AGA CGFM real-world questions that simulate the exam
room and job site with complete Answers; 2024/2025
Types of costs -correct answer Costs can be direct or indirect.
Direct costs are - correct answer those that can be directly attributed to a cost
objective.
Indirect costs are - correct answer jointly or commonly used by two or more cost
objectives and cannot practically or economically be attributed to an objective.
Costs should be assigned on a direct basis at all times. - correct answer False.
Although the direct basis is preferred, in many instances, it is neither practical nor
economical to assign costs on a direct basis.
Which is the preferred sequence for assigning costs? - correct answer direct
tracing, cause-and-effect, and allocation
OMB Circular A-87 was established to allow state and local governments to
determine indirect costs that could be recovered under federal awards. - correct
answer True. The federal government recognized that state and local
governments incurred indirect costs, such as general, administrative and support,
on behalf of federal awards. The indirect cost rate determination process is the
established mechanism that nonfederal entities must use to claim their fair share
of indirect costs under federal awards.
Factors which determine if cost is reasonable under the December 2014 OMB
Uniform Guidance: - correct answer A cost is reasonable if it does not exceed
that which should be incurred by a prudent person under the circumstances
prevailing at the time the decision was made to incur the cost. The question of
reasonableness is particularly important when governmental units are
predominantly federally funded.
,Fringe benefits include - correct answer contribution to retirement system health
care contribution for employees, and life insurance contribution.
2 criteria are needed to determine an indirect cost - correct answer Indirect
costs are those incurred for a common purpose benefiting more than one cost
objective or not readily assignable to an objective without considerable effort.
The amount charged for a user fee can be different based on the cost recovery
objective. - correct answer True. Depending on the cost recovery objective,
different costs would be included in calculating the user fee. If the government
wanted to recover expenditures (outlays), then capital purchases would be
included, even though they benefit future periods. If the government wants to
recovers expenses, an allocation for depreciation would be included. If a
government wants to recover expenses plus debt service, payments for principal
retirement would be included.
Breakeven equation - correct answer Fixed costs divided by Price per unit -
(Labor cost per unit plus material cost per unit)
Cost recovery objectives - correct answer The user fee will recover only direct
costs. The user fee will recover all expenditures, including capital assets. The
user fee will recover expenses (costs during the accrual basis of accounting,
including depreciation).
Cost recovery objectives - correct answer The user fee will recover expenses
(including depreciation) plus an allowance for replacing equipment currently
used.
-The user fee will recover expenses, plus the amount required to pay principal on
outstanding bonds, in lieu of depreciation.
,A major disadvantage of a user fee is that only those who use the service are
charged. - correct answer False. This is the major advantage of user fees-only
those who use the service have to pay for it.
A government's budget should incorporate only a short-term perspective because
the budget is only for a one-year period. - correct answer False. Although the
budget is only for a one-year period, an effective budget incorporates a long-term
perspective focusing on long range goals and objectives, The budget then, is a
measure of what can be accomplished during the one-year period to achieve the
long-range goals and objectives.
The phases of the budget process are: - correct answer preparation, legislative,
and execution
Describe what takes place during the legislative phase of the budget process -
correct answer After receiving the budget from the executive branch, the
legislative branch begins its deliberations. Hearings are held with the CEO, CFO,
agency heads, and other personnel Special interest groups and the general
public have the opportunity to provide opinions.
The legislative branch - correct answer then crafts and passes the appropriation
ordinance or act that sets forth the amounts that can be spent during the year. If
there are two houses in the legislative branch, each must pass a budget. If they
differ, a conference committee of both houses develops the final document.
In a number of states and local governments - correct answer the CEO has the
ability to veto certain items or the entire document. The legislative branch then
has the opportunity to override the veto.
Budgets are primarily organized by program. - correct answer False. Budgets
tend to be organized around the department, agency, or other organizational unit.
, The budget process is most appropriate for containing costs - correct answer is
the line item.
The zero-based budget approach includes - correct answer the process that
begins by assuming the function or activity ceases to exist. Managers then
decide the implications.
The first decision package prepared - correct answer shows the minimum level
of funding required. Additional packages are prepared and prioritized. Eventually,
the priorities are matched to available revenues.
Zero Based Budgeting - correct answer Starting budget preparation from a zero
base is silly- location and level of infrastructure, many policy decisions, etc. Are
set and it makes no sense to build a budget as if they don't.
The ZBB System - correct answer is in which the budget is built from ranked
decision packages (Carter presidency) flowing through the administrative
system- stems from the silly idea that scientific, non-political ranking of programs
is possible.
Zerobased - correct answer builds the budget from service intentions and
resulting input requirements, as opposed to taking the budget from last year and
adding some increment to the line items.
Capital budgets are funded in the same manner as operating budgets. - correct
answer False. Although capital budgets can be funded with current resources,
most are funded through long-term financing options.
A government wants to ensure that those who benefit from a capital project
should pay the cost of financing. How should a project that has a 20-year useful
life be financed? - correct answer Issue a serial bond with level debt service
room and job site with complete Answers; 2024/2025
Types of costs -correct answer Costs can be direct or indirect.
