CPA Business Environment and Concepts (BEC) : CPA Business Environment and Concepts (BEC)
Study concepts, example questions & explanations for CPA Business Environment and Concepts (BEC)
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Example Questions
Example Question #5 : Budgeting
All of the following are considered operating/financial budgets, except the:
Production budget
Sales budget
Cash budget
Capital budget
Capital budget
Capital budgets plan for the purchase of capital assets which only affect the operating budget through their subsequent effect on expense via depreciation.
Example Question #1 : Budgeting
An annual budget would be classified as which type of plan?
Multi-use
None of the answer choices are correct.
Single-use
Operational
Single-use
Annual budgets are single-use tactical plans. This means they are relatively short-term in nature and cover periods of up to 18 months.
Example Question #1 : Make Or Buy Analysis
Which of the following statements is true regarding opportunity cost?
Idle space that has no alternative use has an opportunity cost of zero.
Opportunity cost is representative of actual dollar outlay
The potential benefit is not sacrificed when selecting an alternative
Opportunity cost is recorded in the accounts of an organization that has a full costing system
Idle space that has no alternative use has an opportunity cost of zero.
Opportunity cost is the potential benefit lost by selecting a particular course of action. If idle space has no alternative use, there is no benefit foregone, opportunity cost is zero.
Example Question #2 : Operations Management: Budgeting
Costs relevant to a make or buy decision include variable labor and variable materials as well as:
Property taxes
Factory management costs
Depreciation
Avoidable fixed costs
Avoidable fixed costs
Avoidable fixed costs attach to a specific decision and are incurred only if that decision is taken. They are relevant in marginal analysis.
Example Question #3 : Operations Management: Budgeting
An important concept in decision making is described as "the contribution to income that is foregone by not using a limited resource to its best alternative use." This concept is called:
Irrelevant cost
Marginal cost
Opportunity cost
Incremental cost
Opportunity cost
Opportunity cost is the contribution to income that is foregone by not using a limited resource for its best alternative use.
Example Question #4 : Operations Management: Budgeting
Pro forma financial statements are part of the budgeting process. Normally, the last pro forma statement prepared is:
Statement of cash flows
Capital expenditure plan
Income statement
Statement of cost of goods sold
Statement of cash flows
The statement of cash flows is the last pro forma statement prepared.
Example Question #1 : Make Or Buy Analysis
The cash receipts budget includes:
Extinguishment of debt
Loan proceeds
Interest expense
Funded depreciation
Loan proceeds
The cash receipts budget includes loan proceeds.
Example Question #2 : Make Or Buy Analysis
Which of the following factors would assist in a make or buy analysis?
Neither
Cash inflows
Cash outflows
Both
Both
In assessing how much a decision will cost, as well as how much cash that decision will bring in, a firm can accurately deduce which option is in their best interest.
Example Question #1 : Cost Volume Profit Analysis
An increase in production levels within a relevant range most likely would result in:
Decreasing the variable cost per unit
Increasing the total cost
Increasing the variable cost per unit
Decreasing the total fixed cost
Increasing the total cost
As production levels increase, the total cost would increase as costs are incurred to produce additional output.
Example Question #1 : Cost Volume Profit Analysis
ABC company is using cost volume profit analysis to determine service rates for the upcoming year. Projected costs are: Contribution margin per service performed $1,800, Variable expenses per service performed 1,000, and Total fixed expenses 360,000. Based on these estimates, what is the approximate breakeven point in the number of services performed?
360
450
129
200
200
The formula for breakeven point in number is computed by dividing fixed vests by the contribution margin per unit. This would be 360,000/1,800 = 200.
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