Exam 2 - A13 natal, AIS Exam 2 1. A credit memo is...

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Unformatted text preview: A13 natal, AIS Exam 2 1. A credit memo is generated by the receiving department after a customer has returned merchandise. True 2. Product Planning is the first step in the production cycle. False 3. Flexible budgets do not take into consideration unforeseen changes in the operating environment. Else 4. The use of an imprest checking account for payroll can reduce the threat of theft or fraudulent distribution of paychecks. _'I‘Lu_e 5. Materials requirement planning relies on sales forecasts to schedule inventory purchases. True 6. Obsolescence is a disadvantage associated with ]IT inventory systems. False 7. A back order is created when inventory doesn’t exist to fill a customer order. flue 8. Accruals reflect events that have occurred but no cash has been disbursed or received. Rug 9. Process costing would be applied to mass produced items because it would not be cost effective to trace product costs to each individual item produced. True 10. An earnings statement is usually accompanied by a deduction register. False 11. Which of the following documents normally triggers the billing process in the revenue cycle? a. Packing slip received from shipping department 12. A monthly statement sent to customers serves a control purpose by a. Providing an opportunity for customers to verify the balance owed and activity on the account 13. A company uses the method for tracking accounts receivables where customers pay according to individual sales invoices. This is the open invoice method. 14. Key differences exist when an integrated Enterprise Resource Planning system replaces an existing AIS or legacy system. For example inventory records are more accurate and timely, enabling sales order entry staff to provide customers more accurate information about delivery dates. A customer service manager at Sad Clown Pajamas, Bob, received a call from the manager at Callow Youth Clothing, who informed Bob that Callow was entering bankruptcy liquidation and it was unlikely that they would be able to pay the outstanding balance on their account. Bob should A) document the phone conversation and forward it to the billing department manager. B) prepare a credit memo. C) approve a credit memo. manager. Answer: D 16. Because it is the most exchangeable of all assets, the management of cash has always been the most difficult of all control issues. The most important of all cash controls is — segregation of duties 17. The Squishy Things Toy Company was established in 1948. It recently signed a large contract with a chain of retail toy stores. As a condition of the contract, the Squishy will be required to track and forecast product sales by linking in to the chain's sales database. Squishy will then be responsible for shipping products to the chain's regional warehouses as needed. The relationship between Squishy and the chain is an example of A) vendor-managed inventory. B) sales force automation. C) electronic data interchange. D) optical character recognition. Answer: A 18. Double-checking the accuracy of an invoice is a control that can help to neutralize a threat in the expenditure cycle. What activity would specifically be associated with this control? A) ordering goods B) receiving and storing goods C) paying for goods and services D) requesting goods be ordered Answer: C 19. What is the key difference between the MRP and HT inventory management approaches? MRP schedules to meet estimated sales needs 20. A key decision in ordering is selecting a suitable vendor. Which of these would not be a major criterion? Credit rating of the vendor 21. Duties in the expenditure cycle should be properly segregated to promote internal control. This means that the authorization function is performed by purchasing, the recording function is performed by accounts payable, cash handling is performed by the cashier. 22. To accomplish the objectives set forth in the expenditure cycle, a number of key management decisions must be addressed, which is not ordinarily part of the expenditure cycle? What are the optimal prices for each product or service? 23. The AIS compiles and feeds information among the business cycles. What is the relationship between the revenue and production cycles? Revenue cycle provides sales forecasts, etc, while production sends info back to the revenue cycle. 24. Which of the following is not a product design objective? Make the design easy to track for cost accounting purposes. 25. What is the main difference between MRP-II and HT manufacturing systems? Length of planning horizon 26. Overproduction and underproduction can be a threat to... planning and scheduling 27. Prevention costs are incurred to ensure that products are created without defects the first time. 28. Experts estimate that on average the costs associated with replacing an employee are one and one half of the employee’s salary. 29. Which type of payroll report contains information such as the employees' gross pay, payroll deductions, and net pay in a multicolumn format? A) payroll register B) deduction register C) employee earnings statement D) federal W-4 form Answer: A 31. The key to preventing unauthorized changes to the payroll master file is — segregation of duties between the preparation of paychecks and their distribution 32. This organization provides payroll process as well as other HRM services — professional employer organization 33. Who provides the adjusting entries for a well-designed general ledger and reporting system? The controller's area 34. The general ledger system of an organization should be designed to serve the information requirements of both internal and external users. This means that the system should support A) producing expansive regular periodic reports to cover all information needs. B) the real—time inquiry needs of all users. C) producing regular periodic reports and respond to real—time inquiry needs. D) access by investors and creditors of the organization to general ledger balances. Answer: C 35. Financial statements are prepared in a certain order. Which is last? Statement of cash flows 36. Variances for variable costs will be misleading when the planned output differs from budgeted output. A solution to this problem would be A) calling all costs fixed. B) to use flexible budgeting. C) better prediction of output. D) to eliminate the budgeting process. Answer: B 37. Which of the following tasks are facilitated by maintaining a strong and secure audit trail? A) tracing a transaction from original source document to the general ledger to a report B) tracing an item in a report back through the general ledger to the original source document C) tracing changes in general ledger accounts from beginning to ending balances D) All of the above are facilitated by the audit trail. Answer: D Essays 1. Describe cycle billing and identify how an organization might benefit by using cycle billing. Answer: Cycle billing is spreading out the customer base so that a portion of the billing is done each day to a group of customers. Credit card and utility companies use it extensively because of their large customer bases. The advantage of this method is that the billing load is dispersed and the cash flow of the company is evened out dramatically. 2. What types of decision—making and strategic information should the AIS provide in the expenditure cycle? Answer: The AIS should provide decision making information to: Determine when and how much additional inventory to order. Select the appropriate vendors from whom to order. Verify the accuracy of vendor invoices. Decide whether purchase discounts should be taken. Monitor cash flow needs to pay outstanding obligations. AIS should also provide the following strategic and performance evaluation information on: Efficiency and effectiveness of the purchasing department. Analysis of vendor performance such as on-time delivery, quality, etc. Time taken to move goods from the receiving dock into production. Percentage of purchase discounts taken. 3. What is responsibility accounting? Answer: Responsibility accounting involves the reporting of financial results on the basis of managerial responsibilities within an organization. Reports show actual amounts and variances to budget for the current month and year to date for items controllable at that level. 4. What role does the AIS play in the production cycle? Answer: A company 's AIS plays a vital role in the production cycle. Accurate and timely cost accounting information is essential input to decisions about the following: Product mix (what to produce), Product pricing, Resource allocation and planning (e.g., whether to make or buy a product, relative profitability of different products), Cost management (planning and controlling manufacturing costs, evaluating performance). These decisions require much more detailed information about costs than the data needed to prepare financial statements in accordance with generally accepted accounting principles (GAAP). Thus, the design ofa company '5 production cycle AIS must go beyond merely meeting external financial reporting requirements. ...
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This note was uploaded on 01/08/2012 for the course ACCT 3603 taught by Professor Staff during the Fall '08 term at Oklahoma State.

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Exam 2 - A13 natal, AIS Exam 2 1. A credit memo is...

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