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NEW QUESTION 38
What is the incremental cost of placing an order that would be used in the EOO model?

A. US $19B. US $35C. US $24D. US $48

Answer: A

Explanation:
The incremental cost of additional orders equals the variable costs incurred in purchasing and receiving inventory but not costs associated with shipping). Using the high-low method of analysis, these variable costs can be computed by determining the apparent variable costs for the two given levels of activity. For 160 orders, the relevant costs with a variable element include purchasing clerks, US $1,750: supplies, US $400, and receiving clerks, US $2,200.
The total is US $4,350. For 100 orders, these costs are US $1,250, US $260, and US $1,700, respectively, for a total of US $3,210. As the number of orders increased by 60, the costs increased by US $1 .140. Consequently, the variable or incremental costs per order must have been US $19 $1 .140 - 60 orders). Candman Company is a wholesale distributor of candy. The company leases space in a public warehouse and is charged according to the square feet occupied. Candman has decided to employ the economic order quantity 0Q) method to determine the optimum number of cases of candy to order. The company placed 2,400 orders last year. Data for the high-activity month, the low-activity month, and the year for the purchasing and warehouse operations appear in the next column. The annual charges for the warehouse totaled US $12,750 last year. In addition, the annual insurance and property taxes on the candy stored in the warehouse amounted to US $1,500 and US $2,250, respectively. The average monthly inventory last year was US $75,000.

 

NEW QUESTION 39
An organization decided to outsource its human resources function. As part of its process migration, the organization is implementing controls over sensitive employee data.
What would be the most appropriate directive control in this area?

A. Include a data protection clause in the contract with the service provider.B. Require a Service Organization Controls (SOC) report from the service providerC. Obtain a nondisclosure agreement from each employee at the service provider who will handle sensitive data.D. Encrypt the employees ' data before transmitting it to the service provider

Answer: A

 

NEW QUESTION 40
Which one of the following items is not directly reflected in the basic economic order quantity (EOQ) model?

A. Public warehouse rental charges.B. Quantity discounts lost on inventory purchasesC. Interest on invested capital.D. Inventory obsolescence.

Answer: B

Explanation:
The basic EOQ model minimizes the sum of ordering (or setup) and carrying costs. Included in the formula are annual demand, ordering (or setup) costs, and carrying costs. Carrying costs include warehousing costs, insurance, spoilage, obsolescence, and interest on invested capital. The cost of the inventory itself and any quantity discounts lost on inventory purchases are not components of the EOQ model.

 

NEW QUESTION 41
A corporation reported salaries expense of US $190,000 for December of the current year. The following data are from its records:

The amount of cash payments for salaries during December of the current year was

A. US $226,000B. US $154,000C. US $214,000D. US $166,000

Answer: D

Explanation:
An increase in prepaid salaries indicates that salaries expense is less than the cash paid for salaries. An increase in salaries payable indicates that salaries expense is more than the cash paid for salaries. Thus, the amount of cash payments for salaries was US $166.000$190,000 salaries expense + $6,000 increase in prepaid salaries - $30,000 increase in salaries payable).

 

NEW QUESTION 42
ABC operates a catering service that specializes in business luncheons for large corporations. ABC requires customers to place their orders 2 weeks in advance of the scheduled events. ABC bills its customers on the tenth day of the month following the date of service and requires that payment be made within 30 days of the billing date.
Conceptually, ABC should recognize revenue from its catering services at the date when a:

A. Customer's payment is received.B. Billing is mailed.C. Customer places an order.D. Luncheon is served.

Answer: D

Explanation:
Income, which includes revenue and gains, should not be recognized until an increase in future economic benefits related to an increase in an asset or a decrease in a liability is sufficiently certain and can be measured reliably. The most common time at which these two conditions are met is when the product or merchandise is delivered or services are rendered to customers. Thus, the entity has substantially accomplished what it must do to be entitled to future economic benefits when it serves the luncheon. It should then accrue a receivable and revenue.

 

NEW QUESTION 43
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