P1BC Sol

12/9/22, 10:23 AM CMA Exam Review - Part 1 - Assessment Review
Question 1
1.F.4.a
bus.int.tb.0012_0220
LOS: 1.F.4.a
Lesson Reference: Business Intelligence
Difficulty: medium
Bloom Code: 4
In what way does Big Data most differ from more traditional operational data?
Big Data is comprised of aggregated data stored in repositories specially designed to support data
analytics, as opposed to fresh operational data.
Correct
Big Data sources include a variety of formats and organization, where traditional operational data
is generally stored on more formal structures.
Your Answer
Big Data refers to the collection of stable repositories of historical data that does not support
deleting old data and grows very large over time.
Big Data is a term that refers specifically to new types of nontraditional data that cannot be stored
in traditional databases, such as graphics and other media files.
Rationale
 Big Data is comprised of aggregated data stored in repositories specially designed to
support data analytics, as opposed to fresh operational data.
This answer is incorrect. A repository of data organized specifically to support data analytics is
called a data warehouse, not Big Data.
https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 1/115
Rationale
 Big Data sources include a variety of formats and organization, where traditional
operational data is generally stored on more formal structures.
Big Data is comprised of a variety of data sources, including both structured and unstructured
data that originate from many different sources, as opposed to traditional operational data that
tends to be stored in structured databases.
Rationale
 Big Data refers to the collection of stable repositories of historical data that does not
support deleting old data and grows very large over time.
This answer is incorrect. Big Data includes both historical data and current data. There is no
restriction on deleting data from a Big Data source.
Rationale
 Big Data is a term that refers specifically to new types of nontraditional data that
cannot be stored in traditional databases, such as graphics and other media files.
This answer is incorrect. Big Data includes both traditional repository data and nontraditional
data sources.
Question 2
1.B.2.q
tb.bud.stand.026_1809
LOS: 1.B.2.q
Lesson Reference: Building Budget Standards
Difficulty: easy
Bloom Code: 3
Which of the following statements concerning revising budgets in response to significant new
information is true?
“We cannot revise the budget even though our main raw material increased in price by 15%
because many of our performance targets will change.”
“We should revise the budget to reflect that our main raw material increased in price by 15% since
it will be easier for us to hit our earnings targets if they are revised downward.”
Your Answer
“We should not revise the budget to reflect that our main raw material increased in price by 15% so
that it is easier to see the missed estimate and hold the responsible person accountable.”
Correct
“We should revise the budget to reflect that our main raw material increased in price by 15% since
the original cost estimates are not at all realistic and following them is not helpful.”
Rationale
 “We cannot revise the budget even though our main raw material increased in price by
15% because many of our performance targets will change.”
Incorrect. Budgets are only as valid as the assumptions used to create them. If significant new
information is learned after a budget has been created, the original budget is not really useful to
monitor and assess performance. While revising estimates adds complexity to performance
evaluation, the additional complexity is likely worth the increased validity resulting from
revising the budget.
Rationale
 “We should revise the budget to reflect that our main raw material increased in price
by 15% since it will be easier for us to hit our earnings targets if they are revised
downward.”
Incorrect. While revising estimates likely increases the accuracy of the budget, making it easier
to achieve budgeted targets is not a valid reason for making the revisions.
Rationale
 “We should not revise the budget to reflect that our main raw material increased in
price by 15% so that it is easier to see the missed estimate and hold the responsible person
accountable.”
monitor and assess performance. Continuing to rely on a budget based on information
everyone knows is inaccurate is not a smart business decision. There are other ways to hold
managers accountable for flawed estimates.
Rationale
 “We should revise the budget to reflect that our main raw material increased in price
by 15% since the original cost estimates are not at all realistic and following them is not
helpful.”
Correct. Budgets are only as valid as the assumptions used to create them. If significant new
evaluation, the additional complexity is likely worth the increased validity resulting from a more
accurate revised budget.
Question 3
1.F.4.r
ana.too.tb.035_0220
LOS: 1.F.4.r
Lesson Reference: Analytic Tools
Difficulty: medium
Bloom Code: 5
QTV Corporation is in the television business, which is seasonal. The operations research analyst at
QTV has developed sales and seasonal indexes for the four quarters of the first year using time series
data.
Quarter Sales Seasonal Index

1 (January-March) 4.8 0.93
2 (April-June) 4.1 0.84
3 (July-September) 6.0 1.09
4 (October-December) 6.5 1.14
Which of the following are the intuitive conclusions about the high sales in the fourth quarter for the
QTV Corporation?
I. Sales increased 14% above the average quarterly value

II. Television interest has increased
III. Television purchase pattern is increased
IV. The total of the four seasonal indexes must be 4.0
Your Answer
I and II
II and III
III and IV
Correct
I, II, III, and IV
Rationale
 I and II
This answer is incorrect. While I and II are correct answers, they are not the only correct answers
to this question.
Rationale
 II and III
This answer is incorrect. While II and III are correct answers, they are not the only correct
answers to this question.
Rationale
 III and IV
This answer is incorrect. While III and IV are correct answers, they are not the only correct
answers to this question.
Rationale
 I, II, III, and IV
This question does not require any mathematical calculations. Instead, it requires the correct
interpretation of data that is already computed and presented in the question. It is true that (I)
sales increased 14% above the average quarterly value because fourth quarter seasonal index is
1.14, which is 14% higher than the base index of 1.0, (II) television interest has increased due to
higher sales of $6.5 million in the fourth quarter, (III) television purchase pattern has increased
with the higher sales of $6.5 million in the fourth quarter in getting ready for the winter season
to stay home due to fewer outdoor activities, and (IV) the total of the four seasonal indexes must
be 4.0 (i.e., 0.93 + 0.84 + 1.09 + 1.14).
A seasonalized time series is a set of observations measured at successive points in time or over
successive periods of time. A seasonal index is a measure of how a particular season compares
to the average season. Seasonal variation affects the overall planning process, especially in
labor requests, inventory levels, training needs, and periodic equipment maintenance work. A
seasonal index above 1 indicates a positive effect, a seasonal index of 1 indicates no seasonal
effect, and a seasonal index less than 1 indicates a negative effect.
Question 4
1.F.1.i
aq.ep.man.sys.004_1906
LOS: 1.F.1.i
Lesson Reference: Enterprise Performance Management Systems
Difficulty: medium
Bloom Code: 2
The ultimate goal of enterprise performance management (EPM) is which of the following?
Hindsight
Insight
Correct
Foresight
Visible sight
Rationale
 Hindsight
This is incorrect. Hindsight means past showing the historical results through various reports.
This is not the ultimate goal of EPM.
Rationale
 Insight
This is incorrect. Insight means present showing the current results based on action triggers.
Rationale
 Foresight
Foresight means future showing compliance awareness, strategic planning, and operations
planning. This is the ultimate goal of EPM.
Rationale
 Visible sight
This is incorrect. Visible sight has no timeframes and timelines as it applies to all time zones.
Question 5
1.F.4.a
LOS: 1.F.4.a
Difficulty: medium
Bloom Code: 3
Which of the Big Data Four Vs refers to the complexity of data, including both structured and
unstructured data?
Correct
Variety
Your Answer
Volume
Velocity
Variability
Rationale
 Variety
Variety refers to the complexity of data included in a Big Data dataset.
Rationale
 Volume
This answer is incorrect. Volume refers to the total size of the data in a Big Data dataset.
Rationale
 Velocity
This answer is incorrect. Velocity refers to the pace, or speed, with which new data is acquired
and added to a Big Data dataset.
Rationale
 Variability
This answer is incorrect. Variability refers to the different ways in which data in a Big Data
dataset may be interpreted.
Question 6
1.F.3.f
AQ.inn.app.002_1904
LOS: 1.F.3.f
Lesson Reference: Innovative Applications
Difficulty: medium
Bloom Code: 3
In a cloud computing environment, which of the following service models allows a user-consumer to
use a cloud provider's application system or program running on the provider's cloud infrastructure?
Correct
Software as a service (SaaS)

Your Answer
Platform as a service (PaaS)
Infrastructure as a service (IaaS)
Technology as a service (TaaS)
Rationale
 Software as a service (SaaS)
Correct. Software as a service (SaaS) is the capability provided to a user-consumer is to use the
provider's application system or program running on a cloud infrastructure consisting of
hardware and software. The user-consumer does not manage or control the underlying cloud
provider's infrastructure, including network, servers, operating system, storage, or individual
applications software. These applications are accessible from various user devices through a
web browser, web-based email, or a program interface.
An advantage of the SaaS model is that the user-consumer does not need to invest his time and
money in developing or acquiring a separate application system or program because he could
use the provider's application system or program. A disadvantage of the SaaS is that the user-
consumer does not have a full flexibility and control over the use of the provider's application
system or program. Lack of a customized application system is another disadvantage.
Rationale
 Platform as a service (PaaS)
Incorrect. Platform as a service (PaaS) is the capability provided to the user-consumer to deploy
onto the cloud infrastructure either a consumer-developed or a consumer-acquired application
created using programming languages or libraries, and tools supported by the cloud provider.
The user-consumer does not manage or control the underlying cloud provider's infrastructure,
including network, servers, operating systems, or storage, but has control over the deployed
applications and possibly configuration settings for the application-hosting environment.
Rationale
 Infrastructure as a service (IaaS)
Incorrect. Infrastructure as a service (IaaS) is the capability provided to the user-consumer to
provision processing, storage, and networks where the consumer is able to deploy and run
arbitrary software, which can include operating systems and application programs. The user-
consumer does not manage or control the underlying cloud provider's infrastructure, but has
control over operating systems, storage, and deployed applications, and limited control over
certain network components such as host firewalls.
Rationale
 Technology as a service (TaaS)
Incorrect. Technology as a service (TaaS) does not exist today as a separate service model, but it
could be in use in the future. Technology as a service can also be thought of as a part of
infrastructure as a service.
Question 7
1.D.1.a
1D1-LS11
LOS: 1.D.1.a
Lesson Reference: Cost Drivers and Cost Flows
Difficulty: easy
Bloom Code: 2
A manager is charting out the costs for a production process and finds that if she calculates costs at
various expected production levels, the change in costs is constant. Above a very high level of sales,
the rate is no longer constant. The latter portion is:
outside the cost-benefit constraint.
no longer a variable cost.

Your Answer
no longer a fixed cost.

Correct
outside the relevant range.
Rationale
 outside the cost-benefit constraint.
This answer is incorrect. When, above a very high level of sales, the change in costs is no longer
constant, the latter portion is not outside the cost-benefit constraint.
Rationale
 no longer a variable cost.
constant, the latter portion can still be a variable cost.
Rationale
 no longer a fixed cost.
constant, the latter portion can still be a fixed cost.
Rationale
 outside the relevant range.
The relevant range is the expected range for a cost driver such as a quantity or amount.
Amounts outside the relevant range do not change in a linear fashion.
Question 8
1.F.4.p
ana.too.tb.023_0220
LOS: 1.F.4.p
Difficulty: medium
Bloom Code: 3
You have developed a linear regression equation, y = −58.2 + 1.5467x, that models the expected grade
in Calculus II (y), based on the earned grade in Calculus I (x). According to your model, if a student
wants to earn a grade of 90 in Calculus II, what is the minimum grade that student should earn in
Calculus I?
98
Your Answer
94
93
Correct
96
Rationale
 98
This answer is incorrect. The minimum grade a student should earn in Calculus I is not 98. You
would calculate the minimum grade a student should earn in Calculus I by solving for x in the
given linear equation.
Rationale
 94
This answer is incorrect. The minimum grade a student should earn in Calculus I is not 94. This is
the answer you would get if you solved for y in the given linear equation instead of solving for x.
Rationale
 93
This answer is incorrect. The minimum grade a student should earn in Calculus I is not 93. You
would calculate the minimum grade a student should earn in Calculus I by solving for x in the
given linear equation.
Rationale
 96
You would calculate the minimum grade a student should earn in Calculus I by solving for x in
the given linear equation. x = (y + 58.2) ÷ 1.5467. If y = 90, then x = (90 + 58.2) ÷ 1.5467, or 95.81 or
96 when rounded to the nearest whole number.
Question 9
1.E.2.f
sys.app.c.tb.004_2104
LOS: 1.E.2.f
Lesson Reference: Information System Application Controls
Difficulty: medium
Bloom Code: 3
Which of the following best describes why input controls are needed in an accounting information
system?
Correct
Input controls are needed to help prevent incorrect data from being entered into an accounting
information system.
Your Answer
Input controls are needed to monitor how an accounting information system processes input data
into information output.
Input controls are needed to monitor the various stages of the accounting information system
development life cycle.
Input controls are needed to monitor whether an accounting information system provides useful
output for decision making.
Rationale
 Input controls are needed to help prevent incorrect data from being entered into an
accounting information system.
This answer is correct. Input controls are a type of application control that helps prevent
incorrect data from being input into an accounting information system or detect incorrect data
as soon as possible. They are needed because incorrect data entered into the accounting
information system will result in flawed information coming out of the accounting information
system.
Rationale
 Input controls are needed to monitor how an accounting information system processes
input data into information output.
This answer is incorrect. Processing controls are needed to monitor how an accounting
information system turns input data into information output.
Rationale
 Input controls are needed to monitor the various stages of the accounting information
system development life cycle.
This answer is incorrect. System development controls are needed to monitor the various
stages of the accounting information system development life cycle.
Rationale
 Input controls are needed to monitor whether an accounting information system
provides useful output for decision making.
This answer is incorrect. Output controls are needed to determine if an accounting information
system provides useful output for decision making.
Question 10
1.F.1.h
epman.sys.tb.010_0120
LOS: 1.F.1.h
Difficulty: hard
Bloom Code: 6
All of the following processes are part of Enterprise Performance Management (EPM) except:
Budgeting, planning, forecasting, and modeling
Reporting results to internal and external stakeholders

Correct
Auditing policies for compliance
Analyzing performance vs. plan, prior years, across divisions, or products
Rationale
 Budgeting, planning, forecasting, and modeling
This answer is incorrect. Budgeting, planning, forecasting, and modeling are part of EPM.
Rationale
 Reporting results to internal and external stakeholders
This answer is incorrect. Reporting results to internal and external stakeholders is part of EPM.
Rationale
 Auditing policies for compliance
EPM systems are not auditing or compliance gap identification systems.
Rationale
 Analyzing performance vs. plan, prior years, across divisions, or products
This answer is incorrect. Analyzing performance vs. plan, prior years, across divisions, or
products is part of EPM.
Question 11
1.F.4.o
ana.too.tb.019_0220
LOS: 1.F.4.o
Difficulty: medium
Bloom Code: 4
A marketing analyst at LRK Corporation is studying the relationship between the forecasted auto
industry sales and the forecasted sales of four major auto companies using a multiple regression
model.
Y = a + b1x1 + b2x2 + b3x3 + b4x4
Where Y is industry sales in billions, a is the intercept, b1 is the slope for x1 (Company 1 sales), b2 is
the slope for x2 (Company 2 sales), b3 is the slope for x3 (Company 3 sales), and b4 is the slope for x4
Company 4 sales. Here, Y is the dependent variable and x1, x2, x3, and x4 are independent variables.
Industry Company 1 Company 2 Company 3 Company 4

Sales, 30 billion 40 billion 25 billion 35 billion
Market share 23% 31% 19% 27%
Coefficient of Determination 0.92 0.84 0.89 0.86
Based on the data shown in the table, variation in which of the following companies is best explained
by the industry sales?
Correct
Company 1
Your Answer
Company 2
Company 3
Company 4
Rationale
 Company 1
The coefficient of determination (R²) for Company 1 is 0.92, which is the highest coefficient of
determination. High R² shows higher correlation between industry and company sales. This
means, 92% of sales variation for Company 1 is explained by the industry sales.
The coefficient of determination (R²) measures the proportion of variation in the dependent
variable (Y) that can be explained by the independent variable (X). The value of R² falls between
0 and 1. For example, if R² is 0.95, it means the independent variable (x) explains 95% of the
variation in the dependent variable (y), which is a good measure.
Rationale
 Company 2
This answer is incorrect. The coefficient of determination (R²) measures the proportion of
variation in the dependent variable (Y) that can be explained by the independent variable (X).
The higher the R² the better. The coefficient of determination (R²) for Company 2 is 0.84, which
is not the highest coefficient of determination among these companies.
Rationale
 Company 3
Rationale
 Company 4
Question 12
1.E.1.n
1E1-LS18
LOS: 1.E.1.n
Lesson Reference: External Audit Requirements
Difficulty: easy
Bloom Code: 1
Detection risk is the risk:
Correct
that an internal audit will not uncover incidents where controls have not been followed.
that the business will naturally experience, regardless of internal controls.

