BEC Essentials

Question 1

Average Accounting Rate of Return

Answer 1

Average Annual After-Tax Net Income / Average Cost of Investment

Beware… for a machine costing 60,000 with a salvage value of 10,000, the average investment is 35,000 (i.e. (60,000 + 10,000) / 2

Question 2

Average Propensity to Consume

Answer 2

Measures the percentage of disposable income spent on consumable goods

Question 3

Characteristics of an Oligopoly

Answer 3

• Downard demand curve
• Significant barriers to entry
• Firms compete on nonprice factors
• Few sellers

Question 4

PaaS

Answer 4

use of the cloud to create (not access) software

Question 5

SaaS

Answer 5

use of the cloud to use (not create) software

Question 6

What is the slope of the profit-volume graph?

Answer 6

The contribution margin per unit

Question 7

What formula should be used to calculate the historic economic rate of return on a common stock?

Answer 7

(Dividends + change in price) / beginning price

For common stock, expected returns are from dividends and stock appreciation.

Question 8

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?

Answer 8

Competency.

Think of the word standards as a cue for quality and therefore competency.

Question 9

How is cost per EU computed using Weighted Average?

Answer 9

Counts all work done including the beginning inventory.