BEC - Cost Accounting _ 6.22.2016 (5 of 5)

Question 1

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

Answer 1

Conversion costs Material G

Yes No

Question 2

In which of the following market structures are firms most likely to avoid price competition for fear of creating a “price war”?

Answer 2

Oligopoly.
In an oligopoly, there are few sellers and the actions of each firm are known by and affect the other firms in the industry. Therefore, if one firm lowers its price in an effort to increase market share, other firms are likely to lower their prices.
This could create a “chain reaction,” whereby the few firms are continuously lowering their prices, constituting a “price war.”

Question 3

A domestic entity may be exposed to foreign currency exchange rate risk if it engages in which, if any, of the following kinds of transactions that are denominated in a foreign currency?A domestic entity may be exposed to foreign currency exchange rate risk if it engages in which, if any, of the following kinds of transactions that are denominated in a foreign currency?

Answer 3

Import/Export Transactions Lending/Borrowing Transactions

Yes Yes

Question 4

Kim Co.’s profit center Zee had Year 1 operating income of $200,000 before a $50,000 imputed interest charge for using Kim’s assets. Kim’s aggregate net income from all of its profit centers was $2,000,000. During Year 1, Kim declared and paid dividends of $30,000 and $70,000 on its preferred and common stock, respectively.
Zee’s Year 1 residual income was

Answer 4

$150,000
The dividend information is not relevant to the question. Dividends are a distribution, rather than a determinant, of income. Residual income is computed as:
Residual income = operating income - imputed charge
= $200,000 - $50,000
= $150,000
The imputed charge is the product of a minimum rate of return and the invested capital in the division. The imputed charge is the minimum income that should be achieved by the division with that much invested capital.

Question 5

Which of the following performance measures may lead a manager of an investment center to forgo investments that could benefit the company as a whole?

Answer 5

Return on investment.
The use of (an expected) return on investment (ROI) as a performance measure for an investment center may lead a manager to forgo investments that could benefit the company as a whole. In an investment center, management is responsible for the center’s revenues, costs and related investments. The basic ROI calculation for an investment center is Center Operating Income/Average Center Operating Assets. Center management would likely forgo an investment opportunity that may provide a more than adequate ROI for the company as a whole, but which would provide a ROI lower than the center’s already existing ROI, which would lower the center’s overall ROI.

Question 6

The system that most resembles a managerial accounting, budgeting system is:

Answer 6

MIS.
MIS take planning information (budgets, forecasts, etc.) data and compare it to actual results in periodic management reports (summary reports, variance reports, and exception reports). Hence, MIS can be considered similar to, and may incorporate, traditional budgeting systems.

Question 7

Which one of the following would not be a purpose of the General Agreement on Tariffs and Trade (GATT)?

Answer 7

Establishing procedures for collection of international debt is not a purpose of the General Agreement on Tariffs and Trade (GATT). GATT has as its primary purposes the liberalizing and encouraging international trade by eliminating tariffs, subsidies, import quotas, and other trade barriers, to harmonize intellectual property laws and to reduce transportation costs.

Question 8

What are the purposes of the General Agreement on Tariffs and Trade (GATT)?

Answer 8

Eliminating subsidies to export industries.
Eliminating import quotas.
Harmonizing intellectual property laws.

Question 9

Which of the following is most useful when risk is being prioritized?

Answer 9

Expected value.
This is the best answer of the choices given. An expected value calculates (and integrates) the likelihood of losses with the amount of losses. Hence, an expected value combines the information in low and high probability exposures and low and high-degree loss exposures into a decision-relevant, single, valuable (for decision analysis) number.

Question 10

A group of firms that conspires to make price and output decisions for a product or service is called

Answer 10

a cartel.
A cartel is a group of firms that conspire to make price and output decisions for a product or service; it is overt collusion and illegal in the U.S. A prime example is OPEC, which meets regularly to set output quotas for oil for member oil-exporting countries.

Question 11

During the month of March Year 1, Nale Co. used $300,000 of direct materials. On March 31, Year 1, Nale’s direct materials inventory was $50,000 more than it was on March 1, Year 1.
Direct material purchases during the month of March Year 1 amounted to

Answer 11

$350,000