aab19

Why do accountants criticize the practice of carrying inventories at estimated net realizable values? A) The costs of producing the products are usually estimates. B) There is usually no clearly defined realizable value for any inventories. C) In effect, this practice recognizes income before sales are made. D) It will result in higher cost of goods sold and lesser profits

. Answer: C

Flexible-budget variance = $200,000 (F); sales-volume variance = $350,000 (U); sales-mix variance = $300,000 (F); calculate the static-budget variance. A) $150,000 (U) B) $300,000 (U) C) $300,000 (F) D) $250,000

A) Static-budget variance = $200,000 (F) + $350,000 (U) = $150,000 (U)

The direct allocation method ________. A) does not allocate support department costs to other support departments B) uses information about reciprocal services provided among support departments and can therefore lead to inaccurate estimates of the cost of operating departments C) allocates complete reciprocated costs D) offers key input for outsourcing decisions

Answer: A

Complete reciprocated costs ________. A) are less than the support department's own costs B) include the support department's costs plus any interdepartmental cost allocations C) are used for step-down allocations D) are also referred to as budgeted costs

Answer: B

The sales value at splitoff method ________. A) allocates joint costs to joint products on the basis of the relative total sales value at the splitoff point B) allocates joint costs to joint products on the basis of a comparable physical measure at the splitoff point C) allocates joint costs to joint products on the basis of relative NRV D) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage

Answer: A

Animer Inc. provides the following information. Corporate advertising costs = $800,000 Division A - $4,500,000 Division B - $7,500,000 Assume that customers with higher revenues benefited more from corporate advertising costs than customers with lower revenues. 4) What is the allocated corporate costs for Division B?

Allocated corporate cost for Division B = $7,500,000 / ($4,500,000 + $7,500,000) ×$800,000 = $500,000

A business which enters into a contract to purchase a product which compensates the manufacturer under a cost reimbursement agreement should take an active part in the determination of how joint costs are allocated because ________. A) the manufacturer may allocate a large portion of its other costs to these products B) the business need those information for its tax reporting purposes C) the FASB requires the business to participate in the cost allocation process D) it is an opportunity for the business to enhance its market knowledge

Answer: A

A shift towards a mix of products with a lower contribution margin per unit will most likely result in a(n) ________. A) unfavorable sales-mix variance B) unfavorable sales-quantity variance C) favorable sales-mix variance D) favorable sales-quantity variance

Answer: A

ABC systems use the concept of a ________ to identify the cost drivers that best demonstrate the cause-and-effect relationship between each activity and the costs in the related cost pool. A) cost hierarchy B) customer -cost analysis C) cost allocation D) variance analysis

Answer: A

An example of an allowable cost considered by U.S government contract is ________. A) costs of economy-class airfares B) costs of lobbying activities C) costs of alcoholic beverages D) costs of vacation for executives

Answer: A

An unfavorable sales-mix variance would most likely be caused by ________. A) a new competitor providing better service in the high-margin product sector B) a competitor having distribution problems with high-margin products C) the company offering low-margin products at a higher price D) the company experiencing quality-control problems that get negative media coverage of low-margin products

Answer: A

Businesses offer bundled products to ________. A) increase customer exposure B) avoid the problems of cost allocation C) avoid the problems of revenue allocation D) decrease taxes

Answer: A

Corporate-sustaining costs ________. A) are common to all individual customers B) have a clear cause-and-effect relationship with several cost-allocation bases C) should be allocated for decisions regarding reducing customer costs D) evaluates the effectiveness of sales personnel

Answer: A

Costs incurred to handle each unit sold would most likely be classified as a ________. A) customer output unit-level cost B) customer batch-level cost C) customer-sustaining cost D) corporate-sustaining cost

Answer: A

Homogeneous cost pool leads to ________. A) more accurate costs of a given cost object B) more resources being assigned to that cost object C) the need for more cost drivers D) the need for different cost allocation bases to allocate the costs

Answer: A

In cost allocation, R&D costs are used ________. A) to provide information for economic decisions B) to report to external parties when using generally accepted accounting principles C) to calculate costs of a government contract D) to calculate prime cost of a product

Answer: A

More insight into the sales-volume variance can be gained by subdividing it into ________. A) the sales-mix variance and the sales-quantity variance B) the market-share variance and the sales-mix variance C) the flexible-budget variance and the market-size variance D) the flexible-budget variance and the sales-mix variance

