ACNT 2402

1. Collecting the principal on a loan to another company would be reported on the investing activities section of the statement of cash flows. TRUE 2. Money received from issuing bonds payable would be included as part of a company's financing activities on the statement of cash flows. TRUE 3. The collection of a loan made to a supplier would be treated as an investing activity on a statement of cash flows. TRUE 4. Paying taxes to governmental bodies is considered a cash outflow in the...

1. Incremental analysis is generally the most complicated and least direct approach to decision making. TRUE 2. One assumption in CVP analysis is that the number of units produced and sold does not change. FALSE 3. Reynold Enterprises sells a single product for $25. The variable expense per unit is $15 and the fixed expense per unit is $5 at the current level of sales. The company's net operating income will increase by $10 if one more unit is sold. TRUE 4. One way to compute the tota...

1. Land held for possible plant expansion would not be included as an operating asset when computing return on investment (ROI). TRUE 2. When used in return on investment (ROI) calculations, operating assets do not include investments in land held for future use and investments in other companies. TRUE 3. A disadvantage of using ROI to evaluate performance is that it encourages the manager to reduce the investment in operating assets as well as increase net operating income. FALSE 4. Op...

1. Under variable costing, variable production costs are not treated as product costs. FALSE 2. Under variable costing, fixed manufacturing overhead cost is not treated as a product cost. TRUE 3. Under variable costing, product costs consist of direct materials, direct labor, and variable manufacturing overhead. TRUE 4. The costs assigned to units in inventory are typically lower under variable costing than under absorption costing. TRUE 5. Under variable costing, product cost does no...

1. Comparing a static planning budget to actual costs is a good way to assess whether variable costs are under control. FALSE 2. Directly comparing a static planning budget to actual costs helps to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled. FALSE 3. Fixed costs should be ignored when evaluating how well a manager has controlled costs. FALSE 4. Fixed costs should be included in a flexible b...

1. The use of a predetermined overhead rate in a job-order cost system makes it possible to compute the total cost of a job before production is begun. FALSE 2. If direct labor-hours is used as the allocation base in a job-order costing system, but overhead costs are not caused by direct-labor hours, then jobs with high direct labor requirements will tend to be undercosted relative to jobs with low direct labor requirements. FALSE 3. The formula for computing the predetermined overhead r...

1. Selling costs can be either direct or indirect costs. TRUE 2. A direct cost is a cost that cannot be easily traced to the particular cost object under consideration. FALSE 3. Property taxes and insurance premiums paid on a factory building are examples of period costs. FALSE 4. Conversion cost equals product cost less direct labor cost. FALSE 5. Thread that is used in the production of mattresses is an indirect material that is therefore classified as manufacturing overhead. TRUE ...

1. Comparing a static planning budget to actual costs is a good way to assess whether variable costs are under control. FALSE 2. Directly comparing a static planning budget to actual costs helps to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled. FALSE 3. Fixed costs should be ignored when evaluating how well a manager has controlled costs. FALSE 4. Fixed costs should be included in a flexible b...

True/False 1. Only future costs that differ between alternatives are relevant in decision making. Answer: T 2. Future costs that do not differ between the alternatives in a decision are avoidable costs. Answer: F 3. The book value of a machine, as shown on the balance sheet, is not relevant in a decision concerning the replacement of that machine by another machine. (Ignore taxes.) Answer: T 4. A cost that is relevant in one decision may not be relevant in another decision. Answer: T 5...