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Advanced Cost Accounting

T/F 1. Product costs become expenses in the period they are purchased.

T/F 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.

T/F 3. Cost managers almost always have training as accountants.

T/F 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.

T/F 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.

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

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

T/F 8. The Malcolm Baldrige Quality Award is awarded to companies around the world that excel in quality improvement.
T/F 9. If a company operates at less than full capacity, facility-level costs will have unused resources.

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

T/F 11. Activity-based costing is an approach that first assigns costs to activities and then to goods and services.

T/F 12. Increases or decreases of a cost-driver base cause increases or decreases in the level of activity performed.

T/F 13. Return on Sales is operating income divided by total assets.

T/F 14. Common-size customer profitability statements show the dollar amount of operating income by customer type.

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

T/F 16. The first step in the constant gross margin percentage method is to compute the total gross margin percentage of all products. (Appendix)

T/F 17. If the degree of completion of the ending inventory is underestimated, a company's profits will be overstated for the period.

T/F 18. Only the weighted-average method is allowed for external financial reporting.

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

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

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

T/F 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.

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

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

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

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

T/F 28. Operating Leverage is profit divided by the contribution margin.

T/F 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.

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

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

T/F 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.

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

T/F 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.

T/F 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.

T/F 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.

T/F 37. Customer value measures the revenues generated per customer.

T/F 38. Critical success factors are important key performance indicators in a corporation.

Solution Preview

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

F 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.

F 3. Cost managers almost always have training as accountants.

T 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.

T 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.

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

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

T 8. The Malcolm Baldrige Quality Award is awarded to companies around the world that excel in quality improvement.
T 9. If a company operates at less than full capacity, facility-level costs will have unused resources.

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

T11. Activity-based costing is an approach that ...

Solution Summary

Advanced Cost Accounting True-False questions are answered and explained in detail.

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