Answer: A

Price discounts are influenced by ________. A) the volume of product purchased B) the prime cost of production C) the operational budget D) the contribution -margin per unit

Answer: A

The best method to determining weights for the stand-alone revenue-allocation method is ________. A) selling prices revenue-allocation method because the weights explicitly consider the prices customers are willing to pay for the individual products B) unit cost revenue-allocation method because it can be used on all occasions C) the direct revenue-allocation method since selling prices or unit costs are difficult to calculate for individual products D) physical-units revenue-allocation method because the physical units explicitly value the prices customers are willing to pay for the individual products

Answer: A

The cost-allocation method that allocates each support-department's costs to operating departments only is the ________. A) direct method B) single-rate cost allocation method C) step-down method D) reciprocal method

Answer: A

The sales-mix variance is calculated by ________. A) deducting budgeted contribution margin based on actual units at budgeted mix from budgeted contribution margin based on actual units sold at the actual mix B) deducting budgeted contribution margin based on budgeted units at actual mix from budgeted contribution margin based on actual units sold at the budgeted mix C) deducting budgeted contribution margin based on actual units at actual mix from budgeted contribution margin based on budgeted units sold at the budgeted mix D) deducting budgeted contribution margin based on actual units at actual mix from budgeted contribution margin based on actual units sold at the actual mix

Answer: A

The sales-mix variance will be unfavorable when ________. A) the actual sales mix shifts toward the less profitable units B) the contribution margin per composite unit for the actual mix is greater than the budgeted mix C) the actual unit sales are less than the budgeted unit sales D) the actual contribution margin is less than the static-budget contribution margin

Answer: A

The single-rate cost-allocation method may base the denominator choice on ________. A) master-budget capacity utilization B) fixed cost utilization C) variable cost utilization D) direct-cost utilization

Answer: A

The stand-alone revenue-allocation method ________. A) uses product-specific information on the products in the bundle as weights for allocating the bundled revenues to the individual products B) ranks individual products in a bundle according to criteria determined by management C) ranks individual products in a bundle according to costs allocated to the products D) survey customers about the importance of each of the individual products in their purchase decision

Answer: A

The static-budget variance is the difference between ________. A) an actual result and the corresponding budgeted amount in the static budget B) the budget amount in the static budget and the amount in the flexible budget C) an actual result and the flexible budget amount D) the static budget amount and the sales-volume variance

Answer: A

To guide cost allocation decisions, the fairness or equity criterion ________. A) considers reasonableness as a matter of judgment rather than an operational criterion B) allocates cost among the beneficiaries in proportion to the benefits each receives C) is used more frequently than any other criteria D) is the primary criterion used in activity-based costing

Answer: A

Which of the following illustrates a purpose for allocating costs to cost objects? A) to provide information for cost-control and pricing decisions B) to provide information to customers C) to determine marginal cost D) to measure capital expenditure

Answer: A

Which of the following is a disadvantage of a dual-rate method? A) It allocates fixed costs on the basis of budgeted long-run usage may tempt some managers to underestimate their planned usage. B) It may lead operating department managers to make sub-optimal decisions that are in their own best interest. C) It allocates fixed and variable-cost pool using the same cost-allocation base, which will mislead managers in making decisions. D) It does not guide department managers to make decisions that benefit both the organization as a whole and each department.

Answer: A

Which of the following is a possible reason to allocate joint costs to individual products? A) rate regulation requirements B) to prepare financial statements C) for product design decisions D) to determine tax rates

Answer: A

Which of the following is an advantage of the single-rate method? A) It is less costly to implement. B) It classifies costs as fixed and variable costs. C) It gives signals regarding how variable and fixed costs behave differently. D) It helps the managers on short-run and long-run planning due to fixed cost allocation as per budgeted usage.

Answer: A

Which of the following is an example of division-sustaining costs? A) research and development cost B) corporate administration costs C) corporate brand advertising D) shipment costs

Answer: A

Which of the following is an operating department? A) machining B) accounting C) materials management D) production control

Answer: A

Which of the following statements is true of joint costing? A) The costs of a production process that yields multiple products simultaneously are called joint costs. B) Distribution costs incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point are considered as joint costs. C) The primary purpose of joint costing is to allocate the separable costs to the individual products that are eventually sold. D) Joint costing is less useful for companies which manufacture multiple products simultaneously from the same production process.

