AIS - Exam 2 - Ch. 6 - Expenditure Cycle

Question 1

The Gwallter Reece Chihuahua Sweater Co. (GRCCo) was established in 2013. It recently signed a large contract with PetCo pet stores. GRCCo will be required to track and forecast sweater sales by linking in to PetCo’s sales database. GRCCo will then be responsible for shipping products to PetCo as needed. The relationship between GRCCo and PetCo is an example of

A) sales force automation.
B) electronic data interchange
C) optical character recognition
D) vendor-managed inventory

Answer 1

D) vendor-managed inventory

Question 2

One of the basic activities in the expenditure cycle is the receiving and storage of goods, supplies, and services. What is the counterpart of this activity in the revenue cycle?

A) sales order entry process
B) shipping function
C) cash collection activity
D) cash payments activity

Answer 2

B) shipping function

Question 3

The traditional approach to inventory management to ensure sufficient quantity on hand to maintain production is known as

A) safety stock
B) just-in-time production
C) economic order quantity
D) optimal inventory quantity

Answer 3

C) economic order quantity

Question 4

Economic Order Quantity (EOQ) includes several variables that must be taken into consideration when calculating the optimal order size. One variable, the costs associated with holding inventory, is referred to as

A) ordering costs
B) carrying costs
C) the reorder point
D) stockout costs

Answer 4

B) carrying costs

Question 5

The ________ specifies the point at which inventory is needed.

A) company inventory policies
B) reorder point
C) economic order quantity
D) stockout point

Answer 5

B) reorder point

Question 6

Which electronic files are either read or updated when goods are ordered from a vendor?

A) inventory, vendors, and accounts payable
B) vendors and accounts payable
C) inventory, vendors, and open purchase orders
D) open purchase orders and accounts payable

Answer 6

C) inventory, vendors, and open purchase orders

Question 7

What is a key feature of materials requirements planning (MRP)?

A) minimize or entirely eliminate carrying and stockout costs
B) reduce required inventory levels by scheduling production rather than estimating needs
C) determine the optimal reorder point
D) determine the optimal order size

Answer 7

B) reduce required inventory levels by scheduling production rather than estimating needs

Question 8

Materials requirements planning (MRP)

A) reduces the uncertainty about when materials are needed, thereby reducing the need to carry large levels of inventory.
B) is able to compute exactly the cost of purchasing by taking into account all costs associated with inventory carrying.
C) requires vendors to deliver inventory to the production site exactly when needed and in the correct quantities.
D) None of the above is correct.

Answer 8

A) reduces the uncertainty about when materials are needed, thereby reducing the need to carry large levels of inventory.

Question 9

________ attempts to minimize or eliminate carrying and stockout costs.

A) Just-in-time inventory
B) Materials requirements planning
C) Economic order quantity
D) Evaluated receipt settlement

Answer 9

A) Just-in-time inventory

Question 10

Just-In-Time (JIT) inventory is best characterized by

A) frequent deliveries of large quantities to be held at the work centers.
B) frequent deliveries of smaller quantities of items to the work centers.
C) less frequent deliveries of large quantities of goods to central receiving.
D) infrequent bulk deliveries of items directly to work centers.

Answer 10

B) frequent deliveries of smaller quantities of items to the work centers.

Question 11

What is the key difference between the MRP and JIT inventory management approaches?

A) Only JIT reduces costs and improves efficiency.
B) MRP is especially useful for products such as fashion apparel.
C) JIT is more effectively used with products that have predictable patterns of demand.
D) MRP schedules production to meet estimated sales needs; JIT schedules production to meet customer demands.

Answer 11

D) MRP schedules production to meet estimated sales needs; JIT schedules production to meet customer demands.

Question 12

When would an MRP inventory approach be a preferred to a JIT inventory approach?

A) when a product has a short life cycle
B) when demand for inventory is fairly predictable
C) when demand for inventory is very unpredictable
D) MRP is always a preferred method over JIT.

Answer 12

B) when demand for inventory is fairly predictable

Question 13

Which of the following is least likely to be a major criterion in vendor selection?