Your Answer
that internal controls will not be followed.
that measures the effectiveness of a firm's internal controls.
Rationale
 that an internal audit will not uncover incidents where controls have not been
followed.
Detection risk can also be planned detection risk and is a measure of the risk that audit
evidence will fail to detect misstatements exceeding an acceptable audit risk.
Rationale
 that the business will naturally experience, regardless of internal controls.
This answer is incorrect. Detection risk is not the risk that the business will naturally experience,
regardless of internal controls.
Rationale
 that internal controls will not be followed.
This answer is incorrect. Detection risk is not the risk that internal controls will not be followed.
Rationale
 that measures the effectiveness of a firm's internal controls.
This answer is incorrect. Detection risk is not the risk that measures the effectiveness of a firm's
internal controls.
Question 13
1.F.1.d
tb.er.plan.sys.001_1905
LOS: 1.F.1.d
Lesson Reference: Enterprise Resource Planning Systems
Difficulty: medium
Bloom Code: 3
Which of the following are the major advantages of implementing enterprise resource planning (ERP)
systems?
I. Elimination of legacy systems

II. Improvements in workflow processes
III. Increased access to data
IV. Standardization of IT infrastructure
II only
Your Answer
III only
II and III
Correct
I, II, III, and IV
Rationale
 II only
This is incorrect. This is a partial answer.
Rationale
 III only
Rationale
 II and III
Rationale
All four choices are correct. Major advantages of enterprise resource planning (ERP) systems
include: elimination of costly, inflexible legacy systems (i.e., old and outdated systems),
improvements in workflow processes, increased access to data for operational decision making,
and standardization of information technology (IT) infrastructure (hardware, software,
operating systems, and databases).
Question 14
1.E.1.o
icrisk.tb.007_0120
LOS: 1.E.1.o
Lesson Reference: Internal Control Risk
Difficulty: medium
Bloom Code: 3
If an organization’s management team seeks to improve safeguards over physical or digital assets,
which category of controls would they most likely implement?
The controls would most likely be categorized as network controls because assets form part of the
business supply chain.
Correct
The controls would most likely be categorized as preventive controls because the controls would
reduce the risk of asset theft.
Your Answer
The controls would most likely be categorized as technology controls because the management
team is increasingly interested in data security and intellectual property.
The controls would most likely be categorized as detective controls because organizations prefer
detective controls because they are the most useful type of control because they help
organizations detect unethical activity.
Rationale
 The controls would most likely be categorized as network controls because assets form
part of the business supply chain.
This answer is incorrect. While assets certainly do form components of a business supply chain,
the new control procedures would not fall into the network control category.
Rationale
 The controls would most likely be categorized as preventive controls because the
controls would reduce the risk of asset theft.
Preventative controls would be the most accurate category of controls since these controls
would reduce the risk of possible unethical activity.
Rationale
 The controls would most likely be categorized as technology controls because the
management team is increasingly interested in data security and intellectual property.
This answer is incorrect. While intangible assets are important to business operations, controls
over these assets are not classified as technology controls.
Rationale
 The controls would most likely be categorized as detective controls because
organizations prefer detective controls because they are the most useful type of control
because they help organizations detect unethical activity.
This answer is incorrect. An organization’s control environment is composed of many types of
controls, not just detective controls. If the management team is seeking to improve safeguards
over physical or digital assets, the controls would not likely be categorized as detective
controls.
Question 15
1.F.2.f
sec.brch.tb.040_0120
LOS: 1.F.2.f
Lesson Reference: Controls Against Security Breaches
Difficulty: medium
Bloom Code: 4
What characteristic makes a firewall "advanced"?
Ability to block or forward a packet based on its addresses and destination port
Dynamically responding to emerging threats

Correct
Ability to examine the contents of a packet, as opposed to just its addresses and destination port
Dynamically altering rules based on detected malicious traffic
Rationale
 Ability to block or forward a packet based on its addresses and destination port
This answer is incorrect. Advanced firewalls base blocking and forwarding decisions on more
than addresses and ports.
Rationale
 Dynamically responding to emerging threats
This answer is incorrect. The ability to inspect more than just addresses and ports makes a
firewall advanced. Responding to suspicious traffic is a function of an intrusion prevention
system.
Rationale
 Ability to examine the contents of a packet, as opposed to just its addresses and
destination port
Basic firewalls simply manage packets based on source and destination addresses, and
destination port.
Rationale
 Dynamically altering rules based on detected malicious traffic
This answer is incorrect. The ability to inspect more than just addresses and ports makes a
firewall advanced. Responding to suspicious traffic is a function of an intrusion prevention
system.
Question 16
1.D.3.m
tb.ab.cost.028_1809
LOS: 1.D.3.m
Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing
Difficulty: medium
Bloom Code: 4
TopCo manufactures two types of gadgets: Regular and Deluxe. The firm's overhead consists of the
following: $375,000 in setup costs with number of setups as the driver; $1,500,000 in machining costs
with machine hours as the driver; and $750,000 in packing costs with packing orders as the driver.
Data for the current period follow:
Regular Deluxe
Number of setups 200 400
Machine hours 2,500 5,000
Packing orders 100 275
Units produced 1,500 2,250
What is the total overhead allocated to Regular gadgets under activity-based costing?
$875,000
Your Answer
$1,050,000
Correct
$825,000
$1,750,000
Rationale
 $875,000
Incorrect. This is the amount of overhead that would have been applied to the Regular under a
traditional allocation based on machine hours. Make sure to use three different cost pools, and
the correct allocation base for each pool.
Rationale
 $1,050,000
Incorrect. This is the amount of overhead that would have been applied to the Regular under a
traditional allocation based on units produced. Make sure to use three different cost pools, and
the correct allocation base for each pool.
Rationale
 $825,000
Correct. Under activity-based costing, calculate an application rate for setup costs, an
application rate for machining, and an application rate for packing.
Application rate for setup costs = $375,000 ÷ (200 + 400) = $625 per setup
Application rate for machining = $1,500,000 ÷ (2,500 + 5,000) = $200 per machine hour
Application rate for packing = $750,000 ÷ (100 + 275) = $2,000 per packing order
Overhead allocated to Regular gadgets = (200 setups × $625 per setup) + (2,500 machine hours ×
$200 per machine hour) + (100 packing orders × $2,000 per packing order)
Overhead allocated to Regular gadgets = $125,000 + $500,000 + $200,000 = $825,000
Rationale
 $1,750,000
Incorrect. This is the amount of overhead allocated to the Deluxe under a traditional allocation
based on machine hours. Make sure to use three different cost pools, the correct allocation base
for each pool, and allocate costs using activity for the Regular.
Question 17
1.D.4.d
1D4-LS07
LOS: 1.D.4.d
Lesson Reference: Inventory Management and Production Systems
Difficulty: easy
Bloom Code: 2
The benefits of materials requirements planning (MRP) systems include all of the following except:
reduced retooling and machine setup time.
Correct
less inventory on hand compared to a just-in-time (JIT) system.
reduced coordination between functional areas.
increased bulk purchasing and price breaks.
Rationale
 reduced retooling and machine setup time.
This answer is incorrect. The benefits of MRP systems include reduced retooling and machine
setup time.
Rationale
 less inventory on hand compared to a just-in-time (JIT) system.
In materials requirements planning systems, a master production schedule indicates the
quantities and timing of each part to be produced. Once the scheduled production run begins,
departments push output through a system. In contrast to a JIT system, MRP requires more
inventory on hand.
Rationale
 reduced coordination between functional areas.
This answer is incorrect. The benefits of MRP systems include reduced coordination between
functional areas.
Rationale
 increased bulk purchasing and price breaks.
This answer is incorrect. The benefits of MRP systems include increased bulk purchasing and
price breaks.
Question 18
1.F.2.e
LOS: 1.F.2.e
Lesson Reference: Life Cycle of Data
Difficulty: hard
Bloom Code: 6
A strong data retention policy can help organizations maintain compliance with data retention
regulatory requirements. Once a policy is approved and in place, what else is necessary to provide
the greatest assurance that the policy will be effective?
Your Answer
Technical controls to enforce the policy
Administrative controls to enforce the policy
Periodic review of the policy's effect

Correct
Personnel education
Rationale
 Technical controls to enforce the policy
This answer is incorrect. Although technical controls can help implement policy, educating
personnel on policy compliance expectations is necessary to increase any policy's effectiveness.
Rationale
 Administrative controls to enforce the policy
This answer is incorrect. Although administrative controls can help implement policy, educating
personnel on policy compliance expectations is necessary to increase any policy's effectiveness.
Rationale
 Periodic review of the policy's effect
This answer is incorrect. Reviewing artifacts related to a policy's effects can help evaluate its
effectiveness, but educating personnel on policy compliance expectations is necessary to
increase any policy's effectiveness.
Rationale
 Personnel education
A policy only defines and explains requirements. It is always necessary to inform affected
personnel of requirements before expecting them to comply.
Question 19
1.F.4.o
ana.too.tb.016_0220
LOS: 1.F.4.o
Difficulty: easy
Bloom Code: 3
In the regression equation y = a + bx + c, what does x represent?
Dependent variable
Residual
Correct
Independent variable
Coefficient of determination
Rationale
 Dependent variable
This answer is incorrect. The dependent variable, y in this equation, is the value that you are
trying to predict.
Rationale
 Residual
This answer is incorrect. In this equation, y is the dependent variable. The residual, c, is the
difference between the observed and estimated outcomes.
Rationale
 Independent variable
In this equation, x is the independent variable that is used to predict the dependent variable, y.
Rationale
 Coefficient of determination
This answer is incorrect. The coefficient of determination, R squared, is a "goodness of fit"
metric.
Question 20
1.B.5.i
tb.pc.bud.041_1805
LOS: 1.B.5.i
Lesson Reference: Budgeting for Production Costs
Difficulty: medium
Bloom Code: 3
Boyd Industries had a beginning balance of $59,600 in its Raw Materials Inventory account. At the end
of the period, the ending balance in this account was $61,300. During the period, Boyd purchased
$232,700 of materials. What was the cost of raw materials used during the period?
$353,600
Your Answer
$111,800
$232,700
Correct
$231,000
Rationale
 $353,600
If desired ending inventory is added, materials used in production will be $353,600 ($232,700 +
$61,300 + $59,600). This is not the correct calculation; therefore, this is an incorrect answer.
Rationale
 $111,800
If budgeted beginning inventory is subtracted, materials used in production will be $111,800
($232,700 − $61,300 − $59,600). This is not the correct calculation; therefore, this is an incorrect
answer.
Rationale
 $232,700
If desired ending inventory and budgeted beginning inventory are omitted, materials used in
production will be $232,700. This is not the correct calculation; therefore, this is an incorrect
answer.
Rationale
 $231,000
The total budgeted direct materials to be purchased is calculated as “Material Needed for
Budgeted Production + Desired Ending DM Inventory − Budgeted Beginning DM Inventory.”
Rearranging these figures results in materials used during the period being calculated as
“Materials Purchased − Desired Ending DM Inventory + Budgeted Beginning DM Inventory.” In
this example, Boyd used $231,000 for production this period ($232,700 − $61,300 + $59,600).
Therefore, this is the correct answer.
Question 21
1.F.1.b
acc.inf.sys.tb.013_0120
LOS: 1.F.1.b
Lesson Reference: Accounting Information Systems
Difficulty: medium
Bloom Code: 4
Why is an accounting information system (AIS) insufficient to enforce compliance with production
cost budgetary limits?
An AIS can only serve as a detective control and cannot stop expenditures before they occur.
Your Answer
AIS transactions can provide complete auditing capabilities, but do not provide controls to limit
transactions.
Compliance with any limits requires controls that are beyond the scope of an AIS.
Correct
An AIS imposes controls based on the organization's policies and is subject to the organization's
tolerance to control exceptions.
Rationale
 An AIS can only serve as a detective control and cannot stop expenditures before they
occur.
This answer is incorrect. An AIS can, and does, process expenditures according to internal rules
based on organizational policy. A properly configured AIS can provide detective and
preventative controls.
Rationale
 AIS transactions can provide complete auditing capabilities, but do not provide
controls to limit transactions.
This answer is incorrect. While an AIS does maintain transaction records to provide rich audit
trails, it also can, and most always does, implement rules that govern expenditures.
Rationale
 Compliance with any limits requires controls that are beyond the scope of an AIS.
This answer is incorrect. An AIS provides the ability to define controls based on policies to fulfil
various types of compliance regulations. Transactions are only authorized that conform to AIS
rules.
Rationale
 An AIS imposes controls based on the organization's policies and is subject to the
organization's tolerance to control exceptions.
An AIS can enforce rules, but can always be overridden to the degree that management allows
it. Only an AIS, with management's backing, can enforce spending limits.
Question 22
1.D.5.j
1D5-LS02
LOS: 1.D.5.j
Lesson Reference: Managing Quality
Difficulty: easy
Bloom Code: 2
Conformance quality measures which of the following?
How well the product meets the customers' needs.
Your Answer
How well the design features meet the customers' needs.

Correct
How close the manufactured product is to the design specifications.
How closely the product has met the guidelines of regulatory bodies.
Rationale
 How well the product meets the customers' needs.
This answer is incorrect. Conformance quality does not measure how well the product meets
the customers' needs.
Rationale
 How well the design features meet the customers' needs.
This answer is incorrect. Conformance quality does not measure how well the design features
meet the customers' needs.
Rationale
 How close the manufactured product is to the design specifications.
How close the manufactured product is to the design specifications defines conformance
quality.
Rationale
 How closely the product has met the guidelines of regulatory bodies.
This answer is incorrect. Conformance quality does not measure how well the product has met
the guidelines of regulatory bodies.
Question 23
1.E.1.w
ext.aud.req.tb.010_0120
LOS: 1.E.1.w
Difficulty: easy
Bloom Code: 1
During an annual integrated external audit, which of the following best summarizes the scope of the
work that the external audit team should perform?
The external audit team should examine 100% of all transactions, journal entries, and associated
documentation to ensure a thorough audit.
The external audit team should perform basic samples during this audit because the internal audit
team already reviews 100% of the accounting entries and information.
Correct
The external audit function should conduct risk assessment procedures, and then conduct
appropriate levels of analytical procedures and substantive tests of both financial and nonfinancial
information.
The external audit function should conduct risk assessment procedures, and then conduct
appropriate levels of analytical procedures on the internal controls to comply with the
requirements of an external audit.
Rationale
 The external audit team should examine 100% of all transactions, journal entries, and
associated documentation to ensure a thorough audit.
This answer is incorrect. Continuous auditing and 100% examination of data are where the
audit profession is going, but this is not currently considered a requirement.
Rationale
 The external audit team should perform basic samples during this audit because the
internal audit team already reviews 100% of the accounting entries and information.
This answer is incorrect. The internal audit team may review accounting entries and
information, but the external audit function is tasked with conducting the annual audit, so they
need to do more than just examine basic samples.
Rationale
 The external audit function should conduct risk assessment procedures, and then
conduct appropriate levels of analytical procedures and substantive tests of both financial
and nonfinancial information.
This is an accurate summary of how the external audit team should conduct the external
integrated audit.
Rationale
 The external audit function should conduct risk assessment procedures, and then
conduct appropriate levels of analytical procedures on the internal controls to comply
with the requirements of an external audit.
This answer is incorrect. An annual audit should involve tests and analyses of control
information, financial data, and nonfinancial information.
Question 24
1.E.1.c
1E1-LS12
LOS: 1.E.1.c
Lesson Reference: Internal Control Structure and Management Philosophy
Difficulty: medium
Bloom Code: 3
Which of the following statements is true?
Control procedures can completely make up for careless employees.
Your Answer
Control procedures are ineffective if employees are not all highly educated and trained.
Correct
Hiring, promoting, and training competent personnel are integral to an efficient control
environment.
Higher-paid employees tend to follow control procedures more carefully and consistently.
Rationale
 Control procedures can completely make up for careless employees.
This answer is incorrect. Control procedures cannot completely make up for careless
employees.
Rationale
 Control procedures are ineffective if employees are not all highly educated and
trained.
This answer is incorrect. Control procedures are still effective even if employees are not all
highly educated and trained.
Rationale
 Hiring, promoting, and training competent personnel are integral to an efficient
control environment.
Hiring, promoting, and training competent personnel are integral to an efficient control
environment. However, control procedures will not be ineffective without this, and adherence
to control procedures does not necessarily follow with higher levels of education or pay.
Rationale
 Higher-paid employees tend to follow control procedures more carefully and
consistently.
This answer is incorrect. Higher-paid employees will not necessarily follow control procedures
more carefully and consistently.
Question 25
1.F.4.cc
tb.data.vis.004_1905
LOS: 1.F.4.cc
Lesson Reference: Data Visualization
Difficulty: hard
Bloom Code: 6
Which of the following data visualization tools is used in evaluating capital investment decisions?
Dot plot
Scatter diagram
Correct
Decision tree
Stem-and-leaf diagram
Rationale
 Dot plot
Incorrect. Dot plot is not used in evaluating capital investment decisions. A dot plot is similar to
a histogram in that a distribution of the data value is shown graphically. Dot plots are useful for
small-size datasets where grouping of values into classes of a frequency distribution is not
required. Dot plots are also useful for comparing two distinct datasets or two subgroups of a
dataset.
Rationale
 Scatter diagram
Incorrect. A scatter diagram or scatter plot is used to determine whether a relationship exists
between an independent variable (vertical, y-axis) and a dependent variable (horizontal, x-axis)
as shown in a graph. It detects correlation or trends between two measured factors or variables
of interest such as (1) product price (y-axis) and sales quantity (x-axis) and (2) sales quantity (y-
axis) and net profit or gross profit (x-axis). Note that a correlation, whether positive or negative,
does not guarantee a true relationship as it only suggests a potential relationship.
Rationale
 Decision tree
Correct. Decision trees are used in evaluating capital investment decisions. A decision tree is a
graphical representation of possible alternative decisions, events, or states of nature resulting
from each decision with its associated probabilities, and the outcomes of the events or states of
nature. The decision problem displays the sequential nature of the decision-making situation.
The decision tree has nodes, branches, and circles to represent junction boxes, connectors
between the nodes, and states-of-nature nodes, respectively.
Rationale
 Stem-and-leaf diagram
Incorrect. The stem-and-leaf diagram (SL diagram) is not used in evaluating capital investment
decisions. The SL diagram is a major technique used in exploratory data analysis as it shows
measurements in a rank-ordered bar chart format. This diagram is similar to a histogram but is
relatively easier to develop. The diagram shows individual values whereas the histogram shows
groups of defined classes. The diagram is appropriate to use only when the first-digit or the first
two-digits provide a good basis for separating data into groups. Each group then is similar to a
class or category in a frequency distribution. For example, the first-digit represents the stem
and each of the measurements associated with the first-digit values becomes a leaf in the
display.
Question 26
1.F.1.b
tb.acc.inf.sys.003_1905
LOS: 1.F.1.b
Difficulty: medium
Bloom Code: 3
Identifying discrepancies between product shipping records and customer sales invoices by line item
can affect which of the following accounting information system (AIS) cycles?
Correct
Revenue to cash cycle

