ACC 321 Final Exam Study Guide - Key Economic Terms

Regression analysis is better than the high-low method of cost estimation because regression analysis:

A. Is mathematical.

B. Can provide greater precision and reliability.

C. Fits data into a mathematical equation.

D. Takes less time.

E. Is a statistical method.

Can provide greater precision and reliability

What is the difference between a simple linear regression and a multiple linear regression?

A. Multiple has more than one dependent variable.

B. Simple has a single independent variable.

C. Simple has more than one dependent variable.

D. There is no difference.

E. Multiple always includes a dummy variable.

Simple has a single independent variable.

Comp Company hired Smith & Smith to design a new computer-aided manufacturing facility. The new facility was designed to produce 300 computers per month. The variable costs for each computer are $660 and the fixed costs total $74,700 per month. The average cost per unit, if the facility normally expects to operate at eighty-five percent of capacity, is calculated to be (round to nearest cent):

A. $952.94.

B. $909.00.

C. $936.67.

D. $971.25.

E. $942.47.

$952.94.

The contribution income statement would require a firm to:

A) Separate costs into fixed and variable categories.

B) Separate revenue into different categories.

C) Round off amounts to the nearest dollar.

D) Ignore some estimated fixed expenses, such as depreciation, that don't involve a cash outlay.

E) Restructure its accounting system to accommodate activity-based costing.

Separate costs into fixed and variable categories.

The breakeven point is:

A) The sales volume at which revenues equal total cost plus an operating profit of zero.

B) The sales volume at which revenues equal variable cost and profit is zero.

C) The sales volume at which revenues equal fixed cost and profit is zero.

D) The point at which revenues meet the budget target.

E) The sales volume at which the total contribution margin exceeds total variable costs.

The sales volume at which revenues equal total cost plus an operating profit of zero.

A relatively low margin of safety ratio (MOS%) for a product is usually an indication that the product:

A) Is losing money.

B) Has a high contribution margin.

C) Is riskier than a product with a higher margin of safety ratio.

D) Is less risky than a product with a higher margin of safety ratio.

E) Requires heavy fixed cost to produce or sell.

Is riskier than a product with a higher margin of safety ratio

) In measuring the variable cost per unit, CVP analysis includes:

A) Only variable production costs.

B) Only variable distribution and selling costs.

C) Both variable production and variable selling/distribution costs.

D) Only variable and semi-variable production costs.

Both variable production and variable selling/distribution costs.

During the current year, OutlyTech Corp. expected to sell 24,000 telephone switches. Fixed costs for the year were expected to be $12,144,000, the unit sales price was budgeted at $3,200, and unit variable costs were budgeted at $1,440.

OutlyTech's margin of safety (MOS) in units is (rounded up to nearest whole number):

A) 18,270.

B) 17,100.

C) 20,880.

D) 16,970.

E) 22,190.

17,100.

) Kelvin Co. produces and sells socks. Variable costs are budgeted at $4 per pair, and fixed costs for the year are expected to total $90,000. The selling price is expected to be $6 per pair.

The sales units required for Kelvin Co. to make an after-tax profit (πA) of $15,000, given an income tax rate of 40%, are:

A) 47,500 units.

B) 56,500 units.

C) 65,661 units.

D) 60,000 units.

E) 57,500 units.

57,500 units.

Kelvin Co. produces and sells socks. Variable costs are budgeted at $4 per pair, and fixed costs for the year are expected to total $90,000. The selling price is expected to be $6 per pair.

The sales dollars required to make an after-tax profit (πA) for Kelvin Co. of $15,000, given an income tax rate of 40%, are calculated to be:

A) $336,000.

B) $339,000.

C) $342,000.

D) $360,000.

E) $345,000.

$345,000.

"Budgetary slack" occurs when:

A) Employees refuse to adhere to budgeted plans and operations.

B) The budget is so difficult to meet that employees slack-off from work.

C) An authoritative, or imposed, budgeting process is used.

D) To "meet" budget objectives, employees ask for resources in excess of what they need.

E) Employees ask for fewer resources than they need, in order to continuously improve

To "meet" budget objectives, employees ask for resources in excess of what they need.

A plan of dollar amounts to be spent on long-term projects is called a:

A) Cash budget.

B) Capital budget.

C) Rolling budget.

D) Research budget.

E) Rolling financial forecast.

Capital budget.

The budgeted income statement and budgeted balance sheet benefit a business primarily in terms of the ability of the organization to:

A) Meet stockholder requests for planning information from the organization.

B) Narrow the range of budgeted estimates to a manageable subset.

