13. It is beneficial for two related companies to use the cost price approach fo
ID: 2485361 • Letter: 1
Question
13. It is beneficial for two related companies to use the cost price approach for transfer pricing when both of the companies operate as cost centers and are not concerned with the revenue.
14. A cost that will not be affected by later decisions is termed a sunk cost.
15. Depending on the capacity of the plant, a company may best be served by further processing some of the product and leaving the rest as is, with no further processing.
16. The excess of the cash flowing in from revenues over the cash flowing out for expenses is termed net cash flow.
17. The expected period of time that will elapse between the date of a capital investment and the complete recovery in cash of the amount invested is called the discount period.
18.Charitable contributions are often used as a means of reducing the amount of income tax expense arising from capital investment projects.
19. When a plantwide factory overhead rate is used, the total overhead costs allocated to all products is the same.
20.If the budgeted factory overhead cost is $460,000, the budgeted direct labor hours is 80,000, and the actual direct labor hours is 6,700 for the month, the amount of factory overhead to be allocated is $38,525 (if the allocation is based on direct labor hours).
21. Activity-based costing is much easier to apply than single plantwide factory overhead allocation.
TRUE OR FALSE??? FOR EACH
Explanation / Answer
13. False. When it is appropriate to use market price the companies should use market price or the companies can negogiate a price between the cost and the market price of the product.
14. True. Sunk costs are costs that are not affected by decisions made later.
15. Fales
16. True
17. False. It is called payback period.
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