Your Answer
Human resources and payroll cycle
Production cycle
Financing cycle
Rationale
 Revenue to cash cycle
The scope of revenue-to-cash cycle includes sales, accounts receivable, and cash receipts. If
what was shipped is not billed or invoiced, the shipper will lose revenue and profits.
Rationale
 Human resources and payroll cycle
This is incorrect. Human resources and payroll cycle have nothing to do with product shipping
and invoicing. Its scope of work includes hiring, training, and paying employees and performing
payroll and personnel-related administrative activities.
Rationale
 Production cycle
This is incorrect. Production cycle has nothing to do with product shipping and invoicing
because shipping is done after the production of goods is completed. Production control and
inventory control activities are a part of the production cycle.
Rationale
 Financing cycle
This is incorrect. Financing cycle has nothing to do with product shipping activities. Cash
management, debt management, and equity management activities are a part of the financing
cycle.
Question 27
1.F.2.b
data.proc.tb.016_0120
LOS: 1.F.2.b
Lesson Reference: Data Policies and Procedures
Difficulty: hard
Bloom Code: 6
Big Idea Distributing (BID) provides shipping and warehousing for over 900 customers in 43 states.
BID's executives committed to implementing the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) framework two years ago to better manage their operations, financial
reporting, and compliance goals. After completing the implementation and full auditing cycle, BID
executives are disappointed with the results and why some of BID's objectives are not being met, in
spite of the enormous investment in COSO. A COSO review revealed that the COSO implementation
was carried out well and results are consistent with COSO objectives. What is the most likely reason
for the executives' disappointment?
Excessive control cost
Your Answer
Inadequate risk assessment

Correct
Unrealistic expectations
Personnel collusion
Rationale
 Excessive control cost
This answer is incorrect. Although the cost of implementing the COSO framework may be
substantial, the costs are not unknowns, and must be approved by upper management.
Rationale
 Inadequate risk assessment
This answer is incorrect. If risk assessments are carried out poorly, internal control will be
ineffective. However, an ineffective risk assessment is an uncommon reason for inadequate
control performance and shouldn't be the first place to look for gaps.
Rationale
 Unrealistic expectations
According to COSO key concepts, internal control can only be expected to provide reasonable
assurance, not absolute assurance.
Rationale
 Personnel collusion
This answer is incorrect. A lack of a separation of duties policy can allow collusion to occur, but
personnel collusion is an uncommon reason for inadequate control performance and shouldn't
be the first place to look for gaps.
Question 28
1.D.1.a
tb.concept.cd.023_1809
LOS: 1.D.1.a
Difficulty: medium
Bloom Code: 3
Cole is computing variable cost per unit using the high-low method. The highest level of activity is 725
machine hours at a total cost of $1,900. The lowest level of activity is 225 machine hours at a total
cost of $1,000. What is the variable cost per unit?
$3.80
Correct
$1.80
Your Answer
$2.62
$4.44
Rationale
 $3.80
Incorrect. The variable cost per unit is not calculated as the cost at the highest level of activity
divided by the change in activity. Calculate both the change in total cost and the change in
activity.
Rationale
 $1.80
Correct. The variable cost per unit equals the change in cost divided by the change in activity;
therefore, the variable cost per unit equals $1.80 (($1,900 − $1,000) ÷ (725 − 225)).
Rationale
 $2.62
Incorrect. The variable cost per unit is not calculated as the cost at the highest level of activity
divided by the highest level of activity. Calculate the change in total cost and the change in
activity.
Rationale
 $4.44
Incorrect. The variable cost per unit is not calculated as the cost at the lowest level of activity
divided by the lowest level of activity. Calculate the change in total cost and the change in
activity.
Question 29
1.F.4.h
dat.min.tb.005_0220
LOS: 1.F.4.h
Lesson Reference: Data Mining
Difficulty: hard
Bloom Code: 6
Reliable Imaging (RI) is a medical services firm that offers different types of medical imaging tests
using a fleet of mobile labs. RI sends its mobile labs to rural and other areas that are not serviced by
traditional medical facilities. To pursue expanded federal funding, RI has retained Data Masters, Inc.
(DMI) to analyze its operational data. RI wants to provide data that shows its services are reducing
overall patient care cost and improving outcomes. What is the most difficult challenge DMI analysts
are likely to encounter when analyzing RI's data?
Distributed source data
Your Answer
Noise issues
Correct
Privacy issues
Stale data
Rationale
 Distributed source data
This answer is incorrect. Many data mining input sources are distributed. As long as the data is
available, this is a minor challenge.
Rationale
 Noise issues
This answer is incorrect. Since RI owns the primary data sources, it is likely that extracting clean
data will be possible in many cases.
Rationale
 Privacy issues
Private Health Information (PHI) is protected by numerous regulations. DMI analysts will have to
acquire permission to access source data, demonstrate compliance in all aspects of handling
PHI, and protect individual privacy when presenting results. PHI protection requirements make
analysis on health data more challenging than many other types of data.
Rationale
 Stale data
This answer is incorrect. Since RI owns the primary data sources and that data comes from
ongoing operations, it should be able to provide DMI with current data.
Question 30
1.F.4.cc
data.vis.tb.007_0220
LOS: 1.F.4.cc
Difficulty: medium
Bloom Code: 5
What data visualization technique would be most effective for presenting returns of individual
products presented at various time intervals?
Pie chart
Scatter plot
Correct
Line chart
Histogram
Rationale
 Pie chart
This answer is incorrect. A pie chart is useful in depicting how components relate to one another
and to the sum of all components.
Rationale
 Scatter plot
This answer is incorrect. A scatter plot displays nonlinear data of two variables using a Cartesian
coordinates. Scatter plots are useful in depicting correlation among data.
Rationale
 Line chart
A line chart displays data as points connected by line segments, where points are ordered pairs.
Line charts are helpful in depicting data in two variables using Cartesian coordinates.
Rationale
 Histogram
This answer is incorrect. A histogram is best used to depict the distribution of a single numerical
value.
Question 31
1.F.4.aa
data.vis.tb.005_0220
LOS: 1.F.4.aa
Difficulty: hard
Bloom Code: 6
What is the greatest limitation of data analytics visualization, which can undermine the value of
analysis work?
Correct
Visualizations can overly simplify analysis results and lead to reliance on the visual, as opposed to
the true meaning of the output.
Your Answer
Visualizations run the risk of drawing attention to insignificant findings and can result in
overshadowing more meaningful results.
Visualizations can make analysis results appear overly complex.
Visualizations tend to devalue analysis work, since the results appear as simple graphics.
Rationale
 Visualizations can overly simplify analysis results and lead to reliance on the visual, as
opposed to the true meaning of the output.
Visualizations can make complex data simple but hide important details in the process. One
result can be a reliance on the visual depiction, as the expense of potentially important details
in the underlying analysis results.
Rationale
 Visualizations run the risk of drawing attention to insignificant findings and can result
in overshadowing more meaningful results.
This answer is incorrect. A well-designed visualization should draw attention to the most
important findings, not highlight insignificant ones.
Rationale
 Visualizations can make analysis results appear overly complex.
This answer is incorrect. A well-designed visualization should simplify analysis results and
increase the consumer's understanding of results presented.
Rationale
 Visualizations tend to devalue analysis work, since the results appear as simple
graphics.
This answer is incorrect. While oversimplification is a risk when selecting data analytics
visualization techniques, visualization in general highlights the value of analytics.
Question 32
1.F.2.a
LOS: 1.F.2.a
Difficulty: medium
Bloom Code: 4
Which term is best defined as "the exercise of decision-making and authority for data-related
matters"?
Data management
Correct
Data governance
Data compliance
Data alignment management
Rationale
 Data management
This answer is incorrect. Data management is a superset of data governance, and entails all
aspects of managing an organization's data.
Rationale
 Data governance
Data governance is the exercise of decision-making and authority for data-related matters, and
empowers an organization to protect high data quality standards throughout the data's life
cycle.
Rationale
 Data compliance
This answer is incorrect. Data compliance informally refers to the actions taken to ensure that
data practices comply with regulatory requirements, which is only a subset of data governance.
Rationale
 Data alignment management
This answer is incorrect. This term does not specifically refer to a defined set of techniques, but
informally refers to ensuring that data practices align with organizational goals, which is not a
core definition of data governance.
Question 33
1.F.2.b
LOS: 1.F.2.b
Difficulty: medium
Bloom Code: 4
The Control Objectives for Information and Related Technologies (COBIT) framework makes a clear
distinction between which two enterprise disciplines?
Correct
Governance and management
Operations and compliance

Your Answer
Management and operations
Compliance and governance
Rationale
 Governance and management
According to COBIT, governance and management encompass different activities and should be
addressed separately.
Rationale
 Operations and compliance
This answer is incorrect. COBIT makes a clear distinction between governance and
management.
Rationale
 Management and operations
management.
Rationale
 Compliance and governance
management.
Question 34
1.F.1.h
LOS: 1.F.1.h
Difficulty: hard
Bloom Code: 4
What is the primary objective of Enterprise Performance Management (EPM)?
Integrate management of core business processes, often in real time and mediated by software
and technology
Your Answer
Manage interaction with current and potential customers, using data analysis about customers'
history to improve business relationships with customers
Prepare, support, and help individuals, teams, and organizations in making organizational change
Correct
Ensure strategic goals and objectives are clearly communicated and understood by managers, and
are reflected in their budgets and plans
Rationale
 Integrate management of core business processes, often in real time and mediated by
software and technology
This answer is incorrect. An Enterprise Resource Planning (ERP) system focuses on automating
transactional processes, not an EPM.
Rationale
 Manage interaction with current and potential customers, using data analysis about
customers' history to improve business relationships with customers
This answer is incorrect. A customer relationship management (CRM) system uses analytics to
provide input to improve relationships with customers, not an EPM.
Rationale
 Prepare, support, and help individuals, teams, and organizations in making
organizational change
This answer is incorrect. A change management system assists with, and helps to manage,
organizational change, not an EPM.
Rationale
 Ensure strategic goals and objectives are clearly communicated and understood by
managers, and are reflected in their budgets and plans
EPM systems exist to help enterprises link execution to plans.
Question 35
1.F.2.f
LOS: 1.F.2.f
Difficulty: medium
Bloom Code: 4
Why is a vulnerability assessment generally conducted prior to a pen test?
A vulnerability assessment is necessary to determine which tests to carry out during the pen test
process.
Your Answer
Pen testers can only guess at which methods to attack a system without a vulnerability
assessment.
Due diligence and compliance requirements dictate that a pen test without a vulnerability
assessment is insufficient.
Correct
A vulnerability assessment provides a prioritized list of vulnerabilities that provide pen testers
likely attack vectors to exploit.
Rationale
 A vulnerability assessment is necessary to determine which tests to carry out during
the pen test process.
This answer is incorrect. While a vulnerability assessment can help set the scope of pen testing
activities, it is not a required element.
Rationale
 Pen testers can only guess at which methods to attack a system without a vulnerability
assessment.
Rationale
 Due diligence and compliance requirements dictate that a pen test without a
vulnerability assessment is insufficient.
Rationale
 A vulnerability assessment provides a prioritized list of vulnerabilities that provide pen
testers likely attack vectors to exploit.
While not specifically required, a vulnerability assessment can help set the scope of pen testing
activities.
Question 36
1.D.1.i
tb.costflows.vac.028_1809
LOS: 1.D.1.i
Lesson Reference: Variable Costing versus Absorption Costing
Difficulty: easy
Bloom Code: 2
Which cost is responsible for the difference in total unit costs between full and variable costing
income statements?
Direct materials.
Correct
Depreciation.
Direct labor.
Variable manufacturing overhead.
Rationale
 Direct materials.
Incorrect. Direct materials would be included in the unit cost for both full and variable costing
income statements.
Rationale
 Depreciation.
Correct. Fixed costs like depreciation would be included in the unit cost for full costing income
statements; however, they would be excluded from the unit cost for variable costing income
statements.
Rationale
 Direct labor.
Incorrect. Direct labor would be included in the unit cost for both full and variable costing
income statements.
Rationale
 Variable manufacturing overhead.
Incorrect. Variable manufacturing overhead would be included in the unit cost for both full and
variable costing income statements.
Question 37
1.F.1.a
aq.acc.inf.sys.001_1906
LOS: 1.F.1.a
Difficulty: easy
Bloom Code: 1
All of the following are a function of an AIS (Accounting Information System) except:
Collect and store data.
Your Answer
Transform data to aid in decision support.
Provide controls to ensure that the data is available and maintains integrity.
Correct
Recommend several scenarios from which to base a well-informed decision.
Rationale
 Collect and store data.
This answer is incorrect. This is one of the functions of an AIS, where data is collected and
stored about agents, resources, and events obtained from the value chain.
Rationale
 Transform data to aid in decision support.
This answer is incorrect. Transforming data into useful information for further decision making
by management is one of the functions of an AIS.
Rationale
 Provide controls to ensure that the data is available and maintains integrity.
This answer is incorrect. As part of an AIS, availability and integrity (aspects of data governance)
are crucial for a system providing decision support data points.
Rationale
 Recommend several scenarios from which to base a well-informed decision.
The purpose of an AIS is not to provide scenarios but to provide information for management to
make a well-informed decision.
Question 38
1.F.4.t
ana.too.tb.042_0220
LOS: 1.F.4.t
Difficulty: hard
Bloom Code: 4
A research statistician in the marketing department of a consumer products company is conducting

several test models to determine the reliability and validity of such test models. The statistician
computed the standard error of the estimate and coefficient of determination for an unknown
dependent variable given a known independent variable, as shown in the table here.
Item Test 1 Test 2 Test 3 Test 4

Dependent variable, Y Stock ownership Savings Time Debt
Independent variable, X Wealth Wages Distance Income
Standard error of the estimate, SEE 0.89 0.58 0.39 0.42
Coefficient of determination, R² 0.78 0.84 0.98 0.96
Which of the following tests is more reliable, valid, and explains the most variation in the dependent
variable?
Test 1
Test 2
Correct
Test 3
Test 4
Rationale
 Test 1
This answer is incorrect. Test 1 is not valid and reliable because it has the highest SEE value of
0.89 and the lowest R² value of 0.78. Low SEE and high R² are preferred.
Rationale
 Test 2
This answer is incorrect. Test 2 is not valid and reliable because it has a high SEE value of 0.58
and a low R² value of 0.84. Low SEE and high R² are preferred.
Rationale
 Test 3
Test 3 is more reliable and valid than the other three tests. Test 3 not only has the lowest
standard error of the estimate (SEE of 0.39) but also has the highest coefficient of determination
(R² of 0.98). The higher value of R² (0.98) means that the independent variable (distance)
explains 98% of the variation in the dependent variable (time). Hence, the relationship between
the distance and time is reliable and valid. The SEE is related to the R² in that if the SEE is
positive then the R² are also positive. Low SEE and high R² are preferred.
The standard error of the estimate measures the amount of dispersion or scatter of the past
data around the regression trend line. Here, the standard error is deviation and the estimate is
the forecast. The estimate is used to calculate the true variability in the dependent variable. A
low SEE value is preferred.
The coefficient of determination (R²) measures the proportion of variation in the dependent
variable (Y) that can be explained by the independent variable (X). The value of R² falls between
0 and 1. A high R² value is preferred.
Rationale
 Test 4
This answer is incorrect. Test 4 is not valid and reliable because it has a high SEE value of 0.42
and a low R² value of 0.96. Low SEE and high R² are preferred.
Question 39
2.C.3.h
2C3-LS28
LOS: 2.C.3.h
Difficulty: easy
Bloom Code: 2
Which of the following is a primary benefit of involving cross-functional teams in the target costing
process?
More accurate input and maintenance of cost table databases
More realistic market assessment of customer wants and needs

Your Answer
Improved analysis of how to gain and sustain competitive advantage

Correct
Better assurance that the proposed product or service generates the desired profit margin
Rationale
 More accurate input and maintenance of cost table databases
This answer is incorrect. More accurate input and maintenance of cost table databases is not a
primary benefit of involving cross-functional teams in the target costing process.
Rationale
 More realistic market assessment of customer wants and needs
This answer is incorrect. More realistic market assessment of customer wants and needs is not a
primary benefit of involving cross-functional teams in the target costing process.
Rationale
 Improved analysis of how to gain and sustain competitive advantage
This answer is incorrect. Improved analysis of how to gain and sustain competitive advantage is
not a primary benefit of involving cross-functional teams in the target costing process.
Rationale
 Better assurance that the proposed product or service generates the desired profit
margin
The cross-functional participation of research and design, engineering, production, marketing,
and accounting are necessary to ensure that the proposed product or service when sold
generates the desired profit margin. Stated another way, the cross-functional team is given the
responsibility to design and develop the product or service so that it can be made for the target
cost.
Question 40
1.D.2.h
aq.ab.cost.003_0820
LOS: 1.D.2.h
Difficulty: medium
Bloom Code: 3
Mandy Appliances manufactures toaster ovens. Each oven contains 15 parts totaling $35 in direct
materials. Each oven requires 3 hours of machine time and 1.5 hours for inspection. The company has
the following information regarding activities, activity drivers, and cost per driver units:
Activity Activity Driver Cost per Driver Unit

Machining Machine hours $3.75/machine hour
Materials handling Number of parts $1.20/part
Assembly Number of parts $0.85/part
Inspection Inspection hours $11.80/inspection hour
What is the cost of machining per toaster oven?
$18.00
Your Answer
$12.75
Correct
$11.25
$17.70
Rationale
 $18.00
This answer is incorrect. This amount is the cost of materials handling per toaster oven. Make
sure to use the correct cost per driver unit and the correct activity in the driver for machining.
Rationale
 $12.75
This answer is incorrect. This amount is the cost of assembly per toaster oven. Make sure to use
the correct cost per driver unit and the correct activity in the driver for machining.
Rationale
 $11.25
Correct. The cost per driver unit for machining is $3.75 per machine hour. Each oven requires 3
hours of machine time. Therefore, the cost of machining per toaster oven is $11.25 ($3.75 × 3
hours).
Rationale
 $17.70
This answer is incorrect. This amount is the inspection cost per toaster oven. Make sure to use
the correct cost per driver unit and the correct activity in the driver for machining.
Question 41
1.F.4.r
aq.ana.too.004_1905
LOS: 1.F.4.r
Difficulty: medium
Bloom Code: 3
All of the following are types of time series analysis except:
Trend analysis
Your Answer
Seasonal analysis
Cyclical analysis
Correct
Sensitivity analysis
Rationale
 Trend analysis
This answer is incorrect. Trend analysis is a type of time series analysis that provides quantified
patterns in plotted data points over time. Trend analysis often refers to techniques for
extracting an underlying pattern of behavior in a time series which would otherwise be partly or
nearly completely hidden by noise.
Rationale
 Seasonal analysis
This answer is incorrect. Seasonal analysis is a type of time series analysis where a seasonal
pattern exists when a series is influenced by seasonal factors (e.g., the quarter of the year, the
month, or day of the week). Seasonality is always of a fixed and known period. Hence, seasonal
time series are sometimes called periodic time series.
Rationale
 Cyclical analysis
This answer is incorrect. Cyclical analysis is a type of time series analysis where a cyclical
pattern exists when data exhibits rises and falls that are not of fixed period; the length of the
current cycle is unknown beforehand.
Rationale
 Sensitivity analysis
Sensitivity analysis is not a type of time series analysis. Sensitivity analysis is a process of
varying input parameters of a model within the allowed area and observing the resulting
changes in the model solution. The purpose of sensitivity analysis is to indicate the sensitivity of
simulation to uncertainties in the values of input data in the model.
Question 42
1.D.1.a
1D1-LS77
LOS: 1.D.1.a
Difficulty: easy
Bloom Code: 1
Which one of the following refers to a cost that remains the same as the volume of activity decreases
within the relevant range?
* Source: Retired ICMA CMA Exam Questions.
Correct
Variable cost per unit.

