Gemology Certification Financial Management & Budgeting 3

Question 1

A gemology studio plans to buy a new spectroscope for $6,000 that will last 5 years with no salvage value. What is the annual straight-line depreciation?

Accepted Answer

$1,200

Answer

Annual depreciation = ($6,000 - $0) / 5 years = $1,200 per year.

Question 2

Which budgeting approach requires every expense to be justified from scratch each period, rather than basing it on prior-year figures?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting starts from zero each period and requires justification for all expenditures, not just changes from the prior budget.

Question 3

A gem dealer needs to maintain a minimum cash balance of $5,000. If projected cash inflows are $18,000 and outflows are $16,500, does the dealer need external financing?

Accepted Answer

No, net cash of $1,500 covers the minimum

Answer

Net inflows of $1,500 fall short of the $5,000 minimum balance, so $3,500 in external financing would be required if starting from zero.

Question 4

In a gem retail business, which cost is MOST likely to be variable rather than fixed?

Accepted Answer

Cost of stones purchased for resale

Answer

The cost of stones purchased for resale rises and falls directly with sales volume, making it a variable cost.

Question 5

A gemologist earns $95,000 in gross revenue, with COGS of $52,000 and operating expenses of $28,000. What is the net operating income?

Accepted Answer

$15,000

Answer

Net operating income = $95,000 - $52,000 - $28,000 = $15,000.

Gemology Certification Practice Test

Gemology Certification Practice Test

Gemology Certification Financial Management & Budgeting 3