C) Deal with uncertainty inherent in the budgeting process.

D) Summarize the financial impact of the firm's financial and operating activities for an upcoming period.

E) Satisfy the disclosure requirements of generally accepted accounting principles (GAAP).

Summarize the financial impact of the firm's financial and operating activities for an upcoming period.

A "participative" budget is a(n):

A) Good two-way communication device.

B) Relatively inexpensive and efficient approach to budget preparation.

C) "Top down" management approach.

D) "Zero-based" approach to planning.

E) Alternative budgeting approach to traditional budgeting

Good two-way communication device.

Wild West Fashion expects the total costs of goods sold to be $30,000 in November and $60,000 in December for one of its young adult suits. Management also wants to have on hand at the end of each month 10 percent of the expected total cost of sales for the following month. What dollar amount of suits should be purchased in November?

A) $26,000.

B) $27,000.

C) $33,000.

D) $36,000.

E) $60,000.

$33,000.

LeMinton Company expects the following credit sales for the first five months of the year: January, $25,000; February, $40,000; March, $30,000; April, $36,000, May $40,000. Experience has shown that payment for the credit sales is received as follows: 60% in the month of sale, 25% in the first month after sale, 12% in the second month after sale, and the remainder is uncollectible. How much cash can LeMinton Company expect to collect in March as a result of credit sales (current and past)?

A) $18,000.

B) $28,600.

C) $30,000.

D) $31,000.

E) $32,040.

$31,000.

Oracle Supply Co. supply forecasts purchases of 15,000 widgets in June. It sells the widget at $12.00 per unit. The company has 1,000 units on hand on June 1. The desired ending inventory of widgets on June 30 is to be 20% lower than the beginning inventory. Total June sales for widgets are anticipated to be (in dollars):

A) $177,600.

B) $180,000.

C) $182,400.

D) $189,600.

E) $192,000.

$182,400.

One important short-term financial goal for a company is to earn the projected operating income for the period. The overall extent to which this goal was achieved is measured by comparing the actual operating income for the period to the:

A) Flexible-budget operating income for the period.

B) Prior period's operating income.

C) Income reflected in the company's balanced scorecard.

D) Master budget operating income.

E) Industry average operating income.

Master budget operating income.

The total operating income variance for a period reveals whether a company has achieved:

A) The sales level budgeted for the period.

B) An adequate return on investment (assets) during the period.

C) Control of basic business processes.

D) Control of total expenses for the period.

E) The master budgeted operating income for the period.

The master budgeted operating income for the period.

The "flexible budget" can best be described as a budget that adjusts:

A) Revenues for sales-dollar changes.

B) Budgeted revenues and expenses for changes in output (such as sales volume).

C) Expenses for changes in budgeted output between two periods.

D) For efficiency, but not selling price and cost, changes (variances) during a period.

E) For selling price and cost variances, but not efficiency variances.

Budgeted revenues and expenses for changes in output (such as sales volume).

A "standard cost" is a predetermined amount (e.g., cost) that:

A) Should be incurred under relatively efficient operating conditions.

B) Will be incurred for an operation or a specific objective.

C) Must occur for an operation or a specific objective.

D) Cannot be changed once it is established by management.

E) Is useful for planning and control, but not for inventory valuation purposes.

Should be incurred under relatively efficient operating conditions.

An organization planned to use $82.00 of direct materials per unit of output, but it actually used $80 per unit. During this period, the company planned to make 1,200 units, but produced only 1,000 units. The flexible budget amount for direct materials cost is:

A) $80,000.

B) $82,000.

C) $96,000.

D) $98,400.

E) $24,000.

$82,000.

A total variable cost variance (such as for direct materials) can be broken down into separate variances that evaluate:

A) Price (rate) and efficiency (quantity).

B) Units and cost.

C) Volume (output) and productivity.

D) Sales-volume versus sales-mix effects.

E) Efforts versus results.

Price (rate) and efficiency (quantity).

The difference between the actual sales volume for a period and the flexible-budget sales volume is equal to:

A) The total sales volume variance for the period.

B) The total production-volume variance for the period.

C) The sales price variance for the period.

D) The operating-income sales volume variance for the period.

E) Zero—by definition.

Zero—by definition.

The primary purpose of calculating standard cost variances each period is:

A) To achieve financial control regarding operating activities.

B) To facilitate the recording of manufacturing costs during a period.

C) To adjust reported income to flexible-budget income.

D) To diagnose the cause of operating problems as well as what should be done to correct such problems.

E) To minimize income tax liabilities.

To achieve financial control regarding operating activities.

