Is the following statement TRUE or FALSE regarding activity-based costing (ABC) and cost drivers? "A cost driver is any factor that cause a change in the cost of an activity"

Is the following statement TRUE or FALSE regarding activity-based costing? "Life-cycle costing takes into account all costs incurred in a product like life-cycle with exception of sunk costs incurred on research and development"

Is the following statement TRUE or FALSE regarding activity-based costing? "Life-cycle costing ensures a profit is generated over the life of the product"

Is the following statement about target costing TRUE or FALSE ? "Products should be discontinued if there is a target cost gap"

Is the following statement about target costing TRUE or FALSE ? "A target cost gap is the difference between the target cost for a product and its projected cost"

Is the following statement about target costing TRUE or FALSE ? "A risk with target costing is that cost reductions may affect the perceived value of the product"

Is the following statement about target costing TRUE or FALSE ? "Cost may be reduced in target costing by removing product features that do not add value"

Is the following statement about target costing TRUE or FALSE ? "The high cost of (for ex) research, design and marketing in the early stages in a product's life-cycle necessitate a high initial selling price"

Is the following statement about material flow cost accounting (MFCA) TRUE or FALSE ? "In MFCA, output costs are allocated between positive and negative product costs"

Is the following formula to calculate break even point TRUE or FALSE? Breakeven point in units = Total fixed costs / Contribution per unit

Is the following formula to calculate break even point TRUE or FALSE? "The breakeven point is at the intersection of the sales line and the total costs line"

Is this TRUE or FALSE if material is identified as limiting factor in the case as follows It needs 3 kg of material X and 2 machine hours to produce one unit of product A and those of 2 kg and 1.5 hours for product B. It was expected that 6,000 machine hours and 10,000 kg of X being available for production. Sales demand was 2,000 units for each product

Is the following statement about multiple limiting factors analysis TRUE or FALSE? "Surplus occurs when maximum availability of a other constraining factor is not used"

Is the following statement about price elasticity of demand (P.E.D) TRUE or FALSE? "The price elasticity of demand (PED) is a measure of the extent of change in demand for a good in response to a change in its price"

Is the following statement about full cost-plus pricing TRUE or FALSE? "Full cost-plus is a method of deciding the sales price by adding a percentage mark-up for profit to the marginal cost of the product"

Is the following statement about sunk costs TRUE or FALSE? "Sunk costs are costs that have already been incurred. Sunk costs can be relevant costs"

Is the following statement about joint costs in further processing decision TRUE or FALSE? "In a decision about whether or not to sell a joint product at the split-off point or after further processing, joint costs are irrelevant"

Is the following statement about price skimming strategy TRUE or FALSE? "Price skimming strategy in suitable for new and innovative products"

Is the following statement about cost plus pricing TRUE or FALSE? "Cost-plus pricing methods take the approach of adding a specified of MARGIN to the cost of a product"

Is the following statement about cost plus pricing TRUE or FALSE? "Cost-plus pricing methods always consider the relationship between price and demand"

Is the following statement about limiting factor analysis TRUE or FALSE? "If there is one limiting factor, the best contribution would be earned by maximizing the contribution per unit of that limiting factor"

Is the following statement about depreciation TRUE or FALSE? "Depreciation is not a relevant cost because it is not a cash flow"

Is the following statement about decision rule for make or buy decisions TRUE or FALSE? "When there are no limiting factors restricting the in-house production capacity, the relevant costs are the differential costs between the two options"

Is the following statement about outsourcing true or false ? "The outsourcing option is likely to give management more direct control over the work of products or services from external suppliers"

A budget is a quantified plan of action for a forthcoming accounting period ?

'Control' is not one of the objectives of a budgeting system?

Planning forces management to look ahead, to set out detailed plans for achieving the targets for each department, operation and each manager?

The activities of different departments or subunits of the organization do not need to be co-ordinated to ensure maximum integration of effort towards common goal?

Budgetary planning and control systems require that managers of budget centers are made responsible for the achievement of budget targets for the operations under their personal control.

A budget is a yardstick against which actual performance is measured and assessed ?

Actual performance is a yardstick in which a budget is measured and assessed ?

With top-down budgeting , budget targets are set at senior management level for the organization as a whole and for each major department or activity within the organization ?

With bottom-up budgeting, the budgeting process starts at senior management level?

Incremental budgeting is a method of budgeting in which next year's budget is prepared by using the current year's actual results as a starting point, and making adjustments for expected inflation, sales growth or decline and other known changes?

Incremental budgeting is a method of budgeting in which next year's budget is prepared by using the current year's budgets as a starting point , and making adjustments for expected station ,sales growth or decline and other known changes?

The principle behind zero based budgeting ( ZBB ) is that the budget for each cost center should be made from 'scratch' or zero . Every item of expenditure must be justified in its entirety in order to be included in the next year's budget ?

The principle behind zero based budgeting ( ZBB ) is that the budget for each cost center should be made from the previous year's actual performance ?

Activity based budgeting differs from traditional (absorption) budgeting in the way that budgets are prepared for overhead costs . Overhead costs are budgeted on the basis of activities , rather than on a departmental basis ?

