Practice Exam 8.11.23 Flashcards
Lightning E-Retailing maintains a virtual inventory. When a customer orders an item, the system contacts the firm’s suppliers, who then deliver the goods required to Lightning the next day. This practice is facilitated most by which of the following technologies?
A. Wide area network.
B. Electronic funds transfer.
C. Client-server.
D. Electronic data interchange.
D. Electronic data interchange.
Electronic data interchange (EDI) is the exchange of business documents such as purchase orders and invoices in a standardized electronic format rather than using paper-based documents. EDI involves the communication of data in a format agreed to by the parties directly from a computer in one entity to a computer in another entity, for example, to order goods from a supplier or to transfer funds.
A lumber company produces two-by-fours and four-by-eights as joint products and sawdust as a by-product. The packaged sawdust can be sold for $2 per pound. Packaging costs for the sawdust are $.10 per pound and sales commissions are 10% of sales price. The by-product net revenue serves to reduce joint processing costs for joint products. Joint products are assigned joint costs based on board feet. Cost and production data are:
What is the cost assigned to two-by-fours?
A. $33,333
B. $32,133
C. $32,200
D. $32,000
C. $32,200
The net revenue from sale of the by-product is $1,700 [(1,000 lb. × $2 price) – (1,000 lb. × $.10) – (1,000 lb. × $2 × .1)]. Joint processing costs to be allocated to joint products are therefore $48,300 ($50,000 – $1,700 net by-product revenue). Of this amount, $32,200 should be assigned to the two-by-fours [$48,300 × (200,000 board feet of two-by-fours ÷ 300,000 total board feet)].
The unit costs for direct materials, machining, and assembly of a manufactured product represent
A. Separable costs.
B. Conversion costs.
C. Committed costs.
D. Prime costs.
D. Prime costs.
Prime costs are a manufacturer’s direct cost. Direct materials and direct labor (such as machining and assembly) are examples.
After using the report writer for several months, the marketing analysts gained confidence in using it, but the marketing department manager became concerned. Whenever analysts revised reports they had written earlier, the coding errors kept reappearing in their command sequences. The manager was sure that all the analysts knew what the errors were and how to avoid them. The most likely cause of the reappearance of the same coding errors is inadequate
A. Backups.
B. Change control.
C. Testing.
D. Access control.
B. Change control.
Change control manages changes in information system resources and procedures. It includes a formal change request procedure; assessments of change requests on technical and business grounds; scheduling changes; testing, installing, and monitoring changes; and reporting the status of recorded changes. The analysts were reusing erroneous code that should have been but was not corrected.
A major disadvantage of the life cycle approach to system development is that it is not well-suited for projects that are
A. Structured.
B. Complex.
C. Unstructured.
D. Large.
C. Unstructured.
The life cycle approach is best employed when systems are large and highly structured. In the life cycle process, each stage of development is highly structured, and requirements are clearly defined. However, when the task is unstructured, prototyping may be the better approach.
An employee uses her company-issued ID and password to log into her employer’s human resources system from home and change her choices of benefits. This is an example of
A. Transmission protocol.
B. Extensible markup language.
C. E-business.
D. Data warehouse.
C. E-business.
E-business is an umbrella term referring to all methods of conducting business electronically. This can include strictly internal communications as well as nonfinancial dealings with outside parties (e.g., contract negotiations).
Trumbull Company budgeted sales on account of $120,000 for July, $211,000 for August, and $198,000 for September. Collection experience indicates that 60% of the budgeted sales will be collected the month after the sale, 36% will be collected the second month, and 4% will be uncollectible. The cash receipts from accounts receivable that should be budgeted for September would be
A. $147,960
B. $169,800
C. $194,760
D. $197,880
B. $169,800
The budgeted cash collections for September equal $169,800.
Which of the following is a true statement of vertical and horizontal scalability?
A. Horizontal scalability aims at shortening the time to process a task by each machine in the system.
B. A system can be scaled horizontally by increasing the processing capacity of the existing machines in the system.
C. A vertically scaled system requires a greater increase in physical space than a horizontally scaled system to achieve the same increase in capacity.
D. Vertical scalability aims at shortening the time to process a task by each machine in the system.
D. Vertical scalability aims at shortening the time to process a task by each machine in the system.
Vertical scalability increases computing capacity by adding more power (e.g., RAM, processors, etc.) to the computers instead of adding computers (horizontal scalability). Thus, it aims at shortening the time to process a task by each machine.
