Q2-1. (a) Cost is the current monetary value of
economic resources given up or to be
given up in obtaining goods and services.
Economic resources may be given up by
transferring cash or other property,
issuing capital stock,
Q16-1. A capital expenditure is an expenditure
intended to benefit future periods. It is normally associated with the acquisition or
improvement of plant assets. The real distinction between a capital and revenue expenditur
Q17-1. Responsibility accounting is a program
encompassing all operating management for
which the accounting, cost, or budget divisions
provide technical assistance in the form of
daily, weekly, or monthly control reports.
Q19-1. When standard costs are not incorporated,
they may be used for the purposes of pricing,
budgeting, and controlling cost; but if they are
not used for inventory costing, the advantages from the saving of clerical effo
Q18-1. Standard costs are the predetermined costs
of manufacturing products during a specific
period under current or anticipated operating
conditions. Standards aid in planning and
Q18-2. A few uses
Q20-1. Direct costs are direct materials, direct labor,
and other costs directly assignable to a product.
Direct costing is a procedure by which only
prime costs plus variable factory overhead
are assigned to a product or i
DIRECT COSTING AND COST-VOLUME-PROFIT ANALYSIS
Question Nos. 7-10, 11-13, 27, 28, 32, and 33 are AICPA adapted.
Question Nos. 14-16, 25, 26, 29, 30, 31, and 34 -35 are CIA adapted.
costing procedure that
PLANNING FOR CAPITAL EXPENDITURES
Question No. 4 is AICPA adapted.
Question No. 3 is ICMA adapted.
Question No. 2 is CIA adapted.
The type of costs presented to management for a decision to replace equipment
should be limit
Q22-1. Effective planning and control of capital
expenditures are important because:
(a) financial risk is increased by long-term
(b) the magnitude of capital expenditures is
substantial and the penalties for u
Q21-1. Differential cost is the difference in the cost of
alternative choices. The economist calls such
costs marginal, and the engineer calls them
Q21-2. Marginal cost (or differential cost) is the cost
ECONOMIC EVALUATION OF CAPITAL EXPENDITURES
Question Nos. 8-11, 15-19, 21, 28, 30, and 31 are AICPA adapted.
Question Nos. 12, 13, 20, and 27 are ICMA adapted.
Question Nos. 14, 22-26, and 29 are CIA adapted.
In order to ca
DECISION MAKING UNDER UNCERTAINTY
Question Nos. 1, 2, and 19 are AICPA adapted.
Question Nos. 4-6, 8-11, and 14-17 are ICMA adapted.
Question Nos. 7, 12, 13, and 18 are CIA adapted.
Which of the following best identifies t
Q24-1. Before making a decision under conditions of
uncertainty, a manager should try to assess the
probabilities associated with alternative possible outcomes in order to determine the probable result of each alternative a
Q15-1. Profit planning encompasses (a) sales estimating and sales planning programs; (b) budgeting
programs for control of all costs, both manufacturing and nonmanufacturing; (c) planning and
programming additions to
Compared to traditional costing, ABC is a
more thorough application of cost traceability. Traditional costing traces only direct
material and direct tabor to ou
Q1-1. Planning is the development of a consistent
set of actions, resources, and measurements
by which the achievement of objectives can
be assessed. Planning takes into account the
interactions between the organization and
Q4-1. The five parts are:
(a) Direct materials section
(b) Direct labor section
(c) Factory overhead
(d) Work in process inventories
(e) Finished goods inventories
Q4-2. The balance sheet is a statement of financial
Q5-1. The cost attached to a product is an amount
assigned by the costing methods usedan
amount controlled by the circumstances,
assumptions, and limitations of the method
under which it was compiled. Product costs
The total dollar amount of a fixed cost is constant at different levels of activity within the
relevant range, but fixed cost per unit of activity varies. In contrast, the total amount of a
Q7-1. Quality costs may be grouped into the following three classifications:
1. Prevention costs are the costs incurred to
prevent product failure. They include the
cost of designing high quality products
and production syst
Q6-1. The basic objective of process costing is to
determine the costs of the products manufactured by the company. Determining the cost of
the products manufactured is necessary in
order to properly cost ending inventories
Q9-1. The most frequently used documents in the
procurement and use of materials are purchase requisitions, purchase orders, receiving reports, materials requisitions, bills of
materials, and materials ledger records.
Q8-1. Joint products represent two or more products separated in the course of the same processing operation, with each product having
such relative value that no one product can be
designated as a major product.
Q10-1.The purpose of a JIT system is to minimize
the levels of raw materials and work in
process inventory investments, while improving the overall manufacturing process. The
intent is to pull inventory through the system
Q12-1. Supervisors salaries, indirect labor, overtime
premium, supplies, indirect materials, payroll
tax, factory insurance, and depreciation.
Q12-2. The most important reason for variation in factory overhead is the presen
Departmental overhead rates are preferred
to a single rate because they improve the
control of overhead by department heads
responsible for controllable overhead, and
they increase the accuracy of product and
Q11-1. Yes, to the extent that it is practical to measure the value added or the productivity of a
worker. However, measurement of the contribution of each individual is never exact. Also,
a business cannot pay more for mat
Q23-1. The weighted average cost of capital is computed by the following steps:
(a) Calculate each component of capital as a
percentage of total capital.
(b) Calculate the after-tax cost of each individual capital component