Your Answer
Total variable cost.
Unit fixed cost.
Average cost per unit.
Rationale
 Variable cost per unit.
Variable cost per unit remains the same as the volume of activity decreases within the relevant
range.
Rationale
 Total variable cost.
This answer is incorrect. Total variable cost does not refer to a cost that remains the same as
the volume of activity decreases within the relevant range.
Rationale
 Unit fixed cost.
This answer is incorrect. Unit fixed cost does not refer to a cost that remains the same as the
volume of activity decreases within the relevant range.
Rationale
 Average cost per unit.
This answer is incorrect. Average cost per unit does not refer to a cost that remains the same as
the volume of activity decreases within the relevant range.
Question 43
1.D.2.b
tb.job.oc.042_1809
LOS: 1.D.2.b
Lesson Reference: Job Order Costing
Difficulty: medium
Bloom Code: 4
John at Tim's Toys was working on a custom-made miniature car for a customer. The job, BCB101,
was started in March. At the end of March, the job cost sheet for BCB101 showed direct materials of
$6,000, direct labor of 200 hours at $75 per hour, and overhead of 80% of direct labor cost. During
April, direct materials of $1,700 were added, and John's time ticket showed 50 hours on Job BCB101,
25 hours on Job BCB102, and 40 hours on a new job, BCB103. Job BCB101 was completed on April 29.
What is the total cost of Job BCB101 as of April 29?
Correct
$41,450
Your Answer
$33,000
$8,450
$26,450
Rationale
 $41,450
Correct. The total cost of Job BCB101 equals direct materials plus direct labor plus overhead
applied in March and April.
Direct materials = $6,000 + $1,700 = $7,700
Direct labor = (200 + 50) × $75 = $18,750
Overhead applied = $18,750 × 80% = $15,000
Total cost of Job BCB101 = $7,700 + $18,750 + $15,000 = $41,450
Rationale
 $33,000
Incorrect. This amount is the total cost applied to Job TBCB101 in March. The total cost of Job
BCB101 includes all costs applied in March and April.
Rationale
 $8,450
Incorrect. This amount is the total cost applied to Job BCB101 in April. The total cost of Job
BCB101 includes all costs applied in March and April.
Rationale
 $26,450
Incorrect. This amount is the total of direct labor and overhead for Job TBCB101. The total cost
of a job equals direct materials plus direct labor plus overhead applied.
Question 44
1.F.2.b
AQ.data.proc.003_1904
LOS: 1.F.2.b
Difficulty: medium
Bloom Code: 2
Identify which of the following BEST describes ISACA's COBIT key principles?
Correct
Meeting Stakeholder Needs, Covering the Enterprise End-to-End, Applying a Single-Integrated

Framework, Enabling a Holistic Approach, and Separating Governance from Management
Integrity, Confidentiality, Redundancy, Availability, Governing Policies
Identification, Authentication, Authorization, Auditing, and Accounting
Trust Boundaries, Data Flow Paths, Input Points, Privileged Operations, Details about Security
Stance and Approach
Rationale
 Meeting Stakeholder Needs, Covering the Enterprise End-to-End, Applying a Single-
Integrated Framework, Enabling a Holistic Approach, and Separating Governance from
Management
These are the five key principles that ISACA's COBIT are based on.
Rationale
 Integrity, Confidentiality, Redundancy, Availability, Governing Policies
This answer is incorrect. These are terms used in information technology but are not specific
components of COBIT.
Rationale
 Identification, Authentication, Authorization, Auditing, and Accounting
This answer is incorrect. These terms represent security concepts associated with AAA
(Authentication, Authorization, and Accountability) services.
Rationale
 Trust Boundaries, Data Flow Paths, Input Points, Privileged Operations, Details about
Security Stance and Approach
This answer is incorrect. These steps are used in Threat Modeling, aptly named reduction
analysis or decomposition.
Question 45
1.F.4.q
ana.too.tb.029_0220
LOS: 1.F.4.q
Difficulty: medium
Bloom Code: 3
An accounting analyst at SRK Corporation has developed the following data values representing the
correlation coefficient for four test scenarios.
Test Scenarios Correlation Coefficient

1 Sales + 0.99
2 Costs −1.00
3 Profits −0.99
4 Taxes +1.00
Which of the following tests shows a perfect correlation?
Test 1 only
Your Answer
Test 1 and Test 2

Correct
Test 2 and Test 4
Test 3 only
Rationale
 Test 1 only
This answer is incorrect. Test 1 shows the a very strong and positive correlation of +0.99
because it is very close to +1.00; however, it is not a perfect correlation.
Rationale
 Test 1 and Test 2
This answer is incorrect. Test 1 shows a very strong and positive correlation of +0.99 because it
is very close to +1.00; however, it is not a perfect correlation. Test 2 shows a negative correlation
of −1.00 which is a perfect correlation.
Rationale
 Test 2 and Test 4
Test 2 and Test 4 show a perfect correlation because the correlation coefficient (R) can take on
exact values of −1.00 or +1.00. Correlation defines how two variables are related either directly
or indirectly. It shows the interdependence of two variables in such a way when one variable
changes the other variable also changes. It also indicates how one variable estimates the value
of another variable. When two variables are simultaneously increasing or decreasing, it is called
a positive correlation, whereas when one variable is increasing and the other variable is
decreasing, it is called a negative correlation.
Rationale
 Test 3 only
This answer is incorrect. Test 3 shows a very strong and negative correlation of −0.99 because it
is very close to −1.00; however, it is not a perfect correlation.
Question 46
1.B.2.a
1B2-AT05
LOS: 1.B.2.a
Lesson Reference: Strategy Implementation and Budgeting
Difficulty: easy
Bloom Code: 1
The process of creating a formal plan and translating goals into a quantitative format is:
process costing.
Correct
budgeting.
Your Answer
activity-based costing.
job order costing.
Rationale
 process costing.
This answer is incorrect. Process costing is a method for collecting and assigning manufacturing
costs to units produced.
Rationale
 budgeting.
A budget is a plan expressed in dollar terms.
Rationale
 activity-based costing.
This answer is incorrect. Activity-based costing is a method of assigning costs based on the
actual amount of a certain activity.
Rationale
 job order costing.
This answer is incorrect. Job order costing is a method of assigning manufacturing costs to
batches of products.
Question 47
1.B.2.r
1B2-LS40
LOS: 1.B.2.r
Difficulty: medium
Bloom Code: 3
All of the following are advantages of the use of budgets in a management control system except that
budgets:

provide performance criteria.
force management planning.

Correct
limit unauthorized expenditures.

Your Answer
promote communication and coordination within the organization.
Rationale
 provide performance criteria.
This answer is incorrect. Providing performance criteria is an advantage of using budgets in a
management control system.
Rationale
 force management planning.
This answer is incorrect. Forcing management planning is an advantage of using budgets in a
management control system.
Rationale
 limit unauthorized expenditures.
Advantages of management control systems include the forcing of management to plan,
providing performance criteria, and the promotion of communications and coordination within
the organization.
Rationale
 promote communication and coordination within the organization.
This answer is incorrect. Promoting communication and coordination within the organization is
an advantage of using budgets in a management control system.
Question 48
1.F.3.g
AQ.inn.app.003_1904
LOS: 1.F.3.g
Difficulty: easy
Bloom Code: 2
A computer code used in bitcoins or blockchain is referred to as which of the following?
Crowdfunding contract
Correct
Smart contract
Your Answer
Unilateral contract
Bilateral contract
Rationale
 Crowdfunding contract
Incorrect. Crowdfunding contract is also used in bitcoins, but it is generally referred to as a
financing method in which money is raised through soliciting relatively small individual
investments or contributions from a large number of people.
Rationale
 Smart contract
Correct. A computer code used to automate the issuance of virtual tokens or virtual coins is
called smart contract. The smart contract is not a physical contract usually seen on a paper;
instead, it is an electronic contract residing on a computer. A decentralized autonomous
organization, called a virtual organization, issues these virtual tokens or virtual coins to
investors to raise new capital. Simply stated, computer code bits generate invisible bitcoins.
Rationale
 Unilateral contract
Incorrect. A unilateral contract is one where only one of the parties makes a promise. Insurance
contracts are considered unilateral because only the insurance company (insurer) makes a
promise under the contract. The insurer promises to pay a benefit upon the occurrence of a
certain event, such as an auto accident, death, or disability. Applicants do not make any
promise; they can even elect to stop paying premiums if they desire. The insurer will, however,
have the right to cancel the policy if premiums are not paid. Unilateral contract, which is a type
of traditional contract, has nothing to do with bitcoins.
Rationale
 Bilateral contract
Incorrect. When each party is both a promisor (a person making a promise) and a promisee (the
person to whom a promise is made), the contract is called a bilateral contract. An example is
buying or selling a real estate property such as a house. Bilateral contract, which is a type of
traditional contract, has nothing to do with bitcoins.
Question 49
1.E.1.k
icpolicies.tb.014_0120
LOS: 1.E.1.k
Lesson Reference: Internal Control Policies for Safeguarding and Assurance
Difficulty: medium
Bloom Code: 3
The internal audit function is seeking to improve controls over the posting and approval of fraudulent
journal entries in the accounting system. Which of the following options would best mitigate risk in
this area?
Automate and standardize entries so that employees are not involved in this process.
Correct
Institute a two-step posting system, where no single employee can post and review/approve his or
her own entries.
Place one department or person in charge of posting and approving all entries.
Focusing resources in this area is not an effective use of resources because this is not an area for
high amounts of fraudulent activity.
Rationale
 Automate and standardize entries so that employees are not involved in this process.
This answer is incorrect. Simply automating processes without addressing underlying
challenges only results in these problems becoming automatic and systemic.
Rationale
 Institute a two-step posting system, where no single employee can post and
review/approve his or her own entries.
This represents a logical and efficient way to help reduce risk associated with possible unethical
entries being posted.
Rationale
 Place one department or person in charge of posting and approving all entries.
This answer is incorrect. Placing the responsibility of posting and approving entries on one
single individual or department concentrates the risk of unethical behavior while not
addressing the underlying issues.
Rationale
 Focusing resources in this area is not an effective use of resources because this is not
an area for high amounts of fraudulent activity.
This answer is incorrect. Journal entries are indeed an area where unethical activity can occur
and should be a focus of efforts to reduce possible unethical actions by employees.
Question 50
1.F.4.m
LOS: 1.F.4.m
Difficulty: easy
Bloom Code: 2
What term refers to the collection of applications, tools, and best practices that transform data into
actionable information in order to make better decisions and optimize performance?
Correct
Business intelligence
Your Answer
Data science
Robotic process automation
Data mining
Rationale
 Business intelligence
Business intelligence does refer to the software and procedures to help organizations use data
to make better decisions and optimize performance.
Rationale
 Data science
This answer is incorrect. While business intelligence relies on existing data to provide answers
to clear questions and influence decisions, data science incorporates more extensive
disaggregated data in an exploratory approach.
Rationale
 Robotic process automation
This answer is incorrect. Robotic process automation is technology to capture and interpret
input from existing applications to automate repeatable actions.
Rationale
 Data mining
This answer is incorrect. Data mining is the process of discovering patterns in large datasets,
and is a common component of business intelligence.
Question 51
1.F.2.c
life.data.tb.006_0120
LOS: 1.F.2.c
Difficulty: medium
Bloom Code: 3
Which of the following activities would not be part of the data analytics phase of the data life cycle?
Visualization
Correct
Cleansing
Your Answer
Modeling
Interpretation
Rationale
 Visualization
This answer is incorrect. Visualizing data and the interpretation of state and trends are all part
of the data analytics phase of the data life cycle.
Rationale
 Cleansing
Cleansing data should occur prior to the analysis phase in the data life cycle.
Rationale
 Modeling
This answer is incorrect. Building models is an activity that is part of the data analytics phase of
the data life cycle.
Rationale
 Interpretation
This answer is incorrect. Interpretation of state and trends are part of the data analytics phase
of the data life cycle.
Question 52
1.B.5.m
tb.wrap.ob.023_1805
LOS: 1.B.5.m
Difficulty: medium
Bloom Code: 3
Cupid Co. manufactures dog toys. For 20x7 it had the following amounts related to its most popular
toy, Bacon Ben: beginning finished goods inventory, $30,000, cost of goods manufactured $120,000,
and cost of goods sold $100,000. What was the amount of ending finished goods inventory?
Correct
$50,000
$10,000
$30,000
$20,000
Rationale
 $50,000
Cost of goods sold is defined as “Beginning Finished Goods Inventory + Cost of Goods
Manufactured − Ending Finished Goods Inventory.” Rearranging the figures results in ending
finished goods inventory being calculated as “Beginning Finished Goods Inventory + Cost of
Goods Manufactured − Cost of Goods Sold.” Using the amounts for Cupid results in ending
finished goods inventory of $50,000 ($30,000 + $120,000 − $100,000). Therefore, this is the
correct answer.
Rationale
 $10,000
Cost of goods sold is defined as “Beginning Finished Goods Inventory + Cost of Goods
Manufactured − Ending Finished Goods Inventory.” This formula must be rearranged to
calculate ending finished goods inventory. Ending Finished Goods Inventory for Cupid will be
calculated as $10,000 if the formula were rearranged as Beginning Finished Goods Inventory −
Cost of Goods Manufactured + Cost of Goods Sold ($30,000 − $120,000 + $100,000). This is not
the correct formula; therefore, this is an incorrect answer.
Rationale
 $30,000
If beginning and ending finished goods inventory are the same, then cost of goods
manufactured and cost of goods sold must also be the same. They are not the same for Cupid,
which means ending finished goods inventory cannot be $30,000; therefore, this is an incorrect
answer.
Rationale
 $20,000
Since cost of goods manufactured is greater than cost of goods sold, finished goods inventory
must have increased. The increase is $20,000 (the amount by which cost of goods manufactured
exceeds cost of goods sold), which is not the same as saying the ending finished goods
inventory is $20,000; therefore, this is an incorrect answer.
Question 53
1.F.3.c
tb.sys.dev.lc.013_1905
LOS: 1.F.3.c
Lesson Reference: Process Automation
Difficulty: medium
Bloom Code: 4
Which of the following most closely describes the automation of invoice pre-processing?
Correct
Processing systems can incorporate invoices that originated in an assortment of formats: by

scanning a physical document, by reading contents of an email or electronic fax, or by translating
data from a portal upload.
Your Answer
By imaging the invoice upon receipt, most organizations will be able to adopt a policy of destroying
the physical invoice after two or three months.
Paper-based and electronic documentation from purchasing can be captured electronically by a

