An entity with total aside t, of US $100,000,000 and profit of US purchases staplers with an estimated life of 10 years for US $1,000. In connection with the purchase, the company debits miscellaneous expense. This scenario is most closely associated with which of the following cone opts or principles?

• A.Materiality and going concern.
• B.Relevance and neutrality.
• C.Reliability and comparability.
• D.Materiality and the balance between cost and benefit.

Comment: *

Name: *

Email: *

Verification: *

When applying the cost-benefit approach to a decision, the primary criterion is how well management goals will be achieved in relation to costs. Costs include all expected.

• A.Variable costs for the courses of action but not expected fixed costs because only the expected variable costs are relevant.
• B.Incremental out-of-pocket costs as well as all expected continuing costs that are common to all the alternative courses of action.
• C.Future costs that differ among the alternative courses of action plus all qualitative factors that cannot be measured in numerical terms.
• D.Historical and future costs relative to the courses of action including all qualitative factors that cannot be measured in numerical terms.

Correct Answer: C

The analysis of a make-or-buy decision is based on relevant costs. If costs do not vary with the option chosen they are irrelevant Moreover, the decision may be based on non quantitative factors, for example, the desire to maintain a relationship with a vendor or to assume control over development of a product A business needs a computer application that can be either Other related data follows Computer time is charged using developed internally or purchased. Suitable software from a predetermined rates The organization has sufficient excess vendor costs US $29,000. Minor modifications and testing can be conducted by the systems staff as part of their regular workload If the software is developed internally, a systems analyst would be assigned full time, and a contractor would assume the analyst's responsibilities. The hourly rate for the regular analyst is US $25. The hourly rate for the contractor is US $22. The contractor would occupy an empty office. The office has 100 square feet, and occupancy cost is US $45 per square foot computer capacity for either software development or modification/testing of the purchase software.

Comment: *

Name: *

Email: *

Verification: *

The economic order quantity for inventory is higher for an organization that has:

• A.Higher fixed inventory ordering costs.
• B.A higher purchase price per unit of inventory.
• C.Lower annual unit sales.
• D.Higher annual carrying costs as a percentage of inventory value.

Comment: *

Name: *

Email: *

Verification: *

One department of an organization, Final Assembly, is purchasing subcomponents from another department, Materials Fabrication. The price that will be charged to Final Assembly by Materials Fabrication is to be determined. Outside market prices for the subcomponents are available. Which of the following is the most correct statement regarding a market-based transfer price?

• A.Marginal production cost transfer prices provide incentives to use otherwise idle capacity.
• B.Market transfer prices provide an incentive to use otherwise idle capacity.
• C.Overall long term competitiveness is enhanced with a market-based transfer price.
• D.Corporate politics is more of a factor in a market-based transfer price than with other methods.

Comment: *

Name: *

Email: *

Verification: *

Which of the following is a false statement about cost-based pricing?

• A.A cost-based price should cover costs and provide the desired return on investment.
• B.A commonly used cost-plus pricing formula is to add a markup percentage to the total cost.
• C.Variable costs may not be used as the basis for costs.
• D.A cost-plus price equals the cost plus a markup.

Comment: *

Name: *

Email: *

Verification: *