Answer: A

8) To improve customer profitability, companies should track ________. A) only the final invoice price of a sale B) the volume of the products purchased by each customer C) the location of each customer D) the customer profile

Answer: B

A challenge to using cost-benefit criteria for allocating costs is that ________. A) the costs of designing and implementing complex cost allocations are not readily apparent B) the benefits of making better-informed pricing decisions are difficult to measure C) cost systems are being simplified and fewer multiple cost-allocation bases are being used D) the costs of collecting and processing information keep spiraling upward

Answer: B

An advantage of using a bar chart to visualize customer profitability is that ________. A) differences in commissions paid to sales persons stand out B) the number of "unprofitable" customers stand out C) trends in the volume of purchases become apparent D) company can get ideas about new products or improved methods

Answer: B

An example of allocating joint costs using physical measures is allocating joint costs based on ________. A) sales value at splitoff point B) volume of the products C) constant gross-margin percentage D) net realizable value

Answer: B

Approaches used to rank products for revenue allocation can include ________. A) surveying suppliers on the importance of each product B) using recent data on stand-alone sales performance C) having sales agents use their knowledge and intuition D) surveying middlemen on the importance of each product

Answer: B

Which method of accounting recognizes byproducts in the financial statements at the time their production is completed? A) gross margin method B) sales method C) production method D) market value method

Answer: C

Contract disputes regarding cost allocation can be reduced by defining ________. 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

Answer: B

Corporate administrative costs allocated to a division cost pool are most likely to be ________. A) output unit-level costs B) facility-sustaining costs C) product-sustaining costs D) batch-level costs

Answer: B

Costs in the cost pool having the same or a similar cause-and-effect or benefits-receiving relationship with the cost-allocation base can be achieved in adopting ________. A) indirect cost pools B) homogeneous cost pools C) hetrogeneous cost pools D) direct cost pools

Answer: B

Costs incurred to process orders would most likely be classified as a ________. A) customer output unit-level cost B) customer batch-level cost C) customer-sustaining cost D) corporate-sustaining cost

Answer: B

Customer revenues and ________ are the determinants of customer profitability. A) customer profile B) customer costs C) customer location D) customer industry

Answer: B

Customers making large contributions to the profitability of the company should ________. A) be treated the same as other customers because all customers are important B) receive a higher level of attention from the company than less profitable customers C) be charged higher prices for the same products than less profitable customers D) not be offered the volume-based price discounts offered to less profitable customers

Answer: B

Dropping an unprofitable customer will ________. A) eliminate long-run costs assigned to that customer B) eliminate most short-run costs assigned to that customer C) decrease long-run profitability D) increase the potential to cross-sell other products that are more desirable

Answer: B

If deciding whether to eliminate a distribution channel, allocating corporate-sustaining costs to distribution channels ________. A) helps define cost reduction possibilities B) gives the misleading impression of potential cost savings C) identifies administrative inefficiencies D) evaluates the effectiveness of sales personnel

Answer: B

In joint costing, the ________ assumes that all the markup is attributable to the joint process costs. A) sales value at splitoff method B) NRV method C) constant gross-margin percentage method D) physical measures method

Answer: B

In joint costing, the potential conflict between cost concepts used for decision making and cost concepts used for evaluating the performance of managers will be most severe when the ________ method is used. A) sales value at splitoff B) physical measure C) constant gross-margin percentage NRV D) estimated NRV Answer: B

Answer: B

Outputs with a negative sales value are ________. A) added to cost of goods sold B) added to joint production costs and allocated to joint or main products C) added to joint production costs and allocated to byproducts and scrap D) subtracted from product revenue

Answer: B

The advantage of using practical capacity to allocate costs ________. A) is that it allows a downward supply spiral to develop B) is that it focuses management's attention on managing unused capacity C) is that budgets are much easier to develop D) is that it results in departments bearing a lower percentage of fixed costs

Answer: B

The budgeted contribution margin per composite unit for the budgeted sales mix can be computed by dividing the ________. A) total budgeted contribution margin by the actual total units B) total budgeted contribution margin by the total budgeted units C) actual total contribution margin by the total actual total units D) actual total contribution margin by the total budgeted units

Answer: B

The constant gross-margin percentage NRV method of joint cost allocation ________. A) involves allocating costs in such a way that maintaining the same gross margin percentage for each product that was obtained in prior years B) computes gross margin before allocating the costs to the products C) is the same as the estimated NRV method D) is the same as the sales-value at splitoff method

Answer: B

The cost of the manager of a retail distribution channel would most likely be classified as a ________. A) customer-sustaining cost B) distribution-channel cost C) customer batch-level cost D) corporate-sustaining cost

