BEC - 26

Question 1

calculate average inventory level

Answer 1

order size / 2

Question 2

calculate annual cost of carrying inventory

Answer 2

ave inventory level x unit cost x cost of capital

Question 3

calculate direct material price variance

Answer 3

the difference between std cost and actual cost x actual purchased

Question 4

automated equipment control (hardware controls) are designed to

Answer 4

detect, report, or prevent operational errors within the computer

ex: misreading of magnetic tapes by a tape reader or storage of erroneous data are detected or prevented by the dual gap heads and parity checks

Question 5

Examples of hardware controls (automated equipment controls) include

Answer 5

echo check
dual circuitry
boundary protection
interlock
file protection rings

Question 6

Which of the following transaction processing modes provides the most accurate and complete information for decision making?
Batch.
Distributed.
Online.
Application.

Answer 6

an online system data is readily available for decision-making

Question 7

What is considered the best method to evaluate investment projects to maximize shareholder value

Answer 7

NPV

Question 8

Which of the following is not a principle related to the risk assessment component of internal control?

The organization specifies objectives with sufficient clarity.

The organization identifies risks to the achievement of its objectives across the entity.

The organization considers the potential for fraud.

The organization evaluates and communicates internal control deficiencies in a timely manner.

Answer 8

The organization evaluates and communicates internal control deficiencies in a timely manner.

This is a principal of the monitoring component

Question 9

Approximated cost of not taking a trade discount

Answer 9

Discount % / (100% - discount %) x 365 days / (total pay period - discount period)

Question 10

Describe the decision to sell or process further

Answer 10

The sell or process further decision should be based on incremental revenues and costs beyond the split-off point. If incremental revenue from further processing exceeds incremental costs, then process further. If incremental costs exceed incremental revenues, then sell at the split-off point. In the previous example in which we assumed a sales value at the split-off point, both X1 and Y1 should be further processed.

Incremental revenue

Incremental cost

Advantage of
further processing
X1:
$6,700 – $4,000 = $2,700
–
$2,000
=
$700
Y1:
$1,700 – $1,000 = $ 700
–
$ 400
=
$300

If X1 could have sold for only $5,500 after further processing, the incremental revenue ($1,500) would not cover the incremental cost ($2,000), and X1 should not be further processed.