A) prices of goods
B) credit rating of the vendor
C) quality of goods
D) ability to deliver on time

Answer 13

B) credit rating of the vendor

Question 14

Once a vendor is selected for a product, the vendor’s identity is recorded in the

A) purchase requisition transaction file.
B) purchase requisition master file.
C) inventory transaction file.
D) inventory master file.

Answer 14

D) inventory master file.

Question 15

Duc An Incorporated provides free coffee to employees. Starbucks delivers coffee packages, sugar, creamer, and filters each week. Every month, Starbucks sends Duc An an invoice. This arrangement is best described as a

A) set purchase order.
B) fixed purchase order.
C) blanket purchase order.
D) standard purchase order.

Answer 15

C) blanket purchase order.

Question 16

A major cost in the purchasing function is the number of purchase orders processed. One technique that may reduce purchasing-related expenses is to have suppliers compete with each other to meet demand at the lowest price. The name of this technique is

A) an EDI auction.
B) a trading exchange.
C) a reverse auction.
D) a supplier consortium.

Answer 16

C) a reverse auction.

Question 17

Which of the following is generally not shown on a receiving report?

A) price of the items
B) quantity of the items
C) purchase order number
D) counted and inspected by

Answer 17

A) price of the items

Question 18

A receiving clerk notes that a delivery of 10 units has been received, but the purchase order specified 12 units. A debit memo will need to be prepared to adjust for the difference between the quantity ordered and received. Who should prepare this document?

A) the receiving clerk
B) the controller
C) the vendor
D) the purchasing department manager

Answer 18

D) the purchasing department manager

Question 19

Identify in which of the following scenarios a company could adjust the balance due the vendor by issuing a debit memo.

A) quantity different from that ordered
B) damage to the goods
C) goods that fail inspection for quality
D) All of the above are possible scenarios.

Answer 19

D) All of the above are possible scenarios.

Question 20

What is one of the best ways to improve the overall efficiency and effectiveness of the receipt and storage of ordered items?

A) requiring all suppliers to have the carrier verify quantities and item numbers before shipment
B) requiring all suppliers to include RFID tags on their items
C) requiring all suppliers to use EDI to expedite the receiving department function
D) requiring all delivery trucks to have satellite data terminals to expedite the receiving department function

Answer 20

B) requiring all suppliers to include RFID tags on their items

Question 21

Vendor invoices are approved by the ________, which reports to the ________.

A) purchasing department; controller
B) accounts payable department; treasurer
C) purchasing department; treasurer
D) accounts payable department; controller

Answer 21

D) accounts payable department; controller

Question 22

The disbursement voucher and supporting documents are sent to the ________ for payment prior to the due date.

A) cashier
B) treasurer
C) controller
D) accounts payable department

Answer 22

A) cashier

Question 23

A(n) ________ system posts an approved invoice to the vendor account and stores it in an open invoice file until payment is made by check.

A) nonvoucher
B) voucher
C) cycle
D) evaluated receipt settlement

Answer 23

A) nonvoucher

Question 24

A disbursement voucher contains

A) a list of outstanding invoices.
B) the net payment amount after deducting applicable discounts and allowances.
C) the general ledger accounts to be debited.
D) All of the above are correct.

Answer 24

D) All of the above are correct.

Question 25

One objective of accounts payable is to authorize payment only for goods or services actually ordered and received. The best way to process supplier invoices is to use A) electronic funds transfer for small, occasional purchases from suppliers. B) a nonvoucher system. C) EDI for all small, occasional purchases from suppliers. D) a disbursement voucher system.

Answer 25

D) a disbursement voucher system.

Question 26

What is not an advantage of using disbursement vouchers? A) Disbursement vouchers reduce the number of checks written. B) Disbursement vouchers can be prenumbered which simplifies the tracking of all payables. C) Disbursement vouchers facilitate separating the time of invoice approval from the time of invoice payment. D) There are no disadvantages to using disbursement vouchers.

Answer 26

D) There are no disadvantages to using disbursement vouchers.