processing system for use in later stages of the procure-to-pay process.
Automating the routing of approval flows, verifying accounting codes, and providing interfaces to
match against POs and open receipts.
Rationale
 Processing systems can incorporate invoices that originated in an assortment of
formats: by scanning a physical document, by reading contents of an email or electronic
fax, or by translating data from a portal upload.
These steps would occur prior to the invoice being fully processed on the system, thus
describing the automation of invoice pre-processing.
Rationale
 By imaging the invoice upon receipt, most organizations will be able to adopt a policy
of destroying the physical invoice after two or three months.
This answer is incorrect. This overview describes the data retention automation capability.
Rationale
 Paper-based and electronic documentation from purchasing can be captured
electronically by a processing system for use in later stages of the procure-to-pay process.
This answer is incorrect. This answer option is describing the automatic capturing of paper-
based documents.
Rationale
 Automating the routing of approval flows, verifying accounting codes, and providing
interfaces to match against POs and open receipts.
This answer is incorrect. This answer option is describing automation of workflow of approving
the accounts payable process.
Question 54
1.B.2.d
tb.si.bud.022_1805
LOS: 1.B.2.d
Difficulty: medium
Bloom Code: 4
Which of the following is not an example of using budgets to measure performance against
established goals?
Comparing actual units produced in the current year to budgeted units produced for the current
year
Correct
Comparing actual units produced in the current year to actual units produced for the previous year
Comparing actual hours worked in the current year to budgeted hours worked for the current year
Comparing actual warranty costs in the current year to budgeted warranty costs for the current
year
Rationale
 Comparing actual units produced in the current year to budgeted units produced for
the current year
Comparing actual units produced in the current year to budgeted units produced for the current
year is an example of using budgets to measure performance against established goals because
budgeted units produced for the current year is a goal established in the budget; therefore, this
is an incorrect answer.
Rationale
 Comparing actual units produced in the current year to actual units produced for the
previous year
Budgets express quantitatively how an organization plans to achieve its short-term and long-
term goals. An organization can compare actual results relative to these goals to gauge
performance toward achieving these goals. Comparing actual units produced in the current
year to actual units produced for the previous year is not an example of using budgets to
measure performance against established goals because actual units produced for the previous
year is not a goal established in the budget; therefore, this is the correct answer.
Rationale
 Comparing actual hours worked in the current year to budgeted hours worked for the
current year
Comparing actual hours worked in the current year to budgeted hours worked for the current
budgeted hours worked for the current year is a goal established in the budget; therefore, this is
an incorrect answer.
Rationale
 Comparing actual warranty costs in the current year to budgeted warranty costs for
the current year
Comparing actual warranty costs in the current year to budgeted warranty costs for the current
budgeted warranty costs for the current year is a goal established in the budget; therefore, this
is an incorrect answer.
Question 55
1.F.4.i
dat.min.tb.011_2104
LOS: 1.F.4.i
Difficulty: medium
Bloom Code: 2
All of the following are the implications of the iterative nature of data mining except:
Given the exploratory side of data mining in solving a problem or addressing a requirement, the
process consumes a considerable amount of time, which is translated to higher cost and
investment.
This has given entities opportunities to see their data sets in perspectives and viewpoints, allowing
them to learn more deeply about their own business and processes.
Your Answer
The iteration would produce numerous different results and it is the analyst’s role to screen and
weed out which are meaningful and relevant to the problem being solved or objective being
targeted.
Correct
Data mining has overtaken the analytical process and made traditional statistical techniques
obsolete.
Rationale
 Given the exploratory side of data mining in solving a problem or addressing a
requirement, the process consumes a considerable amount of time, which is translated to
higher cost and investment.
This answer is incorrect. This is an implication of data mining that has paved the way to its
automation.
Rationale
 This has given entities opportunities to see their data sets in perspectives and
viewpoints, allowing them to learn more deeply about their own business and processes.
This answer is incorrect. This is one positive implication of continuous and repetitive data
analysis, one point leading to the other and further enhancing the value-adding potential of
data sets.
Rationale
 The iteration would produce numerous different results and it is the analyst’s role to
screen and weed out which are meaningful and relevant to the problem being solved or
objective being targeted.
This answer is incorrect. This is an implication that it is critical to identify and establish the
appropriate question to answer, or problem to address, at the beginning of the analysis.
Rationale
 Data mining has overtaken the analytical process and made traditional statistical
techniques obsolete.
This answer is correct. Data mining is different from statistics. Data mining as a tool will reveal
the patterns and relationships already using the data processed and analyzed repeatedly,
whereas traditional statistics apply the validation approach of given hypotheses. Better put,
data mining has become an extension of the traditional statistics.
Question 56
1.F.3.b
tb.sys.dev.lc.016_1905
LOS: 1.F.3.b
Lesson Reference: Systems Development Life Cycle
Difficulty: hard
Bloom Code: 5
Which of the following can help in improving a computer system's performance?
Correct
Root cause analysis
Prospective analysis
Your Answer
Retrospective analysis
Contemporary analysis
Rationale
 Root cause analysis
Root causes are fundamental deficiencies or problems that result in a nonconformance, which
must be corrected to prevent recurrence. Root causes link undesirable events or problems to
their sources. Examples of computer system's performance-related problems include system
downtime, website crashes, software glitches, slow response time for online transactions and
queries, system outages, and system reboots. Measuring a problem's root causes involves
determining the sources of identified risks (known risks) and understanding the positive and
negative impacts of those known risks on other areas of a computer system. Corrective controls
must address and reduce the root causes of problems at their source, not symptoms. Root
cause analysis is a technique used to identify the conditions that initiate the occurrence of an
undesirable activity, state, or an event. It identifies relevant causes and effects of problems.
Root cause analysis is a part of risk management techniques and can help in improving a
computer system's performance. Simply stated, root cause analysis moves past events to
current events to future events.
Rationale
 Prospective analysis
This is incorrect. Prospective analysis deals with assumptions, actions, and responses that
relate to future events. This analysis projects current events into future events with the ability to
handle future events based on current information and events. Simply stated, prospective
analysis moves current events to future events. However, prospective analysis cannot help in
improving a computer system's performance.
Rationale
 Retrospective analysis
This is incorrect. Retrospective analysis deals with going back to past events to make sense out
of them and streamlining them going forward. Simply stated, retrospective analysis moves past
events to future events. However, retrospective analysis cannot help in improving a computer
system's performance.
Rationale
 Contemporary analysis
This is incorrect. Contemporary analysis deals with look-now (today) and performs what-can-
go-wrong reviews focusing on the future (tomorrow). These customized reviews move from the
present to the future. Simply stated, contemporary analysis moves present events to future
events. However, contemporary analysis cannot help in improving a computer system's
performance.
Question 57
1.D.4.h
aq.theor.con.002_0820
LOS: 1.D.4.h
Lesson Reference: The Theory of Constraints
Difficulty: easy
Bloom Code: 2
What is the core difference between theory of constraints (TOC) and just-in-time (JIT) management
systems?
Correct
TOC focuses the process on the bottleneck and uses a buffer of inventory to keep the bottleneck at
full capacity while JIT seeks to remove all inventory.
TOC focuses on a horizontal process while JIT focuses on a vertical process.
TOC recognizes a problem with inventory while JIT does not.

Your Answer
TOC focuses on optimizing each operation as a coordinated system to produce only what is needed
while JIT focuses on optimizing each operation by maximizing its individual production capacity.
Rationale
 TOC focuses the process on the bottleneck and uses a buffer of inventory to keep the
bottleneck at full capacity while JIT seeks to remove all inventory.
Correct. The core difference between TOC and JIT is that TOC focuses the process on the
bottleneck and uses a buffer of inventory to keep the bottleneck at full capacity. Optimizing the
system using TOC is a function of optimizing the bottleneck. Put another way, any production
lost at the bottleneck operation represents a permanent loss in the entire organization. In
contrast, all other operations have, by definition, more capacity than the bottleneck operation.
Hence, not only should non-bottleneck operations be controlled to produce only at the capacity
level of the bottleneck, non-bottleneck operations should also use their excess capacity to do
everything possible to facilitate the bottleneck's ability to always operate at its full capacity.
Rationale
 TOC focuses on a horizontal process while JIT focuses on a vertical process.
This answer is incorrect. Both TOC and JIT focus on a horizontal process view that emphasizes
optimizing each operation as a coordinated system to produce only what is needed.
Rationale
 TOC recognizes a problem with inventory while JIT does not.
This answer is incorrect. TOC and JIT both recognize that inventory causes cost, quality, and
timeliness problems.
Rationale
 TOC focuses on optimizing each operation as a coordinated system to produce only
what is needed while JIT focuses on optimizing each operation by maximizing its
individual production capacity.
This answer is incorrect. In contrast to more traditional management systems that seek to
optimize each operation by maximizing its individual production capacity, both TOC and JIT
focus on optimizing each operation as a coordinated system to produce only what is needed.
Question 58
1.D.1.l
aq.joint.pc.009_0820
LOS: 1.D.1.l
Lesson Reference: Joint Product Costing
Difficulty: hard
Bloom Code: 5
Tasty Brands Company manufactures candy from a joint production process and has four main
products: Choco Bar, Nougat Bar, Peanut Bar, and Coconut Bar. Joint costs for one batch are as
follows:
Direct materials $30,500

Direct labor 19,500
Overhead 22,000
Total joint costs $72,000
At the split-off point, one joint process batch yields 30,000 Choco Bars, 25,000 Nougat Bars, 20,000
Peanut Bars, and 15,000 Coconut Bars. If all products are sold at the split-off point, prices are $0.75
per Choco Bar, $1.00 per Nougat Bar, $1.25 per Peanut Bar, and $1.50 per Coconut Bar.
Tasty Brands has the option of further processing all products into king-sized bars with the following
added costs and premium prices:
Added Cost King-sized Price

Choco Bar $18,000 $1.25 per bar
Nougat Bar $20,000 $1.75 per bar
Peanut Bar $22,000 $2.50 per bar
Coconut Bar $24,000 $3.25 per bar
What are the joint costs allocated to the Peanut Bars under the NRV method? Round intermediate
calculations to two decimal points. (Note: This means the allocations across all four bars won't add
up perfectly to the joint cost.)
$18,340
Your Answer
$19,000
Correct
$20,160
$16,000
Rationale
 $18,340
This answer is incorrect. This answer represents the joint costs allocated to the Peanut Bars
under the constant gross profit method.
Rationale
 $19,000
under the sales value at split-off method.
Rationale
 $20,160
First, determine the optimal production and sales solution for Tasty Brands Company by
comparing additional revenue to additional cost.
Choco Bar: ($1.25 – $0.75) × 30,000 bars = $15,000 is NOT greater than $18,000 → Do not process
further!
Nougat Bar: ($1.75 – $1.00) × 25,000 bars = $18,750 is NOT greater than $20,000 → Do not
process further!
Peanut Bar: ($2.50 – $1.25) × 20,000 bars $25,000 is greater than $22,000 → Do process further!
Coconut Bar: ($3.25 – $1.50) × 15,000 bars = $26,250 is greater than $24,000 → Do process
further!
Total NRV = ($0.75 × 30,000) + ($1.00 × 25,000) + ($2.50 × 20,000 – $22,000) + ($3.25 × 15,000 –
$24,000) = $100,250
Cost driver rate = $72,000 ÷ $100,250 = $0.72 per bar
Choco Bar allocation = $0.72 × $22,500 = $16,200
Nougat Bar allocation = $0.72 × $25,000 = $18,000
Peanut Bar allocation = $0.72 × $28,000 = $20,160
Coconut Bar allocation = $0.72 × $24,750 = $17,820
Rationale
 $16,000
under the physical units method.
Question 59
1.F.1.i
LOS: 1.F.1.i
Difficulty: medium
Bloom Code: 4
Enterprise Performance Management (EPM) typically includes monitoring what type of metrics?
Aligned performance metrics (APM)
Your Answer
Policy gap indicators (PGI)
Gap trends analysis (GTA)

Correct
Key performance indicators (KPI)
Rationale
 Aligned performance metrics (APM)
This answer is incorrect. There is no defined metric category called APM.
Rationale
 Policy gap indicators (PGI)
This answer is incorrect. There is no defined metric category called PGI.
Rationale
 Gap trends analysis (GTA)
This answer is incorrect. There is no defined metric category called GTA.
Rationale
 Key performance indicators (KPI)
Enterprises define KPIs for EPMs to use in monitoring organizational performance.
Question 60
1.E.2.b
1E3-LS01
LOS: 1.E.2.b
Lesson Reference: Information System General Controls
Difficulty: medium
Bloom Code: 4
Which of the following are potential threats to an information system?
I. Trojan horses
II. Manipulation of input data
III. Computer viruses
IV. Data theft
Correct
I, II, III, and IV.

Your Answer
III and IV only.
I, II, and III only.
I and II only.
Rationale
 I, II, III, and IV.
There are many threats to information systems, including input manipulation, program
alteration, data theft, sabotage, viruses, Trojan horses, and theft.
Rationale
 III and IV only.
This answer is incorrect. This answer does not select one or more potential threats to an
information system.
Rationale
 I, II, and III only.
This answer is incorrect. This answer does not select one potential threat to an information
system.
Rationale
 I and II only.
This answer is incorrect. This answer does not select one or more potential threats to an
information system.
Question 61
1.F.2.a
LOS: 1.F.2.a
Difficulty: medium
Bloom Code: 2
Which definition best describes data governance?
Correct
Data management techniques that empower an organization to protect high data quality
standards throughout the data's life cycle
IT management techniques to ensure that data practices comply with regulatory requirements
Your Answer
Policies and procedures to ensure that data practices align with organizational goals
Procedures that align IT practices with regulatory requirements and industry best practices
Rationale
 Data management techniques that empower an organization to protect high data
quality standards throughout the data's life cycle
Data governance is best described as a collection of data management techniques that
empower an organization to protect high data quality standards throughout the data's life
cycle.
Rationale
 IT management techniques to ensure that data practices comply with regulatory
requirements
This answer is incorrect. Data governance involves much more than just complying with
regulatory requirements.
Rationale
 Policies and procedures to ensure that data practices align with organizational goals
This answer is incorrect. Data governance involves much more than just aligning practices with
organizational goals.
Rationale
 Procedures that align IT practices with regulatory requirements and industry best
practices
This answer is incorrect. Data governance involves much more than just complying with
regulatory requirements and aligning with industry best practices.
Question 62
1.D.3.m
tb.ab.cost.031_1809
LOS: 1.D.3.m
Difficulty: medium
Bloom Code: 3
The following information comes from Motion Moving's ABC system:
Cost Pool Driver Cost per Driver Unit

Administration Revenue billed $0.08 per dollar revenue
Recruiting and training Number of job hours $0.10 per hour
Travel Miles driven $1.05 per mile
Motion just completed a moving job that required the company's employees to put in 40 job hours
and drive a total of 620 miles. The job produced revenue of $2,500. What is the total amount of
overhead Motion should assign to this job?
$904
Your Answer
$655
$901
Correct
$855
Rationale
 $904
Incorrect. Make sure to correctly match the revenue billed with the cost per dollar revenue, and
the number of job hours with the cost per hour.
Rationale
 $655
Incorrect. Make sure to include the cost assigned to administration along with the costs
assigned to recruiting and training and travel.
Rationale
 $901
Incorrect. Make sure to correctly match the revenue billed with the cost per dollar revenue, and
the number of job hours with the cost per hour. Make sure to include the cost assigned to
administration along with the costs assigned to recruiting and training and travel.
Rationale
 $855
Correct. The total overhead assigned to the job equals administration plus recruiting and
training plus travel overhead. The overhead assigned to each cost pool equals the activity of the
cost driver multiplied by the cost per driver unit.
Total overhead assigned = ($2,500 × $0.08) + (40 × $0.10) + (620 × $1.05)
Total overhead assigned = $200 + $4 + $651 = $855
Question 63
1.F.1.c
aq.acc.inf.sys.005_1906
LOS: 1.F.1.c
Difficulty: medium
Bloom Code: 4
Which of the following are the major challenges in maintaining separate financial systems and
nonfinancial systems?
I. Two sets of books

II. Unsynchronized data
III. Inconsistent results
IV. Conflicting decisions
I and II
Your Answer
II and III
III and IV
Correct
I, II, III, and IV
Rationale
 I and II
This is incorrect. Having two sets of books and unsynchronized data are major challenges of
maintaining separate financial systems and nonfinancial systems but those are not the only
major challenges.
Rationale
 II and III
This is incorrect. Having unsynchronized data and inconsistent results are major challenges of
major challenges.
Rationale
 III and IV
This is incorrect. Having inconsistent results and conflicting decisions are major challenges of
major challenges.
Rationale
All four choices are correct. In the past, financial systems and nonfinancial systems were viewed
as two separate islands with rigid physical and logical borders superficially built around them. It
is like maintaining two separate books for the same organization, which resulted in data
synchronization problems, inconsistent results, and conflicting decisions. Examples of major
challenges in integrating financial systems and nonfinancial systems include cultural barrier,
organizational turf protection (organizational politics), and lack of trust between the managers
who are managing these two diverse systems. Technology is not the challenge or problem here
as it can simply integrate these two diverse systems.
Question 64
1.F.2.f
LOS: 1.F.2.f
Difficulty: medium
Bloom Code: 4
ABC Manufacturing (ABC) engaged Security Associates (SA) to carry out a vulnerability assessment of
ABC's enterprise resource planning (ERP) environment. What would ABC expect SA's vulnerability
assessment report to contain?
Description of SA attacks that successfully compromised ABC's ERP security controls
Your Answer
List of ranked security risks to ABC's ERP environment

Correct
List of known vulnerabilities that exist in ABC's ERP environment
Gap analysis of ABC's ERP security controls and compliance requirements
Rationale
 Description of SA attacks that successfully compromised ABC's ERP security controls
This answer is incorrect. A list of successful attacks would be the expected output of a pen test,
not a vulnerability assessment. A vulnerability assessment report should primarily consist of a
list of identified vulnerabilities, ranked by severity.
Rationale
 List of ranked security risks to ABC's ERP environment
This answer is incorrect. A ranked list of security risks would be the expected output from a risk
assessment, not a vulnerability assessment. A vulnerability assessment report should primarily
consist of a list of identified vulnerabilities, ranked by severity.
Rationale
 List of known vulnerabilities that exist in ABC's ERP environment
A vulnerability assessment report should primarily consist of a list of identified vulnerabilities,
ranked by severity.
Rationale
 Gap analysis of ABC's ERP security controls and compliance requirements
This answer is incorrect. Identified gaps in security controls would be the expected output of a
gap analysis or audit, not a vulnerability assessment. A vulnerability assessment report should
primarily consist of a list of identified vulnerabilities, ranked by severity.
Question 65
1.F.2.f
tb.sec.brch.011_1905
LOS: 1.F.2.f
Difficulty: medium
Bloom Code: 3
Which of the following statements is true about a firewall and an intrusion detection system (IDS)?
Firewalls are a substitution for an IDS.
Your Answer
Firewalls are an alternative to an IDS.

Correct
Firewalls are a complement to an IDS.
Firewalls are a replacement for an IDS.
Rationale
 Firewalls are a substitution for an IDS.
This is incorrect. This choice is not true because firewalls and IDS complement each other.
Rationale
 Firewalls are an alternative to an IDS.
Rationale
 Firewalls are a complement to an IDS.
An intrusion detection system (IDS) should be used as a complement to a firewall, not as a

substitute, alternative, or replacement for it. Together, they provide a synergistic strong effect.
A firewall is a hardware or software providing protection against outside attackers by shielding
a user's computer or network from malicious or unnecessary network traffic. Firewalls can also
prevent malicious software (malware) from accessing a computer or network via the Internet.
Firewalls can be configured to block data from certain locations using computer network
addresses, applications, or ports while allowing relevant and necessary data through using
rules.
An IDS is a hardware or software product that gathers and analyzes information from various
areas within a computer or a network to identify possible security breaches, which include
intrusions (hacker attacks from outside the organization) and misuse (employee attacks from
within the organization).
Rationale
 Firewalls are a replacement for an IDS.
Question 66
1.F.1.a
LOS: 1.F.1.a
Difficulty: easy
Bloom Code: 3
Which statement best describes the role of the accounting information system (AIS) in the value
chain?
The AIS should provide pertinent and timely data to primary value chain operations.
Your Answer
The AIS will increase efficiency of handling an organization's data through automation.
The AIS provides a valuable link to external information ecosystems.

