Question 1

A company is classifying its quality costs to prepare a quality cost report. Which of the following are conformance costs?Select ALL that apply.

Options :

A : Internal Failure Costs

B : External Failure Costs

C : Prevention Costs

D : Appraisal Costs

Answer: C,D

Question 2

A company manufactures and sells a range of products. Relevant data for one unit of a particular product are as follows.The company is using target costing to ensure that it achieves a contribution of 40% of the market selling price.In order to achieve the target cost, by how much does the company need to reduce the variable cost per unit?

Options :

A : $ 2.10

B : $ 0.50

C : $ 1.40

D : $ 2.60

Answer: B

Question 3

Which of the following statements is TRUE about the activity based costing system when compared to absorption costing method?

Options :

A : ABC is easier to administer than an absorption costing system

B : ABC will be less detailed than an absorption costing system

C : ABC will provide more accurate overhead allocation than absorption costing

D : ABC will cost less to administer than an absorption costing system

Answer: C

Question 4

When considering a capital investment, relevant costs for decision making have which THREE of the following features?

Options :

A : They are future costs.

B : They are committed costs.

C : They are incremental costs.

D : They are unavoidable costs.

E : They are cash flows.

Answer: A,C

Question 5

A company is investing $150,000 in a project which will yield an annual cash inflow of $40,000 for eight years. The company's cost of capital is 10%.To the nearest $100, what is the project's equivalent annual net present value?

Options :

A : $11,900

B : $7,900

C : $63,400

D : $21,300

Answer: A

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