Question 27

Which of the following is not an advantage of a voucher system? A) Several invoices may be included on one voucher, reducing the number of checks. B) Disbursement vouchers may be pre-numbered and tracked through the system. C) The time of voucher approval and payment can be kept separate. D) It is a less expensive and easier system to administer than other systems.

Answer 27

D) It is a less expensive and easier system to administer than other systems.

Question 28

A voucher package should include A) a purchase requisition, vendor invoice, and receiving report. B) a purchase order, vendor invoice, and receiving report. C) a purchase requisition, purchase order, and receiving report. D) a bill of lading and vendor invoice.

Answer 28

B) a purchase order, vendor invoice, and receiving report.

Question 29

When purchasing miscellaneous supplies, companies can reduce costs, improve efficiency, and combat employee fraud by A) using procurement cards. B) implementing a JIT inventory system. C) requiring employees to personally purchase items then reimbursing employees at the end of each month. D) paying amounts out of petty cash.

Answer 29

A) using procurement cards.

Question 30

If available, a 1% discount for payment within 10 days instead of 30 days represents an approximate savings of ________% annually. A) 1 B) 12 C) 18 D) 36

Answer 30

C) 18

Question 31

There is a symmetrical interdependence between a firm's expenditure cycle and its suppliers' A) production cycle. B) revenue cycle. C) expenditure cycle. D) general ledger and reporting system.

Answer 31

B) revenue cycle.

Question 32

The Gwallter Reece Chihuahua Sweater Co. (GRCCo) was established in 2013. It recently signed a large contract with PetCo pet stores. GRCCo will be required to track and forecast sweater sales. The technology that is used for communication between GRCCo and PetCo is A) electronic data interchange. B) vendor-managed inventory. C) sales force automation. D) optical character recognition.

Answer 32

A) electronic data interchange.

Question 33

Ngai Nhung is the sales manager at Hung Technologies. At lunch with the company CEO, Ngai proudly announced that he had negotiated a(n) ________ with a client that represented the customer's long-term commitment to buy components from Hung. A) purchase order B) evaluated receipt settlement C) voucher D) blanket purchase order

Answer 33

D) blanket purchase order

Question 34

Ngai Nhung is the sales manager at Hung Technologies. At lunch with the company CEO, Ngai proudly announced that he had received a ________ from a client. The client had just requested a large quantity of components from Hung. A) blanket purchase order B) voucher C) purchase order D) purchase requisition

Answer 34

C) purchase order

Question 35

Ngai Nhung is the sales manager at Hung Technologies. At lunch with the company CEO, Ngai complained that a recent shipment from a vendor had been unsatisfactory and was returned. As a result, Hung's purchasing manager needed to send a ________ to the supplier. A) debit memo B) purchase order C) blanket purchase order D) receiving report

Answer 35

A) debit memo

Question 36

To minimize the number of checks that need to be written to pay vendor invoices, a company should use A) a voucher system. B) a just-in-time inventory system. C) a nonvoucher system. D) an evaluated receipt settlement system.

Answer 36

A) a voucher system.

Question 37

Evaluated receipt settlement increases efficiency by A) eliminating the need for receiving reports. B) eliminating the need for vendor invoices. C) eliminating the need for purchase orders. D) eliminating the need to prepare and mail checks.

Answer 37

B) eliminating the need for vendor invoices.

Question 38

In the expenditure cycle, Financial Electronic Data Interchange (FEDI) increases efficiency by A) eliminating the need for receiving reports. B) eliminating the need for vendor invoices. C) eliminating the need for purchase orders. D) eliminating the need to prepare and mail checks.

Answer 38

D) eliminating the need to prepare and mail checks.

Question 39

Procurement cards differ from corporate credit cards in which of the following ways? A) Credit limits can be set for procurement cards, but not corporate credit cards. B) Credit cards can be used to make purchases without an explicit sign off by supervisors, but procurement cards require a sign off. C) Procurement cards can only be used with approved vendors, but credit cards can be used anywhere. D) Procurement card invoices are sent separately for each card, whereas corporate credit cards are consolidated into a single invoice.

Answer 39

C) Procurement cards can only be used with approved vendors, but credit cards can be used anywhere.

