Missed Questions Flashcards
How are service costs allocated using the step-down (sequential) method of cost allocation?
In a pre-determined sequence, the service department allocated first is the one that provides the most service to other service departments. If there is no difference in service level, the total costs in each service department is used, starting with the department that has the most costs. Once a service department’s costs have been allocated, no further costs are allocated to that service department.
Step 1 - Determine ranking order for allocation
Step 2 - Determine allocation ratios to be used for each support departments
The cost to the company in terms of the cost per check being cleared can be stated as:
Cost per check cleared = (D)(S)(i)
D = days saved in the collection process
S = average check size
i = daily interest rate or opportunity cost (5% ÷ 360 = .0139%)
Substituting the given information into the equation:
Cost per check cleared = 1.2 days × $1,000 × .0139% = $0.17 per check cleared
What is safety stock?
Safety stock (SS) is the additional quantity of inventory held to cover periods in which demand or order lead-time is greater than normal. It is used in the EOQ (economic order quantity) inventory decision model to compute the reorder point: RP = DLT (average demand during lead-time period) + SS. The size of safety stock is based on the degree of variability in demand (the standard deviation) and the acceptable risk of being out of stock (stockout cost).
Which of the following statements is correct concerning the security of messages in an electronic data interchange (EDI) system?
Encryption performed by a physically secure hardware device is more secure than encryption performed by software.
A software tool used for ad hoc, online access to items in a database would most likely be:
a query utility program.
A best-cost producer can gain a competitive advantage:
by delivering a superior product at a lower price than the competition.
If interest rates were much higher when the bond was issued
The market value of bonds is based upon the present value of discounted future cash flows, comprised of an annuity plus a lump sum. The bond’s market value fluctuates with changes in the market interest rates. If interest rates were much higher when the bond was issued, the coupon rate would also have been higher than now, and would therefore be greater than the current market rate; the bond will sell at a premium to par.
the Gordon Model
ignores flotation costs and underpricing