Correct
The AIS should help an organization adopt and maintain its strategic position.
Rationale
 The AIS should provide pertinent and timely data to primary value chain operations.
This answer is incorrect. The AIS does provide pertinent and timely data, but its role is primarily
to support the organization's strategy.
Rationale
 The AIS will increase efficiency of handling an organization's data through automation.
This answer is incorrect. Increased efficiency is a benefit of a well-implemented AIS, but not its
primary role.
Rationale
 The AIS provides a valuable link to external information ecosystems.
This answer is incorrect. The primary role of the AIS is to support an organization's strategic
position, and the AIS functions, such as managing data exchange with external entities, are
simply features of the AIS.
Rationale
 The AIS should help an organization adopt and maintain its strategic position.
The AIS provides a supporting role for the primary activities in the value chain, each of which
directly contributes to an organization's ability to achieve and maintain its strategic position.
Question 67
1.D.1.f
1D3-AT31
LOS: 1.D.1.f
Lesson Reference: Variable Costing versus Absorption Costing
Difficulty: medium
Bloom Code: 3
Huron Industries has recently developed two new products, a cleaning unit for laser discs and a tape
duplicator for reproducing home movies taken with a video camera. However, Huron has only
enough plant capacity to introduce one of these products during the current year. The company
controller has gathered the following data to assist management in deciding which product should
be selected for production.
Huron's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries.
Selling and administrative expenses are not allocated to products.
Tape Duplicator Cleaning Unit

Raw materials $44.00 $36.00
Machining @ $12/hour 18.00 15.00
Assembly @ $10/hour 30.00 10.00
Variable overhead @ $8/hour 36.00 18.00
Fixed overhead @ $4/hour 18.00 9.00
Total cost $146.00 $88.00
Suggested selling price $169.95 $99.98
Acutal research and development costs $240,000 $175,000
Proposed advertising and promotion costs $500,000 $350,000
The costs included in Huron's fixed overhead are:
Your Answer
joint costs.
prime costs.
opportunity costs.
Correct
indirect costs.
Rationale
 joint costs.
This answer is incorrect. The costs included in Huron's fixed overhead are not joint costs.
Rationale
 prime costs.
This answer is incorrect. The costs included in Huron's fixed overhead are not prime costs.
Rationale
 opportunity costs.
This answer is incorrect. The costs included in Huron's fixed overhead are not opportunity costs.
Rationale
 indirect costs.
Indirect costs are those that are not economically traceable to a cost object. In product costing,
the cost object is the product. Overhead costs, including fixed overhead, are product costs that
are not easily traced to the product and are, therefore, indirect costs.
Question 68
1.C.2.b
1C2-LS04d
LOS: 1.C.2.b
Lesson Reference: Business Units and Performance Evaluation
Difficulty: medium
Bloom Code: 3
A company's sales department is responsible for generating income but has few controllable costs.
Conversely, the production department manager is responsible for controlling costs but not setting
prices. Which of the following places each department in the best responsibility center based on the
managers' responsibilities?
Sales: cost center; production: profit center.
Your Answer
Sales: profit center; production: cost center.
Sales: cost center; production: revenue center.

Correct
Sales: revenue center; production: cost center.
Rationale
 Sales: cost center; production: profit center.
This answer is incorrect. "Sales: cost center; production: profit center" does not place each
department in the best responsibility center based on the manager's responsibilities.
Rationale
 Sales: profit center; production: cost center.
This answer is incorrect. "Sales: profit center; production: cost center" does not place each
Rationale
 Sales: cost center; production: revenue center.
This answer is incorrect. "Sales: cost center; production: revenue center" does not place each
Rationale
 Sales: revenue center; production: cost center.
A revenue center is often used in place of a profit center when the manager is not expected to
control costs and thus is concerned only with revenue. The production facility cannot directly
sell or generate profits, so it is treated as a cost center because it is responsible only for costs.
Question 69
1.B.2.q
tb.bud.stand.025_1809
LOS: 1.B.2.q
Lesson Reference: Building Budget Standards
Difficulty: easy
Bloom Code: 2
Which of the following statements concerning revising budgets in response to significant new
information is true?
An organization should not allow revisions to budgets in response to significant new information as
revisions make it harder to monitor and assess performance.
An organization should allow revisions to budgets in response to significant new information as

revisions make it easier to achieve budgeted targets.
Correct
An organization should allow revisions to budgets in response to significant new information as

budgets built on invalid assumptions are not helpful or useful.
Your Answer
An organization should not allow revisions to budgets in response to significant new information as
managers who make faulty assumptions should be held accountable for these mistakes.
Rationale
 An organization should not allow revisions to budgets in response to significant new
information as revisions make it harder to monitor and assess performance.
evaluation, the additional complexity is likely worth the increased validity resulting from
revising the budget.
Rationale
 An organization should allow revisions to budgets in response to significant new
information as revisions make it easier to achieve budgeted targets.
Incorrect. While revising estimates likely increases the accuracy of the budget, making it easier
to achieve budgeted targets is not a valid reason for making the revisions.
Rationale
 An organization should allow revisions to budgets in response to significant new
information as budgets built on invalid assumptions are not helpful or useful.
Correct. Budgets are only as valid as the assumptions used to create them. If significant new
evaluation, the additional complexity is likely worth the increased validity resulting from a more
accurate revised budget.
Rationale
 An organization should not allow revisions to budgets in response to significant new
information as managers who make faulty assumptions should be held accountable for
these mistakes.
monitor and assess performance. Continuing to rely on a budget based on information
everyone knows is inaccurate is not a smart business decision. There are other ways to hold
managers accountable for flawed estimates.
Question 70
1.F.3.b
sys.dev.lc.tb.025_0120
LOS: 1.F.3.b
Difficulty: medium
Bloom Code: 4
How do application designers validate that their solution aligns with, and solves, the stated problem?
Correct
Aligning application design documents with business process analysis documents to ensure the
design solves the stated problems and satisfies business requirements
Your Answer
Testing the developed application throughout the development process
Releasing the developed application to a limited number of users before allowing the entire user
base to access it
Requiring formal documentation and visualization elements that management signs off at each
phase
Rationale
 Aligning application design documents with business process analysis documents to
ensure the design solves the stated problems and satisfies business requirements
All effective technical solutions should solve one or more business problems, and satisfy
requirements that result from the business process analysis activity.
Rationale
 Testing the developed application throughout the development process
This answer is incorrect. While testing throughout the SDLC is necessary, it won't verify that the
application's operation meets business goals unless functionality is aligned with the output
from the business process analysis requirements.
Rationale
 Releasing the developed application to a limited number of users before allowing the
entire user base to access it
This answer is incorrect. Limited release, also called beta testing, helps to find software flaws
and assess acceptance, but will not verify that the application's operation meets business goals
unless functionality is aligned with the output from the business process analysis requirements.
Rationale
 Requiring formal documentation and visualization elements that management signs
off at each phase
This answer is incorrect. Documenting each phase is a positive step, but without aligning each
phase with previous phase requirements, documentation alone won't verify that the
application's operation meets business goals defined in the output from the business process
analysis requirements.
Question 71
1.F.2.b
LOS: 1.F.2.b
Difficulty: medium
Bloom Code: 4
What is the ultimate goal of a data governance framework?
Achieve and maintain regulatory compliance
Maximize data quality without violating regulatory compliance requirements
Minimize overall cost of acquiring, storing, analyzing, and disposing of data

Correct
To enable an enterprise's upper management to make informed decisions about how to manage
data, realize value from it, minimize cost and complexity, manage risk, and ensure compliance
Rationale
 Achieve and maintain regulatory compliance
This answer is incorrect. Compliance is a concern of a data governance framework, but only one
of four main goals. Managing data, leveraging its value, minimizing risk, and maintaining
compliance are all primary goals of a data governance framework.
Rationale
 Maximize data quality without violating regulatory compliance requirements
This answer is incorrect. Compliance and data quality are components of a data governance
framework, but only part of its overall goals. Managing data, leveraging its value, minimizing
risk, and maintaining compliance are all primary goals of a data governance framework.
Rationale
 Minimize overall cost of acquiring, storing, analyzing, and disposing of data
This answer is incorrect. Managing data is only one of the primary goals of a data governance
framework. Managing data, leveraging its value, minimizing risk, and maintaining compliance
are all primary goals of a data governance framework.
Rationale
 To enable an enterprise's upper management to make informed decisions about how
to manage data, realize value from it, minimize cost and complexity, manage risk, and
ensure compliance
Managing data, leveraging its value, minimizing risk, and maintaining compliance are all
primary goals of a data governance framework.
Question 72
1.D.3.m
tb.ab.cost.035_1809
LOS: 1.D.3.m
Difficulty: medium
Bloom Code: 3
At the beginning of the year, managers at King Industries estimated $400,000 in manufacturing
overhead, 20,000 direct labor hours, and 30,000 machine hours. Actual manufacturing costs at the
end of the year were $425,000 in manufacturing overhead. During the year, 22,000 direct labor hours
and 27,000 machine hours were incurred. If King Industries uses a normal costing system, and if
overhead is applied based on direct labor hours, how much overhead was applied during the year?
Correct
$440,000
Your Answer
$540,000
$400,000
$425,000
Rationale
 $440,000
Correct. With a normal costing system, the predetermined overhead rate equals estimated
overhead divided by the estimated base, in this case direct labor hours. The actual activity in
the base is then used to apply the overhead. The predetermined overhead rate is $20 per direct
labor hour ($400,000 ÷ 20,000 direct labor hours). The overhead applied during the year equals
$440,000 ($20 per direct labor hour × 22,000 actual direct labor hours).
Rationale
 $540,000
Incorrect. Make sure to use actual direct labor hours, not actual machine hours, to calculate the
overhead applied.
Rationale
 $400,000
Incorrect. This is the amount of estimated overhead. Make sure to use estimates to calculate the
predetermined overhead rate and use actual activity to apply the overhead.
Rationale
 $425,000
Incorrect. This is the amount of actual overhead. Make sure to use estimates to calculate the
predetermined overhead rate and use actual activity to apply the overhead.
Question 73
1.C.3.f
retinv.ri.tb.020_0120
LOS: 1.C.3.f
Lesson Reference: Return on Investment and Residual Income
Difficulty: hard
Bloom Code: 5
The plastics division of a manufacturing company is planning on purchasing new equipment that
costs $55,000 and disposing old equipment with a book value of $10,000. The new equipment is
expected to increase operating income by $10,850, and no other changes in operating assets are
expected. The company provided the following current information:
Current operating assets $500,000

Current operating income $60,000
Minimum rate of return 13%
Profit margin 20%
Based on the original and new return on investment measures, would the manager choose to
purchase the new equipment?
No, because the return on investment decreases from 13% to 12%

Your Answer
No, because the return on investment decreases from 15.5% to 16.5%

Correct
Yes, because the return on investment increases from 12% to 13%
Yes, because the return on investment increases from 14.5% to 15.8%
Rationale
 No, because the return on investment decreases from 13% to 12%
This answer is incorrect. The return on investment metric is calculated as “Operating Income ÷
Assets.” The current ROI is not 13% and the new ROI will not be 12%.
Rationale
 No, because the return on investment decreases from 15.5% to 16.5%
Assets.” The current ROI is not 15.5% and the new ROI will not be 16.5%.
Rationale
 Yes, because the return on investment increases from 12% to 13%
Return on investment is a performance metric commonly used to evaluate investment centers
as this metric incorporates all the items that an investment center manager is responsible for
(revenues, controllable expenses, and center assets). This metric is calculated as “Operating
Income ÷ Assets.” The current ROI is 12% ($60,000 ÷ $500,000). If the new equipment is
purchased, ROI will increase to 13% ($70,850 ÷ $545,000). Because the equipment will increase
ROI, the manager would choose to purchase it.
Rationale
 Yes, because the return on investment increases from 14.5% to 15.8%
Assets.” The current ROI is not 14.5% and the new ROI will not be 15.8%.
Question 74
1.D.4.d
inv.man.tb.015_2104
LOS: 1.D.4.d
Lesson Reference: Inventory Management and Production Systems
Difficulty: medium
Bloom Code: 3
Which of the following does not accurately describe materials requirement planning (MRP) systems?
Correct
Materials requirement planning systems are not negatively impacted by unforeseen production
interruptions.
Your Answer
Materials requirement planning systems focus on developing a master production schedule.
Materials requirement planning systems have been shown to be effective at improving production
output and reducing costs.
Materials requirement planning systems produce daily targets for raw material and work-in-
process inventory levels.
Rationale
 Materials requirement planning systems are not negatively impacted by unforeseen
production interruptions.
This answer is correct. An MRP system is a subset of enterprise resource planning (ERP) systems.
They focus on developing a master production schedule as a way to increase production output
and reduce workflow interruptions. While they can be beneficial, they are susceptible to
unforeseen production interruptions because the master production schedule is designed with
little to no slack built in. When unforeseen interruptions occur, production slows down and
inventory levels can significantly increase.
Rationale
 Materials requirement planning systems focus on developing a master production
schedule.
This answer is incorrect. An MRP system does focus on developing a master production
schedule. This schedule can help reduce workflow interruptions, resulting in greater output,
less wasted time, and lower costs.
Rationale
 Materials requirement planning systems have been shown to be effective at improving
production output and reducing costs.
This answer is incorrect. A properly designed and operating MRP system can help increase
production output and reduce costs by reducing workflow interruptions.
Rationale
 Materials requirement planning systems produce daily targets for raw material and
work-in-process inventory levels.
This answer is incorrect. As part of the master production schedule, an MRP system also
produces daily targets for raw material and work-in-process inventory levels. These help to
ensure that there are sufficient resources on hand to meet the production schedule without
wasting resources.
Question 75
1.D.1.a
1D1-LS75
LOS: 1.D.1.a
Difficulty: medium
Bloom Code: 3
All of the following items are considered manufacturing costs except for:
Your Answer
Tires for an automobile manufacturer.

