I. Modified True / False: (30 points, 3 points each). There are ten statements below. Please indicate in the space provided whether each statement is either true or false. If the statement is true, then write true. Otherwise, if it is false write false, and correct the statement, so that it becomes true. Failure to correct the statement will cause you to get only half-credit, or only one point.

_______ 1. Activity-based costing may take into account salespersons salaries for those that sell one product exclusively.

_______ 2. Direct labor hours are a preferred base for allocating overhead, especially in capital-intensive industries.

_______ 3. Organizational sustaining activities may include the production managers salary.

_______4. The cost of the security guard for the main company office may be assigned to a product under an activity based costing system.

_______5. First stage of the allocation process gives us cost per activity, and second stage allocation measures the total cost of a particular activity.

• True

_______6. The cash budget is the starting point in the master budget process.

_______7. The flexible budget is used in the master budgeting process.

_______8. A static planning budget is the same as the master budget.

• False

_______9. Differences between the static planning budget and the flexible budget are a result of differences in activity levels.

_______10. If a materials price variance is favorable, but the materials quantity variance in unfavorable, this may indicate that the materials used were of poor quality.