Activity based budgeting is similar to traditional budgeting in the way that budgets are prepared for overhead costs ?

Rolling budgets are budgets which are continuously updated throughout a financial year , by adding a further period ( say a month or a quarter ) and removing the corresponding period that has just ended ?

Rolling budgets are budgets which are continuously updated throughout a financial year, by reviewing the current period (say a month or a quarter) and removing when it has just ended?

In the 'Learning curve theory', the workers are likely to become more confident and knowledgeable about the work as they gain experience, to become more efficient, and to do the work more quickly?

In the 'Learning curve theory', the more units that a worker makes, the longer time spent for producing a unit?

A standard cost is an estimated unit cost built up of standards for each cost element (standard resource price and standard resource usage)?

Standard costing is used to value inventoríe, prepare cost budgets for production and provide control information (variances).

The essence of control is 'measurement of results' and 'comparing' them 'with the original plan'. Any 'deviation from the plan' indicates that 'control actions are required' to make the 'results more closely with the plan'.

The essence of control is 'measurement of results' and 'comparing' them 'with the original plan'. Any 'deviation from the plan' always indicates that 'there is some problems with the actual performance'?

The essence of control is 'measurement of results' and 'comparing' them 'with the original plan'. Any 'deviation from the plan' always indicates that 'there is some problems with the original plan'

A variance is the difference between an actual result and an expected result?

Variance analysis is the process by which the total difference between standard and actual results is analyzed?

When actual results are better than expected results, do we have an adverse variance (A)?

If actual results are worse than expected results, do we have a favorable variance (F)?

The selling price variance measures the effect on expected profit of a selling price different to the standard selling price?

The selling price variance measures the effect on expected profit of a sales volume different to the expected sales volume?

'Unforeseen discounts received' is one of the reasons for a favorable material variance?

'Material price increase' is one of the reasons for a favorable material variance?

'More effective use made of material' one of the reasons for an adverse material variance?

'Theft' is one of the reasons for an adverse material variance?

'Use of workers at a lower rate of pay than standard' is a reason of a favourable labour variance?

'Use of workers at a lower rate of pay than Standard' is a reason of an adverse labour variance?

'Machine breakdown' always make a favourable labour variance?

'Better quality of equipment or materials' may be a reason for a favourable labour efficiency variance?

The materials usage variance can be subdivided into a sales mix variance and a materials yield variance when more than one material is used in the product?

Calculating a mix and yield variance is only meaningful for control purposes when management is in a position to control the mix of materials used in production?

The sales volume variance can be analysed further into a sales mix variance and a sales quantity variance?

If a company sells only one product, it is possible to analyse the overall sales volume variance into a sales mix variance and a sale quantity variance?

When circumstances may occur that make the original budget or standard cost invalid or inappropriate, it may be appropriate to revise a budget or standard cost?

'Planning variances' have arisen because of inaccurate planning or faulty standards?

'Operational variances' have been caused by adverse or favorable operational performance?

In a system of standard costing, idle time is an adverse labour efficiency variance, and is undesirable. But in JIT manufacturing, idle time variance should therefore be expected?

Idle time variance should be reported in 'Just in time' manufacturing?

The philosophy in TQM of 'right first time' may be inconsistent with a standard cost that includes an allowance for wastage

A standard cost is based on an assumption of a desirable steady state: this view is inconsistent with the principle of continuous improvement in TQM.

A budgetary control and variance reporting system can only motivate managers and employees to improve performance and it can't produce undesirable negative reactions.

Performance measures may be divided into 2 types: Financial and Non-financial performance indicators?

Financial measures are typically measures relating to revenues, cost, return on capital, asset values or cash flows and service quality?

Performance measures should only include factors which managers can control by their decisions, and for which they can be held responsible

We should use only one performance measure for one manager

The balanced scorecard focuses on 4 different perspectives as follows: Financial, Customer, Internal and Innovation and Learning?

The balanced scorecard focuses on 4 different perspectives as follow: Financial, Customer, Internal and Internal and Competitor

Each divisional manager is responsible for the performance of the division

A profit center often includes cost center and revenue center

A manager of a revenue center is never responsible for the cost incurred in this center

Activity-based costing helps in identifying non-value-adding activities in a business process.

Overhead allocation in activity-based costing is done based on the number of employees in a department.

In lifecycle costing, all costs associated with a product are tracked throughout its life, from inception to disposal.

A target costing gap occurs when the actual cost of a product is lower than the target cost.

In target costing, eliminating waste from production processes is one way to reduce costs.

Material flow cost accounting (MFCA) distinguishes between usable outputs and waste.

The break-even sales revenue formula is: Total fixed costs ÷ Contribution margin ratio.

Break-even analysis is only useful for non-profit organizations.

If a limiting factor exists, products with higher variable costs should always be prioritized.

Price elasticity of demand is always greater than one for luxury goods.

Full cost-plus pricing ignores market conditions when determining the selling price.

Joint costs are always relevant when deciding whether to process a product further.

