Posted: April 26th, 2016

How is performance evaluated for a cost center?

16. If the net variance of a business using standard costing is significant relevant to total production cost, the net variance should be:
A. assigned to cost of goods sold.
B. allocated between work in process, finished goods, and cost of goods sold.
C. carried forward to the next accounting period.
D. none of the above.

17. Which of the following statements is true regarding the payback period?
A. The time value of money is considered when calculating the payback.
B. The payback analysis is more accurate than the net present value analysis.
C. The payback period is less accurate than the accounting rate of return.
D. The time value of money is not considered when calculating the payback.

18. Fixed costs classified according to the time frame perspective are known as:
A. direct cost and indirect cost.
B. constant and inconsistent cost.
C. committed cost and discretionary cost.
D. product cost and period cost.

19. How is performance evaluated for a cost center?
A. Actual costs incurred compared to budgeted costs.
B. Actual segment margin compared to budgeted segment margin.
C. Comparison of actual and budgeted return on investment (ROI) based on segment margin and assets
controlled by the segment.
D. None of the above.

20. A sunk cost is a cost that:
A. has been incurred and cannot be eliminated.
B. is never relevant in decision-making.
C. is never a differential cost.
D. all of the above.