Question 1

The ﬁrst decade of the SOX legislation was characterized by controversy.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following does not minimize ordering costs when using JIT purchasing?

Accepted Answer

A) Reducing the number of vendors. 
B) Negotiating long-term supply agreements. 
C) Making less frequent payments. 
D) Maintaining a safety stock. 
E) Eliminating inspections. 
A) Reducing the number of vendors. 
B) Negotiating long-term supply agreements. 
C) Making less frequent payments. 
D) Maintaining a safety stock. 
E) Eliminating inspections.

Question 3

Since many internal control procedures are automated, internal software controls are not needed.

Accepted Answer

A) True 
 B)False

Question 4

The EOQ model is a mathematical tool for determining the order quantity that maximizes the costs of ordering and holding inventory.

Accepted Answer

A) True 
 B)False

Question 5

The main idea behind the time value of money is that:

Accepted Answer

A) cash ﬂows received in the distant future are less valuable than cash ﬂows received in the 
B) cash received in year 3, say, $80,000, has the same value as $40,000 received in year 3 
C) cash ﬂows received in different years are treated as equal in value. 
D) cash payments made in the future have the same value as payments made today. 
E) timing considerations of cash ﬂows have little value in decision making. 
A) cash ﬂows received in the distant future are less valuable than cash ﬂows received in the 
B) cash received in year 3, say, $80,000, has the same value as $40,000 received in year 3 
C) cash ﬂows received in different years are treated as equal in value. 
D) cash payments made in the future have the same value as payments made today. 
E) timing considerations of cash ﬂows have little value in decision making.

Question 6

Which of the following choices is closest to the amount of money that must be invested today in order to have $25,000 at the end of four years if the rate of return is 12% compounded annually? Use appendix Table 1, Table 2, Table 3 and Table 4.

Accepted Answer

A) $15,900. 
B) $17,100. 
C) $19,900. 
D) $22,300. 
E) None of the answers is correct. 
A) $15,900. 
B) $17,100. 
C) $19,900. 
D) $22,300. 
E) None of the answers is correct.

Question 7

Inventory holding costs typically include:

Accepted Answer

A) clerical costs of purchase-order preparation. 
B) costs of deterioration, theft, or spoilage. 
C) costs associated with lost sales to customers. 
D) forgone interest on money tied up in inventory. 
E) both costs of deterioration, theft, or spoilage and forgone interest on money tied up in 
A) clerical costs of purchase-order preparation. 
B) costs of deterioration, theft, or spoilage. 
C) costs associated with lost sales to customers. 
D) forgone interest on money tied up in inventory. 
E) both costs of deterioration, theft, or spoilage and forgone interest on money tied up in

Question 8

Even in large companies, few internal controls exist in order to establish greater control of security among limited individuals.

Accepted Answer

A) True 
 B)False

Question 9

Norton Company has a 12% compound annual interest rate.If the ﬁrm invests $60,000 today, how much will have accumulated by the end of eight years? Use appendix Table 1, Table 2, Table 3 and Table 4.

Accepted Answer

A) $117,600. 
B) $148,560. 
C) $298,080. 
D) $738,000. 
E) None of the answers is correct. 
A) $117,600. 
B) $148,560. 
C) $298,080. 
D) $738,000. 
E) None of the answers is correct.

Question 10

The Sarbanes-Oxley Act established the:

Accepted Answer

A) Securities and Exchange Commission (SE
C) . 
B) Public Company Accounting Oversight Board (PCAO
B) . 
C) Financial Accounting Standards Board (FAS
B) . 
D) Institute of Management Accountants (IM
A) . 
E) American Accounting Association (AA
A) . 
A) Securities and Exchange Commission (SE
C) . 
B) Public Company Accounting Oversight Board (PCAO
B) . 
C) Financial Accounting Standards Board (FAS
B) . 
D) Institute of Management Accountants (IM
A) . 
E) American Accounting Association (AA
A) .

Question 11

When graphing the EOQ, which of the following statements is false?

Accepted Answer

A) Holding costs are a downward sloping line to the right. 
B) The EOQ is represented by the minimum total cost. 
C) Ordering costs are a downward sloping line to the right. 
D) Average inventory on hand results in higher holding costs. 
E) As order size increases, so does average inventory on hand. 
A) Holding costs are a downward sloping line to the right. 
B) The EOQ is represented by the minimum total cost. 
C) Ordering costs are a downward sloping line to the right. 
D) Average inventory on hand results in higher holding costs. 
E) As order size increases, so does average inventory on hand.

