QUESTION: 61

Which of the following explain why standard costing is less appropriate in the contemporary business environment?

1. In a continuous improvement environment standard costing can restrict the impetus to remain as cost competitive as rivals.

2. Fixed overhead variances are less relevant as fixed costs represent a decreasing proportion of total manufacturing cost.

3. In a just-in-time environment there are fewer costs to control.

1 only
1 and 2
2 and 3
1 and 3

Answer(s): A

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QUESTION: 62

A pharmaceutical company manufactures pesticides which contain highly toxic chemicals.

In the context of environmental costing, which of the following would be classified as an external failure cost?

Legal cost incurred in a case relating to river pollution caused by use of the company's products in nearby fields.
Cost incurred in a product trial, carried out prior to product launch, as a consequence of the product failing to meet environmental standards.
Clean-up cost resulting from leakage of a toxic chemical at one of the company's production plants.
Cost of employing an outsourcing company to dispose of toxic waste caused by a quality failure during routine production.

Answer(s): A

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QUESTION: 63

XY can choose from four mutually exclusive projects. The projects will each last for one year and their net cash inflows will be determined by market conditions. The forecast net cash inflows for each of the possible outcomes are shown below.

If the company applies the maximax criterion the project chosen would be:

Project A
Project B
Project C
Project D

Answer(s): B

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QUESTION: 64

A special contract requires 640 units of component T.

The inventory of 280 units of component T cost $0.20 per unit but the component is not currently used by the company.

The current market price of component T is $0.24 per unit but the inventory could be sold

for $0.15 per unit.

The relevant cost of the units of component T required for the special contract is:

$100.40
$128.40
$142.40
$153.60

Answer(s): B

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QUESTION: 64

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