The best approach for minimizing the likelihood of software incompatibilities leading to unintelligible messages is for a company and its customers to
A. Acquire their software from the same software vendor.
B. Agree to synchronize their updating of EDI-related software.
C. Agree to use the same software in the same ways indefinitely.
D. Each write their own version of the EDI-related software.
B. Agree to synchronize their updating of EDI-related software.
EDI entails the exchange of common business data converted into standard message formats. Thus, two crucial requirements are that the participants agree on transaction formats and that translation software be developed to convert messages into a form understandable by other companies. Thus, if one company changes its software, its trading partners must also do so.
Warfield Corporation manufactures products C, D, and E from a joint process. Joint costs are allocated on the basis of relative sales value at split-off. Additional information is presented below.
How much of the joint costs should Warfield allocate to product D?
A. $24,000
B. $32,000
C. $28,800
D. $30,000
D. $30,000
Given that total joint costs are $120,000 and total sales value at split-off is $200,000, the ratio of joint costs to sales value is 60% ($120,000 ÷ $200,000). The joint costs of product C are $72,000. Thus, C’s sales value at split-off is $120,000 ($72,000 ÷ 60%). If product C’s sales value is $120,000, D’s sales value is $50,000 ($200,000 – $30,000 E – $120,000 C). Accordingly, the joint costs of product D are $30,000, which is 60% of D’s $50,000 sales value at split-off.
Which of the following would be the responsibility of a database administrator (DBA)?
A. Develop information security policies.
B. Write computer programs.
C. Maintain control over programs and data storage media.
D. Develop the database.
D. Develop the database.
Database administrators are responsible for developing and maintaining the organization’s databases and for establishing controls to protect their integrity.
A customer intended to order 100 units of product Z96014 but incorrectly ordered nonexistent product Z96015. Which of the following controls most likely would detect this error?
A. Hash total.
B. Redundant data check.
C. Check digit verification.
D. Record count.
C. Check digit verification.
Check digit verification is used to identify incorrect identification numbers. The digit is generated by applying an algorithm to the ID number. During input, the check digit is recomputed by applying the same algorithm to the entered ID number.
In which of the following phases of computer system development would training occur?
A. Analysis phase.
B. Implementation phase.
C. Planning phase.
D. Design phase.
B. Implementation phase.
Training occurs during the implementation (installation and operation) phase of computer system development.
Which one of the following is not a reason for a company to use EFT with an EDI system?
A. To reduce input time and input errors.
B. To take advantage of the time lag associated with negotiable instruments.
C. To improve its cash management program.
D. To allow the company to negotiate discounts with EDI vendors based upon prompt payment.
B. To take advantage of the time lag associated with negotiable instruments.
The time lag between transmittal of a check (a negotiable instrument) and its clearance through regular banking channels is called float. Float is eliminated by EFT.
Which of the following characteristics distinguishes electronic data interchange (EDI) from other forms of electronic commerce?
A. EDI transactions are usually recorded without security and privacy concerns.
B. EDI transactions are formatted using standards that are uniform worldwide.
C. EDI transactions cannot be processed without the Internet.
D. EDI transactions need not comply with GAAP.
B. EDI transactions are formatted using standards that are uniform worldwide.
Fact Pattern: Over a 3-year period, a corporation expects sales of 300 units. To avoid the problems associated with employee turnover, it decided to produce 100 units each year, even though sales are expected to increase. The best estimate of sales is 80 units in Year 1, 100 units in Year 2, and 120 units in Year 3. Variable production costs are $50 per unit, and fixed costs are $1,000 per year (even if production is zero).
What is the cost recorded in ending inventory in Year 1 under absorption costing?
A. $1,200
B. $60
C. $6,000
D. $200
A. $1,200
The automation of a process, or the acquisition of an integrated system, presents the organization with an opportunity for
A. Device driver programs.
B. Machine learning.
C. Dynamic testing.
D. Business process reengineering.
D. Business process reengineering.
Business process reengineering involves a complete rethinking of how business functions are performed to provide value to customers. Automating a process presents an opportunity for business process reengineering.
Which of the following input controls would prevent an incorrect state abbreviation from being accepted as legitimate data?
A. Validity check.
B. Reasonableness test.
C. Field check.
D. Digit verification check.
A. Validity check.
Validity checks are tests of identification numbers or transaction codes for validity by comparison with items already known to be correct or authorized.
Blue Co. has current assets of $130 million, current liabilities of $50 million, and equity of $30 million. The current ratio for the company’s peer group is 2.5. Which of the following statements is correct regarding Blue’s current ratio?
