AP AP Financial Management & Budgeting 3

Question 1

What is the difference between a direct cost and an indirect cost?

Accepted Answer

Direct costs are traceable to a specific product or project; indirect costs are shared across multiple cost objects

Answer

Direct costs can be directly attributed to a specific cost object, while indirect costs (overhead) benefit multiple cost objects and must be allocated.

Question 2

Which budget type focuses on expected revenues and expenses for a specific project rather than the whole organization?

Accepted Answer

Project budget

Answer

A project budget outlines the estimated costs and revenues associated with a specific project over its defined timeline.

Question 3

What does ROI stand for and how is it calculated?

Accepted Answer

Return on Investment; (Net Profit / Cost of Investment) × 100

Answer

ROI (Return on Investment) is calculated by dividing the net profit from an investment by its cost and expressing the result as a percentage.

Question 4

In accounts payable, what is a three-way match?

Accepted Answer

Verifying that the purchase order, receiving report, and vendor invoice all agree before paying

Answer

A three-way match is a control process that compares the purchase order, goods receipt (receiving report), and vendor invoice to ensure consistency before payment is authorized.

Question 5

What is the purpose of depreciation in financial reporting?

Accepted Answer

To allocate the cost of a long-term asset over its useful life

Answer

Depreciation systematically allocates the cost of a tangible asset across the periods in which it provides economic benefits.

AP - Advance Placement Practice Test

AP - Advance Placement Practice Test

AP AP Financial Management & Budgeting 3