Which of the following is not a plausible cause of a direct labor efficiency variance?

A) Poor scheduling of work.

B) Inadequate supervision of workers.

C) Materials used are different from those specified.

D) Failure to update the standard cost to conform to wage provisions in the union contract.

E) Batch sizes during the period were different from standard.

Failure to update the standard cost to conform to wage provisions in the union contract.

A manufacturer planned to use $82.00 of materials per unit produced, but in the most recent period it actually used $80.00 of material per unit produced. During this same period, the company planned to produce 1,200 units, but actually produced only 1,000 units. The flexible-budget variance for materials, to the nearest dollar, is:

A) $2,000 favorable.

B) Impossible to determine without additional information.

C) $14,000 unfavorable.

D) $16,400 unfavorable.

E) $2,400 unfavorable.

$2,000 favorable

Cost behavior for variable overhead is more difficult to predict than the behavior of direct materials or direct labor cost for all the following reasons except:

A) Multiple cost drivers are usually involved with variable overhead.

B) Direct material and direct labor contain no semi-variable component.

C) The variable portion of overhead must first be separated from the fixed portion.

D) Variable overhead is a relatively small part of total overhead.

Variable overhead is a relatively small part of total overhead.

A manufacturing company that uses standard costs and flexible budgets can break the total variable overhead cost variance into:

A) Volume and efficiency components.

B) Spending and efficiency variances.

C) Spending and production volume variances.

D) Spending variances only.

E) A selling price variance and a sales volume variance.

Spending and efficiency variances.

In a standard cost system, an unfavorable production-volume variance would result if:

A) There is an unfavorable labor efficiency variance.

B) There is an unfavorable labor rate variance.

C) Actual production is less than the "denominator volume" (that is, the volume level used to establish the fixed overhead application rate).

D) There is an unfavorable fixed manufacturing overhead spending variance.

E) Actual fixed overhead costs are greater than budgeted fixed overhead costs.

Actual production is less than the "denominator volume" (that is, the volume level used to establish the fixed overhead application rate).

Factors contributing to the fixed factory overhead spending variance can include all the following except:

A) Inaccurate budget estimates for these costs.

B) Inadequate control of fixed overhead costs.

C) Misclassification of cost items by the accounting system.

D) Operating inefficiency.

E) Unanticipated increases in costs such as factory insurance.

Operating inefficiency.

The difference between actual overhead costs incurred during a period and the overhead in the flexible budget based on the output for the period is called the:

A) Total overhead spending variance.

B) Total overhead efficiency variance.

C) Production-volume variance.

D) Overhead flexible-budget variance.

E) Total overhead variance.

Overhead flexible-budget variance.

In deciding whether to further investigate a variance, an organization needs to weigh the costs of investigation against the:

A) Ongoing time constraints.

B) Size of the variance.

C) Nature of the variance.

D) Difficulty of the investigation.

E) Anticipated benefits from the investigation.

Anticipated benefits from the investigation.

The difference between variable overhead cost incurred and the total standard variable overhead cost allowed for the output of the period is called the:

A) Total variable overhead variance.

B) Variable factory overhead spending variance.

C) Variable factory overhead rate variance.

D) Variable factory overhead efficiency variance.

E) Variable factory overhead usage variance.

Total variable overhead variance.

The difference between the actual fixed overhead cost incurred during a period and the budgeted fixed overhead cost for the period is the:

A) Fixed overhead efficiency variance.

B) Fixed overhead production-volume variance.

C) Fixed overhead spending variance.

D) Fixed overhead rate variance.

E) Fixed overhead sales-volume variance.

Fixed overhead spending variance.

Which one of the following journal entries in a standard cost system is needed at the end of the period to close out to Cost of Goods Sold an unfavorable production-volume variance?

A) A credit to Finished Goods Inventory, at standard cost.

B) A credit to Cost of Goods sold, at standard cost.

C) A credit to Cost of Goods sold, at actual cost.

D) A debit to the Production Volume Variance account.

E) A debit to Cost of Goods sold.

A debit to Cost of Goods sold.

A cost is not relevant for decision making if it:

A) Does not differ for each option available to the decision maker.

B) Changes from period to period.

C) Is a future cost.

D) Is a mixed cost.

E) Is a fixed cost.

Does not differ for each option available to the decision maker

Variable costs will generally be relevant for decision making because they:

A) Differ between decision options.

B) Are volume-based.

C) Have not been committed and are likely to differ between decision alternatives.

D) Differ between decision options and have been committed.

E) Measure opportunity cost.

Have not been committed and are likely to differ between decision alternatives.

