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Q361. A Gantt chart: 

A. Shows the critical path for a project. 

B. Is used for determining an optimal product mix. 

C. Shows only the activities along the critical path of a network. 

D. Does not necessarily show the critical path through a network. 



The major advantage of a Gantt chart is its simplicity: It requires no special tools or mathematics. However, it depicts only the interrelationships between tasks in a limited way. Thus, trying to identify a project's critical path from a Gantt chart may not be feasible. 

Q362. Price skimming involves: 

A. Setting a low introductory price. 

B. Setting a high introductory price. 

C. Setting different freight charges for customers in different zones. 

D. Using markups tied closely to the price paid for a product. 



Price skimming is used when a new product is introduced at the highest price possible given the benefits of the product. For market skimming to work, the product must appear to be worth its price, the costs of producing a small volume cannot be so high that they eliminate the advantage of charging more, and competitors cannot enter the market and undercut the price. 

Q363. All of the following are potential security issues for e-commerce except: 

A. Correct identification of transacting parties. 

B. Proliferation of computer viruses. 

C. Determining who may rightfully make transaction decisions. 

D. Verification of payment data. 


Explanation: E-commerce is the purchase and sale of goods and services by electronic means. Ecommerce may occur via online transactions on public networks electronic data interchange EDI), and email. E- commerce security issues include the correct identification of transacting parties authentication), determining who may rightfully make decisions authorization), and verification of payment data. While proliferation of computer viruses is a general security issue with regard to information systems, it is not a specific risk associated with e- commerce. 

Q364. Companies that adapt just-in-time purchasing systems often experience 

A. An increase in carrying costs. 

B. A reduction in the number of suppliers. 

C. A greater need for inspection of goods as the goods arrive. 

D. Less need for linkage with a vendor's computerized order entry system. 



The objective of JIT is to reduce carrying costs by eliminating inventories and increasing the deliveries made by suppliers. Ideally, shipments of raw materials are received just in time to be incorporated into the manufacturing process. The focus of quality control under JIT is the 

prevention of quality problems. Quality' control is shifted to the supplier. JIT companies typically do 

not inspect incoming goods; the assumption is that receipts are of perfect quality. 

Suppliers are limited to those who guarantee perfect quality and prompt delivery. 

Q365. What coefficient of correlation results from the following data? 

A. 0 

B. –1 

C. +1 

D. Cannot be determined from the data given. 



The coefficient of correlation in standard notation, r) measures the strength of the linear relationship. The magnitude of r is independent of the scales of measurement of and Y. Its range is -1 .0 to 1 .0. A value of -1 .0 indicates a perfectly inverse linear relationship between and Y. A value of zero indicates no linear relationship between and Y. A value of +1 .0 indicates a perfectly direct relationship between and Y. As increases by 1, consistently decreases by 2. Hence, a perfectly inverse relationship exists, and r must be equal to –1 .0. 

Q366. An organization has a compensation system for its managers based on a management-objectives MBO) approach. The essential premise of MBO is that: 

A. Compensation should be based on qualitative factors. 

B. Employees should be concerned with routine matters, and managers should attend to exceptions. 

C. Employees should participate in setting objectives. 

D. Managers should establish objectives for their employees. 



MBO involves mutual setting of objectives by the superior and the subordinate as a basis for performance evaluation. Based on the Theory if philosophy that employees want to work hard if they know what is expected, MBO requires 1) senior management participation and commitment to the program, 2) integration of the objectives for all subunits into a compatible system directed toward accomplishment of organizational objectives, 3) provision for regular reporting of performance, and 4) free and honest communication between superior and subordinates. Subordinates must make careful assessments of their abilities and their interests, and managers must "coach" subordinates rather than dictate their proper objectives. 

Both sides must maintain flexibility to accommodate unforeseen changes, and the review and analysis of results before setting the next round of objectives is a vital part of the process. 

Q367. In a <List A> personal tax system, an individual's marginal tax rate is normally <List B> the average tax rate. 

A. Option A 

B. Option B 

C. Option C 

D. Option D 



The marginal tax rate is the tax applicable to the last unit of income, whereas the average tax rate is the total tax paid divided by taxable income. In a progressive tax system, higher incomes attract higher tax rates, so the marginal tax rate paid on the last unit of income exceeds the average tax rate. 

Q368. An international nonprofit organization finances medical research. The majority of its revenue and support comes from fundraising activities, investments, and specific grants from an initial sponsoring corporation. The organization has been in operation over 15 years and has a small internal audit department. The organization has just finished a major fundraising drive that raised US $500 million for the current fiscal period. 

The following are selected data from recent financial statements (US dollar figures in millions): 

The auditor wishes to determine if the change in investment income during the current year was due to (a) changes in investment strategy, (b) changes in portfolio mix, or (c) other factors. Which of the following analytical review procedures should the auditor use? 