Answer: B

The costs of all six value-chain functions should be included when determining ________. A) the prime cost of a product B) the selling price of a product C) the contribution margin per unit D) the cost of capital

Answer: B

The drawback of the constant gross-margin percentage NRV method in joint costing is that ________. A) it recognizes that profits are derived from the costs incurred after splitoff B) it assumes the profit margin to be identical across all products C) it attempts to approximate the sales values at splitoff by subtracting from final selling prices the separable costs incurred after the splitoff point D) it ignores the separable costs of further processing Answer: B

Answer: 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

Answer: B

The method that ranks individual products in a bundle for revenue allocation is the ________. A) stand-alone revenue-allocation method B) incremental revenue-allocation method C) unit-cost weighting method D) physical-unit weighting method

Answer: B

The physical-measure method ________. A) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage B) allocates joint costs to joint products on the basis of a comparable physical measure at the splitoff point C) allocates joint costs to joint products on the basis of the relative sales value at the splitoff point D) allocates joint costs to joint products on the basis of relative NRV

Answer: B

The reporting and assessment of revenues earned from customers and the costs incurred to earn those revenues is ________. A) creditor-age analysis B) customer-profitability analysis C) debtor-cost analysis D) customer-turnover analysis

Answer: B

The sales-quantity variance results from a difference between ________. A) the actual sales mix and the budgeted sales mix B) the actual quantity of units sold and the budgeted quantity of unit sales in the static budget C) actual contribution margin and the budgeted contribution margin D) actual market size in units and the budgeted market size in units

Answer: B

The sales-quantity variance will be favorable when ________. A) sales-volume variance and flexible-budget variance are favorable B) actual units of all products sold exceed budgeted units of all products sold C) the actual sales mix shifts towards the more profitable units D) static-budget variance and flexible-budget variance are favorable

Answer: B

The sales-quantity variance will be unfavorable when ________. A) the composite unit for the actual mix is less than for the budgeted mix B) the actual unit sales are less than the budgeted unit sales C) the actual contribution margin per unit is less than the static-budget contribution margin D) the actual sales mix shifts toward the less profitable units

Answer: B

The sales-volume variance is subdivided into ________. A) sales-mix variance and static-budget variance B) sales-mix variance and sales-quantity variance C) flexible-budget variance and fixed-budget variance D) market-share variance and static-budget variance

Answer: B

The sales-volume variance is the difference between ________. A) a sales-mix variance and the corresponding sales-quantity variance B) a flexible-budget amount and the corresponding static-budget amount C) a market-share variance and the corresponding market-size variance D) a sales-mix variance and the corresponding market size variance

Answer: B

The step-down method ________. A) partially recognizes the services provided among support departments B) does not recognize the total services that support departments provide to each other C) is conceptually the most precise method D) results in allocating only the support costs used by operating departments

Answer: B

To allocate corporate costs to divisions, the allocation base used should ________. A) be an output unit-level base B) have the best cause-and-effect relationship with the costs C) combine administrative costs and human resource management costs D) allocate the fixed costs only

Answer: 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

Answer: B

To guide cost allocation decisions, the cause-and-effect criterion ________. A) is used less frequently than the other criteria B) is the primary criterion used in activity-based costing C) considers fairness as a matter of judgment rather than an operational criterion D) advocates allocating costs in proportion to the cost object's ability to bear costs allocated to it

Answer: B

What type of cost is the result of an event that results in more than one product or service simultaneously? A) byproduct cost B) joint cost Diff: 2 Objective: 6 C) main cost D) separable cost

Answer: B

When budgeted cost-allocations rates are used ________. A) user departments are not informed about the charges until the end of the period B) the manager of the supplier division bears the risk of unfavorable cost variances C) user divisions pay for costs that exceed budgeted amounts D) user divisions pay for inefficiencies of the supplier department

Answer: B

When corporate-sustaining costs are fully allocated to distribution channels, then the sum of the distribution-channel operating incomes is ________. A) greater than companywide operating income B) equal to companywide operating income C) equal to customer-level operating income D) greater than customer-level operating income

Answer: B

When the cost pools are homogeneous ________. A) the number of needed cost pools will be more B) the costs in the cost pool have a similar cause-and-effect or benefits-received relationship with the cost-allocation base C) managers should not allocate both variable costs and costs that are fixed in the short-run D) there will be a greater variety of cause-and-effect, benefits-received, or fair-and-equitable relationship with the cost-allocation base