A. Blue’s current ratio is 1.625, which is less liquid than its peer group.
B. Blue’s current ratio is 2.6, which is less liquid than average.
C. Blue’s current ratio is 2.6, which is more liquid than its peer group.
D. Blue’s current ratio is 1.625, which is more liquid than its peer group.
C. Blue’s current ratio is 2.6, which is more liquid than its peer group.
Blue Co.’s current ratio is 2.6 ($130 million ÷ $50 million). Because this amount is larger than the peer group’s ratio, Blue Co. is considered to be more liquid than its peers.
Which of the following is normally included in the financial budget of a firm?
A. Selling expense budget.
B. Direct materials budget.
C. Budgeted balance sheet.
D. Sales budget.
C. Budgeted balance sheet.
The financial budget normally includes (1) the capital budget, (2) the cash budget, (3) the budgeted balance sheet, and (4) the budgeted statement of cash flows.
DB2, Oracle, SQL Server, and Access are
A. Database management systems.
B. Programming languages.
C. Library systems.
D. Access control systems.
A. Database management systems.
Fact Pattern: The following amounts pertain to Arp Co.’s manufacturing operations for March:
For the month of March, Arp’s conversion costs were
A. $40,000
B. $70,000
C. $30,000
D. $72,000
B. $70,000
Conversion cost consists of direct labor and overhead. Direct labor is given as $30,000. Factory overhead is applied at the rate of $10.00 per direct labor hour. Given 4,000 direct labor hours ($30,000 ÷ $7.50) incurred in March, at $10.00 per hour, $40,000 of overhead was applied. Thus, the conversion costs for March total $70,000 ($30,000 + $40,000).
Compared to online real-time processing, batch processing has which of the following disadvantages?
A. A greater level of control is necessary.
B. Additional personnel are required.
C. Stored data are current only after the update process.
D. Additional computing resources are required.
C. Stored data are current only after the update process.
Appropriate uses of an organization’s internal communications network, or intranet, include all of the following except
A. Providing senior management with access to the executive support system.
B. Enabling a project team that crosses departments to collaborate.
C. Informing potential investors about company operations and financial results.
D. Making the human resources policy manual available to employees.
C. Informing potential investors about company operations and financial results.
Intranet is restricted to those within the organization.
Which of the following risks is not greater in an electronic funds transfer (EFT) environment than in a manual system using paper transactions?
A. Inadequate backup and recovery capabilities.
B. Unauthorized access and activity.
C. High cost per transaction.
D. Duplicate transaction processing.
C. High cost per transaction.
EFT is a service provided by financial institutions worldwide that is based on EDI technology. EFT transaction costs are lower than for manual systems because documents and human intervention are eliminated from the transaction process.
What should be examined to determine if an information system is operating according to prescribed procedures?
A. Accessibility to system information.
B. System control.
C. System capacity.
D. System complexity.
B. System control.
The most comprehensive indicator of an information system’s compliance with prescribed procedures is the control the system has over the data. This includes the capacity and complexity of the system, as well as the accessibility of the data to the end-user.
Clear Plus, Inc., manufactures and sells boxes of pocket protectors. The static budget and the actual results for May are as follows:
What amount of operating income will Clear Plus have for May under a flexible budget?
A. $29,200
B. $12,000
C. $18,000
D. $19,200
C. $18,000
The operating income under a flexible budget is $18,000.
In a quality control program, which of the following is (are) categorized as internal failure costs?
A. I only.
B. I, II, and III.
C. III only.
D. II only.
A. I only.
Internal failure costs are those incurred when detection of defective products occurs before shipment. Examples are scrap, rework, tooling changes, and downtime.
Which one of the following characteristics distinguishes income bonds from other bonds?
A. By promising a return to the bondholder, an income bond is junior to preferred and common stock.
B. Income bonds pay interest only if the issuing company has earned the interest.
C. Income bonds are junior to subordinated debt but senior to preferred and common stock.
D. The bondholder is guaranteed an income over the life of the security.
B. Income bonds pay interest only if the issuing company has earned the interest.
Bondholders will receive an income only if the issuing company earns sufficient income to pay the interest.
NEEM Co.’s monthly closing procedures include creating journal entries to account for cash collected at month end. The journal entries are captured by the system and converted into a special format from which the monthly financial report is generated and maintained in the database. This information system performs all of the major tasks except
A. Maintenance.
B. Transformation.
C. Output.
D. Storage.
A. Maintenance.
The four major tasks that any information system must perform are input, transformation, output, and storage. Creating journal entries to account for cash collected at month end is an input task. The system capturing journal entries and converting them into a special format is a transformation task. Generating a monthly financial report is an output task. Maintaining all of the data in the database is a storage task. Maintenance is not considered a major task performed by any information system.
