One the basic activities isthe receiving and storage goods
Chapter 11
MULTIPLE CHOICE
d) the audit committee.
2. Within the expenditure cycle, internal information flows
3. 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
d) What are the optimal prices for each product or service?
4. There are three basic activities in the expenditure cycle. One of the basic activities is
c) the cash collection activity
d) the cash payments activity
b) just-in-time production.
c) economic order quantity.
a) ordering costs.
b) carrying costs.
a) company inventory policies.
b) economic order quantity.
a) inventory, vendors, and accounts payable
b) vendors and accounts payable
a) to minimize or entirely eliminate carrying and stockout costs
b) to reduce required inventory levels by scheduling production rather than estimating needs
a) the uncertainty about when materials are needed is reduced, thus reducing the need to carry large
levels of inventory.
d) None of the above are correct.
11. The inventory management approach that attempts to minimize, if not eliminate,
d) There is no such inventory management approach.
12. What aspect below best characterizes a JIT inventory system?
13. What is the key difference between the MRP and JIT inventory management
approaches?
customer demands.
14. MRP will be a preferred method over JIT when the
15. A key decision in ordering is selecting a suitable vendor. Which of the following
would not be a major criterion in vendor selection?
16. Once a vendor is selected for a product, the company's identity is recorded in the
a) general ledger.
deliver specified products at designated prices is called
a) a purchase order.
a) a document formally requesting a vendor to sell a certain product at a certain price.
b) a request for delivery of certain items and quantities.
a) set order.
b) blanket purchase order.
compete with each other to meet demand at the lowest price. This name of this
technique is
21. The receiving and storage of goods is the responsibility of the receiving department,
which usually reports to the __________ function in the company.
22. The receiving department has two major responsibilities in connection with the
expenditure cycle. Identify one of these responsibilities.
23. Which of the following is generally not shown on a receiving report?
a) price of the items
order specified 12 units. A debit memo will be prepared to adjust for the difference
in the quantity ordered and received. Who should prepare this document?
25. Identify which of the following scenarios the buyer could adjust by using a debit
memo document.
26. What is one of the best ways to improve the overall efficiency and effectiveness of
the receipt and storage of ordered items?
d) requiring all delivery trucks to have satellite data terminals to expedite the receiving department
function
d) satellite technology.
28. Vendor invoices are approved by the __________, which reports to the __________.
29. From a legal standpoint, when does the obligation to pay a vendor arise?
a) when the goods are requisitioned
payment prior to the due date.
a) cashier
vendor account and is stored in an open invoice file until payment is made by check.
a) voucher
a) a list of outstanding invoices.
b) the net payment amount after deducting applicable discounts and allowances.
actually ordered and received. The best way to process supplier invoices is to use
a) electronic funds transfer for small, occasional purchases from suppliers.
a) Disbursement vouchers reduce the number of checks written.
b) Disbursement vouchers can be prenumbered which simplifies the tracking of all payables.
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
b) receipt and storage of goods
c) approving vendor invoices for payment
b) the controller
c) the cashier
is performed by the __________.
a) accounts payable; purchasing; cashier
a) a purchase requisition, vendor invoice, and receiving report.
b) a purchase order, vendor invoice, and receiving report.
a) vendor invoice.
b) sales invoice.
b) streamline noninventory purchases
c) use ERS
b) a JIT inventory system.
c) credit cards.
b) 12
c) 18
a) Any department can now submit a request to purchase items.
b) The system tracks the exact time of delivery.
help mitigate this threat?
a) require the receiving department to verify the existence of a valid purchase order
purchasing agents?
a) purchasing from approved vendors
and storing goods. Identify one of these threats below.
a) errors in counting
a) order only from approved vendors
b) always require that a valid purchase order exists before goods can be accepted at the time of
inventory counts are accurate?
a) control of physical access to the inventory storage areas
neutralize a threat in the expenditure cycle. What process or activity would
specifically be associated with this control?
51. There is a threat of paying an invoice twice. What is an applicable control that may
help mitigate this threat?
52. Which control would be best to prevent payments made to fictitious vendors?
a) allow payments only to approved vendors
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
d) petty cash fund; procurement cards
54. A surprise count of petty cash by the auditor should find the total of __________
d) cash and checks
55. Special care should be taken when EFT payments are made to vendors. What control
d) number all EFT transactions
56. Which of the following threats is not specific to the purchase requisition process of
a) order goods; backup and disaster recovery plans
b) general issues; backup and disaster recovery plans
c) general issues; development of periodic review of appropriate performance reports d) order goods; various data entry and processing edit controlsSHORT ANSWER
58. a) Define expenditure cycle. b) What are the basic expenditure cycle activities? 59. What is the EOQ approach? What are the components of EOQ?65. What are the possible problems associated with receiving goods ordered from a vendor?
66. Name and describe the two common systems for approving vendor payments.
71. What types of decision-making and strategic information should the AIS provide in the expenditure cycle?
72. How can using bar codes on goods or products provide significant benefit in the expenditure cycle?
61) Just-in-time (JIT) is another inventory management technique that minimizes carrying and stockout costs by having deliveries made in quantities and at the time needed for production based on customer demand.
62) Economic Order Quantity (EOQ) is the traditional approach to managing inventory. EOQ is used to find the optimal order size. Ordering costs, carrying costs, and stockout costs are considered in finding the EOQ. The MRP (Materials Requirements Planning) inventory method seeks to reduce inventory levels by scheduling production, based on estimated sales, rather than by estimating needs (which EOQ does). A just-in-time inventory system (or JIT) attempts to minimize, if not totally eliminate, both carrying and stockout costs through the frequent delivery of small amounts of materials, parts, and supplies when they are needed. JIT does not attempt to estimate needs or schedule production based on estimated sales, as it is based on customer demand at a given time. A JIT system almost eliminates finished goods inventory.
67) EDI eliminates the need to enter invoice data and the matching of payment documents - all of this can be done using computers and network technologies. Technology can eliminate the need for vendor invoices by approving payment upon receipt of the goods. Imaging systems can eliminate paper flow, and universal languages such as XML can provide a paperless means of receiving and storing vendor invoices. Use of procurement cards, credit cards, and electronic expense forms can improve the efficiency of non-inventory purchases.
68) MRP systems schedule production based on estimated sales, and JIT systems schedule production based on customer demand. The choice between these two systems is based on the types of products a company sells. For example, products that have predictable patterns of demand and a long life cycle are more suitable for MRP systems. In this case, sales can be forecast with greater accuracy. Conversely, if the product has an unpredictable pattern of demand and a shorter life cycle, then a JIT system is more suitable. JIT is able to adapt better to continuously changing production levels.
72) Bar codes can significantly improve the process of receiving goods from suppliers for several reasons. First, a bar code can easily be scanned electronically. Electronically capturing the unique bar code number of a product not only provides identification and quantity data about the product; it can also provide specific production information such as date and time of manufacture, production run information, etc. Electronically encoding such information into an integrated AIS provides up-to-the-minute inventory counts, as well as counts of units sold, and returns for use in a perpetual inventory system. One significant factor in the wide use of bar codes is that it is cost effective to maintain such a system. Also, both vendor and suppliers can read bar codes, and certain bar code formats are universal in nature. This allows goods to be sold virtually anywhere in the world, allowing for easier global marketing efforts to be made by businesses.