BEC - 15

Question 1

What are some risks that increase with cloud-based computing compared to local server storage?

Answer 1

Data loss
Vendor security failure
System hacks

Question 2

What two things does the profitability index take into account when ranking projects?

Answer 2

(1) time value of money
(2) initial cost of the project

Therefor PI is the method most likely to be used to rank projects competing for limited capital investment funds

Question 3

Which of the following terms represents the residual income that remains after the cost of all capital, including equity capital, has been deducted?

(A) Free cash flow
(B) Market value-added
(C) Economic value added
(D) Net operating capital

AICPA.090354BEC

Answer 3

Economic value added (EVA) is the residual income remaining after the cost of capital has been deducted. It is used to measure economic profit, not accounting profit.

EVA formula:
Net After-Tax Operating Profit less Cost of Capital

Question 4

Will an increase in government spending result in an increase or decrease in aggregate demand in the US economy?

Answer 4

Increase.

Increased govt spending increases demand in the economy. The demand curve shifts upward and to the right.

Question 5

What three things generally cause the value of a stock option to increase?

Answer 5

(1) the longer the time to expiration
(2) the higher the risk-free rate of interest
(3) the higher the volatility of the stock

Question 6

In computing the current period’s manufacturing cost per equivalent unit, the FIFO method of process costing considers current period costs

A. Only
B. Plus cost of beginning WIP inventory
C. Less cost of beginning WIP inventory
D. Plust het cost of ending WIP inventory

AICPA.921147BEC-TH-AR

Answer 6

Ans. A

FIFO ONLY considers the current period cost and effort in computing cost per equivalent unit. The first-in, first-out costs are in the beginning inventory WIP.

FIFO does not mix the costs and effort of two periods when computing cost per equivalent unit.

Question 7

Source code comparison program.

Answer 7

A source code comparison program is used to compare an archived version of the program to the program actually in use.

Question 8

EOQ formula

Answer 8

EOQ = sqrt(2 x annual demand x cost per order / Carrying cost per unit)

Question 9

The full-employment gross domestic product is $1.3 trillion, and the actual gross domestic product is $1.2 trillion. The marginal propensity to consume is 0.8. When inflation is ignored, what increase in government expenditures is necessary to produce full employment?

A.  $100 billion
B.  $80 billion
C.  $20 billion
D.  $10 billion

Answer 9

C. $20B

In order to reach full employment, gross domestic product needs to increase by $.1 trillion (i.e., $1.3 trillion @ full employment - $1.2 trillion @ current = $.1 trillion shortfall). Because of the multiplier effect, additional government expenditures needed to increase gross domestic product by that amount is $20 billion. The formula is:
Multiplier Effect = Initial Change in Spending x (1/(1 - MPC))
Where: Initial Change in Spending = X, and substituting known values:

$.1T = X x [1/(1-.8)] [NOTE: .1T = 100B.]; therefore:

$100B =	 X x [1/.2]
$100B =	 X x 5
X =	 $100B/5
X =	 $20B

A $20B increase in government expenditures would result in $100 billion increase in gross domestic product.

Question 10

Financial structure includes

Answer 10

All debt and all owners’ equity

Question 11

Name 3 parts of the CPU

Answer 11

ALU
RAM
Control Unit