NES Profile: Business Education (309)

Content Domain II: Accounting, Personal Financial Management, and Quantitative Analysis

Competencies:

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Descriptive Statements:

Apply knowledge of basic terminology, principles, and methods of business accounting, including the accounting equation, and the types, characteristics, and purposes of various accounting documents.
Apply knowledge of the steps of the accounting cycle and the use of computerized software in accounting.
Apply procedures for generating and interpreting financial statements, calculating and interpreting financial ratios, and managing cash flow.
Apply methods and procedures used in payroll and inventory accounting.
Apply methods and procedures used in management accounting and evaluation of the financial performance of organizations.

Sample Item:

The table below shows the income statement for the Shamrock Bakery for the year ending December 31.

Shamrock Bakery Income Statement Year Ending December 31
Net Sales	blank	375,360 dollars
Cost of Goods Sold	blank	188,325
Gross Margin	blank	187,035
Operating Expenses
Selling Expenses	59,250 dollars	blank
General and Administrative Expenses	34,464	blank
Total Operating Expenses	blank	95,714 dollars
Income from Operations	blank	91,321 dollars
Other Revenue and Expenses
Interest Income	2,432 dollars	blank
Interest Expenses	4,358 dollars	blank
Excess of Other Expenses over Other Revenues	blank	1,926 dollars
Income Before Income Taxes	blank	89,395 dollars
Income Taxes	blank	14,323 dollars
Net Income	blank	75,072 dollars

According to the statement above, what is the approximate profit margin for the Shamrock Bakery for the past year?

Correct Response and Explanation (Show Correct ResponseHide Correct Response)

A. This question requires the examinee to apply procedures for interpreting financial statements. An income statement provides information regarding a company's net sales, income from various sources, and expenses. The profit margin of a company is defined as its net income divided by its net sales. In this case, the profit margin for Shamrock Bakery is the net income of 75,072 dollars divided by net sales of 375,390 dollars, or 20%.

0005 Understand personal finance and principles of consumer economics.

Descriptive Statements:

Apply principles of personal financial management and financial planning, including types, characteristics, advantages, and disadvantages of various investment options.
Analyze factors that affect the use of credit and strategies for personal credit management.
Apply knowledge of strategies for personal risk management and the types, characteristics, advantages, and disadvantages of various insurance products.
Apply knowledge of consumer economics and factors that affect employment opportunities, cost of living, and personal income.

Sample Item:

An individual charges a total of 1,800 dollars on one credit card during a one-month period. The credit card account has an APR of 16%. Which of the following represents the interest that the individual owes at the end of the month for these charges?

24 dollars
29 dollars
96 dollars
288 dollars

Correct Response and Explanation (Show Correct ResponseHide Correct Response)

A. This question requires the examinee to analyze strategies for personal credit management. The monthly interest that an individual is charged on his or her credit statement can be calculated by dividing the annual percentage rate (APR) by 12 and multiplying that number by the charges on the card for that month. In this case, the APR is 16%, so the monthly interest rate is 1.33%. The charges for the month are $1,800, so the interest on these charges would be .0133 times 1,800 dollars, or approximately $24.

0006 Understand basic techniques of computation and quantitative analysis in business.

Descriptive Statements:

Apply basic computational skills and statistical principles and techniques in various business contexts.
Interpret charts, tables, and graphs in various business contexts.
Apply basic principles of measurement, algebra, mathematical formulae, and other quantitative techniques in various business contexts.

Sample Item:

A salesclerk who sells farm machinery receives a wage of 7 dollars and 50 cents per hour plus a commission of 1.5% of the retail value of each item that he sells. During one week, he works 36 hours and sells three pieces of machinery for 28,000 dollars, 15,000 dollars, and 33,000 dollars. How much money will the salesclerk earn for that week?

870 dollars
1,140 dollars
1,410 dollars
2,700 dollars

Correct Response and Explanation (Show Correct ResponseHide Correct Response)

C. This question requires the examinee to apply basic computational skills in a business context. In this question, a salesclerk is paid both by the hour and on commission. The salesclerk works 36 hours during a week at a wage of 7 dollars and 50 cents per hour. Therefore, the salesclerk's income for the week from this hourly wage is 7 dollars and 50 cents times 36, or 270 dollars. During the week, the salesclerk sells three pieces of machinery for 28,000 dollars, 15,000 dollars, and 33,000 dollars for a total of 76,000 dollars in sales. The salesclerk earns a commission of 1.5% on his or her retail sales, so the commission earned for the week is .015 times 76,000 dollars, or 1,140 dollars. When added to the 270 dollars in wages earned for the week, the salesclerk has earned a total of 1,410 dollars.

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