Answer: B

When the purpose of cost allocation is to provide information for economic decisions or to motivate managers and employees, the best criteria are ________. A) the cause-and-effect and the ability-to bear criteria B) the cause-and-effect and the benefits-received criteria C) the benefits-received and the fairness criteria D) the fairness and the ability-to-bear criteria

Answer: B

When the selling prices of all products at the splitoff point are unavailable, the ________ is the best alternative for allocating joint costs. A) sales value at splitoff method B) NRV method C) physical measures method D) constant gross-margin percentage method:

Answer: B

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

Answer: B

Which of the following criteria has the presumption that the more-profitable divisions have a greater ability to absorb corporate administration costs? A) the fairness or equity criterion B) the ability to bear criterion C) the cause-and-effect criterion D) the benefits-received criterion

Answer: B

Which of the following is a corporate-sustaining cost? A) design costs B) corporate brand advertising C) shipment costs D) research and development costs

Answer: 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.

Answer: 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

Answer: B

Which of the following statements is true of joint production process and its components? A) Distribution costs incurred beyond the splitoff point assignable to each of the specific products identified at the splitoff point are considered as joint costs. B) Decisions relating to the sale or further processing of each identifiable product can be made independently of decisions about the other products beyond the splitoff point. C) When a joint production process yields two or more products with low total sales values relative to the total sales values of other products, those products are called joint products. D) The primary purpose of joint costing is to allocate the separable costs to the individual products that are eventually sold.

Answer: B

Which of the following statements is true of the production method of accounting for byproducts? A) It makes no journal entries until the byproduct is sold. B) It is the preferred method because of the matching principle. C) It records revenues of the byproduct in the income statement as revenue. D) It adds revenues of the byproduct to the cost of goods sold in the income statement.

Answer: B

Which purpose of cost allocation is used to encourage sales representatives to push high-margin products or services? A) to provide information for economic decisions B) to motivate managers and other employees C) to justify costs or compute reimbursement D) to measure income and assets for reporting to external parties

Answer: B

________ occurs when revenues are related to a particular revenue object but cannot be traced to it in an economically feasible (cost-effective) way. A) Revenue estimation B) Revenue allocation C) Resource allocation D) Revenue optimization

Answer: B

) Managers of supplier departments ________. A) view the budgeted rates positively if unfavorable cost variances occur due to price decreases outside of their control B) view the budgeted rates negatively if favorable cost variances occur due to price decreases outside of their control C) view the budgeted rates negatively if unfavorable cost variances occur due to price increases outside of their control D) view the budgeted rates negatively if unfavorable cost variances occur due to price decreases outside of their control

Answer: C

) More insight into the static-budget variance can be gained by subdividing it into ________. A) the sales-mix variance and the sales-quantity variance B) the market-share variance and the market-size variance C) the flexible-budget variance and the sales-volume variance D) the flexible-budget variance and the sales-mix variance

Answer: C

A customer cost hierarchy categorizes costs related to customers into different cost pools on the basis of different ________. A) contribution-margin ratios of products B) distribution-channel costs C) levels of cause-and-effect relationships D) division-sustaining costs

Answer: C

A negative consequence of recording byproducts in the accounting records when the sale occurs is that ________. A) the revenue from the byproducts is usually fairly large and the accounting records will be distorted B) earnings cannot be timed under this method C) managers can be tempted to stockpile byproducts D) it involves complex calculations compared to the production method

Answer: C

Answer the following questions using the information below: The Conity Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $13,000,000 bond issuance, the Electric Mixer Division used $9,100,000 and the Electric Lamp Division used $3,900,000 for expansion. Interest costs on the bond totaled $975,000 for the year. 14) The above interest costs would be considered a(n) ________. A) output unit-level cost B) facility-sustaining cost C) product-sustaining cost D) batch-level cost

Answer: C

Corporate-sustaining costs should be allocated to ________. A) motivate changes in customer behavior B) evaluate distribution-channel managers C) determine the selling price that will cover all costs D) find the cause-and-effect relationship

Answer: C

Cost-based prices ________. A) are one way of setting prices in a competitive market B) provide an inherit incentive for the producer to control costs C) pass the majority of risk to the buyer D) are required in all government contracts

Answer: C

Costs of activities to sell each unit to a customer is an example of ________. A) customer-sustaining costs B) division-sustaining costs C) customer output unit-level costs D) distribution-channel costs

Answer: C

Costs which are NOT economically feasible to trace but which are related to a cost object are known as ________. A) incremental costs B) marginal costs C) indirect costs D) variable costs