Correct
Sales commissions for a car manufacturer.
Plant property taxes for an ice cream maker.
Cream for an ice cream maker.
Rationale
 Tires for an automobile manufacturer.
This answer is incorrect. Tires for an automobile manufacturer would be considered a
manufacturing cost.
Rationale
 Sales commissions for a car manufacturer.
Manufacturing costs are those costs directly related to the production of the good. The answers
include all costs associated with the production of a good, except for the sales commissions for
a car manufacturer.
Rationale
 Plant property taxes for an ice cream maker.
This answer is incorrect. Plant property taxes for an ice cream maker would be considered a
manufacturing cost.
Rationale
 Cream for an ice cream maker.
This answer is incorrect. Cream for an ice cream maker would be considered a manufacturing
cost.
Question 76
1.F.3.a
aq.sys.dev.lc.003_1904
LOS: 1.F.3.a
Difficulty: easy
Bloom Code: 1
All of the following are phases within the Systems Development Lifecycle (SDLC) except:
Your Answer
Systems analysis
Conceptual design
Correct
Workflow knowledge transfer
Operations and maintenance
Rationale
 Systems analysis
This answer is incorrect. System analysis is an evaluative process to assess user needs, resource
requirements, benefits, and costs.
Rationale
 Conceptual design
This answer is incorrect. Conceptual design is the process of creating plans for meeting the
needs of the organization.
Rationale
 Workflow knowledge transfer
Workflow knowledge transfer is not a phase within the SDLC. The phases of the SDLC are system
analysis, conceptual design, physical design, implementation and conversion, and operations
and maintenance.
Rationale
 Operations and maintenance
This answer is incorrect. Operations and maintenance is the process of fine-tuning and refining
the system as users explore functionalities and place demands on the system processing.
Question 77
1.E.1.e
corp.gov.tb.013_2104
LOS: 1.E.1.e
Lesson Reference: Corporate Governance
Difficulty: medium
Bloom Code: 3
Which of the following statements is correct concerning the difference between corporate bylaws
and articles of incorporation?
Correct
Corporate bylaws cover how board members are to be notified of board meetings and articles of
incorporation list the corporation’s registered agent.
Your Answer
Corporate bylaws are available to the public and articles of incorporation are not available to the
public.
Corporate bylaws cover the specific responsibilities of board committees and articles of
incorporation cover how directors should address conflicts of interest.
Corporate bylaws cover the par value of common shares and articles of incorporation cover
whether the corporation is authorized to issue preferred shares.
Rationale
 Corporate bylaws cover how board members are to be notified of board meetings and
articles of incorporation list the corporation’s registered agent.
This answer is correct. Corporate bylaws cover details concerning a corporation’s operations
and structure, including how board members are to be notified of board meetings. Articles of
incorporation contain basic information, such as the name and contact information for the
corporation’s registered agent, who is authorized to receive important legal and tax documents
on behalf of the corporation.
Rationale
 Corporate bylaws are available to the public and articles of incorporation are not
available to the public.
This answer is incorrect. Corporate bylaws cover details concerning a corporation’s operations
and structure. They are private documents of the company and are not available to the public.
Articles of incorporation are filed with the state in which a corporation is formed. The articles
contain basic information such as the number of shares of stock the corporation can issue. They
are available to the public as they are public records.
Rationale
 Corporate bylaws cover the specific responsibilities of board committees and articles
of incorporation cover how directors should address conflicts of interest.
This answer is incorrect. Corporate bylaws cover details concerning a corporation’s operations
and structure, including the specific responsibilities of board committees. However, articles of
incorporation do not provide details on a corporation’s operations and structure, such as how
directors should address conflicts of interest. Corporate bylaws address specific situations such
as this.
Rationale
 Corporate bylaws cover the par value of common shares and articles of incorporation
cover whether the corporation is authorized to issue preferred shares.
This answer is incorrect. Articles of incorporation contain basic information such as whether the
corporation is authorized to issue preferred shares. However, corporate bylaws do not cover the
par value of common shares. Articles of incorporation cover this.
Question 78
1.F.1.e
tb.er.plan.sys.007_1905
LOS: 1.F.1.e
Difficulty: medium
Bloom Code: 2
Which of the following items is an advantage of an ERP (Enterprise Resource Planning) System?
Correct
Improved reporting
Your Answer
Low cost of implementation and maintenance
Lack of complexity
Software is affordable
Rationale
 Improved reporting
Due largely to integration, the ability to generate reports representing data provided from
multiple departments is invaluable.
Rationale
 Low cost of implementation and maintenance
This answer is incorrect. Because of the complexity of an ERP system, proper implementation
and ongoing maintenance in the form of staff will increase the overall cost.
Rationale
 Lack of complexity
This answer is incorrect. An ERP system has many capabilities and because of this, the system is
inherently complex.
Rationale
 Software is affordable
This answer is incorrect. The cost for ERP software can be prohibitively high.
Question 79
1.F.4.d
tb.bus.int.002_1905
LOS: 1.F.4.d
Difficulty: medium
Bloom Code: 3
A business made the decision to utilize a large source of data that has not previously been used.
Which of the following technologies would enable users to interpret the data more easily?
Correct
Data visualization
Your Answer
Process automation
Data mining
Business intelligence
Rationale
 Data visualization
Data visualization enables users less skilled than data scientists to interact with and explore
data.
Rationale
 Process automation
This answer is incorrect. Process automation is the capability to automate processes that are
currently manual in nature.
Rationale
 Data mining
This answer is incorrect. Data mining is the science of analyzing large sets of data to discover
trends or correlations for a specific business need.
Rationale
 Business intelligence
This answer is incorrect. Business intelligence solutions enable users to filter and request real-
time data such as current sales, cash-flow, etc.
Question 80
1.C.1.h
tb.flex.bpa.029_1808
LOS: 1.C.1.h
Lesson Reference: Flexible Budgets and Performance Analysis
Difficulty: medium
Bloom Code: 4
What is the difference between calculating materials price variance and materials quantity variance?
Price variance requires knowing the standard price of materials, whereas quantity variance
requires knowing the actual price of materials.
Correct
Price variance requires knowing the actual price of materials, whereas quantity variance requires
knowing the standard quantity of materials.
Price variance requires knowing the actual quantity of materials, whereas quantity variance
Price variance requires knowing the standard quantity of materials, whereas quantity variance
Rationale
 Price variance requires knowing the standard price of materials, whereas quantity
variance requires knowing the actual price of materials.
Incorrect. To calculate a direct materials price variance, one multiplies the difference between
the standard price of materials and the actual price of materials by the actual quantity of
materials purchased. To calculate a direct materials quantity variance, one multiplies the
difference between the standard quantity of materials and the actual quantity of materials by
the standard price of materials. While one needs to know the standard price of materials to
calculate a direct materials price variance, it is not necessary to know the actual price of
materials to calculate a direct materials quantity variance.
Rationale
 Price variance requires knowing the actual price of materials, whereas quantity
variance requires knowing the standard quantity of materials.
Correct. To calculate a direct materials price variance, one multiplies the difference between
the standard price of materials. This means one needs to know the actual price of materials to
calculate a direct materials price variance and the standard quantity of materials to calculate a
direct materials quantity variance.
Rationale
 Price variance requires knowing the actual quantity of materials, whereas quantity
the standard price of materials. While one needs to know the actual quantity of materials to
calculate a direct materials price variance, it is not necessary to know the actual price of
materials to calculate a direct materials quantity variance.
Rationale
 Price variance requires knowing the standard quantity of materials, whereas quantity
the standard price of materials. This means it is not necessary to know the standard quantity of
materials to calculate a direct materials price variance and it is not necessary to know the
actual price of materials to calculate a direct materials quantity variance.
Question 81
1.F.3.f
inn.app.tb.020_0220
LOS: 1.F.3.f
Difficulty: easy
Bloom Code: 4
What is the most common difference between on-premises applications and Software as a Service
(SaaS) applications?
SaaS applications run on mobile devices and on-premises applications only run on traditional
computers.
SaaS applications do not have access to enterprise databases and historical data.
Your Answer
On-premises applications are more secure and easier to manage than SaaS applications.
Correct
SaaS applications are web-based applications delivered over the Internet and on-premises
applications require access to an enterprise network.
Rationale
 SaaS applications run on mobile devices and on-premises applications only run on
traditional computers.
This answer is incorrect. While SaaS applications commonly run on a wide variety of devices,
many on-premises applications do as well.
Rationale
 SaaS applications do not have access to enterprise databases and historical data.
This answer is incorrect. SaaS applications routinely provide access paths for both cloud-based
and on-premises data repositories. Data access can be customized for specific application
needs.
Rationale
 On-premises applications are more secure and easier to manage than SaaS
applications.
This answer is incorrect. Although SaaS applications may pose additional security challenges,
security is often addressed throughout the design and development process, which results in
deployed products that are at least as secure as most on-premises applications, if not more
secure.
Rationale
 SaaS applications are web-based applications delivered over the Internet and on-
premises applications require access to an enterprise network.
SaaS applications require Internet access and often run in a web browser, while on-premises
applications often require that you install software on the endpoint device and access the
enterprise's internal network to run the application.
Question 82
1.F.1.a
LOS: 1.F.1.a
Difficulty: medium
Bloom Code: 4
What is the relationship between value chain and supply chain?
A supply chain is the logical output of the value chain.
Correct
Linking the output of one organization's value chain to the input of another organization's value
chain creates a single link in a supply chain.
A supply chain is a subordinate data flow to a value chain.
A value chain is a subordinate data flow to a supply chain.
Rationale
 A supply chain is the logical output of the value chain.
This answer is incorrect. While one part of a supply chain may utilize one organization's value
chain outbound data, a supply chain is defined as accepting input from, and providing output
to, other organizations.
Rationale
 Linking the output of one organization's value chain to the input of another
organization's value chain creates a single link in a supply chain.
Linking separate value chains can create a larger system involving multiple organizations,
called a supply chain.
Rationale
 A supply chain is a subordinate data flow to a value chain.
This answer is incorrect. The outputs from, and inputs to, an organization's value chain
operationalize one part of a supply chain, but this doesn't exist only as a data flow.
Rationale
 A value chain is a subordinate data flow to a supply chain.
This answer is incorrect. The outputs from, and inputs to, an organization's value chain
operationalize one part of a supply chain, but this doesn't exist only as a data flow.
Question 83
1.E.1.f
aq.corp.gov.001_1802
LOS: 1.E.1.f
Difficulty: easy
Bloom Code: 1
How entities are systematically directed and controlled refers to which of the following?
Correct
Corporate governance
Your Answer
Sustainability
Agents
Internal controls
Rationale
 Corporate governance
This is correct. Corporate governance refers to how entities are systematically directed and
controlled, including the oversight and obligations of the board of directors, management, and
the audit committee.
Rationale
 Sustainability
This is incorrect. Sustainability refers to an entity's focus on long-term viability by managing
resources without compromising the needs of the present.
Rationale
 Agents
This is incorrect. Agents refer to those authorized to act on behalf of the entity.
Rationale
 Internal controls
This is incorrect. Internal controls refer to the process implemented to provide reasonable
assurance that the objectives in place are achieved.
Question 84
1.D.3.k
tb.v.fc.014_1809
LOS: 1.D.3.k
Lesson Reference: Variable and Fixed Overhead Costs
Difficulty: medium
Bloom Code: 4
If manufacturing overhead is underapplied, how will the Cost of Goods Sold account be affected at
the end of the period?
Cost of Goods Sold will be increased through an adjusting credit.
Correct
Cost of Goods Sold will be increased through an adjusting debit.

Your Answer
Cost of Goods Sold will be decreased through an adjusting debit.
Cost of Goods Sold will be decreased through an adjusting credit.
Rationale
 Cost of Goods Sold will be increased through an adjusting credit.
Incorrect. Cost of Goods Sold would be decreased, not increased, through an adjusting credit.
Rationale
 Cost of Goods Sold will be increased through an adjusting debit.
Correct. If Cost of Goods Sold is underapplied, that means too little overhead has been applied
to jobs so far. A debit to Cost of Goods Sold would increase the expense account.
Rationale
 Cost of Goods Sold will be decreased through an adjusting debit.
Incorrect. Cost of Goods Sold would be increased, not decreased, through an adjusting debit.
Rationale
 Cost of Goods Sold will be decreased through an adjusting credit.
Incorrect. If manufacturing overhead is underapplied, Cost of Goods Sold would need to be
increased, not decreased.
Question 85
1.F.1.d
erplan.sys.tb.020_0120
LOS: 1.F.1.d
Difficulty: hard
Bloom Code: 6
Your small appliance manufacturing organization has experienced substantial growth over the last
three years. Your separate financial, shop floor, and shipping systems no longer can keep up with
your production demands, and management cannot keep track of what is going on in each system.
You hire a consulting firm to assess your business environment and recommend a solution to help
you manage the ever-growing demand for your products and separation of business processes. The
consultants recommend that your organization implement an enterprise resource planning (ERP)
system and provide an explanation of four main benefits of an ERP system. Which benefit most
directly drives the decision to implement an ERP system?
Correct
Visibility of the entire organization's operation
Integration of financial management with all operations
Centralized database to manage all enterprise operational data
Workflow management of the manufacturing process
Rationale
 Visibility of the entire organization's operation
An integrated ERP system provides unmatched visibility of all aspects of an enterprise's
operations.
Rationale
 Integration of financial management with all operations
This answer is incorrect. Although integrating financial management throughout the
organization provides additional control, this benefit is not as essential as enterprise visibility.
Rationale
 Centralized database to manage all enterprise operational data
This answer is incorrect. Centralizing data is an attractive benefit, but not one that directly
enhances an organization's operations or profitability.
Rationale
 Workflow management of the manufacturing process
This answer is incorrect. It is likely that the legacy manufacturing system already provided
manufacturing workflow management. A new ERP system may provide additional functionality,
but this benefit is not as important as overall visibility.
Question 86
1.E.1.b
icphil.tb.001_0120
LOS: 1.E.1.b
Lesson Reference: Internal Control Structure and Management Philosophy
Difficulty: easy
Bloom Code: 1
What is the most appropriate definition of internal control structure as it pertains to the internal
audit processes?
Internal control structure pertains to the number of tests and examinations performed during the
internal audit review by management.
Correct
Internal control structure is linked to the number and type of internal controls established by
management to prevent and uncover possible unethical activity.
Internal control structure is only linked to the testing and procedures over cash and cash
management procedures since those are the most at-risk assets.
Internal control structure pertains to the technology assets and systems put into place to prevent
and uncover potential unethical activity.
Rationale
 Internal control structure pertains to the number of tests and examinations performed
during the internal audit review by management.
This answer is incorrect. Internal control structure does not pertain to the number of tests and
examinations performed during the internal audit review by management.
Rationale
 Internal control structure is linked to the number and type of internal controls
established by management to prevent and uncover possible unethical activity.
This is the most appropriate definition of internal control structure as it pertains to internal
audit processes.
Rationale
 Internal control structure is only linked to the testing and procedures over cash and
cash management procedures since those are the most at-risk assets.
This answer is incorrect. Internal control structure pertains to all controls put into place at an
organization, not only the controls over cash and cash assets.
Rationale
 Internal control structure pertains to the technology assets and systems put into place
to prevent and uncover potential unethical activity.
This answer is incorrect. Technology plays a role in the control structure, but this is not the most
appropriate definition as technology is not all-encompassing in nature.
Question 87
1.D.5.l
cma11.p1.t1.me.0081_0820
LOS: 1.D.5.l
Lesson Reference: Managing Quality
Difficulty: medium
Bloom Code: 3
A company currently is performing a cost of quality analysis of one of its facilities. The following are
costs compiled by the facility accountant:
Inspection $1,500
Warranty repair 2,800
Testing of new materials 400
Product testing 950
Spoilage 645
Scrap 150
Preventive equipment maintenance 590
Liability claims 1,870
Rework 1,285
Total internal failure cost is
*Source: Retired ICMA CMA Exam Questions.
Correct
$2,080.
$2,785.
Your Answer
$4,945.
$5,955.
Rationale
 $2,080.
Internal failure costs are those costs incurred after the product is produced but before
shipment. Those costs include rework costs, cost to scrap, and spoilage:
Rework $1,285
Spoilage 645
Scrap 150
Total $2,080
Rationale
 $2,785.
This answer is incorrect. Spoilage and scrap are incurred after a product is produced but before
it is shipped. In addition, inspection costs are incurred while a product is being produced.
Rationale
 $4,945.
This answer is incorrect. Rework and scrap are incurred after a product is produced but before it
is shipped. In addition, inspection costs are incurred while a product is being produced and
warranty costs are incurred after a product is shipped.
Rationale
 $5,955.
This answer is incorrect. Spoilage and scrap are incurred after a product is produced but before
it is shipped. In addition, warranty costs and liability claims are incurred after a product is
shipped.
Question 88
1.D.3.m
cma11.p1.t1.me.0073_0820
LOS: 1.D.3.m
Difficulty: hard
Bloom Code: 4
A company is implementing an activity-based budgeting system. Setup overhead is allocated based

on setup hours, and manufacturing overhead is allocated based on direct manufacturing labor hours.
Budget information is listed in the table below.
Cost driver information Product A Product B

Number of units per batch 50 25
Setup time per batch 1.75 hours 1.25 hours
Direct manufacturing labor time per batch 1.00 hours 0.75 hours
The company plans to produce 1,000 units of Product A and 750 units of Product B. The activity rates
are $100 per setup hour and $150 per direct manufacturing labor hour. What is the total budgeted
overhead (OH)?
*Source: Retired ICMA CMA Exam Questions.
$10,063
Correct
$13,625
$15,125
$20,125
Rationale
 $10,063
This answer is incorrect. The batch size for Product B is not 50 units per batch.
Rationale
 $13,625
Product A Rate/batch # batches Time/batch Allocated OH
Setup $100/hr 1,000/50 = 20 1.75 hr $3,500
Manf. OH $150/hr 1,000/50 = 20 1 hr $3,000
Product B
Setup $100/hr 750/25 = 30 1.25 hr $3,750
Manf. OH $150/hr 750/25 = 30 0.75 hr $3,375
$13,625
Rationale
 $15,125
This answer is incorrect. The set-up time for Product B is not 1.75 hours per batch.
Rationale
 $20,125
This answer is incorrect. The batch size for Product A is not 25 units per batch.
Question 89
1.F.1.d
erplan.sys.tb.021_0120
LOS: 1.F.1.d
Difficulty: medium
Bloom Code: 5
What is the most valuable benefit of implementing an enterprise resource planning (ERP) system
from the perspective of integrating manufacturing of standardized products with customer
management?
ERP makes it easy to identify customers who frequently return products.
Correct
Quality control can benefit from analyzing current customer feedback on product quality for recent
purchases.
Your Answer
ERP provides a direct link between custom orders and manufacturing workflow.
Customers can be directly billed for completed products.
Rationale
 ERP makes it easy to identify customers who frequently return products.
This answer is incorrect. While identifying customers who frequently return products is valuable
in managing customers, that benefit does not directly affect the manufacturing process.
Rationale
 Quality control can benefit from analyzing current customer feedback on product
quality for recent purchases.
Integrating customer feedback with manufacturing can reduce the time required to respond
directly to customers and rectify quality issues.
Rationale
 ERP provides a direct link between custom orders and manufacturing workflow.
This answer is incorrect. While an ERP system can provide customer visibility for custom
manufacturing, this question relates to standardized product manufacturing.
Rationale
 Customers can be directly billed for completed products.
This answer is incorrect. This benefit is not specific to an ERP system. Any billing system should
provide the ability to directly bill customers for products.
Question 90
1.D.4.n
man.cap.tb.006_0820
LOS: 1.D.4.n
Lesson Reference: Managing Capacity
Difficulty: hard
Bloom Code: 4
The JUR Company has the following information:
Budgeted Capacity Costs Budgeted Volume Practical Capacity Theoretical Capacity

