Amount of fixed overhead cost

Question

Write true or false for the following statements with proper reasons.

Question 1: Product costs become expenses in the period they are purchased.

Question 2: The difference in the amount of fixed overhead cost that is expensed to the income statement under absorption and variable costing is solely attributable to the difference between the number of units produced during the period and the number of units sold.

Question 3: Cost managers almost always have training as accountants.

Question 4: Refraining from disclosing confidential information acquired in the course of their work is an example of the ethical standard of competence for Management Accountants.

Question 5: Job costing or job-order costing treats each individual job as the unit of output and assigns, or allocates costs to each job as resources are used.

Question 6: A credit to the Work-in-Process account will normally be accompanied by a debit to the Finished Goods account.

Question 7: Production cycle time is the elapsed time between starting and finishing a process, including any time to correct mistakes.

Question 8: The Malcolm Baldrige Quality Award is awarded to companies around the world that excel in quality improvement.

Question 9: If a company operates at less than full capacity, facility-level costs will have unused resources.

Question 10: Top managers in an organization should be responsible for analyzing the data gathered in an activity-based-management study.

Question 11: Activity-based costing is an approach that first assigns costs to activities and then to goods and services.

Question 12: Increases or decreases of a cost-driver base cause increases or decreases in the level of activity performed.

Question 13: Return on Sales is operating income divided by total assets.

Question 14: Common-size customer profitability statements show the dollar amount of operating income by customer type.

Question 15: The net realizable value (NRV) of a product is its sales revenue less all allocated costs.

Question 16: The first step in the constant gross margin percentage method is to compute the total gross margin percentage of all products.

Question 17: If the degree of completion of the ending inventory is underestimated, a company's profits will be overstated for the period.

Question 18: Only the weighted-average method is allowed for external financial reporting.

Question 19: In the formula, "TC = F + VX", V is considered to be the cost driver.

Question 20. The use of multiple independent variables usually increases the proportion of the variation in the dependent variable explained by the cost prediction equation.

Question 21. The direct method of cost allocation allocates the cost of support-service departments to all departments including other service departments.

Question 22. When using the step-method of allocation, once the organization makes an allocation from a support-service department, no subsequent allocations are made back to that department.

Question 23. If past financial records are used to help determine the financial analysis for a project, the financial records should be adjusted for inflation.

Question 24. The present value of receiving $1 each year for the next three years would be the same as receiving $3 at the end of three years.

Question 25. Variable costs are always relevant in decision making and are the only costs that should be considered.

Question 26. In making special order pricing decisions, generally only unit costs and batch-costs need to be considered assuming excess capacity exists.

Question 27. The Theory of Constraints states that companies should emphasize the most productive aspects of the value chain as they are the most profitable.

Question 28. Operating Leverage is profit divided by the contribution margin.

Question 29. A financial planning model is a set of mathematical relationships expressing interactions between the various operational, financial, and environmental events that determine the overall results of an organization's activities.

Question 30. Budgetary padding is the difference between the revenue or cost projections provided and an actual revenue or cost.

Question 31. When computing the direct-material price variance, it is not important to distinguish between the quantity purchased and the quantity use.

Question 32. A manager will be interested in investigating material price variances where the price of the material is set by an international market and tied into a long-term contract.

Question 33. The fundamental purpose of a responsibility accounting system is to help an organization reap the benefits of decentralization while minimizing the costs.

Question 34. The manager of an investment center is held accountable for the subunit's profits and the invested capital used by the subunit to generate its profit.

Question 35. When there is excess production capacity, there is no opportunity cost to the company and the transfer price under the general rule is only the outlay cost.

Question 36. In situations when the producing division has excess capacity or the external market is imperfectly competitive, the general rule and the external market price will yield the same transfer price.

Question 37. Customer value measures the revenues generated per customer.

Question 38. Critical success factors are important key performance indicators in a corporation.