Question

of the following is incorrect about variance reports? facilitate management by exception" they should only be sent to the top level of management They should be prepared as soon as possible They may vary in form, content, and frequency among companies. using variance reports to evaluate cost control management normally looks into: All variances Favorable variances only Unfavorable variances only Both favorable and unfavorable variances that exceed a predetermined quantity measure such as a percentage or dollar amount. 25. Which of the following is incorrect about a standard costing system? a. It is applicable to job order costing b. It is applicable to process costing c it reports only favorable variances d it keeps separate accounts for each variance 26. In a decision to repair, retain, or replace equipment, the book value of the old equipment is a a. Opportunity cost b. Sunk cost Cincremental cost d. Marginal cost. 27. If an unprofitable segment of a company is eliminated: a Net Income will always increase b. Variable expenses of the eliminated segment will have to be absorbed by other segments C Fixed expenses allocated to the eliminated segment will have to be absorbed by other segments d. Net Income will always decrease. Sales Revenue est will be allocated to the Fixed Costs 28. A segment of Hazard Inc. has the following data $200,000.00 Variable costs $140,000.00 $100,000.00 If this segment is eliminated, Son of costs will be eliminated and the rest will be remainine segments of Harard Inc. What should Handdo? Eliminate the segment, net income will be 50.000 greater Eliminate the segment, neincome will be $10.000 peater Keep the segment; net income will be 5.200,000 preter d. Keep the segment net income will be $10,000.00 peater

Answer 1

Answer 23 - Variance report is sent not only to the top management.

Therefore, the correct answer is option (b).

Answer 24 - In using Variance reports to evaluate cost control, management normally looks into both favourable and unfavourable variances that exceed a predetermined quantity measure such as a percentage or dollar amount.

Therefore, the correct answer is option (d).

Answer 25 - Standard costing system reports both favourable and unfavourable variances. It is incorrect to say that it reports only favourable variances.

Therefore, the correct answer is option (c).

Answer 26 - In a decision to repair, retain or replace equipment, the book value of the old equipment is considered as sunk cost. Because it is not recoverable and is irrelevant.

Therefore, the correct answer is option (b).

Answer 27 - If an unprofitable segment of the company is eliminated, fixed expenses allocated to the eliminated segment will have to be absorbed by other segments. Because fixed cost remains same and the part of the fixed cost which belonged to the eliminated segment will be transferred to other segments.

Therefore, the correct answer is (c).

Answer 28 - Eliminate the segment, net income will be $10000 greater.

If segment is eliminated, loss of $40000 is eliminated ($200000 - $140000 - $100000 = -$40000)

And 50% of fixed costs is also eliminated that is, $50000. So, it is net benefit of $10000.

Therefore, the correct answer is option (b).