costs to products produced in
varying lot sizes?
28. Gram Co. develops computer programs to meet customers' special
requirements. How should Gram categorize payments to employees
who develop these programs?

29. Where one part of an organization provides an essential business
process where previously it had been provided by multiple parts of that
same organization, this is called
30. Which of the following items often provides a significant risk with
off-shore operations?
31. A manufacturing company has several product lines.
Traditionally, it has allocated manufacturing overhead costs between
product lines based on total machine hours for each product line.
Under a new activity-based costing system, which of the following
overhead costs would be most likely to have a new cost driver assigned
to it?
32. Nile Co.'s cost allocation and product costing procedures follow
activity-based costing principles. Activities have been identified and
classified as being either value-adding or nonvalue-adding as to each
product. Which of the following activities, used in Nile's production
process, is nonvalue-adding?
33. Which of the following items is a process management approach
that involves radical change?
34. In an income statement prepared as an internal report using the
direct (variable) costing method, fixed selling and administrative
expenses would
35. The absorption costing method includes in work in process and
finished goods inventories:
36. In an income statement prepared as an internal report using the
direct (variable) costing method, fixed selling and administrative
expenses would
37. Cay Co.'s 2005 fixed manufacturing overhead costs totaled
$100,000, and variable selling costs totaled $80,000. Under direct
costing, how should these costs be classified?

38. Using the variable costing method, which of the following costs
are assigned to inventory?
39. A manufacturing company prepares income statements using both
absorption and variable costing methods. At the end of a period, actual
sales revenues, total gross profit, and total contribution margin
approximated budgeted figures, whereas income was substantially
greater than the budgeted amount. There was no beginning or ending
inventories. The most likely explanation of the income increase is that,
compared to budget, actual
40. Which of the following statements is correct regarding the
difference between the absorption costing and variable costing
methods?
41. A manufacturing company prepares income statements using both
absorption and variable costing methods. At the end of a period, actual
sales revenues, total gross profit, and total contribution margin
approximated the budgeted figures, whereas income was substantially
below the budgeted amount. There was no beginning or ending
inventories. The most likely explanation for the income shortfall is
that, compared to budget, actual
42. A single-product company prepares income statements using both
absorption and variable costing methods. Manufacturing overhead
cost applied per unit produced in 2005 was the same as in 2004. The
2005 variable costing statement reported a profit, whereas the 2005
absorption costing statement reported a loss. The difference in
reported income could be explained by the units produced in 2005
being
43. At the end of Killo Co.'s first year of operations, 1,000 units of
inventory remained on hand. Variable and fixed manufacturing costs
per unit were $90 and $20, respectively. If Killo uses absorption
costing rather than direct (variable) costing, the result would be a
higher pretax income of

44. Lynn Manufacturing Co. prepares income statements using both
standard absorption and standard variable costing methods. For 2005,
unit standard costs were unchanged from 2004. In 2005, the only
beginning and ending inventories were finished goods of 5,000 units.
How would Lynn's ratios using absorption costing compare with those
using variable costing?
45. A direct labor overtime premium should be charged to a specific
job when the overtime is caused by the
46. In a job cost system, manufacturing overhead is
47. Birk Co. uses a job order cost system. The following debits
(credits) appeared in Birk's work in process account for the month of
April 2005: Birk applies overhead to production at a predetermined
rate of 80% of the direct labor cost. Job No. 5, the only job still in
process on April 30, 2005, was charged with direct labor of $2,000.
What was the amount of direct materials charged to Job No. 5?
47.
48. A job order cost system uses a predetermined factory overhead rate
based on expected volume and expected fixed cost. At the end of the
year, under applied overhead might be explained by which of the
following situations?
49. A standard cost system may be used in
50. During the current year, the following manufacturing activity took
place for a company's products: Beginning work in process: 10,000
units, 70% complete, Units started into production during the year:
150,000 units, Units completed during the year: 140,000 units, Ending
work in process: 20,000 units, 25% complete. What was the number of
equivalent units produced using the first-in, first-out method?
51. Yarn Co.'s inventories in process were at the following stages of
completion on April 30, 2004:

52. The forming department is the first of a two-stage production
process. Spoilage is identified when the units have completed the
forming process. The costs of spoiled units are assigned to units
completed and transferred to the second department in the period
when spoilage is identified. The following information concerns
forming's conversion costs in May 2005: Using the weighted average
method, what was forming's conversion cost transferred to the second
production department?
53. Weighted average and first in, first out (FIFO) equivalent units
would be the same in a period when which of the following occurs?
54. In computing the current period's manufacturing cost per
equivalent unit, the FIFO method of process costing considers current
period costs
55. Black, Inc. employs a weighted average method in its process
costing system. Black's work in process inventory on June 30 consists
of 40,000 units. These units are 100% complete with respect to
materials and 60% complete with respect to conversion costs. The
equivalent unit costs are $5.00 for materials and $7.00 for conversion
costs. What is the total cost of the June 30 work in process inventory?
56. A process costing system was used for a department that began
operations in January 2005. Approximately the same number of
physical units, at the same degree of completion, were in work in
process at the end of both January and February. Monthly conversion
costs are allocated between ending work in process and units
completed. Compared to the FIFO method, would the weighted
average method use the same or a greater number of equivalent units
to calculate the monthly allocations?
57. In process 2, material G is added when a batch is 60% complete.
Ending work in process units, which are 50% complete, would be
included in the computation of equivalent units for

58. The following information pertains to Lap Co.'s Palo Division for
the month of April: All materials are added at the beginning of the
process. Using the weighted average method, the cost per equivalent
unit for materials is
59. Which of the following is not a basic approach to allocating costs
for costing inventory in joint-cost situations?
60. Kode Co. manufactures a major product that gives rise to a by-
product called May. May's only separable cost is a $1 selling cost when
a unit is sold for $4. Kode accounts for May's sales by deducting the
$3 net amount from the cost of goods sold of the major product. There
are no inventories. If Kode were to change its method of accounting
for May from a by-product to a joint product, what would be the effect
on Kode's overall gross margin?
61. Mighty, Inc. processes chickens for distribution to major grocery
chains. The two major products resulting from the production process
are white breast meat and legs. Joint costs of $600,000 are incurred
during standard production runs each month, which produce a total of
100,000 pounds of white breast meat and 50,000 pounds of legs. Each
pound of white breast meat sells for $2 and each pound of legs sells for
$1. If there are no further processing costs incurred after the split-off
point, what amount of the joint costs would be allocated t
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