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NEW QUESTION # 126
In an economic order quantity EOQ) model, both the costs per order and the holding costs are estimates. If those estimates are varied to determine how much the changes affect the
optimal EOQ, such an analysis would be called a:
- A. Decision analysis.
- B. Forecasting model.
- C. Sensitivity analysis.
- D. Critical path method analysis.
Answer: C
Explanation:
An economic order quantity EOQ) sensitivity analysis involves varying the holding carrying) costs per unit and/or the order costs to determine how much the changes affect the optimal EOQ.
NEW QUESTION # 127
Which of the following statements accurately describes one of the characteristics that distinguishes a multinational company from a domestic company?
- A. A multinational company uses raw materials and components from more than one country.
- B. A multinational company exports its products to other countries.
- C. A multinational company has stockholders in other countries.
- D. A multinational company operates outside of its country of origin.
Answer: D
NEW QUESTION # 128
Assume that the value of a share of QQ Company ordinary stock at the expiration date is either US $30 or US $45. What is the difference in the net payoff on the portfolio because of a difference in the stock price at the maturity date?
- A. US $0
- B. US $5.00
- C. US $7.50
- D. US $10.00
Answer: A
Explanation:
If the stock price at the maturity date is US $30, AA Company will have a share of stock worth US $30 and a put option worth US $10 $40 exercise price -$30 stock price). The call option will be worthless. Hence, the net payoff is US $40 $30 + $10). If the stock price at the maturity date is US $45, the share of stock will be worth US $45, the put will he worthless, and the loss on the call will be US $5 $45 - $40). Thus, the net payoff will be US $40 $45 - $5). Consequently, the difference in the net payoff on the portfolio because of a difference in the stock price at the maturity date is US $0 $40 - $40).
NEW QUESTION # 129
The internal audit activity has identified accounting errors that resulted in the organization overstating its net income for the fiscal year. Which of the following is the most likely cause of this overstatement?
- A. Ending inventory was understated for the year.
- B. Cost of goods sold was understated for the year.
- C. Beginning inventory was overstated for the year.
- D. Cost of goods sold was overstated for the year.
Answer: B
NEW QUESTION # 130
The best evidence that contingency planning is effective is to have:
- A. Signoff on the plan by the internal audit activity.
- B. Successful testing of the plan.
- C. Comprehensive documentation of the plan.
Answer: B
NEW QUESTION # 131
A company is formulating its plans for the coming year, including the preparation of its cash budget. Historically. 30% of the company's sales are cash sales. The remaining 70% are credit sales with the following collection pattern:
Sales for the first 5 months of the coming year are forecast as follows:
For the month of April, the total cash receipts from sales and collections on account would be:
- A. US$3,729,968
- B. US$4,025,200
- C. US$4,408,000
- D. US$3,781,600
Answer: D
Explanation:
The cash receipts for April equal April's cash sales (US $4,000,000 * 30% = US $1.200, 000), 40% of April's credit sales, and 58% of March's credit sales. Consequently, total cash receipts equal US $3,781,600 [$1,200,000 + ($4,000,000 * 40% x 70%) + ($3,600,000 x 58% x 70%)].
NEW QUESTION # 132
Which of the following should be established by management during implementation of big data systems to enable ongoing production monitoring?
- A. Key performance indicators
- B. Change and patch management
- C. Master data management
- D. Reports of software customization
Answer: A
NEW QUESTION # 133
A seller's price is below an appropriate measure of costs. Moreover, the seller has a reasonable prospect of recovering the resulting loss in the future through higher prices or a greater market share. Accordingly, the seller has engaged in:
- A. Price discrimination.
- B. Collusive pricing.
- C. Predatory pricing.
- D. Dumping.
Answer: C
Explanation:
Predatory pricing is intentionally pricing below cost to eliminate competition and reduce supply. Many statutes prohibit the practice. Pricing is predatory when two conditions are met: (1) the seller's price is below an appropriate measure of its costs, and (2) it has a reasonable prospect of recovering the resulting loss through higher prices or greater market share.
NEW QUESTION # 134
The activity of trading futures with the objective of reducing or controlling risk is called:
- A. Insuring.
- B. Short-selling.