Answer: C

Discontinuing an unprofitable customer ________. A) will eliminate all corporate costs assigned to and may result in losing more revenues relative to costs saved B) will eliminate all costs assigned to and may result in gaining more revenues relative to costs saved C) will not eliminate all costs assigned to and may result in losing more revenues relative to costs saved D) will not eliminate all corporate costs assigned to and may result in gaining more revenues relative to costs saved

Answer: C

In joint costing, which of the following changes may lead to a change in product classification? A) main product sales price increases due to a new application B) byproduct sales price decreases due to a new government regulation C) main product becomes technologically obsolete D) byproduct loses its market due to a new invention

Answer: C

Managers use customer-profitability analysis report to ensure that ________. A) unpaid invoices are categorized according to age by due date B) costs related to customers are segmented into different cost pools on the basis of different types of cost drivers or cost-allocation bases C) customers making large contributions to the operating income of a company receive a high level of attention from the company D) cost allocation of indirect cost is in place

Answer: C

NOT allocating some corporate costs to divisions and products results in ________. A) an increase in overall corporate profitability B) the sum of individual product profitability being less than overall company profitability C) the sum of individual product profitability being greater than overall company profitability D) a decrease in overall corporate profitability

Answer: C

Which of the following is included in an explicit written contract for cost allocation? A) resource allocation for the budgeted costs B) the rate at which the company should be taxed upon C) permissible cost-allocation bases D) profit that the company must earn

Answer: C

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

Answer: C

The benefits-received criteria for allocating joint costs indicate market-based measures are preferred because ________. A) physical measures such as quantity are clear bases for allocating cost than other measures B) physical measures are more difficult to calculate C) revenues are usually the best indicators of the benefits received D) revenues always remain consistent over short-run

Answer: C

The cost of visiting customers would most likely be classified as a ________. A) customer output unit-level cost B) customer batch-level cost C) customer-sustaining cost D) corporate-sustaining cost

Answer: 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

Answer: C

The difference between budgeted contribution margin per composite unit for the actual mix and the budgeted contribution margin per composite unit for the budgeted mix is the ________. A) material-mix variance B) flexible-budget variance C) sales-mix variance D) sales-volume variance

Answer: C

The direct allocation method ________. A) allocates support-department costs to operating departments by fully recognizing the mutual services provided among all support departments B) 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) allocates each support-department's costs to operating departments only D) requires managers to rank the support departments in the order that the step-down allocation is to proceed

Answer: C

The focus of joint costing is on allocating costs to individual products ________. A) before the splitoff point B) after the splitoff point C) at the splitoff point D) at the end of production

Answer: C

The method that allocates costs by explicitly including all the services rendered among all support departments is the ________. A) direct method B) step-down method C) reciprocal method D) sequential method

Answer: 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

Answer: C

The products of a joint production process that have low total sales values compared with the total sales value of the main product are called ________. A) primary products B) joint products C) byproducts D) waste products

Answer: C

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) highlights the complete reciprocated costs of support departments and how these costs differ from budgeted or actual costs of the departments 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

Answer: C

To guide cost allocation decisions, the ability to bear criterion ________. A) is the primary criterion used in activity-based costing B) allocates cost among the beneficiaries in proportion to the benefits each receives. C) results in subsidizing products that are not profitable D) is used more frequently than any other criteria

Answer: C

To reduce distribution-channel costs, a company could ________. A) improve the efficiency of the ordering process B) make fewer customer visits C) eliminate distribution to retailers and only service wholesalers D) reduce product-handling costs

Answer: C

Tours Corp offers towing services, auto routing, travel brochures, and other travel services for one annual fee. This is an example of ________. A) revenue tracing B) revenue allocation C) a bundled product D) a business conglomerate

Answer: C

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

Answer: C

What factor most often drives joint cost allocation? A) performance evaluation B) manager compensation C) selling prices D) simplicity of the method

Answer: C

When a single manufacturing process yields two products, one of which has a relatively high sales value compared to the other, the two products are respectively known as ________. A) joint products and byproducts B) joint products and scrap C) main products and byproducts D) main products and joint products

Answer: C

When actual cost-allocations rates are used ________. 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

Answer: C

When individual activities within a cost pool have a similar relationship with the cost driver, the cost pool ________. A) is not considered for customer-profitability analysis B) need multiple cost drivers C) is considered a homogeneous cost pool D) is considered an allocated cost pool