"Committed" and "Sunk" costs are:

A) Generally not fixed.

B) Generally small in amount.

C) The result of prior bad decisions.

D) Not relevant for decision-making.

E) Recoverable in trade.

Not relevant for decision-making.

Depreciation expense is relevant in a decision only in the context of:

A) Time value of money.

B) Amortized values.

C) Reducing the tax liability of the organization.

D) Determining sunk costs associated with the decision problem.

E) Regulatory reporting.

Reducing the tax liability of the organization.

The decision to keep or drop products or services involves strategic consideration of all the following except:

A) Potential impact of the decision on the demand for the remaining products or services.

B) Potential impact of the decision on employee morale.

C) Potential impact of the decision on pricing of other products offered by the firm.

D) Growth potential of the firm.

E) The desired inventory levels of the product.

The desired inventory levels of the product.

One of the behavioral problems with relevant cost analysis is a possible overemphasis on:

A) Short-term goals.

B) Unit fixed costs.

C) Opportunity costs.

D) Strategic goals.

E) Goal congruency issues.

Short-term goals.

A boat, costing $108,000 and uninsured, was wrecked the very first day it was used. This boat can either be disposed for $11,000 cash and be replaced with a similar boat costing $110,000, or rebuilt for $98,000 and be brand new as far as operating characteristics and looks are concerned. A relevant cost analysis of the decision to replace the boat shows:

A) A cost equivalence between the two decision options.

B) An $11,000 net advantage associated with the decision to fix the old boat.

C) A $1,000 cost advantage associated with the decision to fix the old boat.

D) A $21,000 cost advantage associated with the decision to fix the old boat.

E) A $2,000 cost advantage associated with the decision to purchase a new boat.

A $1,000 cost advantage associated with the decision to fix the old boat.

A company owns equipment that is used to manufacture important parts for its production process. Because the equipment is repeatedly breaking down, the company plans to sell the equipment for $10,000 and select one of the following alternatives: (1) acquire new equipment for $80,000 and continue to manufacture the part at the same variable cost, or (2) purchase the parts from an outside company at $4 per part. In the short run, the company should analyze the two decision alternatives by comparing the variable cost of manufacturing the parts:

A) Plus $80,000, to the cost of buying the parts.

B) To the cost of buying the parts less $10,000.

C) Less $10,000, to the cost of buying the parts.

D) To the cost of buying the parts.

E) Plus $70,000, to the cost of buying the parts.

Plus $70,000, to the cost of buying the parts.

When there is limited capacity, the minimum acceptable price for a "special sales order" should equal the ________ from the product that is sacrificed plus the incremental costs of the product being produced.

A) Selling price

B) Full cost

C) Variable cost

D) Contribution margin

E) Gross profit

Contribution margin

In making sound capital budgeting decisions, the principal focus is on:

A) After-tax cash flows only.

B) Timing of the cash flows only.

C) After-tax cash flows and the timing of these cash flows.

D) Accounting-based measures of revenues and expenses.

E) Nonfinancial performance indicators of various projects under consideration.

After-tax cash flows and the timing of these cash flows.

The tax impact of a capital investment project (such as the replacement of a major piece of machinery) is present during:

A) The project initiation stage (i.e., time period 0) and final disposal stage only.

B) All stages (initiation, operation, and final disposal) of the project.

C) Only the project initiation stage and the operation stage.

D) The project operation stage only.

E) The project disposal stage only.

All stages (initiation, operation, and final disposal) of the project.

Which of the following is not a characteristic of the payback method for making capital budgeting decisions?

A) It is easy to calculate and comprehend.

B) It focuses primarily on liquidity, rather than profitability, of an investment project.

C) It can be considered a rough measure of risk.

D) It considers returns over the entire life of the project.

E) It requires estimates of after-tax cash inflows and after-tax cash outflows.

It considers returns over the entire life of the project.

The time value of money is explicitly considered in which one of the following capital budgeting method(s)?

A) Payback method.

B) Net present value (NPV) method.

C) Operating cash-flow method.

D) Book (accounting) rate of return method.

E) Residual income method.

Net present value (NPV) method

Given two projects with the same total (i.e., project lifetime) cash flow returns (CFRs), the internal rate of return (IRR) method of capital budgeting would favor a proposal having yearly CFRs that were:

A) Even.

B) Uneven.

C) Heavier towards the end of a proposal's life.

D) Heavier towards the beginning of a proposal's life.

E) Heavier towards the middle of a proposal's life.

Heavier towards the beginning of a proposal's life.

