Chapter 15

Which of the following is an example of an allowable cost considered by U.S. government contract? A) supervision costs B) costs of lobbying activities C) costs of alcoholic beverages D) costs of vacation for executives

A

Contract disputes regarding cost allocation can be reduced by defining which of the following? A) the material items allowed for production B) the terms used, such as what constitutes direct labor C) permissible tax deductions D) minimum profit level the company should earn

B

If management wants to choose a method of revenue allocation that best captures the "benefits received" by customers then they would use ________ to allocate revenue to products in a bundle. A) stand-alone revenue -allocation based on unit costs B) stand-alone revenue-allocation based on selling prices C) stand-alone revenue-allocation based on physical units D) stand-alone revenue-allocation based on unit costs

B

Revenue allocation is used when ________. A) revenues cannot be estimated but can be traced to specific cost objects B) revenues are related to a particular revenue object but cannot be traced to it in an economically feasible way C) revenues are not related to a particular object but can be traced to that object in an economically feasible way D) revenue optimization is the goal

B

The dual-rate cost-allocation method classifies costs in each cost pool into a ________. A) budgeted-cost pool and an actual-cost pool B) variable-cost pool and a fixed-cost pool C) direct-cost pool and an indirect-cost pool D) direct-cost pool and a reciprocal-cost pool

B

To discourage unnecessary use of a support department, management might ________. A) allocate user department costs based upon support department usage B) allocate support department costs based upon user department usage C) allocate a fixed amount of support department costs to each and every department D) allocate a fixed amount of user department costs to each and every department

B

When budgeted cost-allocations rates are used ________. A) user departments are not informed about the charges until the end of the period which makes decision making during the period difficult B) user departments can determine the amount of service to request and if allowed, can determine whether to use an internal or external resource C) user divisions pay for costs that exceed budgeted amounts D) user divisions pay for inefficiencies of the supplier department

B

When using the dual-rate method, the fixed cost allocation is based on ________. A) actual rate B) budgeted usage C) incremental cost allocation D) prime cost allocation

B

Which of the following is a disadvantage of single-rate method? A) It is very costly to implement. B) It may lead operating department managers to make sub-optimal decisions that are in their own best interest. C) It does not signal to department managers how variable costs and fixed costs behave differently. D) It requires managers to distinguish variable costs from fixed costs, which is often a challenging task.

B

Which of the following is an example of a revenue object? A) suppliers B) products C) labor D) duration to complete a given task

B

Which of the following methods ranks individual products in a bundle for revenue allocation? A) stand-alone revenue-allocation method B) incremental revenue-allocation method C) unit-cost weighting method D) physical-unit weighting method

B

Cost-plus contracts negotiated with suppliers of the government usually involves ________. A) a price that allows the contractor to break-even B) a price that covers the contract's cost plus other noncash benefits C) the supplier's cost to perform the contact (provide the product or service) plus a fee D) a price that covers the contractor's direct costs plus an amount to cover overhead costs

C

The costs of unused capacity are highlighted when ________. A) actual usage based allocations are used B) budgeted usage allocations are used C) practical capacity-based allocations are used D) the dual-rate cost-allocation method allocates fixed costs based on actual usage

C

The method that allocates costs in each cost pool using the same rate per unit is known as the ________. A) incremental cost-allocation method B) reciprocal cost-allocation method C) single-rate cost allocation method D) dual-rate cost-allocation method

C

When actual cost-allocations rates are used, which of the following would be true? A) user divisions pay for costs that exceed budgeted amounts B) managers of the supplier division are motivated to improve efficiency C) user divisions are unaware of the allocated amounts until the end of the budget period D) managers know with certainty the rates to be used in that budget period

C

Which of the following is an example of a bundled product? A) a checking account B) A complete mechanics tool kit C) an accounting textbook with an access code to a homework/study system D) Microsoft Excel

C

Which of the following would be an explicit agreement of reimbursement on a contract? A) contractor will produce a bill at the end of the contract without having disclose costs B) contractor will seek payment for contract without having to submit a bid or disclose a mark-up C) contractor agrees with customer before the project begins, on a set price D) Contractor will bill the customer based on what the contractor perceives to be the going rate

C

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

15) 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

In certain high-cost defense contracts involving new weapons and equipment, contracts are rarely subject to competitive bidding because ________. A) the government taxes the defense companies at a higher level than that of other public sector companies B) there is an implicit agreement among defense contractors to "share contracts" C) all defense contractors have essentially the same cost structure D) no contractor is willing to assume all the risk of receiving a fixed price for the contract

D

Under the dual-rate cost-allocation method, when fixed costs are allocated based on actual usage then ________. A) user-division managers are motivated to make accurate long-run usage forecasts B) user-division managers can better plan for the short-run and for the long-run C) the costs of unused capacity are highlighted D) variations in one division's usage affect another division's allocation

D

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

Which of the following is an advantage of a dual-rate method? A) It is the most widely used method in practice. B) It is less costly to implement. C) It avoids the expensive analysis for categorizing costs as either fixed or variable. D) It allocates fixed cost as per the budgeted usage that helps in short and long-run planning.

D

Which of the following would be considered the biggest advantage of using practical capacity to allocate costs? A) focuses the user's division with the costs of overused capacity B) never causes over or under-allocated overhead C) burdens the user divisions with the costs of unused capacity D) focuses management's attention on unused capacity

D