Acct 3333.01

1. ABC systems create ________. A) one large cost pool B) homogeneous activity-related cost pools C) activity-cost pools with a broad focus D) activity-cost pools containing many direct costs

B

1. ABC systems help managers to ________. A) value ending inventory more accurately B) identify new designs to reduce costs C) evaluate direct material costs more efficiently D) improve the inventory turnaround time

B

1. Activity-based costing (ABC) can eliminate cost distortions because ABC systems ________. A) establish a cause-and-effect relationship with the activities performed B) use single cost pool for all overhead costs, thereby enabling simplicity C) use a broad average to allocate all overhead costs D) never consider interactions between different departments in assigning support costs

A

1. Activity-based costing is most likely to yield benefits for companies ________. A) with complex product design processes that vary significantly from product to product B) with operations that remain fairly consistent across product lines C) in a monopolistic market D) having nominal percentage of indirect costs

A

1. If a company has excess capacity, the most it would pay for buying a product that it currently makes would be the ________. A) total variable cost of producing the product B) full cost of producing the product C) total cost of producing the product D) business function cost of the product

A

1. Overcosting a particular product may result in: A) pricing the product too high B) pricing the product too low C) operating efficiencies D) understating total product costs

A

1. The allocation of indirect costs in an activity-based costing system A) may require other costs to be allocated to activities before the costs of the activities can be allocated to the products. B) is simplified because more costs are identified as direct costs. C) requires the use of heterogeneous cost pools. D) is simplified because a limited number of activities are identified as cost objects.

A

1. Which of the following costs is irrelevant in the decision making of a special order when there is idle production capacity - enough excess capacity to accept the order? A) fixed manufacturing costs B) units sold C) material cost D) labor hours incurred

A

1. Which of the following departments would not be considered a service or support department? A) assembly B) information systems C) shipping D) plant maintenance

A

1. Which of the following is a relevant cost to be included in a make-or-buy decision? A) fixed salaries that will not be incurred if the part is outsourced B) pension costs to the current employees C) increase in the cost of repairing of all equipment of the firm D) material-handling costs that cannot be eliminated even if the product is outsourced

A

1. Which of the following is an example of sunk costs? A) wages to security staffs B) cost of purchasing raw materials C) cost of an alternative investment D) wages payable to skilled laborers to make a product

A

1. Advanced Technology Products produces 10 different fastners. Each time a type of fastener is produced, the equipment must be stopped and items such as filters and drill bits must be changed, oil must be added to the equipment and some parts need lubrication. This work must be done before the products can be produced, the costs related to this activity would be part of which cost pool? A) Output-level costs B) Batch-level costs C) Product-sustaining costs D) Service-sustaining costs

B

1. It only makes sense to implement an ABC system when ________. A) a single product is produced in bulk B) its benefits exceed its implementation costs C) it traces more costs as direct costs D) production process is labor-intensive

B

1. Recognizing ABC information is not always perfect because ________. A) it mostly uses far too many indirect cost pools than what is actually required B) it balances the need for better information against the costs of creating a complex system C) it lacks the simplicity that traditional systems used to have to allocate overhead costs D) it never measures how the resources of an organization are used

B

1. What is always the question to ask to determine if revenues or costs are relevant? A) What is the time frame for achieving results? B) What difference will a particular action make? C) Who will be responsible? D) How much will it cost?

B

1. Which of the following is not a reason for the performance evaluation model to differ from the decision model? A) The use of different time frames: one being an annual basis, the other a period of several years. B) The accounting systems enable each decision to be tracked separately. C) The accrual accounting method incorporates irrelevant costs. D) Top management is rarely aware of particular desirable alternatives that were not chosen by subordinate managers.

B

1. Which of the following statements is true of activity-based costing? A) In activity-based costing, direct labor-hours is always the best allocation base to allocate all non-manufacturing indirect costs. B) Activity based costing is more suited to companies with high product diversity than companies with single product line. C) Activity based costing broadly averages or spreads the cost of resources uniformly to cost objects such as products or services. D) The main advantage of activity-based costing over peanut-butter costing is the accurate distribution of all direct costs to the products.

B

1. Special cost-allocation problems arise when ________. A) support department costs exceed budgetary estimates B) practical capacity is used as the allocation base C) support departments provide reciprocal services to each other and operating departments D) the same cost-allocation base is used among various support departments

C

1. Sunk costs ________. A) are future costs for decision making B) are avoidable costs C) are irrelevant for decision making D) are foregone contribution by not using a limited resource in its next-best alternative use

C

1. Advertising of a specific product is an example of A) unit-level costs. B) batch-level costs. C) product-sustaining costs. D) facility-sustaining costs.

C

1. Aqua Company produces two products-Alpha and Beta. Alpha has a high market share and is produced in bulk. Production of Beta is based on customer orders and is custom designed. Also, 55% of Beta's cost is shared between design and setup costs, while Alpha's major portions of costs are direct costs. Alpha is using a single cost pool to allocate indirect costs. Which of the following statements is true of Aqua? A) Aqua will overcost Beta's direct costs as it is using a single cost pool to allocate indirect costs. B) Aqua will undercost Alpha's indirect costs because alpha has high direct costs. C) Aqua will overcost Alpha's indirect costs as it is using a single cost pool to allocate indirect costs. D) Aqua will overcost Beta's indirect costs because beta has high indirect costs.