A. Simple linear regression that compares investment income changes over the past 5 years to determine the nature of the changes. 

B. Ratio analysis that compares changes in the investment portfolio on a monthly basis. 

C. Trend analysis that compares the changes in investment income as a percentage of total assets and of investment assets over the past 5 years. 

D. Multiple regression analysis that includes independent variables related to the nature of the investment portfolio and market conditions. 



Regression analysis develops an equation to explain the behavior of a dependent variable (for example, investment income) in terms of one or more independent variables (for example, market risk and the risks of particular investments). Multiple regression analysis is the best approach because it allows the auditor to regress the change in investment income on more than one independent variable. 

Q369. Which of the following is a computer program that appears to be legitimate but performs some illicit activity when it is run? 

A. Hoax virus. 

B. Web crawler. 

C. Trojan horse. 

D. Killer application. 



A Trojan horse is a computer program that appears friendly, for example, a game, but that actually contains an application destructive to the computer system. 

Q370. Which of the following creates a valid contract between the parties? 

A. A reward was posted for the capture of Tom Jones_ Maypole Burden, the county sheriff, captured Jones and claimed the reward. 

B. Slim Polestone promised to give Mabel Abbot a wedding present. 

C. Anxious Father promised to pay Albert Niceguy US $4,000 to take his daughter to the annual Mulestone Dance. Albert agreed. 

D. Festival Fanny was drowning in her hot tub. Her boyfriend pulled her out. After the rescue, Festival's husband promised to pay her boyfriend US $4 for rescuing his wife. 



A valid contract exists because Anxious Father offered to pay Albert US $4,000 for taking his daughter to the dance. This is a unilateral contract supported by the consideration of US $4,000. Albert will be entitled to the US $4,000 after he takes the daughter to the dance. 

Q371. A perpetual inventory system uses a minimum quantity on hand to initiate purchase ordering 

procedures for restocking. In reviewing the appropriateness of the minimum quantity level 

established by the stores department, the internal auditor is least likely to consider 

A. Stockout costs, including lost customers. 

B. Seasonal variations in forecasting inventory demand. 

C. Optimal order sizes determined by the economic order quantities model. 

D. Available storage space and potential obsolescence. 



The basic economic order quantity EOQ) model is based on the following variables: demand, variable cost per purchase order, and variable unit carrying cost. Thus, minimum stocking levels do not affect the EOQ. 

Q372. With regard to inventory management, an increase in the frequency of ordering will normally: 

A. Reduce the total ordering costs. 

B. Have no impact an total ordering costs. 

C. Reduce total carrying costs. 

D. Have no impact on total carrying costs. 



Inventory carrying costs can sometimes be transferred to suppliers. If a seller has good enough control of demand schedules to know exactly when goods are needed, orders can be placed so that goods arrive no earlier than when actually needed. This practice relies on a supplier who is willing to take the responsibility for storing the needed inventory and shipping it to arrive on time. Suppliers are more willing to provide this type of service when they have many competitors. 

Q373. Selling below cost in other countries is called: 

A. Predatory pricing. 

B. Price discrimination. 

C. Dumping. 

D. Collusive pricing. 


Explanation: Dumping, which refers to selling below cost in other countries, is an inappropriate pricing tactic that may trigger retaliatory tariffs and other sanctions. 

Q374. If a central bank wishes to implement an expansionary monetary policy, which one of the following actions would it take? 

A. Raise the reserve requirement and the rate at which member banks may borrow from the central bank. 

B. Purchase additional government securities and lower the rate at which member banks may borrow from the central bank. 

C. Reduce the reserve requirement and raise the rate at which member banks may borrow from the central bank. 

D. Raise the rate at which member banks may borrow from the central bank and sell government securities. 



A central bank affects monetary policy primarily through the purchase and sale of government securities. A purchase of securities is expansionary because it increases bank reserves and the money supply. However, the sale of government securities by the central bank contracts the money supply by removing resources from the economy. 

Lowering the reserve requirement the percentage of deposits that a bank must keep on hand) also expands the money supply by increasing the loan able funds held by banks. 

Similarly, lowering the rate at which member banks may borrow from the central bank encourages borrowing and increases the money supply. 

Q375. All of the following are objectives of pricing except: 

A. Image oriented objectives. 

B. Profit maximization. 

C. Stabilization. 

D. Production maximization. 


Explanation: Pricing objectives include> 


 Profit maximization, which assumes that all firms select the price that results in the highest profit 


 Target margin maximization, which is stated as a percentage ratio of profits to sales 


 Volume-oriented objectives, which refers to setting prices to meet target sales volumes or market shares. 


 image oriented objectives, which refers to setting prices to enhance the consumer's perception of the firm's merchandise mix 


 Stabilization objectives, which refers to setting prices to maintain a stable relationship between the firm's prices and the industry leader's prices Price setting is not a factor in maximizing production.