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 #1 : Cash Conversion Cycle
As a company becomes more conservative with respect to working capital policy, it would tend to have a(n):
Decrease in the operating cycle
Increase in the ratio of current assets to noncurrent assets
Increase in the ratio of current liabilities to noncurrent liabilities
Decrease in the quick ratio
Increase in the ratio of current assets to noncurrent assets
An increase in the ratio of current assets to non-current assets would be indicative of an increasingly conservative working capital policy.
Example Question #3 : Cash Conversion Cycle
Each of the following items is included when computing a firm's target cash conversion cycle, except the:
Days of payables outstanding
Cash discount period
Days in inventory
Days sales in accounts receivable
Cash discount period
The cash conversion cycle does not include the cash discount period. Cash discounts would be considered as a component of receivables collections and payables deferrals.
Example Question #23 : Financial Management Process
An increase in sales collections resulting from an increased cash discount for prompt payment would be expected to cause a:
Decrease in the cash conversion cycle
Increase in bad debt issues
Increase in the operating cycle
Increase in the average collection period
Decrease in the cash conversion cycle
An increase in sales collections would decrease the cash conversion cycle.
Example Question #2 : Cash Conversion Cycle
The cash conversion cycle is the length of time from an initial expenditure for production to the date:
Cash is collected from suppliers
Cash is paid to employees for production
Cash is collected from customers offset by the length of time it takes to pay vendors
Cash is recorded on the books
Cash is collected from customers offset by the length of time it takes to pay vendors
This is the definition and purpose of the cash conversion cycle which exists to quantify a firm's ability to generate cash flow.
Example Question #1 : Cost Accounting Variance Formulas
The differences between standard hours at standard wage rates and actual hours at standard wage rates is referred to as which of the following types of variances
Labor usage
Indirect labor spending
Labor rate
Direct labor spending
Labor usage
The difference between standard hours at standard wage rates and actual hours at standard rates is the labor usage/efficiency variance.
Example Question #2 : Cost Accounting Variance Formulas
Which of the following types of variances would a purchasing manager most likely influence?
Direct materials price
Direct materials quantity
Direct labor rate
Direct labor efficiency
Direct materials price
The direct materials price variance could be used to monitor purchasing manager performance.
Example Question #3 : Cost Accounting Variance Formulas
Which of the following standard costing variances would be least controllable by a production supervisor?
Material usage
Overhead volume
Overhead efficiency
Labor efficiency
Overhead volume
The overhead volume variance is a function of the budgeted amount of overhead based on standard hours. The production supervisor has little control over established standard and budgeted amounts.
Example Question #4 : Cost Accounting Variance Formulas
The only sales variance listed below that does not use contribution margin to compute results is:
Sales price variance
Market size variance
Market share variance
Sales volume variance
Sales price variance
The sales price variance does not use contribution margin.
Example Question #1 : Cost Accounting Variance Formulas
The production volume variance is due to:
]Inefficient or efficient use of direct labor hours
Efficient or inefficient use of variable overhead
A significant shift in the mix and yield of direct labor relative to the static budget
Difference from the planned level of the base used for overhead allocation and the actual level achieved
Difference from the planned level of the base used for overhead allocation and the actual level achieved
The production volume variance is due to the difference from the planned level of the based used for overhead allocation and the actual level achieved.
Example Question #6 : Cost Accounting Variance Formulas
The cost of goods manufactured would generally not include which of the following?
Direct labor
Overhead
Direct materials
Selling costs
Selling costs
Selling costs are not relevant for the goods a firm manufactures, rather this would be relevant for the cost of goods sold.
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