Indicate your agreement with each of the following statements by checking the box to the left of it. If you do not agree with a statement, leave the box unchecked. You have to get any 10 answers correct to score full 20 points on this question. Check All That Apply The topic of capital budgeting is important because the returns from the investment are guaranteed to occur as expected. As one goes farther and farther into the future to expect cash inflows from the investment, the likelihood and present value of those cash inflows become smaller. If a project is acceptable using the Payback Period method, it means that the project will be acceptable using the Unadjusted Rate of Return method. All fixed costs are always irrelevant in making the decisions discussed in Chapter 6 in this class. Unless we have surplus capacity, we cannot necessarily accept a special order at a price significantly lower than the usual price. An ideal case for the use of ABC will be when most costs are in the form of material or direct labor costs. Spending a lot of money on prevention costs cannot guarantee that there will not be any internal or external failure costs. As soon as products are completed, their product costs are transferred from Raw Materials Inventory to Finished-Goods Inventory. Over-applying overhead can result in charging a higher price for products and services since cost is often a factor in calculating the final price. So, companies should always over-apply overheads to their products. In a public accounting firm, costs are assigned to an audit engagement in much the same way they are assigned to a single batch of tables by a furniture manufacturer. Manufacturing overhead is a pool of direct production costs that must be traced to each unit manufactured. If actual overhead costs are $600,000 and estimated volume of direct labor hours is 10,000 , then the predetermined overhead rate is $600,000110,000=$60 per labor hour. Electricity costs that were incurred by a company's administrative offices should be debited to Utilities Expense and reported on the income statement as such. A principal objective of cost accounting systems is to ensure that overhead costs are allocated in accordance with generally accepted accounting principles. Overhead application rates allow overhead costs to be assigned as units are being produced or services are being provided to customers throughout the accounting period