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SuppA - Supplement A Financial Analysis Supplement A...

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Supplement A - Financial Analysis Supplement A Financial Analysis True / False Questions 1. Fixed cost per unit of output remains constant regardless of the Level of output. FALSE Level: Medium 2. Fixed cost remains constant regardless of the Level of output. TRUE Level: Easy 3. Variable cost changes directly in proportion with changes in the Level of output. TRUE Level: Easy 4. Variable cost per unit is constant regardless of the Level of output. TRUE Level: Medium 5. Fixed cost includes variable overhead expenses such as utility bills. FALSE Level: Easy SuppA-1
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Supplement A - Financial Analysis 6. Variable costs include expenses such as rent, property taxes, insurance payments and salaries of top management. FALSE Level: Easy 7. Sunk costs are expenses or investments that continue to exist and do not change regardless of the decision. TRUE Level: Easy 8. Sunk costs are the cost of repaying certain bonds through sinking funds. FALSE Level: Easy 9. Opportunity cost is the benefit forgone resulting from choosing an inferior course of action. TRUE Level: Easy 10. Opportunity cost is the price of obtaining an opportunity. FALSE Level: Easy SuppA-2
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Supplement A - Financial Analysis 11. Risk in is inherent in any investment. TRUE Level: Easy 12. A risk-free investment is called "sure-fire" because the promised returns are certain. FALSE Level: Easy 13. Expected value is the expected outcome multiplied by the probability of its occurrence. TRUE Level: Easy 14. Expected value is the anticipated selling price of a fixed asset, like corporate real estate. FALSE Level: Easy 15. The economic life of a machine is the period over which it provides the best method for performing its task. TRUE Level: Easy 16. Depreciation is a method for allocating costs of capital equipment to future time periods when it will continue to be used. TRUE Level: Easy SuppA-3
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Supplement A - Financial Analysis 17. Depreciation is an annual assessment reflecting management's judgment about the gradual wasting away of assets as they become older. FALSE Level: Easy 18. Amortization and depreciation have different meanings. FALSE Level: Easy 19. The purpose if the sum-of-the-years'-digits (SYD) method is to reduce the book value of an asset rapidly in early years and at a lower rate in the later years of its life. TRUE Level: Easy 20. Activity-based costing techniques have been developed to alleviate accounting problems by refining overhead allocation processes to more directly reflect actual proportions of overhead consumed by the production activity. TRUE Level: Easy 21. While cost-driver selection is an informative part of activity-based costing, it is not a required part of the methodology. FALSE Level: Easy SuppA-4
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Supplement A - Financial Analysis 22. Activity-based costing is sometimes referred to as transaction costing.
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