1. Modified True/ False (20 points, 1 point each). There are twenty statements below. Some are true and some are false. Please write the word true or false in the space provided. If the statement is false, you must correct it for any credit. No credit will be given otherwise.

________1. A master budget takes place during the process of planning.

________2. The Chief Financial Officer has final approval of the company budget.

________3. An example of a period cost is indirect materials used in the sales department.

________4. The estimate used to apply overhead to a product cost is called the direct method.

________5. The job cost sheet is used to keep records in a process costing system.

________6. The only time that finished goods inventory is charged to COGS is at year end.

________7. The journal entry to record the cost of direct labor during the assembly line process is Dr. Payroll Expense and Cr. Payroll Payable.

________8. Beginning Work-in-Process Inventory + Costs Added = Amounts Completed and Transferred + Ending Work-in-Process Inventory.

________9. Both Beginning Work-in-Process Inventory and Amounts Completed and Transferred are 100% complete.

_______10. When service department costs are allocated to other departments based on sales, this penalizes departments that are most profitable.

_______11. Activity-based costing may take into account salespersons salaries for those that sell one product exclusively.

_______12. Direct labor hours are a preferred base for allocating overhead, especially in capital intensive industries.

_______13. Organizational sustaining activities may include the production managers salary.

_______14. The cost of the security guard for the main company office may not be assigned to a product under an activity based costing system.

_______15. First stage of the allocation process gives us cost of activity, and second stage allocation measures the total cost of a particular activity.

_______16. The cash budget is the starting point in the master budget process.

_______17. The flexible budget is used in the master budgeting process.

_______18. A static planning budget is the same as the master budget.

_______19. Differences between the static planning budget and the flexible budget are a result of differences in activity levels.

_______20. If a material price variance is favorable, but the material quantity variance is unfavorable, this may indicate that the materials used were of poor quality.