Which one of the following is an advantage of the payback method of evaluating capital investment proposals?

A) It provides a (rough) measure of project risk.

B) It is linearly related to the net present value (NPV) of a proposed project.

C) It considers all possible future cash flows of the project.

D) It applies conventional discounting procedures to anticipated future cash flows.

E) It allows managers to choose between competing projects with different useful lives.

It provides a (rough) measure of project risk.

For a capital investment project, a net present value (NPV) of $500 indicates that the:

A) Project's true or economic rate of return exceeds the hurdle (discount) rate.

B) Project's internal rate of return (IRR) is likely unacceptable.

C) Present value of cash outflows exceeds the present value of after-tax cash inflows.

D) Total cash outflows for the project are expected to be $500.

E) Internal rate of return (IRR) exceeds the accounting rate of return (ARR) on the project.

Project's true or economic rate of return exceeds the hurdle (discount) rate.

Two investments have the same total cash inflows and the same payback period. Therefore:

A) These two investments are equally desirable.

B) These two investments must be identical in terms of the present value of the cash inflows.

C) The payback period method can help decision makers choose between these two investments.

D) One pattern of cash inflows may, in a present value sense, be preferable to the other investment's pattern of cash inflows.

E) Most likely, these two investments required approximately the same initial investment.

One pattern of cash inflows may, in a present value sense, be preferable to the other investment's pattern of cash inflows.

Omaha Plating Corporation is considering purchasing a machine for $1,500,000. The machine is expected to generate a constant after-tax income of $100,000 per year for 15 years. The firm will use straight-line (SL) depreciation for the new machine over 10 years with no residual value.

What is the payback period for the new machine?

A) 4 years.

B) 5 years.

C) 6 years.

D) 10 years.

E) 15 years.

6 years.

Omaha Plating Corporation is considering purchasing a machine for $1,500,000. The machine is expected to generate a constant after-tax income of $100,000 per year for 15 years. The firm will use straight-line (SL) depreciation for the new machine over 10 years with no residual value.

What is the estimated accounting (book) rate of return (rounded to two decimal places) on the initial investment?

A) 6.67%.

B) 10.00%.

C) 13.33%.

D) 16.67%.

E) 23.33%.

6.67%.

Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the net after-tax cash inflow in Year 1 from the investment?

A) $72,000.

B) $96,000.

C) $108,000.

D) $112,000.

E) $120,000.

$96,000.

Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the amount of net income (after taxes) in Year 2 of the investment? Round to the nearest whole number.

A) $24,000.

B) $36,000.

C) $48,000.

D) $60,000.

E) $120,000.

$36,000.

Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the payback period for the new machine (rounded to nearest one-tenth of a year)? (Assume that the cash inflows occur evenly throughout the year.)

A) 2.5 years.

B) 2.7 years.

C) 3.1 years.

D) 3.6 years.

E) 4.2 years.

3.1 years.

Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

Rounded to the nearest whole percentage (e.g., 31.349% = 31%), what is the annual accounting (book) rate of return (ARR) based on the initial investment?

A) 12%.

B) 20%.

C) 32%.

D) 36%.

E) 40%.

12%.

Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the net present value (NPV) of the investment, rounded to the nearest whole dollar? (The PV annuity factor for 5 years, 10% is 3.791.) Assume that the cash inflows occur at year-end.

A) ($270,480).

B) $63,936.

C) $109,428.

D) $154,920.

E) None of these.

$63,936.

Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the approximate internal rate of return (IRR) of the investment? (NOTE: To answer this question, students must have access to Table 2 from Appendix C, Chapter 12.) Assume that annual after-tax cash flows occur at year-end.

A) Less than 12%.

B) Somewhere between 12% and 14%.

C) Somewhere between 15% and 20%.

D) Somewhere between 20% and 25%.

E) Over 25%.

Somewhere between 15% and 20%.

Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the present value payback period, rounded to one-tenth of a year? (Note: PV factors for 10% are as follows: year 1 = 0.909; year 2 = 0.826; year 3 = 0.751; year 4 = 0.683; year 5 = 0.621; the PV annuity factor for 10%, 5 years = 3.791. Assume that annual after-tax cash inflows occur at year-end.)

A) 2.5 years.

B) 3.0 years.

C) 3.3 years.

D) 3.6 years.

E) 4.0 years.

4.0 years.

If a company is faced with limited capital funds for investment (i.e., the company faces capital rationing), the best general method to employ to assess individual project profitability is:

A) Cash-flow bailout.

B) Net present value (NPV).

C) Payback.

D) Discounted payback.

E) Profitability index (PI).

Profitability index (PI).