Answer: C

Which cost-allocation criterion is most likely to subsidize poor performers at the expense of the best performers? A) the fairness or equity criterion B) the benefits-received criterion C) the ability to bear criterion D) the cause-and-effect criterion

Answer: C

Which of the following is one of the methods of allocating support department costs to operating departments? A) dual-cost allocation method B) incremental method C) step-down method D) single-rate cost allocation method

Answer: C

Which of the following journal entries can happen only under the production method of recording byproducts? A) Work in Process B) C) Finished Goods - Byproduct Accounts Payable Cash or Accounts Receivable Revenues - Main product Byproduct Inventory Finished Goods - Main product Work in Process D) Cash or Accounts Receivable Revenues - Byproduct

Answer: C

Which of the following statements best define splitoff point in joint costing? A) It is the point at which managers decide to discontinue one or more of the products. B) It is the point at which the managers decide to outsource some of its production processes. C) It is the juncture in a joint production process when two or more products become separately identifiable. D) It is the juncture at which decisions determining joint costs of various products to be produced are taken.

Answer: C

Which of the following statements is true of main products and byproducts? A) A byproduct will never become a main product. B) A main product will never become a byproduct. C) Product classifications may change over time. D) Product classifications remains constant over time.

Answer: C

Which of the following statements is true of the methods for allocating joint costs? A) The net realizable value method uses the sales value of the units sold during the accounting period to allocate joint costs. B) The sales value at splitoff method always results in the same gross-margin percentage for all products. C) The sales value at splitoff method allocates joint costs to each product in proportion to the sales value of total production. D) The net realizable value method results in the same joint production cost per unit products.

Answer: C

Which of the following statements is true of the methods for allocating joint costs? A) The sales value at splitoff method lacks a common basis for allocating joint costs to products. B) The complexity of the sales value at splitoff method increases when managers make frequent changes to the sequence of post-splitoff processing decisions. C) The NRV method assumes that none of the markup is attributable to the separable costs. D) The NRV method treats the joint products as though they comprise a single product.

Answer: C

Which of the following statements is true of the sales method of accounting for byproducts? A) It makes journal entries when the byproducts are produced. B) It is the preferred method because of the matching principle. C) It allows a firm to manage its reported earnings by timing the sale of byproducts. D) This method recognizes the byproduct inventory in the accounting period in which it is produced.

Answer: C

Which of the methods of allocating joint costs usually is considered the simplest to implement? A) estimated net realizable value B) constant gross-margin percentage NRV C) sales value at splitoff D) physical measures

Answer: C

________ categorizes costs related to customers into different cost pools on the basis of either different classes of cost drivers or different degrees of difficulty in determining the cause-and-effect (or benefits-received) relationships. A) Customer-profitability analysis B) Customer revenues C) Customer cost hierarchy D) Price discounting

Answer: C

________ is the differentiating factor while classifying a product as a main product or byproduct. A) Number of units per processing period B) Weight or volume of outputs per period C) Percentage of total sales value D) Joint costs incurred up to the splitoff point

Answer: C

1) Allocation of corporate-sustaining costs is useful for ________. A) evaluating the performance of salespersons with individual customer accounts B) motivating distribution-channel management C) focusing on the cause-and-effect relationships with the cost-allocation bases D) motivating division managers to examine how corporate costs are planned and controlled

Answer: D

2) Flexible budget contribution margin is equal to ________. A) actual contribution margin per unit times actual units sold of each product B) actual contribution margin per unit times budgeted units sold of each product C) budgeted contribution margin per unit times budgeted units sold of each product D) budgeted contribution margin per unit times actual units sold of each product

Answer: D

A cost of operating a facility, department, activity area, or like cost object that is shared by two or more users is called a ________. A) combined cost B) distinct cost C) fixed cost D) common cost

Answer: D

For companies in which full allocation is not followed, corporate sustaining costs are ________. A) allocated to divisions using cause-and-effect relationship B) allocated to customers using cause-and-effect relationship C) added to aggregate operating incomes of the divisions D) subtracted as a lump-sum amount after aggregating operating incomes of the divisions

Answer: 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

Answer: D

In joint costing, the sales value at splitoff method is used frequently ________. A) in a dynamic business environment where the selling prices change frequently B) in anticipation of subsequent management decisions C) when selling prices are dependent on further processing decisions D) since the selling-price data exists at the splitoff

Answer: D

In joint costing, which of the following is a market-based approach to allocating costs? A) sales units B) units of production C) physical measures D) net realizable value