Question 12

Pika Pumps uses a special component in manufacturing its pool pumps.Pika produces 26,000 pool pumps per year, each of which requires one of these special components.The annual cost of holding one component is $4 and Pika's management estimates that the cost of placing and receiving a typical order is $125.Production is constant, and the lead time to receive an order is one week.Assume 52 weeks in a year. The reorder point is:

Accepted Answer

A) 1,000 components. 
B) 500 components. 
C) 100 components. 
D) 225 components. 
E) Not enough information is provided to determine the reorder point. 
A) 1,000 components. 
B) 500 components. 
C) 100 components. 
D) 225 components. 
E) Not enough information is provided to determine the reorder point.

Question 13

Lucas Sugar wants to accumulate funds to open his own restaurant after he graduates from culinary school and gains experience working in local restaurants.Lucas deposited $20,000 into a fund on January 2 of the current year.Lucas will be able to deposit $10,000 at the end of each of the next 5 years.If the fund pays 4% interest compounded annually, how much will Lucas have in his restaurant fund at the end of the 5th year? Use appendix Table 1, Table 2, Table 3 and Table 4.

Accepted Answer

A) $64,160. 
B) $78,500. 
C) $29,830. 
D) $70,000. 
E) $85,170. 
A) $64,160. 
B) $78,500. 
C) $29,830. 
D) $70,000. 
E) $85,170.

Question 14

Green Company owes White Company money for the purchase of equipment.White has given Green the following payment options: I.Immediate payment in full of $38,000. II.Annual payments of $15,000 made at the end of each of the next three years. III.A single payment of $48,000 made at the end of three years. Green uses a 10% annual compound interest rate and will choose the option with the lowest present value.Which option should Green choose, and what is the present value of that option? Use appendix Table 1, Table 2, Table 3 and Table 4.

Accepted Answer

A) Option I, $34,542. 
B) Option I, $38,000. 
C) Option II, $37,305. 
D) Option III, $34,164. 
E) Option III, $36,048. 
A) Option I, $34,542. 
B) Option I, $38,000. 
C) Option II, $37,305. 
D) Option III, $34,164. 
E) Option III, $36,048.

Question 15

When considering safety stock and its effect on EOQ, which of the following statements is false?

Accepted Answer

A) Safety stock is equal to the potential excess usage of an input. 
B) The reorder point is affected by the existence of safety stock. 
C) Safety stock decreases inventory holding costs. 
D) Safety stock decreases the potential costs caused by inventory shortages. 
E) Fluctuations in monthly usage of a material indicate the desirability of a safety stock. 
A) Safety stock is equal to the potential excess usage of an input. 
B) The reorder point is affected by the existence of safety stock. 
C) Safety stock decreases inventory holding costs. 
D) Safety stock decreases the potential costs caused by inventory shortages. 
E) Fluctuations in monthly usage of a material indicate the desirability of a safety stock.

Question 16

When comparing EOQ and JIT inventory systems, which of the following statements is false?

Accepted Answer

A) The EOQ approach takes the viewpoint that some inventory is necessary. 
B) The EOQ system assumes a constant order quantity. 
C) JIT argues that inventory investments should be minimized. 
D) The EOQ system focuses on acquisition and holding costs. 
E) JIT argues that safety stocks are necessary to reduce the probability of a stock shortage. 
A) The EOQ approach takes the viewpoint that some inventory is necessary. 
B) The EOQ system assumes a constant order quantity. 
C) JIT argues that inventory investments should be minimized. 
D) The EOQ system focuses on acquisition and holding costs. 
E) JIT argues that safety stocks are necessary to reduce the probability of a stock shortage.

Question 17

Under section 404 of the Sarbanes-Oxley Act, auditors are required to:

Accepted Answer

A) attest to and report on the effectiveness of the client's internal controls. 
B) establish and maintain internal controls for audited companies. 
C) advise management on its preparation of the Report on Internal Controls. 
D) evaluate the company's internal control system periodically throughout the year. 
E) All of the answers are correct. 
A) attest to and report on the effectiveness of the client's internal controls. 
B) establish and maintain internal controls for audited companies. 
C) advise management on its preparation of the Report on Internal Controls. 
D) evaluate the company's internal control system periodically throughout the year. 
E) All of the answers are correct.