Question 40

Identify the department below that should not be able to submit a purchase requisition. A) Marketing B) Production C) Inventory Control D) None of the above

Answer 40

D) None of the above

Question 41

Once a purchase request is approved, what is the next step? A) The system creates a purchase order. B) The accounts payable department approves the purchase request, creating a purchase order. C) The inventory master file is accessed to find the preferred supplier(s). D) The department that created the purchase request may buy the requested item(s).

Answer 41

C) The inventory master file is accessed to find the preferred supplier(s).

Question 42

EFT payments are generally performed by A) the treasurer. B) a cashier. C) an accounts payable clerk. D) a credit manager.

Answer 42

B) a cashier.

Question 43

Which of the following is not an activity performed in the expenditure cycle? A) ordering B) receiving C) cash disbursement D) shipping

Answer 43

D) shipping

Question 44

The first major business activity in the expenditure cycle is A) ordering inventory, supplies, or services. B) a customer sale. C) shipping goods to customers. D) receiving goods from vendors.

Answer 44

A) ordering inventory, supplies, or services.

Question 45

The traditional approach to inventory management generally involves A) high stockout costs. B) minimizing item cost. C) receiving goods or services just prior to the time they are needed. D) maintaining inventory levels so that production can continue even if inventory use is greater than expected.

Answer 45

D) maintaining inventory levels so that production can continue even if inventory use is greater than expected.

Question 46

True or False: Under the EOQ inventory approach, carrying costs are usually ignored for low-cost/low-usage items.

Answer 46

TRUE

Question 47

True or False: The EOQ approach to managing inventory has been gaining popularity in recent years.

Answer 47

FALSE

Question 48

Although there are some similarities between JIT and MRP, identify one major difference below. A) production scheduling B) reducing the opportunity for inventory theft C) reducing inventory carrying costs D) requires more analysis than EOQ

Answer 48

A) production scheduling

Question 49

Ideally, inventory purchases occur in response to ________ in a JIT inventory system. A) customer demand B) optimal demand C) forecast demand D) supplier demand

Answer 49

A) customer demand

Question 50

A JIT inventory system would be especially useful for a company that manufactures A) toys associated with new movie releases. B) toothpaste. C) alarm clocks. D) motor oil.

Answer 50

A) toys associated with new movie releases.

Question 51

Which of the following factors is not of key importance when selecting inventory suppliers? A) product price B) vendor corporate structure C) product quality D) vendor delivery dependability

Answer 51

B) vendor corporate structure

Question 52

MacDougalKids is a mid-sized manufacturer of organic baby food. MacDougalKids uses the EOQ inventory management approach. Which of the following factors would likely be least important when selecting inventory suppliers? A) product price B) product quality C) vendor delivery dependability D) All would be equally important.

Answer 52

C) vendor delivery dependability

Question 53

MacDougalKids is a mid-sized manufacturer of organic baby food. MacDougalKids uses a JIT inventory management approach. Which of the following factors would likely be least important when selecting inventory suppliers? A) product price B) product quality C) vendor delivery dependability D) All would be equally important

Answer 53

A) product price

Question 54

To accomplish the objectives set forth in the expenditure cycle, a number of key management decisions must be addressed. Which of the decisions below is not ordinarily found as part of the expenditure cycle? A) How can cash payments to vendors be managed to maximize cash flow? B) What is the optimal level of inventory and supplies to carry on hand? C) Where should inventories and supplies be held? D) What are the optimal prices for each product or service?

Answer 54

D) What are the optimal prices for each product or service?

Question 55

Requiring all packing slips be reconciled to purchase orders before accepting a delivery of inventory would be most likely to prevent which of the following situations? A) A supplier delivers more inventory than ordered at the end of the year and sends an invoice for the total quantity delivered. B) An employee mails a fake invoice to the company, which is then paid. C) The inventory records are incorrectly updated when a receiving department employee enters the wrong product number on the receiving report. D) Receiving department employees steal inventory and then claim the inventory was received and delivered to the warehouse.

Answer 55

A) A supplier delivers more inventory than ordered at the end of the year and sends an invoice for the total quantity delivered.

