Question 1

Which one of the following is not an advantage of a participatory budgeting process?

Options :

A : Control of uncertainties.

B : Goal congruence.

C : Communication between departments.

D : Coordination between departments.

Answer: A

Question 2

Mark Tian, a staff accountant, becomes aware of an off-balance sheet bank account where funds have been diverted with offsetting creditsapproved by his immediate supervisor. His immediate supervisor refuses to discuss it and suggests Tian forget about it. Which one of thefollowing should be Tian’s next course of action in this circumstance?

Options :

A : Communicate his concerns confidentially to the company’s independent auditor.

B : Communicate his concerns confidentially to the company’s external legal counsel.

C : Put his concerns in writing to the immediate supervisor and copy the company’s independent auditor.

D : Discuss his concerns with the level of management above the immediate supervisor.

Answer: D

Question 3

Elite Running Ltd has recently implemented a new evaluation process that bases bonuses primarily on the variance between budgeted andactual cost for cost centers. Individuals with budgeted to actual variances in excess of 20% will receive no bonus. Richard Banes overseesone cost center of Elite and is concerned that his bonus will be adversely impacted. He has a strong personal relationship with the controller,who is responsible for developing, reviewing, and approving budgets. He has asked the controller to accept his budget with estimated costshigher than would be reasonably expected for the next fiscal year. In appreciation for accepting these inflated costs, Banes offered thecontroller season tickets to the sport of his choice. Which one of the following standards of IMA’s Statement of Ethical Professional Practiceis relevant?

Options :

A : Confidentiality, if the controller fails to report the incident to the audit committee.

B : Integrity, if the controller accepts the tickets because acceptance would prejudice his ability to carry out his duties.

C : Competence, if the controller accepts the tickets because he has not performed his duties in accordance with established laws.

D : Credibility, if the controller shares Banes’ offer with another member of the management team.

Answer: B

Question 4

A corporation utilizes an activity-based costing system for applying costs to its two products, P and Q. In the assembly department, material handling costs vary directly with the number of parts inserted into the product. Machinery is recalibrated and oiled each weekend regardless of the number of parts inserted during the previous week. Both material handling and machinery maintenance costs are charged to the product on the basis of the number of parts inserted. Due to reengineering of the production process for Product P, the number of insertion parts per finished unit has been reduced. How will the redesign of the production process for Product P affect the activity-based cost of Product Q?

Options :

A : Material handling cost per Q will remain unchanged, and machinery maintenance cost per Q unit will remain unchanged.

B : Material handling cost per Q unit will increase, and machinery maintenance cost per Q unit will remain unchanged.

C : Material handling cost per Q will remain unchanged, and machinery maintenance cost per Q unit will increase.

D : Material handling cost per Q unit will increase, and machinery maintenance cost per Q unit will increase.

Answer: C

Question 5

Wilson Company uses a comprehensive planning and budgeting system. The proper order for Wilson to prepare certain budget scheduleswould be:

Options :

A : Cost of goods sold, income statement, balance sheet, and statement of cash flows.

B : Cost of goods sold, balance sheet, income statement, and statement of cash flows.

C : Income statement, balance sheet, statement of cash flows, and cost of goods sold.

D : Statement of cash flows, cost of goods sold, income statement, and balance sheet.

Answer: A

Smartly Prepare Exam with Free Online FMAA Practice Test

Buying Options: