Identify each statement as True or False.

a. Having a bonus based on the direct materials purchase price variance can motivate purchasing department personnel to buy inferior goods.

b. A master budget is typically a long-range strategic plan covering two years. Master budgets provide an accurate control number to evaluate performance and award bonuses.

c. Government agencies should compare actual results against flexible budgets for actual services provided to properly determine efficiency.

d. The balanced scorecard attempts to provide a more comprehensive picture of a company’s goals by including both financial and nonfinancial measures of performance and relating the performance measures to the strategic goals of the company.

e. In today’s manufacturing environment, which features a significant amount of automation, standard cost systems should emphasize understanding sources of non–value-added activities related to materials, labor, and especially indirect production costs (overhead).

f. The difference between available capacity and used capacity is known as the fixed overhead spending variance.

g. All unfavorable variances should be investigated because they can be controlled by management. Cost-benefit concerns imply that management should not waste time on analyzing any favorable variances.

h. Redesigning processes to achieve lower defects and forging relations with the right suppliers are examples of prevention activities.

i. Carrying costs of inventory, waiting time, and costs of moving inventory are theoretically non–value-added costs that can be eliminated.

j. Companies should focus on the lowest quoted initial purchase cost from suppliers and reward purchasing managers for achieving large favorable price variances.

k. Activity-based management can be used to determine which non–value-added activities can be eliminated and how to better function in a competitive environment.