Question

17. Direct costs: A. are incurred to benefit B. are incurred due to a spe C. can be easily traced to D. are the variable Denefit a particular accounting period. due to a specific decision. traced to a particular cost object. sts of producing a product. 18. The main difference between van A. whether variable manufactum B. whether fixed manufacturing Cosu C. whether fixed manufact included in product costs. D. whether selling and en variable costing and absorption costing ufacturing costs should be included in prod acturing costs should be included in product ether fixed manufacturing costs and fixed selling osting centers on: in product costs. product costs. ve costs should be elling and administrat Selling and administrative costs should be included in p in product costs. 19. Kenny Co. currently produce product cost of the part Direct materials Direct labour of its products. The unit y produces a part used in the manufacture of one cost of the part is RM33, computed as follows: RM12 Variable manufacturing overhead Fixed manufacturing overhead Unit product cost 10 RM33 10,000 of the parts for ufacturing overhead costs upplier. Assume that direct ne per unit dollar advantage An outside supplier has offered to provide the annual requireme only RM27 each. The company estimates that 30% of the fixed manula above will continue if the parts are purchased from the outside supp labour is an avoidable cost in this decision. Based on these data, the per or disadvantage of purchasing the parts from the outside supplier would A. RM1 advantage. B. RM3 advantage. C. RM1 disadvantage. D. RM4 disadvantage. 20. All of the following are functions of budgets EXCEPT: A. identify a company's most profitable products. B. evaluate performance. C. create a plan of action. D. assist in the control of profit and operations. 21. Perry Electronics is considering re-launching one of its products. At a competitive of RM78 per unit, the company projects sales of 10,000 units. The current manuf per unit is one-third of selling price. The desired mark-up on full manufacturi If the company uses target costing and plans to have a similar amount of minimum cost it should meet: products. At a competitive selling price The current manufacturing cost full manufacturing cost is 20%. hilar amount of profit, what is the A. RM26 B. RM65 C. RM97.50 D. None of the above.

Answer 1

17. Answer: C. can be easily traced to a particular cost object.

Direct costs are costs both variable and fixed, that can be easily traced to a particular cost object. The costs which cannot be traced to a particular cost object are indirect costs.

18. Answer: B. whether fixed manufacturing costs should be included in product costs.

Variable costing includes the direct materials, direct labor, and variable manufacturing costs in the product cost. Under absorption costing, the fixed manufacturing costs are also included in the product cost in addition to those included under variable costing. Fixed and variable selling and administrative costs are excluded from the product cost under both variable costing and absorption costing.

19. Kenny Co.

Answer: B. RM3 advantage.

	Make	Buy	Advantage (Disadvantage)
Direct materials	12	0	12
Direct labor	8	0	8
Variable manufacturing overhead	3	0	3
Fixed manufacturing overhead	10	3	7
Purchase price	0	27	-27
Total RM	33	30	3

20. Answer: A. identify a company’s most profitable products.

A budget is a formal plan of future business actions. It provides a sort of benchmark against which actual results can be compared and performance evaluated. It is used in controlling costs and thereby assists in the control of profit and operations. Hence, B., C., and D. are all functions of a budget.

A budget may however not be prepared at product level and may not be able to identify the most profitable products.

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