True/False Questions

____ 1. Industries that typically use process cost systems include chemicals, oil, metals, paper, and pharmaceuticals.

____ 2. The methods of evaluating capital investment proposals can be grouped into two general categories that can be referred to as (1) methods that ignore present value, and (2) present values methods.

____ 3. Variable costs are costs that remain constant in total dollar amount as the level of activity changes.

____ 4. As product costs are incurred in the manufacturing process, they are accounted for as assets and reported on the balance sheet as inventory.

____ 5. Since the costs of producing an intermediate product do not change regardless of whether the intermediate product is sold or processed further, these costs are not considered in deciding whether to further process a product.

____ 6. If the total unit cost of manufacturing Product Y is currently $36 and the total unit cost after modifying the style is estimated to be $48, the differential cost for this situation is $12.

____ 7. A process whereby the effect of fluctuations in level of activity is built into the budgeting system is referred to as flexible budgeting.

____ 8. In an investment center, the manager has the responsibility and the authority to make decisions that affect not only costs and revenues, but also the plant assets invested in the center.

____ 9. The capital expenditures budget summarizes future plans for acquisition of fixed assets.

____ 10. The process by which management plans, evaluates, and controls long-term investment decisions involving fixed assets is called capital investment analysis.