BEC - 12

Question 1

Scrap

Answer 1

net proceeds typically reduce OH costs

Question 2

Flexible budget

Answer 2

Budgets produced at different activity levels.

Many flexible budgets include fixed components. The term “flexible” budget does not imply the exclusion of fixed costs.

Direct material usage budgets and marketing budgets are both appropriate for flexible budgets.

Question 3

Approaches for evaluating capital budgeting opportunities include:

Answer 3

Discounted payback period approach
Payback period approach
Profitability index approach

NOT regression analysis.

Question 4

Regression Analysis

Answer 4

A statistical tool for investigating relationships between variables, NOT for assessing capital budgeting opportunities

Question 5

Backflush costing system

Answer 5

Used in JIT systems, backflush costing systems simplify product costing by costing production at the completion of an order. Minimal inventories are maintained, and cellular production facilities are used.

Question 6

What are the expected effects of changing from a traditional inventory management system to JIT wrt inspection costs and detail of costs tracked to jobs.

Answer 6

Inspection Costs: decrease

Minimal inventories are maintained. Inspection costs are reduced because zero defects is a goal. Production stops until the cause of the defect can be identified and fixed.

Detail of costs tracked to jobs: decrease

The job is simply costed at completion

Question 7

The system of internal control begins with _________

Answer 7

Setting organizational objectives. This underlies the entire process of control creation and assessment

Question 8

JIT systems have what impact on cost per purchase order and inventory carrying costs?

Answer 8

JIT reduces carrying costs by ordering more frequently but in lower quantities to keep inventories to a minimum.

JIT system orders smaller #s of units per order, but orders more frequently to avoid inventory build-up. This means JIT INCREASES TOTAL ORDER COSTS. With decreasing order costs, the total ordering costs is kept to a reasonable level. Furthermore, the decrease in holding costs from holding less inventory more than covers the increased cost of ordering more frequently.

Question 9

What types of systems is a checkpoint mostly used in?

Answer 9

Batch. The use of a checkpoint and restart is an important backup procedure.

Question 10

A commonly used rule for setting transfer prices:

Answer 10

standard variable cost + lost contribution margin to seller