Determine whether the following statements are correct and state why:

(a) The historical cost of inventory is $60 000 at year-end. When it is converted to constant end-of-year dollars by multiplying by 110/100 to get $66 000, the $66 000 is still the historical cost of the inventory.

(b) Last month the quantity variance was determined to be $12,000 favourable, and this month it is $24 000 favourable: therefore, the efficient use of materials has been doubled.

(c) On the basis of saving income tax, Company X ascertained that the diminishing-balance depreciation method is better than the straight-line method. By using the diminishing-balance method for depreciation rather than the straight-line method, Company X saved $10 000 in income tax this year; therefore, the former method is 10000 times better than the latter.

(d) On the basis of the amount of assets, we can say that Company X is twice as large as Company Y, because its total assets amount to $1 000 000 compared with $500 000 for Y.

AppendixLO1