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IIA Business Knowledge for Internal Auditing Sample Questions (Q72-Q77):
NEW QUESTION # 72
A value-added tax is collected on the basis of:
Answer: C
Explanation:
A value-added tax is similar to a retail sales tax on consumer goods. It is applied to the difference between the value of an entity's sales and the value of its purchases from other entities, that is. to the value added to the input In effect, a value-added tax is a national tax that penalizes consumption.
NEW QUESTION # 73
Which combination below explains the impact of credit card interest incurred and paid during the period on1) equity on the balance sheet and2) the statement of cash flows?
Answer: A
Explanation:
Interest incurred is classified as interest expense on the income statement, which in turn reduces equity on the balance sheet by reducing retained earnings. Cash payments for
interest made by an entity that is not a financial institution may be classified on the statement of cash flows as an outflow of cash from operating or financing activities.
NEW QUESTION # 74
Each stock out of a product sold by Company I-: costs US $1,750 per occurrence. The carrying cost per unit of inventory is US $5 per year, and the company orders 1,500 units of product 24 times a year at a cost of US $100 per order. The probability of a stock out at various levels of safety stock is.
What is the optimal safety stock level for the company?
Answer: C
Explanation:
The total expected cost of safety stock equals the sum of the expected annual stock out cost and the expected annual carrying cost. Annual expected stock out cost equals the cost per occurrence US $1,750), times the probability of a stock out per cycle, times the number of cycles 24). Annual expected carrying cost of a safety stock equals the unit carrying cost US $5) times the number of units. Hence, a safety stock of 400 units has the lowest total expected cast.
NEW QUESTION # 75
Heniser Pet Foods manufactures two products, X. and Y. The unit contribution margins for
Products X. and Y are US $30 and US $50, respectively. Each product uses Materials A and
B. Product uses 6 pounds of Material A and 12 pounds of Material B. Product Y uses 12 pounds of Material A and 8 pounds of Material B. The company can purchase only 1,200 pounds of Material A and 1,760 pounds of Material B. The optimal mix of products to manufacture is:
Answer: A
Explanation:
Linear programming is a technique used to maximize a contribution margin function or to minimize a cost function, subject to constraints such as scarce resources or minimum/maximum levels of production. Thus, linear programming is often used for planning resource allocations. In this problem, the equation to be maximized, called the objective function, is: U3 $30)K+ $50Y. This equation is to be maximized subject to the constraints on materials. The two constraint functions are:
Material A: 6X + 12Y < 1,200 Material B: I 2X + 8Y < 1,760
One way to solve this problem is to graph the constraint lines and determine the feasible area. The optimal production level is at an extreme point within the feasible area. The graph shows that a production level of 120 units of and 40 units of Y is a feasible production level that maximizes the contribution margin.
NEW QUESTION # 76
Which of the following are typical audit considerations for a review of authentication?
1. Authentication policies and evaluation of controls transactions.
2. Management of passwords, independent reconciliation, and audit trail.
3. Control self-assessment tools used by management.
4. Independent verification of data integrity and accuracy.
Answer: A
NEW QUESTION # 77
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