- C. Hedging.
- D. Factoring.
Answer: C
Explanation:
Hedging is the use of offsetting commitments to minimize the effect of adverse future price movements. Thus, a financial manager may limit many risk exposures by trading in futures markets.
NEW QUESTION # 135
A contract dispute has arisen between an organization and a major supplier. To resolve the dispute, the most competent evidence is:
- A. A letter from the supplier's attorney.
- B. Oral testimony of contracting parties.
- C. The original contract.
- D. Actions by parties to the contract.
Answer: C
Explanation:
The best primary) evidence is the most persuasive evidence. Reliability and the best evidence rule are closely related. The best evidence rule is ordinarily applied only to documentary evidence, especially to proof of the content of a writing. If the original writing is available, the best evidence rule prohibits a parry from proving the content of a writing through oral testimony. Therefore, the original writing is the most competent evidence.
NEW QUESTION # 136
Which is the least effective form of risk management?
- A. People-based detective control.
- B. Systems-based preventive control.
- C. Systems-based detective control.
- D. People-based preventive control.
Answer: A
NEW QUESTION # 137
Fulford Company applies the target pricing and costing approach. The following information about costs and revenues of Fulford's product are available for the year just ended:
Fulford plans to increase unit sales to 80,000 by reducing the product's unit price to US $320.
If Fulford desires a unit target operating income of 12CYo, by what amount must it reduce the full cost per unit?
- A. US $70.40
- B. US $38.40
- C. US $80.00
- D. US $32.00
Answer: A
Explanation:
Unit target operating income is US $38.40 $320 unit target price 12°X0). Hence, the unit target full cost is US $281.60 $320 - $38.40). The current full cost per unit is US $352.00 [($13,200,000 CGS + $7,920,000 other value chain operating costs) - 60,000 units sold], so the necessary reduction in the full cost per unit is US $70.40 $352.00 - $281.60).
NEW QUESTION # 138
A company has sales of US $500,000, variable costs of US $300,000 and pretax profit of US $150,000. If the company increased the sales price per unit by 10%, reduced fixed costs by 20%, and left variable cost per unit unchanged, what would be the new breakeven point in sales dollars?
- A. U S $125,000
- B. U S $110,000
- C. US $100,000
- D. US $88,000
Answer: D
Explanation:
The breakeven point in sales dollars is equal to the sum of fixed cost plus any desired pretax profit, divided by contribution margin ratio [ sales -variable costs) - sales]. Fixed cost was US $50,000 $500,000 sales $300,000 VC - $150,000 pretax profit). Given the increase in sales of 10% and decrease in fixed costs of 20%. the breakeven point in sales is US $88,000.
A company manufactures and sells a single product It takes two machine hours to produce one unit. Annual sales are expected to be 75.000 units. Annual production capacity is
200.000 machine hours. Expected selling price is US $10 per unit. Cost data for manufacturing and selling the product are as follows:
NEW QUESTION # 139
An entity produces a country A and sells some of its output in country B. Selling prices are identical in the two countries. The corporate tax rates are 40% in country A and 20% in country B. Assuming that the entity does not increase or decrease production, it should <List A> sales in country B and set as <List B> a transfer price as possible, in order to minimize global taxes.
- A. Option A
- B. Option D
- C. Option B
- D. Option C
Answer: C
Explanation:
The tax-minimizing strategy is to minimize taxable income where tax rates are high and to maximize taxable income where tax rates are low. Consequently, the entity should sell more in country B but set a low transfer price. This dual strategy minimizes sales and profits in country A, minimizes cost of sales in country B. and maximizes sales and profits in country B.
NEW QUESTION # 140
The appropriate discount rate to use in valuing a business combination is the:
- A. Acquirer's weighted average cost of capital.
- B. Combined entity's cost of equity.
- C. Acquirer's cost of equity.
- D. Combined entity's cost of debt.
Answer: B
Explanation:
If the not incremental cash flows to the acquirer's shareholders are to be calculated, the discount rate used should be the cost of equity capital. Moreover, this rate should reflect the risk associated with the use of funds rather than their source. The rate therefore should not be the cost of capital of the acquirer but rather the cost of equity of the acquire after the combination. This calculation requires a new estimate of beta to be used in the Capital Asset Pricing Model.
