Level B
This cognitive level includes items that test for the application of material to novel situations and the ability to analyze or break down information into its component parts. Items that require application or analysis are included in this level.
Application: Items in this category measure understanding of ideas or content to a point where you can apply that understanding to an entirely new situation. The objective of these items is to test whether you can use the knowledge in an appropriate manner in a real-life situation.
Example:
The balance sheet for Miller Industries shows the following.
Cash $ 8,000,000
Accounts Receivable 13,500,000
Inventory 7,800,000
Prepaid Expenses 245,000
Property, Plant, & Equipment 4,700,000
Based on this information, what are the Total Current Assets for this firm?
a. $21,500,000.
b. $29,300,000.
c. $29,545,000.
d. $34,245,000.
Key = c
Rather than rely on memory or comprehension alone, the situation presented in this item requires you to draw on your knowledge of the calculation of Total Current Assets and apply that knowledge to the particular data presented in the problem. Other items dealing with this level of testing might ask you to identify a specific situation requiring a certain course of action, or the most appropriate procedure or steps to apply to a particular problem.
Analysis: Analysis involves the ability to break down material into its component parts so that its organizational structure can be understood. It involves the ability to recognize parts, as well as the relationships between those parts, and to recognize the principles involved. Items in this category ask you to differentiate, discriminate, distinguish, infer, and determine the relevancy of data.
Example:
A firm is considering the implementation of a lock-box collection system at a cost of $80,000 per year. Annual sales are $90 million, and the lock-box system will reduce collection time by 3 days. The firm currently is in debt for $3,000,000. If the firm can invest the funds designated for the lock-box at 8%, should it use the lock-box system? Assume a 360-day year.
a. Yes, it will produce a savings of $140,000 per year.
b. Yes, it will produce a savings of $60,000 per year.
c. No, it will produce a loss of $20,000 per year.
d. No, it will produce a loss of $60,000 per year.
Key = c
In this item, you are presented with a novel situation, and asked to identify the data that are relevant to the problem at hand, which in this case involves the determination of the savings or loss of implementing a lock-box type of collection system. You are required to apply principles to determine savings or loss, and then to make an analysis of the outcomes of the alternative courses of action.
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