Question

5. Which of the following cost classifications would be the most useful for the managerial decision making purposes such as planning and control?

A. Manufacturing costs vs non manufacturing costs

B. Product costs vs period costs

C. Expired costs vs unexpired costs

D. Variable costs vs fixed costs

12. Limited human capacity to process a given job for a given period, combined with fixed compensation paid periodically, would MOST likely result in a:

A. Mixed cost

B. Step cost

C. Variable cost

D. Fixed cost

13. A disadvantage of the high-low method for cost analysis is:

A. It does not consider all the available observations

B. It cannot be used when there are a large number of observations

C. It is too time consuming to apply

D. It relies totally on the judgement of the person performing the cost analysis

15. Costs incurred to make products can be capitalized (inventoried) in asset accounts in the balance sheet until the products are actually sold. Which of the following accounting concepts or principles justifies the use of this deferral accounting procedure?

A. Historical cost principle

B. Matching principle

C. Going-concern principle

D. Accrual-basis accounting

23. Which of the following can NOT be regarded as the criticism for the "actual costing" (i.e. using an actual overhead rate instead of a predetermined overhead rate)"?

A. It does not have any overhead variance at the end of each period

B. It does not allow timely reporting or assignment of costs for specific jobs or products

C. It may not provide stable overhead rates if the market and production conditions change frequently

D. Identical products may be assigned different amounts of overhead costs if they are produced in different periods of time

Answer 1

5. Which of the following cost classifications would be the most useful for the managerial decision making purposes such as planning and control?

D. Variable costs vs fixed costs (Most used practically for planning and control)

12. Limited human capacity to process a given job for a given period, combined with fixed compensation paid periodically, would MOST likely result in a:

A. Mixed cost (Cost that has both mixed and variable component)

13. A disadvantage of the high-low method for cost analysis is:

A. It does not consider all the available observations (Only high and low points are considered in this cost method which are only 2 points that is very low for analysis)

15. Costs incurred to make products can be capitalized (inventoried) in asset accounts in the balance sheet until the products are actually sold. Which of the following accounting concepts or principles justifies the use of this deferral accounting procedure?

B. Matching principle (As per this, revenue and related expenses should be recognized in the same period, so cost is not recognized until sales happen.)

23. Which of the following can NOT be regarded as the criticism for the "actual costing" (i.e. using an actual overhead rate instead of a predetermined overhead rate)"?

C. It may not provide stable overhead rates if the market and production conditions change frequently (Predetermined rate is good for a company with stable overhead rates but if market and production changes are frequent, then actual overhead rate is better as it gives more true picture of actual costs than predetermined rate)