A skimming pricing strategy can lead to a high initial profit margin.

Cost-plus pricing is commonly used in industries with volatile demand.

In budgeting, co-ordination ensures that all departments align with the organization's overall goals.

Zero-based budgeting assumes that all expenses need to be justified each year, starting from zero.

Incremental budgeting considers efficiency improvements automatically in its approach.

Rolling budgets provide greater flexibility in dynamic business environments.

The learning curve effect assumes that labor efficiency improves with experience.

Standard costing relies heavily on historical data to set benchmarks.

A variance always indicates that actual performance deviates from the standard plan.

Selling price variance measures the difference between the actual and expected sales price.

A favorable variance always indicates better performance.

If material wastage increases, it will lead to an adverse material usage variance.

Poor-quality materials can result in an adverse material variance.

Idle time is a common issue in just-in-time (JIT) manufacturing systems.

Better equipment maintenance can lead to favorable labor efficiency variances.

Sales mix variance arises only when multiple products are sold.

A planning variance often indicates unrealistic initial budgeting.

Operational variances measure the actual performance of operations against standard benchmarks.

Total quality management (TQM) emphasizes continuous improvement over maintaining standard costs.

Variance analysis helps in identifying both favorable and adverse trends in cost and revenue performance.

Financial performance measures include profit margins, return on investment, and cash flow ratios.

A divisional manager's primary responsibility is to maximize the financial performance of their division.

Managers of cost centers are responsible for revenue generation.

A balanced scorecard integrates non-financial measures with financial measures for comprehensive evaluation.

Innovation and learning are not included in the balanced scorecard framework.

Performance indicators should consider both short-term and long-term objectives.

Marginal costing only considers variable costs for decision-making.

Fixed costs remain constant in total, regardless of the level of activity.

Variable costs per unit change as the level of activity changes.

Semi-variable costs contain both fixed and variable components.

Contribution margin is the difference between sales revenue and fixed costs.

In make-or-buy decisions, fixed costs are always considered relevant.

The primary goal of outsourcing is to achieve cost savings and operational efficiency.

Outsourcing can reduce management's control over product quality.

Budget variances can indicate either inefficiencies or unexpected changes in business conditions.

Adverse labor efficiency variance suggests that less time was spent on production than expected.

Overproduction often leads to adverse material usage variances.

In TQM, allowances for defects contradict the philosophy of 'zero defects.'

Profit centers are accountable for both revenues and costs but not investments.

Investment centers focus on return on investment and asset utilization.

Overhead absorption rates are determined based on estimated activity levels.

Under-absorbed overhead occurs when actual overhead costs exceed absorbed overhead costs.

Marginal costing ignores fixed costs in profit planning.

Standard costing provides a benchmark for evaluating actual performance.

Idle time is always considered a controllable cost.

Higher inventory levels often lead to increased holding costs.

Throughput accounting focuses on maximizing output and minimizing inventory.

Bottleneck resources determine the capacity of the entire production process.

A key feature of just-in-time (JIT) systems is minimizing work-in-progress inventory.

Value-added activities in ABC are those that directly contribute to customer satisfaction.

In decision-making, relevant costs must differ between alternatives.

Avoidable costs are irrelevant for decision-making.

Opportunity cost is the value of the best alternative foregone.

Economic order quantity (EOQ) minimizes the total cost of ordering and holding inventory.

Sunk costs should be ignored in decision-making processes.

Absorption costing allocates fixed costs to products based on activity levels.

Activity-based budgeting identifies costs by analyzing resource consumption of activities.

Incremental budgeting can perpetuate inefficiencies from previous budgets.

Zero-based budgeting is more time-consuming than incremental budgeting.

Kaizen costing focuses on continuous cost reduction throughout the product's lifecycle.

The learning curve predicts that as cumulative production doubles, unit costs decrease at a constant rate.

Target costing is most effective when introduced during the design phase.

Predetermined overhead rates are calculated based on past data and future forecasts.

A flexible budget adjusts for actual activity levels during the reporting period.

Sensitivity analysis examines how changes in input variables impact outcomes.

Scenario analysis considers multiple possible future states of the business environment.

Decision trees are used to evaluate the expected value of different choices under uncertainty.

Overhead costs in activity-based costing are traced directly to products.

The primary purpose of budgets is to provide control and accountability in organizations.

Responsibility accounting assigns costs to managers based on their control over expenses.

Performance evaluation systems should align with organizational goals and objectives.

Ethical considerations are irrelevant in setting performance targets.

In lifecycle costing, post-sale costs are irrelevant for decision-making.

Relevant costing ignores fixed costs entirely in decision-making.

Sales volume variances measure differences in the actual and budgeted number of units sold.

The margin of safety is the difference between actual sales and break-even sales.

Cost control focuses on reducing expenses without compromising quality.

Benchmarking involves comparing performance metrics with industry standards.

Efficiency variances measure how well resources are utilized.

Variance analysis only applies to financial data.

Total cost of ownership includes acquisition costs, operating costs, and disposal costs.

Depreciation expenses are always included in cash flow analysis.