1 internal auditors may have educational backgrounds or


1. Internal auditors may have educational backgrounds or experience in which of the following fields? 

  1. accounting 
  2. finance 
  3. information systems 
  4. all of the above

2. Which of the following would be considered part of manufacturing overhead?

  1. hourly wages for employees in the accounting department 
  2. monthly salary expense for factory maintenance personnel 
  3. monthly salary expense for finished good warehouse personnel 
  4. sales commissions paid to sales personnel directly related to product sales


3. When an employee circumvents an internal control procedure, which of the following is likely to take place?

  1. management should be glad 
  2. he almost always rationalizes the action 
  3. the employee should be fired immediately, regardless of the nature of the problem 
  4. all of the above


4. Which costs are sometimes found on the income statement and sometimes found on the balance sheet?

  1. period costs 
  2. product costs 
  3. both period and product costs 
  4. neither period nor product costs


5. Which costs are always found on the income statement, but never on the balance sheet?

  1. period costs 
  2. product costs 
  3. both period and product costs 
  4. neither period nor product costs


6. In some cases, managers may invest in long-term projects even though they may reduce ROI in the short run. Reasons a manager might make such an investment include

  1. legal/regulatory requirements 
  2. good strategic fit 
  3. improved public relations 
  4. all of the above


7. Companies using a just-in-time production system

  1. produce products based on sales forecasts 
  2. produce products based on customer demand 
  3. have mostly foreign customers 
  4. generally are small companies

8. A company with department names like fabrication, painting, and finishing is likely to use what type of costing to reflect its production operation?

  1. job order 
  2. process 
  3. actual 
  4. normal


9. An artist creates original works on commission. She is likely to use what type of costing?

  1. job order 
  2. process 
  3. actual 
  4. normal


10. John Adams is a cash receipts clerk for Boro Company. He receives payments from customers and records the payments to the customers' accounts. John receives a payment from Bobbie Jones for merchandise purchased on account. But, instead of recording the payment to Jones' account and depositing the cash, he pockets the cash. Later, John receives a payment from Shorty Cobb. Instead of recording the payment to Cobb's account, he records it to Jones' account. This is an example of

  1. misstating inventory 
  2. floating 
  3. lapping 
  4. understating accounts receivables


11. A potential capital investment will be depreciated $5,000 per year for five years. Which of the following pieces of information would a manager need to calculate the cash flow associated with depreciation?

  1. the asset's residual value 
  2. the discount rate 
  3. the tax rate 
  4. none of the above, since there is no cash flow associated with depreciation


12. Capital investment decisions typically involve several kinds of cash flows. Which kind best describes an asset's residual value?

  1. annuity due 
  2. lump sum 
  3. ordinary annuity 
  4. none of the above


13. Choosing the proper method of allocating costs to products and services can have a major impact on what?

  1. the selling price of the product or service if selling price is based on competition 
  2. arriving at a proper cost for the product or service 
  3. total manufacturing costs 
  4. the method used doesn't matter


14. It is estimated that the cost of electricity to run a machine for an entire 8-hour shift is $16. The machine can produce 200 units of product for each hour of operation. How much electricity cost is allocated to each unit of product?

  1. $0.01 
  2. $0.10 
  3. $1.00 
  4. cannot calculate from the information given


15. Fast Delivery Company delivers packages and business documents for local businesses located in the Houston metropolitan area. If the company decided to adopt an ABC costing system to accumulate costs for its service, what would be an appropriate cost driver to use for the cost of the packaging envelopes provided to customers?

  1. number of miles to be driven in the delivery 
  2. number of drivers on the truck 
  3. number of packages 
  4. number of orders


16. Which of the following elements of Cooper's cost hierarchy is most difficult to allocate because they cannot be associated directly with a product?

  1. unit-level costs 
  2. batch-level costs 
  3. product-level costs 
  4. facility-level costs


17. Sebastian, an investment center manager in RKH Corporation, is trying to boost the current period's return on investment. Which of the following actions will achieve that goal?

  1. purchasing a new piece of equipment on the last day of the fiscal year 
  2. raising commission rates for salespeople from 3% to 4% 
  3. delaying preventive maintenance on existing equipment until next year 
  4. all of the above will increase the current period's ROI


18. A collection of related operating budgets is known as a

  1. pro forma financial statement 
  2. flexible budget 
  3. static budget 
  4. master budget


19. Hamilton has budgeted total manufacturing overhead costs for the year as $125,000 based on 20,000 direct labor hours. The ratio of variable manufacturing overhead costs to fixed manufacturing overhead costs is 2:1. In a given month 2,000 direct labor hours are budgeted for production. How much overhead is budgeted?

  1. $12,500.00 
  2. $11,805.55 
  3. $11,110.42 
  4. $10,416.67


20. Research has shown that managers perform best when

  1. there is no budget to worry about 
  2. there is a moderately difficult but achievable budget 
  3. the budget is obviously unachievable, but presents a tremendous challenge 
  4. budgets contain a maximum of slack


21. Kirland Company collected the following information to prepare its cash budget for the first quarter of a recent fiscal period. Beginning

cash balance $4,250 

Capital Expenditures 3,000
Collections on account 23,000
Depreciation on factory equipment 1,000
Dividends 1,000
Period costs 11,100
Product costs (excludes depreciation) 20,150
If Kirkland wants an ending cash balance of $4,000, how much will it have to borrow in the first quarter?

  1. $0 
  2. $12,000 
  3. $13,000 
  4. some other amount


22. The cost of customer ill will caused by a defective product is an example of a(n)

  1. prevention cost 
  2. appraisal cost 
  3. internal failure cost 
  4. external failure cost


23. Control charts may be used for each of the following except

  1. provide a warning for an unexpected change 
  2. return the system to an "in-control" status 
  3. decrease inspection costs 
  4. identify errors in the process and determine basic causes


24. All of the above are key elements of just-in-time except

  1. cycle times are longer 
  2. high quality output is required 
  3. inventory levels are reduced 
  4. suppliers become partners rather than adversaries


25. If a materials quantity variance is based on the amount of material used in a period, who should be held accountable for managing the variance?

  1. production manager 
  2. purchasing manager 
  3. accounting manager 
  4. cannot be determined from the information given


26. Which of the following statements is TRUE?

  1. marketing managers never contribute to production variances 
  2. unfavorable materials quantity variances are always the responsibility of the production manager 
  3. both 1 and 2 are true 
  4. neither 1 nor 2 is true


27. All of the following are elements of a statistical process control chart except for:

  1. a characteristic's expected value (such as expected weight of material)
  2. three lines indicating control limits for the characteristic 
  3. time observations of the characteristic 
  4. values of the characteristic


28. Product variability has what effect on costs and customer satisfaction?

  1. increases costs and increases customer dissatisfaction 
  2. decreases costs and increases customer dissatisfaction 
  3. increases costs and decreases customer dissatisfaction 
  4. decreases costs and decreases customer dissatisfaction


29. Holding all other factors equal, if net income increases, what will be the effect on return on investment (ROI)?

  1. it will increase proportionately 
  2. it will decrease proportionately 
  3. it will remain the same 
  4. ROI will increase at twice the rate of the increase in net income


30. Bottlenecks are generally caused by

  1. inefficient machine operators 
  2. poor management 
  3. a machine that produces at a slower rate than other machines in the process 
  4. none of the above will generally produce bottlenecks

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