Question 18

Inventory decisions involve a delicate balance between three classes of costs: ordering costs, advertising costs, and shipping costs.

Accepted Answer

A) True 
 B)False

Question 19

The factor applicable to individual cash ﬂows in a series of equal cash ﬂows is called the:

Accepted Answer

A) single-sum, present-value factor. 
B) total discount factor. 
C) accumulation factor. 
D) compound discount factor. 
E) internal rate discount factor. 
A) single-sum, present-value factor. 
B) total discount factor. 
C) accumulation factor. 
D) compound discount factor. 
E) internal rate discount factor.

Question 20

The provisions of section 302 of the Sarbanes-Oxley Act (as originally enacted) require the signing oﬃcers of a company to do all of the following except:

Accepted Answer

A) audit the internal controls over ﬁnancial reporting. 
B) establish the internal controls over ﬁnancial reporting. 
C) maintain the internal controls over ﬁnancial reporting. 
D) evaluate the internal controls over ﬁnancial reporting. 
E) disclose material weaknesses in the internal controls over ﬁnancial reporting. 
A) audit the internal controls over ﬁnancial reporting. 
B) establish the internal controls over ﬁnancial reporting. 
C) maintain the internal controls over ﬁnancial reporting. 
D) evaluate the internal controls over ﬁnancial reporting. 
E) disclose material weaknesses in the internal controls over ﬁnancial reporting.

The ﬁrst decade of the SOX legislation was characterized by controversy.

Which of the following does not minimize ordering costs when using JIT purchasing?

Since many internal control procedures are automated, internal software controls are not needed.

The EOQ model is a mathematical tool for determining the order quantity that maximizes the costs of ordering and holding inventory.

The main idea behind the time value of money is that:

Which of the following choices is closest to the amount of money that must be invested today in order to have $25,000 at the end of four years if the rate of return is 12% compounded annually? Use appendix Table 1, Table 2, Table 3 and Table 4.

Inventory holding costs typically include:

Even in large companies, few internal controls exist in order to establish greater control of security among limited individuals.

Norton Company has a 12% compound annual interest rate.If the ﬁrm invests $60,000 today, how much will have accumulated by the end of eight years? Use appendix Table 1, Table 2, Table 3 and Table 4.

The Sarbanes-Oxley Act established the:

When graphing the EOQ, which of the following statements is false?

When considering safety stock and its effect on EOQ, which of the following statements is false?

When comparing EOQ and JIT inventory systems, which of the following statements is false?

Under section 404 of the Sarbanes-Oxley Act, auditors are required to:

Inventory decisions involve a delicate balance between three classes of costs: ordering costs, advertising costs, and shipping costs.

The factor applicable to individual cash ﬂows in a series of equal cash ﬂows is called the:

The provisions of section 302 of the Sarbanes-Oxley Act (as originally enacted) require the signing oﬃcers of a company to do all of the following except:

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Filters

Exam 13: Inventory Management and Economic Order Quantity (EOQ) Analysis

The ﬁrst decade of the SOX legislation was characterized by controversy.

Which of the following does not minimize ordering costs when using JIT purchasing?

Since many internal control procedures are automated, internal software controls are not needed.

The EOQ model is a mathematical tool for determining the order quantity that maximizes the costs of ordering and holding inventory.

The main idea behind the time value of money is that:

Which of the following choices is closest to the amount of money that must be invested today in order to have $25,000 at the end of four years if the rate of return is 12% compounded annually? Use appendix Table 1, Table 2, Table 3 and Table 4.

Inventory holding costs typically include:

Even in large companies, few internal controls exist in order to establish greater control of security among limited individuals.

Norton Company has a 12% compound annual interest rate.If the ﬁrm invests $60,000 today, how much will have accumulated by the end of eight years? Use appendix Table 1, Table 2, Table 3 and Table 4.

The Sarbanes-Oxley Act established the:

When graphing the EOQ, which of the following statements is false?

When considering safety stock and its effect on EOQ, which of the following statements is false?

When comparing EOQ and JIT inventory systems, which of the following statements is false?

Under section 404 of the Sarbanes-Oxley Act, auditors are required to:

Inventory decisions involve a delicate balance between three classes of costs: ordering costs, advertising costs, and shipping costs.

The factor applicable to individual cash ﬂows in a series of equal cash ﬂows is called the:

The provisions of section 302 of the Sarbanes-Oxley Act (as originally enacted) require the signing oﬃcers of a company to do all of the following except:

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Filters