Question 56

Comparing quantities on a vendor invoice to quantities on the receiving report would not prevent or detect which of the following situations? A) receiving and accepting inventory not ordered B) theft of inventory by receiving department employees C) update of wrong inventory items due to data entry error D) order for an excessive quantity of inventory

Answer 56

A) receiving and accepting inventory not ordered

Question 57

Which of the following would probably be the least effective control to mitigate the risk of paying a phony invoice payable for inventory purchases that were never made? A) Only pay from original invoices. B) Require three-way match for all inventory purchase invoices. C) Cancel all invoices and supporting documentation when paid. D) Establish strict access and authorization controls for the approved vendor master file.

Answer 57

A) Only pay from original invoices.

Question 58

Which of the following controls would be the least effective in preventing paying the same invoice twice? A) Only pay from original invoices. B) Cancel each document in the voucher package once the check is prepared and mailed. C) Only pay vendor invoices that have been matched and reconciled to a purchase order and a receiving report. D) Allow only the accounts payable department to authorize payment for vendor invoices and allow only the cash disbursements department to cut and mail checks to vendors.

Answer 58

D) Allow only the accounts payable department to authorize payment for vendor invoices and allow only the cash disbursements department to cut and mail checks to vendors.

Question 59

If duties are properly segregated, the authorization function is performed by ________, the recording function is performed by ________, and cash handling is performed by the ________. A) accounts payable; purchasing; cashier B) purchasing; accounts payable; cashier C) purchasing; cashier; accounts payable D) purchasing; accounts payable; treasurer

Answer 59

B) purchasing; accounts payable; cashier

Question 60

Evaluated receipt settlement approves payment of vendor invoices after reconciling the purchase order and the A) receiving report. B) vendor invoice. C) sales invoice. D) disbursement voucher.

Answer 60

A) receiving report.

Question 61

What is the best control to mitigate the threat of paying prices that are too high for goods ordered? A) Require the receiving department to verify the existence of a valid purchase order. B) Use only approved suppliers and solicit competitive bids. C) Only pay invoices that are supported by the original voucher package. D) Use bar-code technology to eliminate data entry errors.

Answer 61

B) Use only approved suppliers and solicit competitive bids.

Question 62

What is the best way to prevent the acceptance of goods that were never ordered? A) Order only from approved vendors. B) Enforce an appropriate conflict of interest policy in place. C) Match the packing slip to a purchase order before accepting delivery. D) Require specific authorization from the purchasing manager before accepting any goods.

Answer 62

C) Match the packing slip to a purchase order before accepting delivery.

Question 63

Which of the following is not a common control for ensuring inventory is secure and inventory counts are accurate? A) control of physical access to the inventory storage areas B) transfers of inventory with proper documentation C) sending "blind" copies of purchase orders to inventory control for data entry D) making physical counts of inventory at least once per year

Answer 63

C) sending "blind" copies of purchase orders to inventory control for data entry

Question 64

What control would best mitigate the threat of paying an invoice twice? A) never authorizing payment of a photocopy of an invoice B) double-checking mathematical accuracy of invoices C) approval of purchase orders D) maintaining adequate perpetual inventory records

Answer 64

A) never authorizing payment of a photocopy of an invoice

Question 65

Which control would best prevent payments made to fictitious vendors? A) Allow payments only to approved vendors. B) Restrict access to any payment or approval documents. C) Have an independent bank reconciliation. D) Make sure all documents are in order before approving payments.

Answer 65

A) Allow payments only to approved vendors.

Question 66

In the expenditure cycle, good control dictates that expenditures should be paid by check. This may not be feasible when minor purchases are made. To facilitate quick payment for minor purchases, a(n) ________ should be set up and maintained using ________. A) special bank account; disbursement vouchers B) imprest fund; vouchers C) cash box; small denomination bills D) petty cash fund; procurement cards

Answer 66

B) imprest fund; vouchers

Question 67

A surprise count of an imprest petty cash fund should find the total of ________ equal to the amount authorized for the fund. A) cash and credit memos B) cash and vouchers C) cash D) cash and checks

Answer 67

B) cash and vouchers

Question 68

What control should be put in place that assigns responsibility for EFT payments made to vendors? A) Encrypt all EFT transmissions. B) Time stamp all EFT transactions. C) Establish a control group to monitor EFT transactions for validity and accuracy. D) Number all EFT transactions.

