MCS PRACTICE EXAM QUESTIONS & ANSWERS
Yes You Can! is an after-school program for youth that allows students to create and
implement different community projects. It is run during the school year by a group of
retired business professionals and student volunteers. The majority of the funding for
the program comes from the provincial government.
The Board of Directors is comprised of teachers, parents, and a business professional.
Recently, one of the board members learned that the implementation of performance
measures is a not-for-profit best practice.
There are four categories of measures to consider: financial measures, internal
business measures, learning growth measures, and social impact measures. Which the
following would be a relevant social impact measure?
a) number of hours spent on community projects
b) number of returning volunteers on a given year
c) number of training sessions offered to volunteers
d) cost per student enrolled in the pro - Answers - a) number of hours spent on
community projects
1. An organization's production department wants to add a productivity measure to its
performance measurement system. Which of the following performance measures is the
department likely to choose?
a. return on investment
b. volume of output produced
c. units of output per direct labour hour
d. profit per unit of output produced - Answers - c. units of output per direct labour hour
1. Residual income (RI) is a better measure for evaluating the performance evaluation
of investment centre managers than ROI. Why?
a. Using RI eliminates the problems associated with measuring the asset base.
b. If RI is used as the measure, higher-return divisions will select investments meeting
the required rate of return.
c. When using ROI as the performance measure, results will be static as assets are
depreciated.
d. Using RI eliminates uncertainty about the appropriate required rate of return. -
Answers - b. If RI is used as the measure, higher-return divisions will select
investments meeting the required rate of return.
1. What is the audit committee's responsibility in preventing fraud in an organization?
a. The audit committee establishes and maintains internal controls to prevent fraud.
b. The audit committee provides recommendations on the control and governance
process.
, c. The audit committee Ensures that an appropriate system of internal control has been
established.
d. The audit committee assesses the risk of material misstatement due to fraud. -
Answers - c. The audit committee Ensures that an appropriate system of internal
control has been established.
1. A purchasing agent received an expensive gift from a vendor in return for directing a
significant amount of business to this vendor. Which of the following is the best course
of action to prevent such an occurrence?
a. All purchases exceeding specified dollar amounts should be approved by an official
who determines their compliance with budgetary requirements.
b. Important high-volume materials should be purchased from at least two different
sources to ensure supply protection.
c. The company should establish a conflict-of-interest policy that precludes the
acceptance of vendor gifts.
d. The company should undertake both (a) and (b). - Answers - c. The company
should establish a conflict-of-interest policy that precludes the acceptance of vendor
gifts.
1. What is the basic difference between a static budget and a flexible budget?
a. A static budget is based on rigid goals, whereas a flexible budget allows
management some latitude in meeting goals.
b. A static budget applies to an entire organization, whereas a flexible budget applies to
individual departments.
c. A static budget is based on standard accounting practices, whereas a flexible budget
is based on absorption costing practices.
d. A static budget is based on a specific level of output, whereas a flexible budget can
be adjusted for any level of output within the relevant range. - Answers - d. A static
budget is based on a specific level of output, whereas a flexible budget can be adjusted
for any level of output within the relevant range.
1. Which of the following statements is TRUE?
a. A balanced scorecard is primarily used to set an organization's communication
strategy.
b. Cause-and-effect logic should be built into a company's balanced scorecard
objectives.
c. A balanced scorecard requires the use of financial, customer, internal, and growth
perspectives only.
d. The balanced scorecard aims to measure all financial and non-financial components
of an organization. - Answers - b. Cause-and-effect logic should be built into a
company's balanced scorecard objectives.
1. Which of the following is NOT a concept underlying agency theory?
a. moral hazard
b. adverse selection
c. rationality
Yes You Can! is an after-school program for youth that allows students to create and
implement different community projects. It is run during the school year by a group of
retired business professionals and student volunteers. The majority of the funding for
the program comes from the provincial government.
The Board of Directors is comprised of teachers, parents, and a business professional.
Recently, one of the board members learned that the implementation of performance
measures is a not-for-profit best practice.
There are four categories of measures to consider: financial measures, internal
business measures, learning growth measures, and social impact measures. Which the
following would be a relevant social impact measure?
a) number of hours spent on community projects
b) number of returning volunteers on a given year
c) number of training sessions offered to volunteers
d) cost per student enrolled in the pro - Answers - a) number of hours spent on
community projects
1. An organization's production department wants to add a productivity measure to its
performance measurement system. Which of the following performance measures is the
department likely to choose?
a. return on investment
b. volume of output produced
c. units of output per direct labour hour
d. profit per unit of output produced - Answers - c. units of output per direct labour hour
1. Residual income (RI) is a better measure for evaluating the performance evaluation
of investment centre managers than ROI. Why?
a. Using RI eliminates the problems associated with measuring the asset base.
b. If RI is used as the measure, higher-return divisions will select investments meeting
the required rate of return.
c. When using ROI as the performance measure, results will be static as assets are
depreciated.
d. Using RI eliminates uncertainty about the appropriate required rate of return. -
Answers - b. If RI is used as the measure, higher-return divisions will select
investments meeting the required rate of return.
1. What is the audit committee's responsibility in preventing fraud in an organization?
a. The audit committee establishes and maintains internal controls to prevent fraud.
b. The audit committee provides recommendations on the control and governance
process.
, c. The audit committee Ensures that an appropriate system of internal control has been
established.
d. The audit committee assesses the risk of material misstatement due to fraud. -
Answers - c. The audit committee Ensures that an appropriate system of internal
control has been established.
1. A purchasing agent received an expensive gift from a vendor in return for directing a
significant amount of business to this vendor. Which of the following is the best course
of action to prevent such an occurrence?
a. All purchases exceeding specified dollar amounts should be approved by an official
who determines their compliance with budgetary requirements.
b. Important high-volume materials should be purchased from at least two different
sources to ensure supply protection.
c. The company should establish a conflict-of-interest policy that precludes the
acceptance of vendor gifts.
d. The company should undertake both (a) and (b). - Answers - c. The company
should establish a conflict-of-interest policy that precludes the acceptance of vendor
gifts.
1. What is the basic difference between a static budget and a flexible budget?
a. A static budget is based on rigid goals, whereas a flexible budget allows
management some latitude in meeting goals.
b. A static budget applies to an entire organization, whereas a flexible budget applies to
individual departments.
c. A static budget is based on standard accounting practices, whereas a flexible budget
is based on absorption costing practices.
d. A static budget is based on a specific level of output, whereas a flexible budget can
be adjusted for any level of output within the relevant range. - Answers - d. A static
budget is based on a specific level of output, whereas a flexible budget can be adjusted
for any level of output within the relevant range.
1. Which of the following statements is TRUE?
a. A balanced scorecard is primarily used to set an organization's communication
strategy.
b. Cause-and-effect logic should be built into a company's balanced scorecard
objectives.
c. A balanced scorecard requires the use of financial, customer, internal, and growth
perspectives only.
d. The balanced scorecard aims to measure all financial and non-financial components
of an organization. - Answers - b. Cause-and-effect logic should be built into a
company's balanced scorecard objectives.
1. Which of the following is NOT a concept underlying agency theory?
a. moral hazard
b. adverse selection
c. rationality
