Ch- 7
26. Which cost is not charged to the product under variable costing?
a. direct materials.
b. direct labor.
c. variable manufacturing overhead.
d. fixed manufacturing overhead.
27. Which cost is not charged to the product under absorption costing?
a. direct materials.
b. direct labor.
c. variable manufacturing overhead.
d. fixed administrative expenses.
28. Absorption costing
a. is required under GAAP.
b. is required for external reporting purposes.
c. allows income to be manipulated through production decisions.
d. is (does) all of the above (a, b, and c).
Ch 8
29. The cost-plus pricing approach’s major advantage is
a. it considers customer demand.
b. that sales volume has no effect on per unit costs.
c. it is simple to compute.
d. it can be used to determine a product’s target cost.
30. Factors that can affect pricing decisions include all of the following except
a. cost considerations.
b. environment.
c. pricing objectives.
d. all of these are factors.
31. In most cases, prices are set by the
a. customers.
b. competitive market.
c. largest competitor.
d. selling company.
32. A company must price its product to cover its costs and earn a reasonable profit in
a. all cases.
b. its early years.
c. the long run.
d. the short run.
Ch 9
TRUE-FALSE STATEMENTS
33. Budgets represent management’s plans in financial terms. TRUE
34. Budgets promote efficiency and serve as a deterrent to waste. TRUE
35. A budget can be a means of communicating a company’s objectives to external parties. FALSE
36. A budget facilitates coordination of activities within the business but is a poor tool for evaluating performance. FALSE
37. A budget is more beneficial if accepted by lower level management. FALSE
Ch 10
38. Budget reports comparing actual results with planned objectives should be prepared weekly to be most effective. FALSE
39. If actual results are different from planned results by a large amount, the difference should be investigated by management to achieve effective budgetary control. TRUE
40. Cash budget reports are often prepared daily, whereas others are prepared less frequently depending on the activities being monitored. FALSE
41. The master budget is the basis of developing flexible budgets. TRUE
42. A flexible budget is more useful in evaluating a manager’s performance than a static budget. TRUE
43. A static budget is one that is geared to the most profitable level of activity for a company. TRUE
Ch 11
44. Inventories cannot be valued at standard cost in financial statements. FALSE
45. Standard cost is the industry average cost for a particular item. FALSE
46. A standard is a unit amount, whereas a budget is a total amount. TRUE
47. Standard costs may be incorporated into the accounts in the general ledger. TRUE
48. An advantage of standard costs is that they simplify costing of inventories and reduce clerical costs. TRUE
49. Setting standard costs is relatively simple because it is done entirely by accountants. TRUE
50. Normal standards should be rigorous but attainable. TRUE
