9 questions 3 to 4 sentences each

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5. Explain the difference between a product cost and period cost and give at least 2 examples of each.

7. Why aren’t actual manufacturing overhead costs traced to jobs just as direct materials and direct labor costs are traced to jobs?

8. What factors should be considered in selecting a base to be used in computing the predetermined overhead rate?

9. In all respects, Company A and Company B are identical except that Company A’s costs are mostly variable, whereas Company B’s costs are mostly fixed. When sales increase, which company will tend to realize the greatest increase in profits? Explain.

10. Which product should have a larger markup over variable cost, a product whose demand is elastic or a product whose demand is inelastic? Explain.

11. “The principal purpose of the cash budget is to see how much cash the company will have in the bank at the end of the year.” Do you agree? Explain.

12. Describe the flow of budget data in an organization. Who are the participants in the budgeting process, and how do they participate?

13. What is net present value? Can it ever be negative? Explain.

14. As the discount rate increases, the present value of a given future cash flow also increases. Do you agree? Explain.

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