CIRCLE 2.01 When making business decisions managers must focus on as well as rel
ID: 2590653 • Letter: C
Question
CIRCLE 2.01 When making business decisions managers must focus on as well as relevant costs irrelevant Overhead allocation rates are based on estimates and are not precisely correct and should be evaluated and adjusted periodically 2.02 2.03 Activity based costing is based primarily on estimates made by factony managers and does not involve actual production volumes realized If labor hours actually expended fall short of those predicted for the standard costing model - a favorable variance results 2.04 It is generally recommended to leave non-financial personnel out of the budgeting process 2.05 Generally (but not alwaysl) companies attempt to realize a sales mix which maximizes profit 2.06 A favorable budget variance for revenues would involve higher sales than expected 2.07 The payback methoed of capital budget decision making ignores the concept of the present value of future cash flows. 2.08 2.09 A company would generally be in a better position as a price-taker than a price-setter Responsibility Centers for budgeting purposes include Revenue, Profit, and Cost Centers 2.10Explanation / Answer
Note;
There are more than 4 parts of this question. So as per rule I am answering first 4 parts of this question.
(2.01).
Answer is (F) False.
Explanation;
As we know that irrelevant costs are those costs which are not change with decisions of the managers. Hence when making business decisions then managers need not focus on the irrelevant costs and only focus on relevant costs.
(2.02).
Answer is (T) True.
Explanation;
Definitely’ overhead allocation rates are based on estimates and these estimates may be incorrect sometime. Hence these estimated allocation rates should be evaluated and adjusted periodically.
(2.03).
Answer is (F) False.
Explanation;
Under Activity Based Costing (ABC), first of all managers identify the real cause of the costs as an activity then costs are allocated on the basis of those activity base. Hence given statement is false.
(2.04).
Answer is (T) True.
Explanation;
As we know that when actual cost is below than the standard cost then difference between both is known as favourable variance result. Thus we can say that whenever there is low actual hours in compare to standard hours then answer will be favourable.