Answer 68

C) Establish a control group to monitor EFT transactions for validity and accuracy.

Question 69

Which of the following threats is not specific to the purchase requisition process of the expenditure cycle? A) stockouts B) purchasing from unauthorized vendors C) requisitioning goods not needed D) All of the above are threats in the purchase requisition process.

Answer 69

B) purchasing from unauthorized vendors

Question 70

The management at Barks-a-Million is considering a new inventory control system. The current system is inadequate because it frequently causes stockouts that interrupt production and lead to excess stock of other materials — resulting in markdowns and high carrying costs. The new system will focus on ensuring that these costs are minimized. The new inventory control system will likely employ A) a reorder point. B) a just-in-time inventory system. C) the economic order quantity. D) materials requirements planning.

Answer 70

C) the economic order quantity.

Question 71

The management at Barks-a-Million is considering a new inventory control system. The current system is inadequate because it frequently causes stockouts that interrupt production and lead to excess stock of other materials — resulting in markdowns and high carrying costs. The new system will focus on ensuring that orders are placed with sufficient lead time to prevent stockouts by using A) a just-in-time inventory system. B) the economic order quantity. C) materials requirements planning. D) a reorder point.

Answer 71

D) a reorder point.

Question 72

The management at Barks-a-Million is considering a new inventory control system. The current system is inadequate because it frequently causes stockouts that interrupt production and lead to excess stock of other materials — resulting in markdowns and high carrying costs. The new system, which will focus on forecasting demand for Sad Clown's products, will likely employ A) a just-in-time inventory system. B) the economic order quantity. C) materials requirements planning. D) a reorder point.

Answer 72

C) materials requirements planning.

Question 73

The management at Barks-a-Million is considering a new inventory control system. The current system is inadequate because it frequently causes stockouts that interrupt production and lead to excess stock of other materials — resulting in markdowns and high carrying costs. The new system will focus on reducing or completely eliminating carrying costs, most likely employing A) a just-in-time inventory system. B) a reorder point. C) materials requirements planning. D) the economic order quantity.

Answer 73

A) a just-in-time inventory system.

Question 74

Anong Mali is the purchasing manager at Wattana Technologies. She has responsibility for reviewing and authorizing purchase orders. She also reviews receiving reports, approves or corrects them, and authorizes the cashier to pay vendor invoices. Which of the following would correct control weaknesses related to these activities? A) Controls are adequate under the current system. B) Vendor invoices should be reviewed by accounts receivable and then cancelled when paid. C) Vendor invoices should be reviewed by the purchasing manager to ensure that they are correct. D) Accounts payable should reconcile purchase orders, receiving reports, and invoices.

Answer 74

D) Accounts payable should reconcile purchase orders, receiving reports, and invoices.

Question 75

Anong Mali is the purchasing manager at Wattana Technologies. She has responsibility for reviewing and authorizing purchase orders. Receiving reports are prepared by shipping and receiving based on the relevant purchase order(s). Purchase orders, receiving reports, and vendor invoices are reconciled by accounts payable, which authorizes payment. Which of the following would correct control weaknesses related to these activities? A) Controls are adequate under the current system. B) Accounts payable should authorize purchase orders. C) Receiving reports should be reviewed and corrected by the purchasing manager. D) Vendor invoices should be reviewed by the purchasing manager to ensure that they are correct.

Answer 75

A) Controls are adequate under the current system.

Question 76

The receiving clerk at Wattana Technologies examines incoming shipments and reconciles their contents with the relevant purchase orders. A receiving report is then sent to accounts receivable and the vendor's invoice is approved for payment. Which of the following would correct control weaknesses related to these activities? A) Accounts payable should reconcile the purchase order and the receiving report. B) The invoice should be approved for payment by the shipping clerk after the purchase order and receiving report are reconciled. C) Invoices, purchase orders, and receiving reports should be reconciled by the receiving clerk. D) Controls are adequate under the current system.

