Which of the Following Is an Example of a Preventive

question 92

Multiple Choice

Which of the following is an example of a preventive control?

• A) management level reviews of actual performance versus budgets
• B) credit manager following up on an exception report showing sales made to a customer who has exceeded their credit limit
• C) sales invoices are automatically priced using the information in the price master file
• D) a bank reconciliation

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Definitions:

Natural Monopoly

A situation in which a single firm can produce the entire market output at a lower cost than could several firms, making it most efficient for a single firm to serve the entire market.

Average Total Cost

The total cost of production divided by the total quantity of output produced.

Legal Cartel Theory

A concept where regulations permit or create conditions for the existence of cartels, which are agreements between competing firms to control prices or markets.

Public Interest Theory

Suggests that regulations are supplied in response to the demand of the public for the correction of inefficient or inequitable market practices.