Updated Nov-2021 IIA-CIA-Part3 Exam Practice Test Questions
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NEW QUESTION 93
The process of adding resources to shorten selected activity times on the critical path in project scheduling is called:
- A. The Delphi technique.
- B. A branch-and-bound solution.
- C. Crashing.
- D. ABC analysis.
Answer: C
Explanation:
Activity times are estimated for normal effort and crash effort. Crashing is the process of adding resources to shorten activity times on the critical path in project scheduling. The network diagram and the corresponding activity cost chart for a manufacturing project at Networks, Inc. are presented below. The numbers in the diagram are the expected times in days) to perform each activity in the project.
NEW QUESTION 94
The Huron Corporation purchases 60,000 headbands per year. The average purchase lead time is 20 working days, and the maximum lead time is 27 working days. Safety stock equals 1,750 units. The corporation works 240 days per year. Huron should reorder headbands when the quantity in inventory reaches:
- A. 6,750 units.
- B. 5,250 units.
- C. 1,750 units.
- D. 5,000 units.
Answer: A
Explanation:
The reorder point is the quantity on hand when an order is placed. If it has 20-day normal lead time, a safety stock of 1,750 units, and usage of 250 units per day, an order should be placed when 27 days of inventory are on hand, a total of 6,750 units 250 units 27 days).
Jed Ryerson Computer Furniture, Inc. RCF) manufactures a line of office computer chairs. The annual demand for the chairs is estimated to be 5,000 units. The annual cost to hold one unit in inventory is US 10 per year, and the cast to initiate a production run is US $1,000. There are no computer chairs on hand, and RCF has scheduled four equal production runs of computer chairs for the coming year, the first of which is to be run immediately. RCF has 250 business days per year, sales occur uniformly throughout the year, and production start-up is within one day. RCF is considering using the following formula for determining the economic order quantity EOQ):
If: A = cast to initiate a production run per purchase order D = annual unit demand K = cost of carrying one unit per year
NEW QUESTION 95
If implementing EDI with suppliers permitted more frequent orders and more frequent communication about them, a company could be more effective by using EDI to:
- A. Ensure that it always maintained a 25-day buffer stock.
- B. Schedule production to reduce the number of setups required.
- C. Track materials through production to completed orders.
- D. Reduce costs by reducing raw materials inventory.
Answer: D
Explanation:
A well-managed company seeks to minimize the sum of the costs of holding and ordering inventory. An EDI system reduces the costs of ordering, thereby permitting the company to order more frequently. More frequent ordering reduces inventory and the associated holding costs.
NEW QUESTION 96
A manufacturer uses a materials requirements planning 1RP) system to track inventory, orders, and raw material requirements. A preliminary audit assessment indicates that the organization's inventory is understated. Using audit software, what conditions should the auditor search for in the MRP database to support this hypothesis?
I. Item cost set at zero.
II. Negative quantities on hand.
III. Order quantity exceeding requirements.
IV.
Inventory lead times exceeding delivery schedule.
- A. II and I only.
- B. I and II only.
- C. III and I only.
- D. I and I only.
Answer: B
Explanation:
If there is no monetary amount in the database for existing inventory, inventory will be understated. Moreover, inadequate edit checks or uncontrolled borrow/paybacks could cause negative quantities to be reported. This condition would cause inventory to be understated. If the amount ordered exceeds requirements, the result is an increase in inventory. However, by itself, this condition would not cause inventory to be understated or overstated. Also, if lead times are longer than delivery times, the effect is an increase in inventory but not necessarily a misstatement.
NEW QUESTION 97
The Eastern division, it sells goods internals to the Western division of the company. The quoted external price in industry publications from a supplier material near Eastern in US $ 200 per ton plus transportation. It costs US $ 20 per ton to transport the goods to Western Eastern's actual market cost per ton to buy the direct materials to make the transferred product is US $100. Actual per ton direct labor is US $50. Other actual costs of storage and handling are US $40. The company president select a US $220 transfer price. This is an example of:
- A. Negotiated transfer pricing.
- B. Cost-based transfer pricing.
- C. Market-bas, d transfer pricing.
- D. Bost-plus-20% transfer pricing.
Answer: C
Explanation:
A transfer price is the price charged by one segment of an organization for a product or service supplied to another segment of the same organization. The three basic criteria that the transfer pricing system in a decentralized company should satisfy are to 1) provide information allowing central management to evaluate divisions with respect to total company profit and each division's contribution to profit. 2) stimulate each manager's efficiency without losing each division's autonomy, and 3) motivate each divisional manager to achieve his/her own profit goal in a manner contributing to the company's success. Because the US $220 transfer price selected is based on the quoted external price market), it is an example of market-based transfer pricing.
NEW QUESTION 98
Preferred stock is less risky for investors than is common stock because:
- A. Common stock has priority over preferred stock with regard to earnings and assets.
- B. Preferred dividends are usually cumulative.
- C. Preferred stock with no conversion feature has a higher dividend yield than does convertible preferred stock.
- D. Common stock pays dividends as a stated percentage of face value.
Answer: B
NEW QUESTION 99
The total exports of Vietnam are US $20,000,000 worth of rice to Greece, and the total exports of Greece are US $18, 11,111100 worth of olives to Vietnam. The terms of trade are:
- A. Option C
- B. Option A
- C. Option B
- D. Option D
Answer: B
Explanation:
A country's terms of trade are calculated by dividing its export price index by its import price index and multiplying by 100. Greece's total exports US $18,000,000) divided by its total imports US $20,000,000) equals 0.9 x 100 = 90. Vietnam's total exports US $20,000,000) divided by its total imports US $18,000,000) equals 1.11 x 100 = 111.