Direct costs are - correct answer those that can be directly attributed to a cost
objective.
Indirect costs are - correct answer jointly or commonly used by two or more cost
objectives and cannot practically or economically be attributed to an objective.
Costs should be assigned on a direct basis at all times. - correct answer False.
Although the direct basis is preferred, in many instances, it is neither practical nor
economical to assign costs on a direct basis.
Which is the preferred sequence for assigning costs? - correct answer direct
tracing, cause-and-effect, and allocation
OMB Circular A-87 was established to allow state and local governments to
determine indirect costs that could be recovered under federal awards. - correct
answer True. The federal government recognized that state and local
governments incurred indirect costs, such as general, administrative and support,
on behalf of federal awards. The indirect cost rate determination process is the
established mechanism that nonfederal entities must use to claim their fair share
of indirect costs under federal awards.
Factors which determine if cost is reasonable under the December 2014 OMB
Uniform Guidance: - correct answer A cost is reasonable if it does not exceed
that which should be incurred by a prudent person under the circumstances
prevailing at the time the decision was made to incur the cost. The question of
reasonableness is particularly important when governmental units are
predominantly federally funded.
,Fringe benefits include - correct answer contribution to retirement system health
care contribution for employees, and life insurance contribution.
2 criteria are needed to determine an indirect cost - correct answer Indirect
costs are those incurred for a common purpose benefiting more than one cost
objective or not readily assignable to an objective without considerable effort.
The amount charged for a user fee can be different based on the cost recovery
objective. - correct answer True. Depending on the cost recovery objective,
different costs would be included in calculating the user fee. If the government
wanted to recover expenditures (outlays), then capital purchases would be
included, even though they benefit future periods. If the government wants to
recovers expenses, an allocation for depreciation would be included. If a
government wants to recover expenses plus debt service, payments for principal
retirement would be included.
Breakeven equation - correct answer Fixed costs divided by Price per unit -
(Labor cost per unit plus material cost per unit)
Cost recovery objectives - correct answer The user fee will recover only direct
costs. The user fee will recover all expenditures, including capital assets. The
user fee will recover expenses (costs during the accrual basis of accounting,
including depreciation).
Cost recovery objectives - correct answer The user fee will recover expenses
(including depreciation) plus an allowance for replacing equipment currently
used.
-The user fee will recover expenses, plus the amount required to pay principal on
outstanding bonds, in lieu of depreciation.
,A major disadvantage of a user fee is that only those who use the service are
charged. - correct answer False. This is the major advantage of user fees-only
those who use the service have to pay for it.
A government's budget should incorporate only a short-term perspective because
the budget is only for a one-year period. - correct answer False. Although the
budget is only for a one-year period, an effective budget incorporates a long-term
perspective focusing on long range goals and objectives, The budget then, is a
measure of what can be accomplished during the one-year period to achieve the
long-range goals and objectives.
The phases of the budget process are: - correct answer preparation, legislative,
and execution
Describe what takes place during the legislative phase of the budget process -
correct answer After receiving the budget from the executive branch, the
legislative branch begins its deliberations. Hearings are held with the CEO, CFO,
agency heads, and other personnel Special interest groups and the general
public have the opportunity to provide opinions.
The legislative branch - correct answer then crafts and passes the appropriation
ordinance or act that sets forth the amounts that can be spent during the year. If
there are two houses in the legislative branch, each must pass a budget. If they
differ, a conference committee of both houses develops the final document.
In a number of states and local governments - correct answer the CEO has the
ability to veto certain items or the entire document. The legislative branch then
has the opportunity to override the veto.
Budgets are primarily organized by program. - correct answer False. Budgets
tend to be organized around the department, agency, or other organizational unit.
, The budget process is most appropriate for containing costs - correct answer is
the line item.
The zero-based budget approach includes - correct answer the process that
begins by assuming the function or activity ceases to exist. Managers then
decide the implications.
The first decision package prepared - correct answer shows the minimum level
of funding required. Additional packages are prepared and prioritized. Eventually,
the priorities are matched to available revenues.
Zero Based Budgeting - correct answer Starting budget preparation from a zero
base is silly- location and level of infrastructure, many policy decisions, etc. Are
set and it makes no sense to build a budget as if they don't.
The ZBB System - correct answer is in which the budget is built from ranked
decision packages (Carter presidency) flowing through the administrative
system- stems from the silly idea that scientific, non-political ranking of programs
is possible.
Zerobased - correct answer builds the budget from service intentions and
resulting input requirements, as opposed to taking the budget from last year and
adding some increment to the line items.
Capital budgets are funded in the same manner as operating budgets. - correct
answer False. Although capital budgets can be funded with current resources,
most are funded through long-term financing options.
A government wants to ensure that those who benefit from a capital project
should pay the cost of financing. How should a project that has a 20-year useful
life be financed? - correct answer Issue a serial bond with level debt service
