1-Job-order costing is used when products aued specially produced. T 2-Normal co
ID: 2578899 • Letter: 1
Question
1-Job-order costing is used when products aued specially produced. T 2-Normal costing is a system which uses estimated direst materials, actual direct labor and a predetermined overhead rate. 3-A materials requisition form is a document that is used to record the amount of materials that are being used in work in process. 4-Prevention costs are costs that are incurred to keep defects from occurring.· S-Opportunity costs are costs that are incurred when one alternative is chosen over another. 6- Decision making is the process of establishing goals and specifying how to achieve them 7-Cognitive biases cannot be climinated 8- Financial Accounting is based on historical costs. 9-Qualty Training is an internal failure cost 10-Factory supervisors salaries is a period cost. 11-A product that has a low rate of defects is said to have a low Quality of conformance 12SIn many companies, small groups of employees known as the audit committee meet on a regular basis to discuss ways to improve quality 13-When a product that is defective is delivered to a customer external failure costs are incurred. 14-Of the four groups of costs associated with quality of conformance, prevention costs are-r generally most damaging to a company.Explanation / Answer
S.No.
TRUE/ FALSE
REASON
1
true
When direct and indirect costs are assigned to individual products rather than departments, it is known as job order costing. Hence, this costing method is suitable where the products are customized and non-uniform. Hence, the statement holds true that when products are specially produced, job order costing is used.
2
false
Under normal costing, three costs are used to find the value of products:
1.Actual direct material costs
Hence, the statement is wrong as it says ‘estimated direct material costs’ are used.
3
false
A material requisition form is a document used for making request for materials for manufacturing a product. It is used by the production department on the basis of which materials are issued to it by the warehouse or storage.
Hence, the statement is wrong though the material requisition form is used to allocate production costs to work in process.
4
true
When expenditure is incurred with the objective of quality control, it is known as prevention cost. This is to ensure that defects are avoided as well as defective products do not enter the market.
Hence, the statement is true as these costs are incurred to prevent the defect from occurring.
5
false
Opportunity costs are the costs that could have been incurred but were actually not incurred as the alternative was not chosen. Thus, opportunity cost represents an alternative which is given up.
The statement given in question is wrong as the statement says that these costs are actually incurred when one alternative is chosen.
6
false
Decision making process includes identifying the various alternatives and choosing the best one to achieve an objective.
The statement given in question is wrong as goal setting or identification of objectives to be achieved is not a part of decision making. Decision making involves evaluation of various alternatives which can help achieve the goals effectively and efficiently.
7
true
Cognitive bias refers to the unconscious influences on decision making by people due to their own perceptions which result in reasoning and judgment errors.
Though strategies can be adopted to prevent and reduce the negative effects of cognitive biases, it cannot be eliminated completely. Hence, the statement is true.
8
true
Recording assets on the basis of its historical or original cost is one of the generally accepted accounting principles. Thus, assets are recorded in the balance sheet on the basis of their purchase price and not their current market value.
9
false
Quality training falls under the category of prevention costs and not internal failure costs.
Internal failure costs include the following costs:
10.
true
Salary is a period cost as period costs include general and administrative expenses that can be attributed to a certain period rather than a transactional event. Thus, these costs cannot be capitalized and are associated with the passage of time.
11
false
The extent to which a product meets its design specification as per the needs of the customer is known as its quality of conformance.
If the defects are less, then the product is known to have high quality of conformance.
12
false
An audit committee is required to offer its oversight of the performance of a company with objectivity. It is mainly responsible for financial reporting and disclosure.
Though the reports of the audit committee and its recommendations can be used as inputs for the purpose of quality control, the primary objective is not to discuss the ways to improve quality.
13
true
External failure costs include all costs relating to repairs and servicing, warranty claims, complaints, returns etc. Thus, these costs are incurred to remedy the defects highlighted by the customer.
Hence, the statement is true as a defective product if delivered to a customer needs to be replaced etc.
14
false
Of the four costs, external failure costs are the most damaging because they result in dissatisfied customers and damaged goodwill. It also leads to lesser sales and profits in future.
S.No.
TRUE/ FALSE
REASON
1
true
When direct and indirect costs are assigned to individual products rather than departments, it is known as job order costing. Hence, this costing method is suitable where the products are customized and non-uniform. Hence, the statement holds true that when products are specially produced, job order costing is used.
2
false
Under normal costing, three costs are used to find the value of products:
1.Actual direct material costs
- Actual direct labor costs
- Predetermined overhead rate
Hence, the statement is wrong as it says ‘estimated direct material costs’ are used.
3
false
A material requisition form is a document used for making request for materials for manufacturing a product. It is used by the production department on the basis of which materials are issued to it by the warehouse or storage.
Hence, the statement is wrong though the material requisition form is used to allocate production costs to work in process.
4
true
When expenditure is incurred with the objective of quality control, it is known as prevention cost. This is to ensure that defects are avoided as well as defective products do not enter the market.
Hence, the statement is true as these costs are incurred to prevent the defect from occurring.
5
false
Opportunity costs are the costs that could have been incurred but were actually not incurred as the alternative was not chosen. Thus, opportunity cost represents an alternative which is given up.
The statement given in question is wrong as the statement says that these costs are actually incurred when one alternative is chosen.
6
false
Decision making process includes identifying the various alternatives and choosing the best one to achieve an objective.
The statement given in question is wrong as goal setting or identification of objectives to be achieved is not a part of decision making. Decision making involves evaluation of various alternatives which can help achieve the goals effectively and efficiently.
7
true
Cognitive bias refers to the unconscious influences on decision making by people due to their own perceptions which result in reasoning and judgment errors.
Though strategies can be adopted to prevent and reduce the negative effects of cognitive biases, it cannot be eliminated completely. Hence, the statement is true.
8
true
Recording assets on the basis of its historical or original cost is one of the generally accepted accounting principles. Thus, assets are recorded in the balance sheet on the basis of their purchase price and not their current market value.
9
false
Quality training falls under the category of prevention costs and not internal failure costs.
Internal failure costs include the following costs:
- Waste
- Scrap
- Rectification work
- Failure analysis
10.
true
Salary is a period cost as period costs include general and administrative expenses that can be attributed to a certain period rather than a transactional event. Thus, these costs cannot be capitalized and are associated with the passage of time.
11
false
The extent to which a product meets its design specification as per the needs of the customer is known as its quality of conformance.
If the defects are less, then the product is known to have high quality of conformance.
12
false
An audit committee is required to offer its oversight of the performance of a company with objectivity. It is mainly responsible for financial reporting and disclosure.
Though the reports of the audit committee and its recommendations can be used as inputs for the purpose of quality control, the primary objective is not to discuss the ways to improve quality.
13
true
External failure costs include all costs relating to repairs and servicing, warranty claims, complaints, returns etc. Thus, these costs are incurred to remedy the defects highlighted by the customer.
Hence, the statement is true as a defective product if delivered to a customer needs to be replaced etc.
14
false
Of the four costs, external failure costs are the most damaging because they result in dissatisfied customers and damaged goodwill. It also leads to lesser sales and profits in future.
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