NEW QUESTION 100
The mobility of personal smart devices significantly increases which of the following risks?
- A. Physical security risks
- B. Data integrity risks
- C. Privacy risks
- D. Compliance risks.
Answer: A
NEW QUESTION 101
Refer to the exhibit.
If the profit margin of an organization decreases, and all else remains equal, which of the following describes how the "Funds Needed" line in the graph below will shift?
- A. The "Funds Needed" line will point downward with an extreme slope.
- B. The "Funds Needed" line will point downward with a minimal slope.
- C. The "Funds Needed" line will remain pointed upward, but will become less steep.
- D. The "Funds Needed" line will remain pointed upward, but will become more steep.
Answer: D
NEW QUESTION 102
During the past few years, Wilder Company has experienced the following average number of power outages:
Each power outage results in out-of-pocket costs of US $800. For US $1,000 per month, Wilder can lease a generator to provide power during outages. If Wilder leases a generator in the coming year, the estimated savings (or additional expense) for the year will be
- A. US$7,200
- B. US $(1,267)
- C. US$3,200
- D. US $(15,200)
Answer: C
Explanation:
Each outage costs US $800, but this expense can be avoided by paying US $1,000 per month (US $12,000 for the year). The expected-value approach uses the probability distribution derived from past experience to determine the average expected outages per month.
3/12x0 = 0.0 2/12x1 = 0.16667 4/12x2 = 0.66667 3/12x3 = 0.75000 1.58334
The company can expect to have, on average. 1.58334 outages per month. At US $800 per outage, the expected cost is US $1,266.67. Thus, paying US $1.000 to avoid an expense of US $1,266.67 saves US $266.67 per month, or US $3,200 per year.
NEW QUESTION 103
When evaluating projects breakeven time is best described as:
- A. The point where cumulative cash inflows on a project equal total cash outflows.
- B. The point at which discounted cumulative cash inflows on a project equal discounted total cash outflows.
- C. Project investment - annual net cash inflows.
- D. Annual fixed costs - monthly contribution margin.
Answer: B
Explanation:
Breakeven time is a capital budgeting tool that is widely used to evaluate the rapidity of new product development. It is the period required for the discounted cumulative cash inflows for a project to equal the discounted cumulative cash outflows. The concept is similar to the payback period, but it is more sophisticated because it incorporates the time value of money. It also differs from the payback method because the period covered begins at the outset of a project, not when the initial cash outflow occurs.
NEW QUESTION 104
Which of the following inventory items would be the most frequently reviewed in an ABC inventory control system?
- A. Expensive, frequently used, high stockout cost items with long lead times.
- B. Inexpensive, frequently used, high stockout cost items with long lead times.
- C. Expensive, frequently used, low stockout cost items with long lead times.
- D. Expensive, frequently used, high stockout cost items with short lead times.
Answer: A
Explanation:
The ABC system is a method for controlling inventories that divides inventory items into three groups: Group A - high-monetary-value items, which account for a small portion (perhaps 10%) of the total inventory usage Group B-- medium-monetary-value items, which may account for about 20% of the total inventory items Group C -- low-monetary-value items, which account for the remaining 70% of sales or usage The ABC system permits the proper degree of managerial control to be identified and exercised over each group. Group A items are reviewed on a regular basis. Group B items may not have to be reviewed as often as group A items, but more often than group C items. For group C, extensive use of models and records is not cost effective. It is cheaper to order large quantities infrequently. The ABC method therefore reduces the safety-stock investment because high-value items are frequently monitored and medium-value items are monitored more often than inexpensive items. Frequent review can prevent stockouts and decrease inventory levels, and the cost of such review is minimized if it is limited to high- or medium-value items.
NEW QUESTION 105
Which of the following would Batchelder most likely use as a hash total?
- A. 0
- B. 1
- C. FG HK80
- D. 2
Answer: D
Explanation:
Input controls in batch computer systems are used to determine that no data are lost or added to the batch. Depending on the sophistication of a particular system. control may be accomplished by using record counts, batch totals, or hash totals. The hash total is a control total without a defined meaning, such as the total of employee numbers or invoice numbers, that is used to verify the completeness of data. The hash total of the invoice numbers is 810. Batch elder Company has the following invoices in a batch:
NEW QUESTION 106
A systems development approach used to quickly produce a model of user interfaces, user interactions with the system, and process logic is called:
- A. Application generation.
- B. Prototyping.
- C. Neural networking.
- D. Reengineering.
Answer: B
Explanation:
Prototyping produces the first model(s) of a new system. This technique usually employs a software tool for quick development of a model of the user interface such as by report or screen), interaction of users with the system for example, a menu-screen approach or data entry), and processing logic the executable module). Prototyping stimulates user participation because the model allows quick exploration of concepts and development of solutions with quick results.
NEW QUESTION 107
Which of the following conditions could lead an organization to enter into a new business through internal development rather than through acquisition?
- A. The condition of the economy is poor.
- B. It is expected that there will be slow retaliation from incumbents.
- C. The acquiring organization has information that the selling organization is weak.
- D. The number of bidders to acquire the organization for sale is low.
Answer: B
NEW QUESTION 108
Which of the following is the best reason for considering the acquisition of a nondomestic
organization?
- A. Increased diversity of corporate culture.
- B. Opportunity to influence local government policy.
- C. Relatively fast market entry.
- D. Improved cash flow of the acquiring organization.
Answer: C
NEW QUESTION 109
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