$600,000 12,000 units 20,000 units 30,000 units
During the year, JUR produced 11,500 units and spent $620,000 on capacity costs. What is the cost of
unplanned idle capacity using budgeted volume, practical capacity, and theoretical capacity,
respectively to calculate the allocation rate (rounded)?
Correct
$25,000, $15,000, and $10,000
$0, $240,000, and $360,000
$25,000, $25,000, and $25,000
$25,833, $15,500, and $10,333
Rationale
 $25,000, $15,000, and $10,000
There are three typical choices for the denominator for the fixed cost allocation rate. Budgeted
production, practical capacity, or theoretical capacity can be used. Budgeted production is the
level of production expected for the current period. Practical capacity measures capacity based
on current management policies, as well as based on machine and labor scheduling
expectations. It also allows for unavoidable productivity losses due to machine breakdowns,
production errors, employee vacations, and maintenance. Theoretical capacity measures
capacity assuming all constraints and limitations are removed. The allocation rates assuming
these three denominators are $50 per unit ($600,000 ÷ 12,000), $30 per unit ($600,000 ÷ 20,000),
and $20 per unit ($600,000 ÷ 30,000), respectively. Unplanned idle capacity occurs when actual
activity is less than budgeted activity. In this example, it is 500 units (12,000 – 11,500) regardless
of the denominator used. The value of these 500 units differs based on the allocation rate. The
500 units are worth $25,000 when budgeted production is used (500 × $50), $15,000 when
practical capacity is used (500 × $30), and $10,000 when theoretical capacity is used (500 × $20).
Rationale
 $0, $240,000, and $360,000
This answer is incorrect. These are the costs of planned idle capacity.
Rationale
 $25,000, $25,000, and $25,000
This answer is incorrect. While the number of units of unplanned idle capacity is the same under
all three denominators, the cost of those units is not the same.
Rationale
 $25,833, $15,500, and $10,333
This answer is incorrect. Actual capacity costs are not allocated.
Question 91
1.E.1.s
ext.aud.req.tb.006_0120
LOS: 1.E.1.s
Difficulty: easy
Bloom Code: 1
Which of the following provides the best definition of an integrated audit?
An integrated audit is an audit of the effectiveness of the internal controls over financial reporting
where the internal auditors and external auditors work together and integrate their findings.
Your Answer
An integrated audit is an audit of the financial statement information integrated with a tax audit.
An integrated audit is a comprehensive audit of both the internal controls and operational
compliance at an organization.
Correct
An integrated audit is an audit of the effectiveness of the internal controls over financial reporting
integrated with an audit of the financial statement information.
Rationale
 An integrated audit is an audit of the effectiveness of the internal controls over
financial reporting where the internal auditors and external auditors work together and
integrate their findings.
This answer is incorrect. This option does not provide the correct definition of an integrated
audit.
Rationale
 An integrated audit is an audit of the financial statement information integrated with a
tax audit.
audit.
Rationale
 An integrated audit is a comprehensive audit of both the internal controls and
operational compliance at an organization.
audit.
Rationale
 An integrated audit is an audit of the effectiveness of the internal controls over
financial reporting integrated with an audit of the financial statement information.
This is the most appropriate definition of an integrated audit.
Question 92
1.D.4.m
man.cap.tb.015_2104
LOS: 1.D.4.m
Lesson Reference: Managing Capacity
Difficulty: hard
Bloom Code: 4
Which of the following statements is correct concerning the choice for the denominator for allocation
rate calculations and capacity management?
Correct
Practical capacity is the best denominator choice for capacity management since it is best on a
realistic usage of available capacity.
Actual output is the best denominator choice for capacity management since it is best on the
actual usage of available capacity.
Your Answer
Budgeted output is the best denominator choice for capacity management since it is best on the
expected usage of available capacity.
Theoretical capacity is the best denominator choice for capacity management since it is best on
the ideal usage of available capacity.
Rationale
 Practical capacity is the best denominator choice for capacity management since it is
best on a realistic usage of available capacity.
This answer is correct. When calculating allocation rates, companies have discretion on what
level of output to use for the denominator of the calculation. The choices are practical capacity
(output under realistic circumstances), theoretical capacity (output under ideal circumstances),
and budgeted output (output expected in the period). Using practical capacity gives the
company the ability to most accurately evaluate the cost of unused capacity. The cost of
unused capacity can be broken down into the cost of unplanned unused capacity and the cost
of planned unused capacity. Unplanned unused capacity refers to the difference between
actual output and budgeted output while planned unused capacity refers to the difference
between budgeted output and the denominator used in the allocation rate. By using practical
capacity, the company can calculate the cost of planned unused capacity and unplanned
unused capacity. If it uses theoretical output, it can calculate the cost of both types of unused
capacity. The values tend not to be very realistic, however, since theoretical capacity is based
on ideal conditions, not realistic conditions. The cost of planned unused capacity is particularly
an issue when theoretical capacity is used. If it uses budgeted output, it can only calculate the
cost of unplanned unused capacity.
Rationale
 Actual output is the best denominator choice for capacity management since it is best
on the actual usage of available capacity.
This answer is incorrect. Using actual output for the denominator does not enhance capacity
management since it does not provide any information on unused available capacity. The
amount of overhead allocated would be the same as the budgeted amount, resulting in no
variance driven by unused available capacity.
Rationale
 Budgeted output is the best denominator choice for capacity management since it is
best on the expected usage of available capacity.
This answer is incorrect. Using budgeted output for the denominator does provide some
information on unused available capacity. Specifically, a company can estimate the cost of
unplanned unused capacity. However, using it does not allow the company to estimate the cost
of planned unused capacity.
Rationale
 Theoretical capacity is the best denominator choice for capacity management since it
is best on the ideal usage of available capacity.
This answer is incorrect. Using theoretical capacity for the denominator does provide some
information on unused available capacity. A company can estimate the cost of unplanned and
planned unused capacity when using theoretical capacity. However, the cost of planned unused
capacity tends to be artificially high when theoretical capacity is used since theoretical capacity
is often not a very realistic figure. This causes a large difference between available capacity and
planned usage.
Question 93
1.E.1.p
corp.gov.tb.008_2104
LOS: 1.E.1.p
Difficulty: hard
Bloom Code: 4
Which of the following statements is not correct concerning provisions of the Sarbanes-Oxley Act of
2002 designed to improve the financial reporting process?
Key executives (typically the CEO and CFO) must certify that they have designed internal controls
that are adequate to ensure financial reporting integrity.
The lead audit partner must rotate off engagements every five years.
Correct
External auditors are allowed to provide internal audit services for audit clients as long as the
client’s audit committee approves them in advance.
Audit committees have the sole authority to hire and fire independent auditors.
Rationale
 Key executives (typically the CEO and CFO) must certify that they have designed
internal controls that are adequate to ensure financial reporting integrity.
This answer is incorrect. The Act does require this certification as a way to increase investor
confidence in the financial reporting process.
Rationale
 The lead audit partner must rotate off engagements every five years.
This answer is incorrect. The Act does mandate that the lead audit partner rotate off
engagements every five years as a way to improve auditor independence.
Rationale
 External auditors are allowed to provide internal audit services for audit clients as long
as the client’s audit committee approves them in advance.
This answer is correct. The Sarbanes-Oxley Act of 2002 contains a number of provisions
designed to improve the quality of financial reporting. One issue addressed is external auditor
independence. Although the Act does allow external auditors to provide certain non-audit
services to audit clients with prior audit committee approval, internal audit services are not one
of these allowed services. This is because having an external auditor provide internal audit
services to audit clients can impair auditor independence.
Rationale
 Audit committees have the sole authority to hire and fire independent auditors.
This answer is incorrect. The Act does give sole authority to the audit committee to hire, fire,
and compensate independent auditors as a way to increase investor confidence in the financial
reporting process.
Question 94
1.D.3.k
aq.v.fc.009_0820
LOS: 1.D.3.k
Lesson Reference: Variable and Fixed Overhead Costs
Difficulty: easy
Bloom Code: 2
If manufacturing overhead is under-applied and the amount is considered significant, what is the
most appropriate adjustment to the accounts of a manufacturing company at the end of the period?
The under-applied amount should decrease cost of goods sold through an adjusting credit.
Your Answer
The under-applied amount should increase cost of goods sold through an adjusting debit.
The under-applied amount should be allocated to work-in-process inventory, finished goods

inventory, and cost of goods sold through an adjusting credit that decreases each of these
accounts.
Correct
The under-applied amount should be allocated to work-in-process inventory, finished goods

inventory, and cost of goods sold through an adjusting debit that increases each of these accounts.
Rationale
 The under-applied amount should decrease cost of goods sold through an adjusting
credit.
This answer is incorrect. When manufacturing overhead is under-applied, applied overhead is
less than actual overhead, so manufacturing costs have been understated. Decreasing cost of
goods sold would not correct an understatement.
Rationale
 The under-applied amount should increase cost of goods sold through an adjusting
debit.
This answer is incorrect. Decreasing cost of goods sold for this under-applied amount would not
be the best treatment in the accounts.
Rationale
 The under-applied amount should be allocated to work-in-process inventory, finished
goods inventory, and cost of goods sold through an adjusting credit that decreases each of
these accounts.
This answer is incorrect. When manufacturing overhead is under-applied, applied overhead is
less than actual overhead, so manufacturing costs have been understated. Decreasing work-in-
process inventory, finished goods inventory, and cost of goods sold would not correct an under-
application of overhead costs.
Rationale
 The under-applied amount should be allocated to work-in-process inventory, finished
goods inventory, and cost of goods sold through an adjusting debit that increases each of
these accounts.
Correct. If manufacturing overhead is under-applied, applied overhead is less than actual
overhead, so the Manufacturing Overhead account will be closed with a credit. Since the
amount is considered significant, the entire amount is allocated to work-in-process inventory,
finished goods inventory, and cost of goods sold, which increases each of these accounts.
Question 95
1.D.2.a
1A4-CQ19
LOS: 1.D.2.a
Lesson Reference: Job Order Costing
Difficulty: medium
Bloom Code: 4
Playtime Toys estimates that it will sell 200,000 dolls during the coming year. The beginning
inventory is 12,000 dolls; the target ending inventory is 15,000 dolls. Each doll requires two shoes
which are purchased from an outside supplier. The beginning inventory of shoes is 20,000; the target
ending inventory is 18,000 shoes. The number of shoes that should be purchased during the year is:
203,000 shoes.
Your Answer
398,000 shoes.
201,000 shoes.
Correct
404,000 shoes.
Rationale
 203,000 shoes.
This answer is incorrect. This answer represents expected production of dolls, not number of
shoes to be purchased.
Rationale
 398,000 shoes.
This answer is incorrect. This answer used sales estimate instead of production estimate in the
calculation of the number of shoes that should be purchased during the year.
Rationale
 201,000 shoes.
This answer is incorrect. This answer used expected production of dolls, not number of shoes
needed for expected production of dolls in the calculation of number of shoes to be purchased.
Each doll requires two shoes.
Rationale
 404,000 shoes.
The purchase of shoes is calculated as follows:
Purchase of shoes = (production requirement) + (expected ending inventory) − (expected

beginning inventory)
Production requirement = (2 shoes per doll)(number of dolls)
Expected production, dolls = (sales) + (expected ending finished goods inventory) − (expected
beginning finished goods inventory)
Expected production, dolls = 200,000 dolls + 15,000 dolls − 12,000 dolls = 203,000 dolls.
Therefore, the number of shoes to be purchased during the year is calculated as follows:
Number of shoes to be purchased = (2 shoes/doll)(203,000 dolls) + 18,000 shoes − 20,000 shoes
Number of shoes to be purchased = 406,000 shoes + 18,000 shoes − 20,000 shoes = 404,000
shoes
Question 96
1.F.2.e
LOS: 1.F.2.e
Difficulty: medium
Bloom Code: 5
What result is the most common direct result of a lack of a clear record retention policy?
Correct
Growing data repositories with data kept past its useful lifetime
Your Answer
Deleting data before reaching the end of its usefulness
Storing local copies of data in multiple locations
Creating incompatible formats for storing data
Rationale
 Growing data repositories with data kept past its useful lifetime
Without a clear procedure for removing data, repositories tend to grow with stale data, taking
up storage space unnecessarily.
Rationale
 Deleting data before reaching the end of its usefulness
This answer is incorrect. While a lack of a clear data retention policy may result in some data
being removed prematurely, it most likely results in data being kept too long.
Rationale
 Storing local copies of data in multiple locations
This answer is incorrect. The practice of creating multiple copies of data isn't a common side
effect of a lack of a data retention policy. Such practices are generally discouraged and should
be addressed in a data retention policy, but are not the most common effect of the absence of a
data retention policy.
Rationale
 Creating incompatible formats for storing data
This answer is incorrect. A data retention policy has little to do with the format in which data
gets stored. The most common effect of a lack of a data retention policy is that data gets stored
too long after its effective usefulness has passed.
Question 97
1.F.3.e
inn.app.tb.018_0220
LOS: 1.F.3.e
Difficulty: medium
Bloom Code: 5
In what ways can cloud computing make data analysis of large datasets more accessible?
Big data analysis is more efficient when carried out on virtual servers.
Correct
Many cloud computing vendors offer toolsets and libraries to carry out advanced analysis of cloud-
stored data.
Cloud storage supports larger datasets.
Cloud-based datasets are easier to access for analytics tools.
Rationale
 Big data analysis is more efficient when carried out on virtual servers.
This answer is incorrect. Analysis software depends on efficient access to data and sufficient
available processing power. From a pure performance perspective, in-house resources often
provide better utilization than shared cloud-based resources.
Rationale
 Many cloud computing vendors offer toolsets and libraries to carry out advanced
analysis of cloud-stored data.
Part of the value of using cloud service providers is the value-added services, which include
tools to easily carry out data analysis on large cloud-based datasets.
Rationale
 Cloud storage supports larger datasets.
This answer is incorrect. Although cloud-based storage may provide very large dataset access,
on-premises storage can generally provide access to similar sized datasets, at a faster access
rate.
Rationale
 Cloud-based datasets are easier to access for analytics tools.
This answer is incorrect. Analytics tools can access local and remote data with similar effort and
efficiency.
Question 98
1.F.1.b
tb.acc.inf.sys.002_1905
LOS: 1.F.1.b
Difficulty: medium
Bloom Code: 3
Spend analysis is conducted in which of the following accounting information system (AIS) cycles?
Revenue-to-cash cycle
Correct
Expenditures cycle
Your Answer
Production cycle
Financing cycle
Rationale
 Revenue-to-cash cycle
This is incorrect. Spend analysis is not conducted in the revenue-to-cash cycle. Billing, accounts
receivable, and cash receipts activities are a part of the revenue to cash cycle.
Rationale
 Expenditures cycle
Spend analysis is conducted in the expenditure cycle, which consists of purchasing and
procurement activities. Spend analysis is a strategic approach to spending amounts and
profiles in private sector or public sector organizations. It is a process of analyzing an
organization's spending levels (purchasing level) to develop a better picture of what and how
much it is spending to make and sell goods or services. Spend analysis is a very useful technique
during procurement of materials and services for the organization because huge amounts of
money are spent acquiring materials and labor to make goods and to provide services to
customers.
Rationale
 Production cycle
This is incorrect. Spend analysis is not conducted in the production cycle. Production control
and inventory control activities are a part of the production cycle.
Rationale
 Financing cycle
This is incorrect. Spend analysis is not conducted in the financing cycle. Cash management,
debt management, and equity management activities are a part of the financing cycle.
Question 99
1.F.4.j
aq.dat.min.004_1905
LOS: 1.F.4.j
Difficulty: easy
Bloom Code: 3
Which of the following is the most popular data query tool because it returns data that matches
English-like criteria in the form of tables that are easy to understand and visualize?
Correct
SQL
ANSI
Your Answer
ISAM
VSAM
Rationale
 SQL
SQL returns data that matches English-like criteria in the form of tables that are easy to
understand and visualize.
Rationale
 ANSI
This answer is incorrect. ANSI (the American National Standards Institute) is a private non-profit
organization that oversees the development of voluntary consensus standards. ANSI adopted
SQL as the standard query tool in the 1980s
Rationale
 ISAM
This answer is incorrect. ISAM (indexed sequential access method) is a method of accessing
data. However, SQL is considered more useful than ISAM because SQL returns data that
matches English-like criteria in the form of tables that are easy to understand and visualize.
Rationale
 VSAM
This answer is incorrect. VSAM (Virtual Storage Access Method) is a method of accessing data.
However, SQL is considered more useful than VSAM because SQL returns data that matches
English-like criteria in the form of tables that are easy to understand and visualize.
Question 100
1.F.4.r
ana.too.tb.031_0220
LOS: 1.F.4.r
Difficulty: medium
Bloom Code: 4
What data analysis technique would likely best predict the expected number of guests on a particular
day at a major theme park?
Linear regression
Logistic regression
Your Answer
Classification
Correct
Time series analysis
Rationale
 Linear regression
This answer is incorrect. Linear regression can model data based on any observations but
cannot effectively predict future outcomes based on seasonal fluctuations.
Rationale
 Logistic regression
This answer is incorrect. Logistic regression can model data based on any observations but
cannot effectively predict future outcomes based on seasonal fluctuations.
Rationale
 Classification
This answer is incorrect. Classification simply associates observations with predefined classes.
It does not support prediction of outcomes.
Rationale
 Time series analysis
Time series analysis models the structure of data based on observations taken over time, with
the ability to adjust for seasonal fluctuations. This technique could take into account the time of
year, and even the time of day, to help predict how many customers are likely to visit the park
on any day.

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12/9/22, 10:23 AM CMA Exam Review - Part 1 - Assessment Review

Quarter Sales Seasonal Index

I. Sales increased 14% above the average quarterly value

I, II, III, and IV

Software as a service (SaaS)

Platform as a service (PaaS)

Infrastructure as a service (IaaS)

Technology as a service (TaaS)

no longer a variable cost.

no longer a fixed cost.

outside the relevant range.

Reporting results to internal and external stakeholders

Auditing policies for compliance

Analyzing performance vs. plan, prior years, across divisions, or products

Y = a + b1x1 + b2x2 + b3x3 + b4x4

Industry Company 1 Company 2 Company 3 Company 4

that the business will naturally experience, regardless of internal controls.

that internal controls will not be followed.

that measures the effectiveness of a firm's internal controls.

I. Elimination of legacy systems

I, II, III, and IV

Dynamically responding to emerging threats

Dynamically altering rules based on detected malicious traffic

Overhead allocated to Regular gadgets = $125,000 + $500,000 + $200,000 = $825,000

less inventory on hand compared to a just-in-time (JIT) system.

reduced coordination between functional areas.

increased bulk purchasing and price breaks.

Technical controls to enforce the policy

Administrative controls to enforce the policy

Periodic review of the policy's effect

How well the design features meet the customers' needs.

How close the manufactured product is to the design specifications.

Revenue to cash cycle

Human resources and payroll cycle

Inadequate risk assessment

Visualizations can make analysis results appear overly complex.

Data alignment management

Governance and management

Operations and compliance

Management and operations

Compliance and governance

Variable manufacturing overhead.

Transform data to aid in decision support.

Recommend several scenarios from which to base a well-informed decision.

A research statistician in the marketing department of a consumer products company is conducting

Item Test 1 Test 2 Test 3 Test 4

More realistic market assessment of customer wants and needs

Improved analysis of how to gain and sustain competitive advantage

Activity Activity Driver Cost per Driver Unit

What is the cost of machining per toaster oven?

* Source: Retired ICMA CMA Exam Questions.

Variable cost per unit.

Total variable cost.

Unit fixed cost.

Average cost per unit.

Direct materials = $6,000 + $1,700 = $7,700

Direct labor = (200 + 50) × $75 = $18,750

Overhead applied = $18,750 × 80% = $15,000

Total cost of Job BCB101 = $7,700 + $18,750 + $15,000 = $41,450

Meeting Stakeholder Needs, Covering the Enterprise End-to-End, Applying a Single-Integrated

Integrity, Confidentiality, Redundancy, Availability, Governing Policies

Identification, Authentication, Authorization, Auditing, and Accounting

Test Scenarios Correlation Coefficient