Question 1

Which one of the following is the best reason for using variable costing?

Options :

A : Variable costing is acceptable for income tax reporting purposes.

B : All costs are variable in the long term.

C : Fixed factory overhead is more closely related to the capacity to produce than to the production of specific units.

D : Variable costing usually results in higher operating income than if a company uses absorption costing.

Answer: C

Question 2

Budgets are a necessary component of financial decision making because they help provide a(n)

Options :

A : means to use all the firm-s resources

B : means to check managerial discretion

C : automatic corrective mechanism for errors

D : efficient allocation of resources

Answer: D

Question 3

Dividends paid to company shareholders would be shown on the statement of cash flows as

Options :

A : operating cash inflows

B : operating cash outflows

C : cash flows from financing activities

D : cash flows from investing activities

Answer: B

Question 4

Elite Running Ltd has recently implemented a new evaluation process that bases bonuses primarily on the variance between budgeted andactual cost for cost centers. Individuals with budgeted to actual variances in excess of 20% will receive no bonus. Richard Banes overseesone cost center of Elite and is concerned that his bonus will be adversely impacted. He has a strong personal relationship with the controller,who is responsible for developing, reviewing, and approving budgets. He has asked the controller to accept his budget with estimated costshigher than would be reasonably expected for the next fiscal year. In appreciation for accepting these inflated costs, Banes offered thecontroller season tickets to the sport of his choice. Which one of the following standards of IMA’s Statement of Ethical Professional Practiceis relevant?

Options :

A : Confidentiality, if the controller fails to report the incident to the audit committee.

B : Integrity, if the controller accepts the tickets because acceptance would prejudice his ability to carry out his duties.

C : Competence, if the controller accepts the tickets because he has not performed his duties in accordance with established laws.

D : Credibility, if the controller shares Banes’ offer with another member of the management team.

Answer: B

Question 5

Mark Tian, a staff accountant, becomes aware of an off-balance sheet bank account where funds have been diverted with offsetting creditsapproved by his immediate supervisor. His immediate supervisor refuses to discuss it and suggests Tian forget about it. Which one of thefollowing should be Tian’s next course of action in this circumstance?

Options :

A : Communicate his concerns confidentially to the company’s independent auditor.

B : Communicate his concerns confidentially to the company’s external legal counsel.

C : Put his concerns in writing to the immediate supervisor and copy the company’s independent auditor.

D : Discuss his concerns with the level of management above the immediate supervisor.

Answer: D

Confidently Practice Online with Free FMAA Exam Cram

Buying Options: