Some multiple choice questions

An example of a discretionary fixed cost would be:

1. amortization on equipment
2. property taxes
3. salaries of top management
4. advertising

Which of the following is one of the advantages to the target costing approach?

1. In the target costing approach, costs are fully known before the product is actually designed.
2. There is usually a higher level of cost-consciousness in the target costing approach than in the cost plus approach.
3. The target costing approach approach often leads to higher levels of features included that some customers may want.
4. The target costing approach can be completed by marketing department personnel without involving others in the process.

A plant operating at capacity would suggest that most likely:

1. every machine and person in the plant is working at the maximum possible rate.
2. only some specific machines or processes are operating at the maximum rate possible.
3. fixed costs will need to change to accommodate increased demand.
4. managers should produce those products with the highest contribution margin in order to deal with the constrained resource.

In an activity based cost system, when the manufacturing overhead account has a credit balance at the end of the year:

1. the manufacturing overhead account is over applied
2. the manufacturing overhead account is under applied
3. an error has been made as only actual manufacturing overhead should be recorded
4. the work in process inventory account will have a credit balance

The Cost of Goods Manufactured represents:

1. the amount of cost charged to Work in Process during the period
2. the amount transferred from Work in Process to Finished Goods during the period
3. the amount of cost placed into production during the period
4. the prime production costs