Identify the differences among relevant costs for short-term and long-term production output decisions.

The purpose of evaluating performance in the decision process is to provide feedback.

TRUEFALSE

Anticipated future costs that differ with alternative courses of action are known as relevant costs.

TRUEFALSE

The total cost difference between two separate alternatives in a decision making process is the net relevant cost.

TRUEFALSE

Each item included in the relevant-cost analysis should differ according to the alternative being considered and be an expected future revenue or cost.

TRUEFALSE

Understand the four purposes for period cost allocation and the four criteria to justify the method chosen to allocate the non-manufacturing period costs.

The allocation of one particular cost must satisfy all four justifications of cost allocation.

TRUEFALSE

Indirect costs typically constitute a large percentage of the costs assigned to cost objects.

TRUEFALSE

Full product costing requires the recovery of all costs generated by all business functions in the value chain.

TRUEFALSE

The costs of designing and implementing sophisticated cost allocation systems are usually not very visible.

TRUEFALSE

Scrap frequently has a zero sales value.

TRUEFALSE

There are no logical reasons for allocating joint costs.

TRUEFALSE

1Select a method and allocate revenue from a product bundle to its distinct components.

Revenue allocation occurs where revenues can be identified with an individual product (service, customer, and so on) in an economically feasible (cost-effective) way.

TRUEFALSE

Revenue tracing results in a more accurate assignment of revenues to products, than does revenue allocation.

TRUEFALSE

A bundled product is a package of two or more products or services, sold for a single price, where the individual components of the bundle may also be sold as separate items, each with their own stand-alone prices.

TRUEFALSE

The stand-alone revenue allocation method pertains to products that cannot be bundled together.

TRUEFALSE

An example of a bundled product is when a resort hotel charges a single price for lodging, food, and recreational activities.

TRUEFALSE

Chapter 17Process Costing

1Distinguish process- from job-costing allocation methods within the decision framework, and apply the weighted-average method of inventory valuation when the beginning work-in-process inventory is zero.

The primary difference between job costing and process costing is the extent of averaging used to compute unit costs of products or services.

TRUEFALSE

Standard costing can be used in process costing systems.

TRUEFALSE

Operating personnel must be able to estimate the percentage of work-in-process completed in process costing.

TRUEFALSE

Equivalent units measure output in terms of the physical quantities of each of the inputs (factors of production) that have been consumed by the units.

TRUEFALSE

Process costing is extremely useful when there are a variety of products produced, as compared to the production of a single product.

TRUEFALSE

Chapter 18Spoilage, Rework, and Scrap

1Distinguish among spoilage, rework, and scrap, and apply the appropriate methods to account for normal and abnormal spoilage.

Scrap products may be reprocessed and subsequently sold as a finished good.

TRUEFALSE

The costs of abnormal spoilage are written off as a loss; however, the costs of normal spoilage are treated as part of cost of goods manufactured.

TRUEFALSE

Normal spoilage is avoidable and controllable.

TRUEFALSE

Spoilage issues arise in accounting for process costing but not in accounting for job costing.

TRUEFALSE

An item classified as spoilage has no value.

TRUEFALSE

Chapter 19Inventory Cost Management Strategies

1Evaluate relevant data and decide on the economic order quantity (EOQ).

Ordering costs consist of the costs of goods acquired from suppliers including freight and transportation costs.

TRUEFALSE

Purchasing costs consist of the costs of preparing and issuing a purchase order.

TRUEFALSE

Carrying costs arise when a customer demands a unit of product and that unit is not readily available.

TRUEFALSE

The economic order quantity decision model aids in the calculation of the optimal quantity of inventory to order.

TRUEFALSE

The reorder point is simplest to compute when either demand or lead time is certain.

TRUEFALSE

Chapter 20Capital Budgeting: Methods of Investment Analysis

1Apply the concept of the time value of money to capital budgeting decisions.

In capital budgeting decisions, revenues and costs are analyzed over the short-run.

TRUEFALSE

Accrual accounting measures income on a year-to-year basis.

TRUEFALSE

Cost systems with an exclusive period-by-period focus are more likely to identify project costs over multiple periods.

TRUEFALSE