PTD5 Flashcards

1
Q
Which type of economic market structure is composed of a large number of sellers, each producing an identical product, and with no significant barriers to entry and exit?
Monopoly.
Oligopoly.
Perfect competition
Monopolistic competition.
A

This is the definition of perfect competition

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2
Q

Which of the following is true of enterprise resource planning (ERP) systems?

I. The online analytical processing system (OLAP) provides data warehouse capabilities for the ERP system.

II. The ability of an ERP system to provide an integrated view of transactions in all parts of the system is a function of the online transaction processing (OLTP) system.

I only.
II only.
Both I and II.
Neither I nor II.

A

I only.

The online analytical processing system (OLAP) incorporates data warehouse and data mining capabilities within the ERP.

The online transaction processing system (OLTP) records the day-to-day operational transactions and enhances the visibility of these transactions throughout the system. It is primarily the OLAP and not the OLTP, that provides an integrated view of transactions in all parts of the system. The OLTP is primary concerned with collecting data (and not analyzing it) across the organization.

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3
Q

In a perfect monopoly, which of the following describes the relationship between the marginal revenue curve and the demand curve?
The marginal revenue curve is the demand curve.
The marginal revenue curve is above the demand curve and the curves diverge as the quantity increases.
The marginal revenue curve is below the demand curve and the curves diverge as the quantity increases.
The marginal revenue curve is below and parallel to the demand curve.

A

The marginal revenue curve is below the demand curve and the curves diverge as the quantity increases.

In a perfect monopoly market structure, the marginal revenue curve is below the demand curve and the curves diverge as the quantity increases. The basic reason for the relationship is that, facing a downward-sloping demand curve, the firm must continuously lower its selling price in order to sell more units; therefore, marginal revenue must be below demand.

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4
Q

Which one of the following is an advantage of using variable costing?

(This question is CMA adapted)

Variable costing complies with the U.S. Internal Revenue Code.
Variable costing complies with generally accepted accounting principles.
Variable costing makes cost-volume relationships more easily apparent.
Variable costing is most relevant to long-run pricing strategies.

A

Variable costing makes cost-volume relationships more easily apparent.

A major advantage of the use of variable costing is that it makes cost-volume relationships more apparent

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5
Q

Which one of the following responses is not an advantage to a corporation that uses the commercial paper market for short-term financing?
This market provides more funds at lower rates than other methods provide.
The borrower avoids the expense of maintaining a compensating balance with a commercial bank.
There are no restrictions as to the type of corporation that can enter into this market.
This market provides a broad distribution for borrowing.

A

There are no restrictions as to the type of corporation that can enter into this market. This answer is correct. Only very creditworthy firms can issue commercial paper.

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6
Q

Yeager Corporation has used regression analysis to perform price elasticity analysis. In doing so management regressed the quantity demanded (y variable) against price (x variable) with the following results:

Multiple R	.86798
Adjusted R squared	.72458
Standard error	542.33
Intercept	56400.50
Price coefficient	− 4598.20
What percentage of the variation in quantity demanded is explained by price?
A

72.458%

The adjusted R squared (.72458) measures the percent of the variance in the dependent variable explained by the independent variable.

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7
Q
Which of the following is least likely to be an example of big data?
Dark data.
Multifactor identification data.
Sales data.
Video conferencing data.
A

Sales data.

(Correct!) This is a traditional accounting data source. Therefore, while these data will find their way into a big data pool (eventually), this is the least likely to be an example of big data, from the offered alternatives.

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8
Q
A significant decline in the exchange rate of the U.S. dollar generally will have which of the following effects?
It will hurt all U.S. businesses.
It will benefit U.S. importers.
It will benefit U.S. exporters.
It will benefit all U.S. businesses.
A

It will benefit U.S. exporters.

(Correct!) A significant decline in the exchange rate of the U.S. dollar generally will benefit U.S. exporters. A decline in the U.S. dollar will make U.S. goods less expensive for foreign buyers, which will help U.S. businesses that export goods.

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9
Q

Day Mail Order Co. applied the high-low method of cost estimation to customer order data for the first 4 months of Year 1. What is the estimated variable order filling cost component per order?

Month	Orders	Cost
January	1,200	$3,120
February	1,300	$3,185
March	1,800	$4,320
April	1,700	$3,895
6,000	$14,520
$2.00.
$2.42.
$2.48.
$2.50.
A

The calculation of the variable cost per unit (or slope term) uses the high and low production points, provided they are representative of the distribution. The change in the cost for the two points (March is high, January is low) is divided by the change in activity level.

Slope = ($4,320 - $3,120)/(1,800 - 1,200) = $2.00

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10
Q
IT facility controls are
Detective.
General.
Corrective.
Preventive.
A

IT facility controls are general controls. That is, they are controls over the IT department as a whole. For example, restricting access to the IT department prevents unauthorized individuals from gaining physical access to the system.

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11
Q
A ceramics manufacturer sold cups last year for $7.50 each. Variable costs of manufacturing were $2.25 per unit. The company needed to sell 20,000 cups to break even. Net income was $5,040. This year, the company expects the following changes: sales price per cup to be $9.00; variable manufacturing costs to increase 33.3%; fixed costs to increase 10%; and the income tax rate to remain at 40%. Sales in the coming year are expected to exceed last year's sales by 1,000 units. How many units does the company expect to sell this year?
21,000
21,600
21,960
22,600
A

22,600

This is a detailed problem that requires working backwards through a contribution margin (CM) formatted income statement to determine total CM of $113,400.

CM per unit ($5.25) is given by subtracting variable cost ($2.25) from price ($7.50).

20,000 X 5.25 = 105,000

BEFORE TAX PROFIT = $5,040 (TAX IS 40%) SO $5,040/.60 = $8,400

$105,000 + 8,400 = $113,400

Year one units sold of 21,600 is calculated by dividing total CM ($113,400) by CM per unit ($5.25).

Year two units sold (22,600 units) is equal to year one units plus 1,000 units.

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12
Q
In a job-costing system, issuing indirect materials to production increases which account?
Materials control.
Work in process control.
Manufacturing overhead control.
Manufacturing overhead allocated.
A

Manufacturing overhead control.

The cost of indirect materials used increases the Manufacturing Overhead Control account and decreases Materials Control.

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13
Q
Are the following fixed-rate investments subject to interest rate risk during their life?
Domestic Bonds
International bonds
U.S. Treasury Bills
Yes
Yes
Yes
Yes
Yes
No
Yes
No
No
Yes
No
Yes
A

YES TO ALL THREE

All fixed-rate debt investments have an interest rate risk associated with them. Specifically, the risk is that the market rate of interest will go up, causing the value of outstanding debt (issued at a lower interest rate) to go down.

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14
Q

A single-product company prepares income statements using both absorption and variable costing methods. Manufacturing overhead cost applied per unit produced in Year 2 was the same as in Year 1.

The Year 2 variable costing statement reported a profit, whereas the Year 2 absorption costing statement reported a loss.

The difference in reported income could be explained by the units produced in Year 2 being

Less than the units sold in Year 2.
Less than the activity level used for allocating overhead to the product.
In excess of the activity level used for allocating overhead to the product.
In excess of the units sold in Year 2.

A

Less than the units sold in Year 2.

Absorption costing includes fixed manufacturing costs as part of product costs; direct costing expenses fixed manufacturing costs as a period expense. Because of this, inventory valuation under absorption costing is more than inventory valuation under direct costing. When a firm sells more than it produces, it must use some of its existing inventory. Since absorption costing has a higher inventory valuation, the cost of goods sold under absorption costing will be higher (and income lower) than under direct costing.

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