Question

True or false

1. the control function gathers feedback to ensure that plans are being followed.

2. when the benefits of a potential decision are greater than the cost, the decision should usually be made.

3. decision making involves making a selection among competing alternatives

4.period cost involve direct: materials, director labor, and manifacturing overhead.

5. a good example of a cost diverter production labor wages is the number of machine hours

6. a fixed cost changes in direct proportion to changes in a cost driver .

7. the income statement can be expressed as sales - variable expenses fixed expense = net operating income

8. CM is used first to cover fixed expenses . any remaining CM contributes in net operating income

9. committed fixed cost are long-term and cannot be significantly reduced in the short term.

1o. in the mixed-cost equation: y=a+bx, the a is the slope

Answer 1

ANSWERS-

1)TRUE. As Management process has five functions, Planning, Organising, Staffing, directing and Controlling.

As first function, plans for the future of the Organisation, it plans organisational goal. Second function, Organise all the employees and Organisation structure. Third functions,staff means select the best employees having good skills and experience. Fourth function, directing directs all the activities runs in the Organisation and the last fifth function Controlling, compares the difference between the actual position and the target where the Organisation plans to be. It also gathers feedback to ensure that plans are followed because by gathering feedback, measurement of actual performance is done .

2)TRUE. Decision making is a process which results in the selection of best choice from the lots of options. Decision maker is the person who makes the decisions. Decision maker takes decision by keeping in mind that the decision must fulfill the objects of Organisation and it's goals. So, where the benefits of a potential decision are greater than the cost, so the decision is usually made as here benefits are more than the cost which benefits Organisation also, so the decision maker will make this decision.

3)True. As we know decision making is a process which makes decision by selecting the best from among alternatives available. So, yes it is true that decision making involves making a selection among competitive alternatives.

4) FALSE.

In Accounting, there are two cost -

1. Product cost

2. Period cost

1. Product cost- Product cost are the direct cost which is involved in producing a product. This direct cost are-

Direct labour, direct material and overhead costs etc.

2. Period cost- Period costs are the cost which are not directly tied to production of product like marketing expenses, office depreciation and indirect labour etc.

So, it is false as period cost doesn't involve direct material, direct labour and manufacturing overhead etc.

5)FALSE. As the numbers of Machine hour can not divert cost of production labour wages.

6)FALSE.

​​​​​​Fixed cost is the cost which is not change by the change of any other cost. This cost is fixed. This cost is not affected by changes in cost driver level.

As, Variable cost is the cost that changes in direct proportion to changes in the cost driver level.

7) Given information is not clear. So, true and false judgement cannot be done.

8)True.

Contribution Margin is the amount left after deducting Variable expenses from sales. It is the amount available to cover fixed expenses and then for the profits of the period. So, it is true.

9)True.

As committed fixed cost are the cost which are not recovered as it is long term and it cannot be reduced in short term.

10) False.

mixed cost equation refers to the behaviour cost and expenses. In its equation, y=a+bx.

Y means total cost, a means fixed cost and X is the number of units in activity and b is the variable rate per unit of activity.