NEW QUESTION # 141
The efficient markets theory implies that securities prices are:
- A. Fair and a reflection of all publicly available information.
- B. Not the best benchmark for corporate financial decisions
- C. Not a good estimate of future cash flows.
- D. Always less than their fair value.
Answer: A
Explanation:
The efficient markets theory proposes that the market is continuously adjusting to new information and acting to correct pricing errors.
NEW QUESTION # 142
The basic formula for the Black-Schools Option Pricing Model essentially refs is The difference between the expected present value of the final stock price and the present value of the exercise price.
An entity wishes to price a call option written on a nondividend-paying stock using the Black-Scholes Option Pricing Model. The current stock price is US $50, the exercise price is US $48. The risk-free interest rate is 5.0%, the option expires in 1 year, and the cumulative probabilities used to calculate the present values of the final stock price and the exercise price are 65 and 58 respectively. If the value of et-n) is .9512. the current value of the call option is:
- A. US $6.02
- B. US $4.02
- C. US $2.00 Answer
- D. US $4.66
Answer: A
Explanation:
C is the current value of a call option with time t in years until expiration, S is the current stock price. N di is the cumulative probability that ai deviation less than di will occur in a standardized normal distribution [N di) is an area to the left of d under the curve for the standard normal distribution], E is the call's exercise price. e is a constant approximately 2.7183), and r is the annualized continuous risk-free rate of return. Thus, the value of the call is:
NEW QUESTION # 143
An organization was forced to stop production unexpectedly, as raw materials could not be delivered due to a military conflict in the region. Which of the following plans have most likely failed to support the organization?
- A. Backup plans.
- B. Contingency plans.
- C. Standing plans.
- D. Just-in-time delivery plans.
Answer: B
NEW QUESTION # 144
An internal auditor is using data analytics to locus on high-risk areas during an engagement. The auditor has obtained data and is working to eliminate redundancies in the dat a. Which of me following statements is true regarding this scenario?
- A. The auditor is cleaning the data in preparation for determining which processes may tie involved
- B. The auditor is reviewing the data prior lo defining the question
- C. The auditor is analyzing the data m preparation for communicating the results
- D. The auditor is normalizing data in preparation for analyzing it
Answer: D
NEW QUESTION # 145
A manufacturing firm produces multiple families of products requiring various combinations of different types of parts. The manufacturer has identified various cost pools. One of which consists of materials handling costs. This cost pool includes the wages and employee benefits of the workers involved in receiving materials, ins ting materials, storing materials in inventory, and moving materials to the workstations; depreciation and maintenance of materials handling equipment forklift trucks): and costs of supplies used as well as other related costs. Of the following, the most appropriate cost driver for assigning materials handling costs to the various products most likely is:
- A. Number of units produced.
- B. Number of vendors involved.
- C. Number of parts used.
- D. Direct labor hours.
Answer: C
Explanation:
Cost drivers should be related to the costs accumulated in cost pools. The number of parts used has a direct cause-and-effect relationship with materials handling costs. The more parts used. the more handling is involved.
NEW QUESTION # 146
The most important reason to use risk assessment in audit planning is to:
- A. Assist in developing audit programs.
- B. Improve budgeting accuracy.
- C. Identify redundant controls.
- D. Enhance assurance provided to management.
Answer: D
NEW QUESTION # 147
The term "short-selling" is the:
- A. Betting that a stock will increase by a certain amount within a given period of time.
- B. Selling of a security that was purchased by borrowing money from a broker.
- C. Selling of all the shares you own in an entity in anticipation that the price will decline dramatically.
- D. Selling of a security that is not owned by the seller.
Answer: D
Explanation:
Short-selling is accomplished by borrowing securities from a broker and selling those securities. At a later time, the loan is repaid by buying securities on the open market and returning them to the broker. The seller speculates that the stock's market price will decline.
NEW QUESTION # 148
Which of the following local area network physical layouts is subject to the greatest risk of failure if one device fails?
- A. Bus network.
- B. Mesh network.
- C. Token ring network.
- D. Star network.
Answer: C
NEW QUESTION # 149
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