Financial The Certified Internal Auditor Part 3 CIA-III Exam Questions in PDF

Free Financial CIA-III Dumps Questions (page: 13)

To remove the effect of seasonal variation from a time series, original data should be:

  1. Increased by the seasonal factor.
  2. Reduced by the seasonal factor.
  3. Multi plied by the seasonal factor.
  4. Divided by the seasonal factor.

Answer(s): D

Explanation:

Seasonal variations are common in many businesses. To remove the effect of seasonal variation from a time series, the original data (with the four trends) is divided by the seasonal norm.



The moving-average method of forecasting:

  1. Is a cross-sectional forecasting method.
  2. Regresses the variable of interest on a related variable to develop a forecast.
  3. Derives final forecasts by adjusting the initial forecast based on the smoothing constant.
  4. Includes each new observation in the average as it becomes available and discards the oldest observation.

Answer(s): D

Explanation:

The simple moving-average method is a smoothing technique that uses the experience of the past N periods (through time period t) to forecast a value for the next period. Thus, the average includes each new observation and discards the oldest observation. The forecast formula for the next period (for time period t+1) is the sum of the last N observations divided by N.



A company is formulating its plans for the coming year, including the preparation of its cash budget. Historically. 30% of the company's sales are cash sales. The remaining 70% are credit sales with the following collection pattern:



For the month of April, the total cash receipts from sales and collections on account would be:

  1. US$3,729,968
  2. US$3,781,600
  3. US$4,025,200
  4. US$4,408,000

Answer(s): B

Explanation:

The cash receipts for April equal April's cash sales (US $4,000,000 * 30% = US $1.200, 000), 40% of April's credit sales, and 58% of March's credit sales. Consequently, total cash receipts equal US $3,781,600 [$1,200,000 + ($4,000,000 * 40% x 70%) + ($3,600,000 x 58% x 70%)].



A learning curve of 80% assumes that the incremental unit time is reduced by 20% for each doubling of output. Also, direct labor cost is proportionate to time worked.
What is the incremental direct labor cost of the 16th unit produced as an approximate percentage of the first unit produced?

  1. 41%
  2. 31%
  3. 51%
  4. 64%

Answer(s): A

Explanation:

The assumption is that the incremental unit time (time to produce the last unit) is reduced by 20% when production doubles. Thus, the labor cost of the sixteenth unit is 40.96% of that for the first unit (100% x 80% x 80% x 80% x 80%).



Management of a bookkeeping company observed that the average time spent to perform identical tasks using a new software package decreases as the number of tasks performed increases. The following information on the use of the new software was collected.


If this learning effect continues, what is the average time to perform each of the first eight tasks?

  1. 7.29 minutes.
  2. 8.1 minutes.
  3. 6.56 minutes.
  4. 5.90 minutes.

Answer(s): A

Explanation:

Learning curves reflect the increased rate at which people perform tasks as they gain experience. The time required to perform a given task becomes progressively shorter. This technique is applicable only to the early stages of production or to any new task. One common assumption is that the cumulative average time per unit is reduced by a fixed percentage each time cumulative production is doubled. Based on the given data, this company has a 90% learning curve (90% x 10 minutes = 9 minutes, and 90% x 9 minutes = 8.1 minutes). Accordingly, the cumulative average time to perform eight tasks is 7.29 minutes (90% x 8.1 minutes).



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