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True or False Accounting Exercise 1- Costs that can be traced to a cost object in...

True or False Accounting Exercise

1- Costs that can be traced to a cost object in a cost-effective way are called direct costs: TRUE or FALSE

2- In order to perform cost-volume-profit analysis, a company must be able to identify its variable and fixed costs. TRUE or FALSE

3- Traditional cost systems usually allocate overhead to products on the basis of direct labor. TRUE or FALSE

4- Unless there are other factors to be considered, an investment opportunity with a return on investment that equals or exceeds the company's required rate of return would be accepted.TRUE or FALSE

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Answer #1

Requirement 1:-

The correct answer for the question is TRUE. The costs that can be traced directly to a cost object in a cost effective and economic way are called the Direct costs.

Requirement 2:-

This statement is TRUE. A company should be able to differentiate between its variable and fixed costs in order to perform the Cost Volum Profit analysis at varying levels.

Requirement 3:-

This statement is TRUE. Generally/mostly the traditional cost system assigns the overhead costs based on the Direct labor hours or the machine hours.

Requirement 4:-

Required rate of return is the company's requirement out of the capital investment being made. Hence, an investment opportunity with a return on investment that equals or exceeds the company's required rate of return would be accepted. The statement is TRUE.

Please let me know if you have any questions via comments. All the best :) !

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