CIA-III Exam Questions and Answers | Exam-Dumps (Page: 14)

QUESTION: 66 Exam Topic: 1, Volume A

The average labor cost per unit for the first batch produced by a new process is US $120. The cumulative average labor cost after the second batch is US $72 per product. Using a batch size of 100 and assuming the learning curve continues, the total labor cost of four batches will be:

US$4,320
US$10,368
US$2,592
US$17,280

Answer(s): D

Explanation:

The learning curve reflects the increased rate at which people perform tasks as they gain experience. The time required to perform a given task becomes progressively shorter. Ordinarily, the curve is expressed in a percentage of reduced time to complete a task for each doubling of cumulative production. One common assumption in a learning curve model is that the cumulative average time (and labor cost) per unit is reduced by a certain percentage each time production doubles. Given a US $120 cost per unit for the first 100 units and a US $72 cost per unit when cumulative production doubled to 200 units, the learning curve percentage must be 60% (US $72 + $120). If production is again doubled to 400 units (four batches), the average unit labor cost should be US $43.20 ($72 x 60%). Hence, total labor cost for 400 units is estimated to be US $17,280 (400 units x $43.20).

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QUESTION: 67 Exam Topic: 1, Volume A

CORRECT TEXT
Simulation, a widely used technique in decision modeling, is a(n):

Process of modeling whereby real activities are represented in mathematical or other form.
Technique used to pinpoint random deviations in industrial processes and other repetitive operations.
Technique used to separate costs into fixed and variable portions.
Inventory management model that is used to calculate the optimum order quantity.

Answer(s): A

Explanation:

Computer simulation is used when an optimization model cannot be developed, e.g., because the variables exceed the equations describing them. Simulation involves constructing a mathematical/logical model incorporating most of the features of the problem. This model is tested in a variety of hypothetical situations, and the modeled responses can then be measured.

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QUESTION: 68 Exam Topic: 1, Volume A

An account executive has just designed a Monte Carlo model to estimate the costs of a particular type of project. Validating the model could include all except:

Checking for errors in the computer programming.
Checking that assumed probability distributions are reasonable.
Comparing test results with previously validated models.
Applying the model.

Answer(s): D

Explanation:

The Monte Carlo technique is used in a simulation to generate the individual values for a random value. An essential step in the simulation procedure is to validate the mathematical model used. This process involves not only searching for errors but also verifying the assumptions. It also should provide some assurance that the results of the experiment will be realistic. This assurance is often obtained using historical data. If the model gives results equivalent to what actually happened, the model is historically valid. There is still some risk, however, that changes could make the model invalid for the future. The model should not be implemented until this validation process is complete.

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QUESTION: 69 Exam Topic: 1, Volume A

Which of the following is not true about simu-lation models that use Monte Carlo processes?

They are deterministic in nature.
They may involve sampling.
They mathematically estimate what actual performance would be.
They emulate stochastic systems.

Answer(s): A

Explanation:

The Monte Carlo simulation is often used in computer modeling to generate the individual values for a random variable. The performance of a quantitative model under uncertainty may be investigated by randomly selecting values for each variable in the model (based on the probability distribution of each variable) and then calculating the value of the solution. Because Monte Carlo processes use the laws of probability to generate values for random variables, simulations using them are probabilistic, not deterministic.

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QUESTION: 70 Exam Topic: 1, Volume A

The sales manager for a builder of custom yachts developed the following conditional table for annual production and sales:

According to the table, how many yachts should be built?

10
20
30
50

Answer(s): C

Explanation:

To achieve the maximum expected profit. 30 yachts should be built. For each level of production, multiply the probability of demand by the expected profit. The computation for the maximum is: 0.1 (-US $10) + 0.2($10) + 0.5($30) + 0.2($30) = US $22.

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Financial CIA-III Exam (page: 14) Financial The Certified Internal Auditor Part 3 Updated on: 15-Feb-2026

QUESTION: 66 Exam Topic: 1, Volume A

Explanation:

QUESTION: 67 Exam Topic: 1, Volume A

Explanation:

QUESTION: 68 Exam Topic: 1, Volume A

Explanation:

QUESTION: 69 Exam Topic: 1, Volume A

Explanation:

QUESTION: 70 Exam Topic: 1, Volume A

Explanation:

Financial CIA-III Exam (page: 14)
Financial The Certified Internal Auditor Part 3
Updated on: 15-Feb-2026