CPA Business Environment and Concepts Practice Questions
1. A new partner can be added to a limited partnership:
a. If all partners agree.
b. If all general partners agree.
c. If all limited partners agree.
d. If more than half of all partners agree.
2. At the end of Traverse Co.'s financial year, there are 2,500 units in inventory. The variable manufacturing costs of production for those units are $50/unit, and the fixed manufacturing costs are $25/unit.
How would the pretax income for Traverse Co. compare if they used the absorption costing method and the variable costing method to determine pretax income?
a. Pretax income would be the same with both methods.
b. Pretax income would be $125,000 higher if Traverse uses the absorption costing method.
c. Pretax income would be $62,500 higher if Traverse uses the absorption costing method.
d. Pretax income would be $125,000 higher if Traverse uses the variable costing method.
3. In a computer, what is ROM?
a. Memory that one can access and read but not change
b. A permanent type of computer memory
c. Computer memory that allows the stored information to be accessed in any order
d. All of the above
4. If a 7% price increase leads to a 3% decrease in demand:
a. The demand is elastic.
b. The demand is inelastic.
c. The supply is elastic.
d. The supply is inelastic.
5. Which of the following is true when the government subsidizes a product?
a. The price will decrease, affecting supply.
b. The price will increase, affecting supply.
c. The price will stay the same, but supply will change.
d. The price will stay the same, but demand will change.
6. Bank XYZ gives a loan for $300,000 with a stated interest rate of 6.5% and requires a compensating balance of 25%. The effective cost of the loan is:
a. 6.8%
b. 8.67%
c. 15.38%
d. 26%
7. What is a server?
I. A computer that gives other computers access to shared files and software
II. A set of rules used when computers exchange a set of data
III. A method of encrypting data on computers
a. I only
b. II only
c. I and III only
d. II and III only
8. A new partner can be added to a general partnership:
a. If more than one partner agrees.
b. If more than half of the partners agree.
c. If all partners agree.
d. A new partner cannot be added to a general partnership.
9. What is the Black-Scholes method?
a. A technique used to measure the coefficient of variation
b. A technique used to predict the yield curve on money markets
c. A technique used to determine relative risk levels
d. A technique used to value stock options
10. Capstone's bond with a $500 face value with a 6% interest rate is selling for $450 at present. What is the bond's current yield?
a. 2.7%
b. 1.33%
c. 13.3%
d. 27%
11. Madison Corp. is considering an investment with an expected return of 15% and a standard deviation of 12%. What is the relative risk level of the investment?
a. 0.8
b. 80
c. .03
d. .30
12. The percentage of profit on sales multiplied by the capital employed turnover rate yields:
a. A company's return on sales (ROS).
b. A company's rate of return (ROR or ROI) on an investment.
c. A company's residual income.
d. A company's economic value added (EVA).
13. Functional benchmarking involves:
a. Benchmarking against best practices regardless of industry.
b. Benchmarking within a firm.
c. Benchmarking within an industry.
d. Benchmarking against a firm's competitors.
14. Nathan Co. experienced a decrease of $25,000 in its direct materials inventory during September of 2008. During the same month, purchases of direct material totaled $125,000. What was the total amount of direct materials used by Nathan Co. during September 2008?
a. $25,000
b. $100,000
c. $125,000
d. $150,000
15. Use the weighted-average model to find the cost per equivalent unit for materials during September at Cushman Co. using the following data:
Units completed in September (45,000)
Units started in September (40,000) with cost of materials of $15,000
Beginning work in progress (10,000 units) with cost of materials of $5,000
Ending work in progress (5,000)
a. $0.33 per unit
b. $0.35 per unit
c. $0.40 per unit
d. $0.50 per unit
16. Given the following data for Cascade Manufacturing, determine the total cost of units in the ending work in process inventory as of February 28 using the FIFO method.
Ending inventory, February 28:
80% complete for materials, 50% complete for conversion costs
Ending work in process inventory, February 28:
36,000 units
Equivalent unit cost of materials: $5.20
Equivalent unit cost of conversion: $4.60
a. $99,360
b. $149,760
c. $249,120
d. $274,870
17. Consider the standard regression equation y = a + bx. Which of the following statements are true?
I. a is the constant variable.
II. b is the coefficient for the dependent variable.
III. x is the dependent variable.
a. I only
b. II only
c. I and III only
d. I, II, and III
18. Which of the following is the equation for determining the equivalent unit cost of materials used during a time period using the FIFO method?
a. Cost of materials used divided by the number of equivalent units of production
b. Completed units plus equivalent units in ending inventory minus the equivalent units in beginning inventory
c. The number of equivalent units of production divided by the cost of materials used
d. Completed units plus the equivalent units in beginning inventory minus the equivalent units in ending inventory
19. Which of the following statements about regression analysis are true?
I. A regression coefficient of 0.25 shows a stronger relationship than a regression coefficient of -0.43.
II. A regression coefficient of 1.25 shows a stronger relationship than a regression coefficient of 0.85.
III. A regression coefficient of -0.93 shows a stronger relationship than a regression coefficient of 0.45.
a. I only
b. II only
c. III only
d. Neither I, II, nor III
20. Money spent to pay quality assurance inspectors to inspect a product before it is shipped to customers is known as:
a. Internal failure
b. External failure
c. Appraisal cost
d. Prevention cost
