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Q241. Quality cost indices are often used to measure and analyze the cost of maintaining a given level of quality. One example of a quality cost index, which uses a direct labor base, is computed as
Based upon these costs data, the quality cost index:
A. Decreased four points from May to June.
B. Vas unchanged from May to June.
C. Increased 10 points from May to June.
D. Decreased 10 points from May to June.
Answer: A
Explanation:
The index for May was [US $4,000 + $6,000 + $12,000 + $14,000) – $90,000], and the index for June was 6% [US $5,000 + $5,000 + $15,000 + $-11,000) – $100,000].
Q242. Data regarding four different products manufactured by an organization are presented as follows. Direct material and direct labor are readily available from the respective resource markets.
Units Produced per Machine Hour: A: 3 B: 4 C: 2 D: 3
The product that is the most profitable for the manufacturer in this situation is
A. Product A
B. Product B
C. Product C
D. Product D
Answer: B
Explanation:
Answer (B) is correct. When resources are limited, maximum profits are achieved by maximizing the dollar contribution margin per limited or constraining factor. In this situation, machine hours are the constraining factor. Product B has a contribution margin per machine hour of US $28 [A x (US $18 - $11)], which is greater than that of Product A [3 x (US $15 - $7) = US $24], Product C [2 x (US $20 - $10) = US $20], or Product D [3 x (US $25 - $16) = US $27].
Q243. A company experiences both variable usage rates and variable lead times for its inventory items. The probability distributions for both usage and lead times are known. A technique the company could use for determining the optimal safety stock levels for an inventory item is:
A. Queuing theory.
B. Linear programming. C. Decision tree analysis. D. Monte Carlo simulation.
Answer: D
Explanation:
Simulation is a technique for experimenting with mathematical models using a computer. Monte Carlo simulation is a technique to generate the individual values for a random variable. A random number generator is used to produce numbers with a uniform probability distribution. The second step of the Monte Carlo process then transforms the random numbers into values consistent with the desired distribution. The performance of a model under conditions of uncertainty may be investigated by randomly selecting values for each of the variables in the model based on the probability distribution of each variable and then calculating the value of the solution. Advantages of Monte Carlo simulation are that time can be compressed, alternative policies can be considered, and complex systems can be analyzed.
Q244. What is the economic term used to describe the situation in which each nation specializes in the production of goods that it produces relatively more efficiently than other nations and imports those goods that are produced relatively more efficiently by other nations?
A. Balance of trade.
B. Diminishing returns.
C. Relative competition.
D. Comparative advantage.
Answer: D
Explanation:
The relevant concept is comparative advantage, which compares the costs of inputs within a single country_ In contrast, the concept of absolute advantage with respect of inputs between countries. It is possible that a country might have an absolute advantage, with respect to every product, but comparative. advantage is different from absolute advantage. A particular nation can have a comparative advantage even though it does not have an absolute advantage. For example assume that Country A can produce Item for US $100 and Item Y for US $200 and that Country B earl produce Item X for US $50 and Item Y for US $150. B has an absolute advantage in the production of both procedures however, B has a comparative advantage in producing Item X 50 100, or 50% of the A cost compared with 150 200, or 75% of the A cost for Item Y)_ A has a comparative advantage in producing Item Y 200 150. or 133% of the B cost, versus 100 50, or 200% for Item X). A nation will benefit by exporting goods in which it has a comparative advantage and importing goods in which it does not have a comparative advantage. Total output will be maximized when each nation specializes in the products in which it has the greatest comparative advantage or the least comparative disadvantage.
Q245. Inefficient use of excess computer equipment can be controlled by
A. Contingency planning.
B. System feasibility studies.
C. Capacity planning.
D. Exception reporting.
Answer: C
Explanation:
Planning is as important for the information systems function as for any other part of the organization. The master plan for this function should be consistent with the strategic plan for the organization and include goals and objectives. an inventory of current capacity, and a forecast of future needs. The plan is the basis for determining hardware needs.
Q246. When faced with the problem of filling a newly created or recently vacated executive position, organizations must decide whether to promote from within or to hire an outsider.
One of the disadvantages of promoting from within is that:
A. Internal promotions can have negative motivational effect on the employees of the firm.
B. Internal promotions are more expensive to the organization than hiring an outsider.
C. It is difficult to identify proven performers among internal candidates.
D. Hiring an insider leads to the possibility of social inbreeding within the firm.
Answer: D
Explanation:
Hiring an internal candidate can lead to social inbreeding. Many firms look to external candidates for certain jobs because they bring a fresh perspective to the organization's problems and may have more up-to-date training or education.