Answer 76

A) Accounts payable should reconcile the purchase order and the receiving report.

Question 77

The receiving clerk at Wattana Technologies examines incoming shipments and checks their purchase order numbers. A receiving report is then sent to accounts payable, where it is reconciled with the relevant purchase orders and invoices and payment is authorized. Which of the following would correct control weaknesses related to the clerk's activities? A) Controls are adequate under the current system. B) Vendor invoices should be approved for payment by the purchasing manager. C) Purchase orders and receiving reports should be reconciled by the purchasing manager. D) Vendor invoices should be approved for payment by the shipping clerk after the purchase order and receiving report are reconciled.

Answer 77

A) Controls are adequate under the current system.

Question 78

Which of the controls below would be least effective at preventing a company from ordering goods at a price higher than market? A) Only place orders with vendors on an approved vendor list. B) Variance analysis of actual expenses to budgeted expenses C) For high-dollar goods, solicit competitive bids from possible vendors. D) Frequent review of, and update to, vendor price lists stored in the AIS

Answer 78

B) Variance analysis of actual expenses to budgeted expenses

Question 79

Which of the following would be the best control to prevent receiving department employees from stealing inventory and claiming the ordered quantity wasn't received from the vendor? A) Reconcile quantity on packing slip to physical count when accepting delivery. B) Restrict physical access to the receiving area. C) Require all deliveries be made at the receiving area. D) Require dual signatures on the move ticket when receiving delivers the inventory to the warehouse.

Answer 79

A) Reconcile quantity on packing slip to physical count when accepting delivery.

Question 80

Identify one way to improve the accuracy of inventory records that use a perpetual inventory approach A) use of an ERP system B) require the accounting department to calculate cost of goods sold periodically C) use IT to eliminate the need for manual data entry D) use of an MRP inventory system

Answer 80

C) use IT to eliminate the need for manual data entry

Question 81

Why would a firm perform ABC cost analysis? A) to identify the best inventory supplier B) to reconcile accounts payable C) to prioritize physical inventory counts D) to verify production quality

Answer 81

C) to prioritize physical inventory counts

Question 82

True or False: It is important to physically count inventory, at least periodically, even in a perpetual inventory system.

Answer 82

TRUE

Question 83

What is the main reason a list of potential alternative suppliers be maintained? A) in case the primary supplier is out of stock B) so the firm can sample different suppliers C) in case the primary supplier is more expensive D) to segregate purchasing suppliers

Answer 83

A) in case the primary supplier is out of stock

Question 84

Identify the most accurate statement below. A) Several purchase requisitions are often created to fill one purchase order. B) Several purchase orders are often created to fill one purchase requisition. C) Every purchase requisition should lead to the creation of one purchase order. D) Every purchase order should lead to the creation of one purchase requisition.

Answer 84

B) Several purchase orders are often created to fill one purchase requisition.

Question 85

Identify item below that is the biggest purchasing function cost driver. A) the number of purchase requisitions processed B) the number of suppliers used C) the number of purchase orders processed D) the quantity of items ordered

Answer 85

C) the number of purchase orders processed

Question 86

A reverse auction would likely be best suited to the purchase of A) central processing units (CPUs). B) soybeans. C) designer clothing. D) automobiles.

Answer 86

B) soybeans.

Question 87

One way a firm could reduce the risk of problems with supplier dependability is to A) purchase inventory from only U.S.-based suppliers. B) use an ERP system for purchases. C) require suppliers to be ISO 9000 certified. D) automate the purchasing function.

Answer 87

C) require suppliers to be ISO 9000 certified.

Question 88

An important control that can be used to reduce the risk of employee kickbacks is A) surveillance cameras. B) job rotation. C) off-site restrooms. D) use of ID badges.

Answer 88

B) job rotation.

Question 89

Restricting access to the approved supplier list can A) help reduce the risk of fraudulent disbursements. B) cause purchase order approval delays. C) eliminate the risk of duplicate payment. D) improve the efficiency of the expenditure cycle.

Answer 89

A) help reduce the risk of fraudulent disbursements.