C

1. Each of the following are true of relevant information except: A) Past costs are helpful when making predictions but not relevant when making decisions B) Different alternatives can be compared by examining differences in expected future revenues and expected total future costs C) significant past investment amounts are relevant to decision making D) Not all future revenues and expenses are relevant

C

1. For a company which produce its products in batches, the CEO's salary is a(n) ________ cost. A) batch-level B) output unit-level C) facility-sustaining D) product-sustaining

C

1. Managers are examining a possible replacement of a machine decision and generate the following numbers: Book value of old machine $1,00,000 Current disposal value of old machine $50,000 Loss on disposal of old machine $300,000 Cost of new machine $600,000 In performing an analysis and in attempt to answer the question, "should we replace the old machine", which of the following statements would be true A) the book value of the old machine is relevant B) the book value of the old machine and the current disposal value of the old machine are both relevant C) the cost of the new machine and the current disposal value of the old machine are relevant D) the book value of the old machine and the current disposal value of the old machine are the only relevant items

C

1. The reciprocal allocation method ________. A) is the most widely used because of its simplicity B) requires the ranking of support departments in the order that the allocation is to proceed C) fully incorporates interdepartmental relationships into the support-department cost allocations D) allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments

C

1. The theory of constraints (TOC) defines throughput margin as ________. A) operating income minus the direct material costs of the goods sold B) operating income minus the direct labor costs of the goods sold C) revenues minus the direct material costs of the goods sold D) revenues minus the full costs of the goods sold

C

1. Which of the following costs always differ among future alternatives? A) fixed costs B) historical costs C) relevant costs D) variable costs

C

1. Which of the following describes who the direct allocation method allocates support-department costs? A) it allocates support-department costs to operating departments by fully recognizing the mutual services provided among all support departments B) it allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments C) it allocates each support-department's costs to operating departments only D) it requires managers to rank the support departments in the order that the step-down allocation is to proceed

C

1. Which of the following is an irrelevant cost when considering where to drop a customer? A) cost of goods sold B) marketing support C) depreciation D) sales order and delivery processing

C

1. Which of the following minimizes the risks of outsourcing? A) the use of short-term contracts that specify price B) shifting the firm's responsibility for on-time delivery to the supplier C) building close partnerships with the supplier D) increasing the contract price

C

1. Which of the following should not be considered for every option in the decision process? A) Relevant revenues B) Relevant costs C) Historical costs D) Opportunity costs

C

1. Which of the following would be the case under the stand-alone method of allocating common costs? A) the individual users of a cost object are ranked in the order of users least responsible for the common cost and then uses this ranking to allocate cost among those users B) disputes can arise over who is the primary user C) each party bears a proportionate share of the total costs in relation to their individual stand-alone costs D) the individual users of a cost object are ranked in the order of users most responsible for the common cost and then uses this ranking to allocate cost among those users

C

1. With a constraining resource, managers should choose the product with the ________. A) lowest contribution margin per unit of the constraining resource B) highest sales price C) highest contribution margin per unit of the constraining resource D) highest gross profit

C

In refining a cost system A) total direct costs are unchanged because they can be traced in an economically feasible way to the product and traced costs are more accurate. B) the costs are grouped in homogeneous pools of the same or similar amounts. C) the criterion of cause-and-effect is used to relate indirect costs to a factor that systematically links to a cost object. D) the organization looks for cost-allocation bases that will provide a uniform spreading of indirect costs to each product.

C

1. A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost? A) the book value of the old equipment B) the depreciation expense on the old equipment C) the loss on the disposal of the old equipment D) the setup cost of the new equipment

D

1. All of the following are examples of quantitative factors except: A) cost of direct materials B) budget for marketing activities C) product development time D) employee morale

D

1. Corny Solutions processes various corn related food items. One of its facilities located in Iowa, performs some initial processing of corn on the cob once it arrives from the corn fields. The corn from that facility will be further processed elsewhere into corn for popping and corn meal. The costs incurred at the Iowa plant would be considered ________. A) combined costs B) distinct costs C) fixed costs D) common costs

D

1. Demand for refinements to the costing system has accelerated due to ________. A) increase in direct costs B) decrease in product diversity C) decrease in indirect costs D) competition in product markets

D

1. In a make-or-buy decision, which of the following would not be relevant? A) the quality of the product B) the portion of fixed costs that could be eliminated by outsourcing C) a lease that could be discontinued upon accepting the "buy proposal" D) property taxes on the plant that will still be necessary even if the product is outsourced

D

1. RCG Services is investigating its profitability relationship with each of its customers. What is the one question RCG should ask in deciding whether to keep or drop a particular customer? A) Will the customer meet a specific designated gross margin percentage? B) Will the customer be willing to pay a higher price to insure RCG's profitability? C) Will enough customers be found to replace any customers dropped for lack of profitability? D) Will expected total corporate office costs decrease if a decision is made to drop the customer?

D

1. Under the incremental method of allocating common costs ________. A) the parties are interested in being viewed as primary users B) each party bears a proportionate share of the total costs in relation to their individual stand-alone costs C) the first-incremental user bears a higher proportion of the cost in comparison with the primary user D) the primary user bears the maximum of the total cost

D

1. Under which allocation method are one-way reciprocal support services recognized? A) direct method B) artificial cost method C) reciprocal method D) step-down method

D

1. Which of the following is not a correct use of the term opportunity cost? A) Opportunity costs are considered period costs rather than inventoriable costs for accounting purposes. B) Opportunity costs must be considered by managers when making decisions. C) Opportunity cost plus the incremental future revenues and costs equal the relevant revenues and costs of any alternative when capacity is constrained. D) The opportunity cost of holding inventory is the income forgone by tying up money in inventory and not investing it elsewhere.

D

Undercosting or overcosting results from A) allocating indirect costs to multiple products. B) assigning traced costs to each product. C) assigning costs to different products using varied costing systems within the same organization. D) assigning broadly averaged costs across multiple products without recognizing amounts of resources used by which products.

D