Q247. The cost of scrap, rework, and tooling changes in a product quality cost system is categorized as a n)
A. Training cost.
B. External failure cost.
C. Internal failure cost.
D. Prevention cost.
Answer: C
Explanation:
Internal failure costs are incurred when detection of defective products occurs before shipment. Examples of internal failure costs are scrap, rework, tooling changes, and downtime.
Q248. Which of the following control frameworks was acknowledged by the U.S. Securities and Exchange Commission as an appropriate model for designing internal controls under the requirements of the Sarbanes-Oxley Act of 2002?
A. COSO
B. eSAC
C. COBIT
D. GTAG
Answer: A
Explanation:
The importance and durability of the COSO Framework was reinforced when the U.S. Securities and Exchange Commission acknowledged it as an appropriate model for designing internal controls under the requirements of the Sarbanes-Oxley Act of 2002.
Q249. In a large organization, the biggest risk in not having an adequately staffed information center help desk is:
A. Increased difficulty in performing application audits.
B. Inadequate documentation for application systems.
C. Increased likelihood of use of unauthorized program code.
D. Persistent errors in user interaction with systems.
Answer: D
Explanation:
The biggest risk in not having an adequately staffed help desk is that users will unknowingly persist in making errors in their interaction with the information systems.
Q250. Which of the following may provide a leading indicator of a future increase in gross domestic product?
A. A reduction in the money supply.
B. A decrease in the issuance of building permits.
C. An increase in the timeliness of delivery by vendors.
D. An increase in the average hours worked per week of production workers.
Answer: D
Explanation: An economic indicator is highly correlated with changes in aggregate economic activity. A leading indicator changes prior to a change in the direction of the business cycle. The leading indicators included in the Conference Board’s index are average weekly hours worked by manufacturing workers, unemployment claims, consumer goods orders, stock prices, orders for fixed assets, building permits, timeliness of deliveries, money supply, consumer confidence, and the spread between the yield on 10-year Treasury bonds and the federal funds rate. An increase in weekly hours worked by production workers is favorable for economic growth.
Q251. If the bank uses the rnaxirna criterion for selecting the location of the branch, it will select:
A. L1
B. L2
C. L3
D. L4
Answer: D
Explanation:
Under the maximax criterion, the decision maker selects the choice that maximizes the maximum profit. The maximum profits for the five locations are
A bank plans to open a branch in one of five locations labeled L1, L2, L3, L4, L5). Demand for bank services may be high, medium, or low at each of these locations. Profits for each location- demand combination are presented in the payoff matrix.
Q252. Which of the following characteristics distinguishes computer processing from manual processing?
A. Computer processing virtually eliminates the occurrence of computational error normally associated with manual processing.
B. Errors or fraud in computer processing will be detected soon after their occurrence.
C. The potential for systematic errors is ordinarily greater in manual processing than in computerized processing.
D. Most computer systems are designed so that transaction trails useful for audit purposes do not exist.
Answer: A
Explanation:
Computer processing uniformly subjects like transactions to the same processing instructions. A computer program defines the processing steps to accomplish a task. Once the program is written and tested appropriately, it will perform the task repetitively and without error. However, if the program contains an error, all transactions will be processed incorrectly.
Q253. A company stocks, maintains, and distributes inventory. The company decides to add to the safety stock and expedite delivery for several product lines on a trial basis. For the selected product lines the company will experience:
A. An increase in some costs but no change in the service level.
B. A change in the service level.
C. An increase in ordering, carrying, and delivery costs.
D. decrease in ordering, carrying, and delivery costs.
Answer: B
Explanation:
Safety stocks are amounts held in excess of forecasted demand to avoid the losses associated with stock outs. Holding safety stocks improves the level of service to customers at the expense of increased holding costs.
Q254. Which of the following terms best describes the type of control practice evidenced by a segregation of duties between computer programmers and computer operators?
A. Systems development control.
B. Hardware control.
C. Applications control.
D. Organizational control.
Answer: D
Explanation:
Organizational control concerns the proper segregation of duties and responsibilities within the information systems function. For example, programmers should not have access to the equipment, and operators should not have programming ability. Although proper segregation is desirable, functions that would be considered incompatible if performed by a single individual in a manual activity are often performed through the use of an information systems program or series of programs. Therefore, compensating controls may be necessary, such as library controls and effective supervision.
Q255. Management of a company is attempting to build a reputation as a world-class manufacturer of quality products. Which of the following measures would not be used by the firm to measure quality?
A. The percentage of shipments returned by customers because of poor quality.
B. The number of parts shipped per day.
C. The number of defective parts per million.
D. The percentage of products passing quality tests the first time
Answer: B
Explanation:
The number of parts shipped per day would most likely be used as a measure of the effectiveness and efficiency of shipping procedures, not the quality of the product. This measure does not consider how many of the parts are defective.