Answer: D

Products with a relatively low sales value are known as ________. A) primary products B) main products C) joint products D) byproducts

Answer: D

Salary of top management and general-administration costs is an example of ________. A) customer output unit-level costs B) customer batch-level costs C) distribution-channel costs D) corporate-sustaining costs

Answer: D

The biggest advantage of using practical capacity to allocate costs is that it ________. 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

Answer: D

The chart used to express customer profitability is called the whale curve because ________. A) it is forward-bending at the point where customers start to become profitable and thus resembles a humpback whale B) it is forward-bending at the point where customers start to become unprofitable and thus resembles a humpback whale C) it is backward-bending at the point where customers start to become profitable and thus resembles a humpback whale D) it is backward-bending at the point where customers start to become unprofitable and thus resembles a humpback whale

Answer: D

The net realizable value method ________. A) allocates joint costs to joint products on the basis of a comparable physical measure at the splitoff point B) allocates joint costs to joint products on the basis of the relative sales value at the splitoff point C) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage D) allocates joint costs to joint products on the basis of relative NRV

Answer: D

The sales-mix variance will be favorable when ________. A) the actual contribution margin is greater than the static-budget contribution margin B) actual unit sales are more than budgeted unit sales C) the actual sales mix shifts toward the less profitable units D) the budgeted contribution margin for actual sales mix is greater than budgeted mix

Answer: D

The sales-quantity variance can be decomposed into ________. A) sales-mix variance and sales-volume variance B) static-budget variance and flexible-budget variance C) flexible-budget variance and sales-volume variance D) market-share variance and market-size variance

Answer: D

The sales-quantity variance is calculated by ________. A) deducting budgeted contribution margin based on actual units at actual mix from budgeted contribution margin based on actual units sold at the actual mix B) deducting budgeted contribution margin based on actual units at actual mix from budgeted contribution margin based on actual units sold at the budgeted mix C) deducting budgeted contribution margin based on budgeted units at actual mix from budgeted contribution margin based on actual units sold at the budgeted mix D) deducting budgeted contribution margin based on budgeted units at budgeted mix from budgeted contribution margin based on actual units sold at the budgeted mix

Answer: D

The static-budget variance will be favorable, when ________. A) budgeted unit sales are more than actual unit sales B) the actual contribution margin is less than the static-budget contribution margin C) the actual sales mix shifts toward the less profitable units D) the flexible-budget and the sales-volume variance are favorable

Answer: D

To give more weight to the product that most likely drives the sales of the bundled product, the revenue allocation should be weighted using ________. A) selling prices B) unit costs C) physical units D) stand-alone product revenues

Answer: D

To guide cost allocation decisions, the benefits-received criterion ________. A) generally uses the cost driver as the cost allocation base B) advocates allocating costs in proportion to the cost object's ability to bear costs allocated to it C) is the primarily used criterion in activity-based costing D) may use an allocation base of division revenues to allocate advertising costs

Answer: 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

Answer: 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

Answer: D

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

Answer: D

When a product is the result of a joint process, the decision to process the product past the splitoff point further should be influenced by the ________. A) total amount of the joint costs B) portion of the joint costs allocated to the individual products C) extra revenue earned past the splitoff point D) extra operating income earned past the splitoff point

Answer: D

Which corporate costs should be allocated to divisions? A) costs incurred to process orders B) cost related to homogeneous cost pools only C) product-handling costs D) both fixed and variable costs

Answer: D

Which of the following departments is a support department for a boat manufacturing company? A) production B) molding C) assembling D) accounting

Answer: 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.

Answer: D

Which of the following statements best define joint products? A) When one product has a high total sales value compared with the total sales value of other products of the process, that product is called a joint product. B) Product of a joint production process that have the same sales value compared with the total sales value of the by products is called a joint product. C) When one product has a low total sales value compared with the total sales value of other products of the process, that product is called a joint product. D) When a joint production process yields two or more products with high total sales values relative to the total sales values of other products, those products are called joint products.

Answer: D

Which of the following statements is true in regard to the cause-and-effect relationship between allocated joint costs and individual products? A) A high individual product value results in a high level of joint costs. B) A low individual product value results in a low level of joint costs. C) A high individual product value results in a low level of joint costs. D) There is no cause-and-effect relationship.

Answer: D

Which of the following statements is true of sell-or-process-further decisions in joint costing? A) Joint costs incurred before the splitoff point are relevant in deciding whether to process the product further. B) All separable costs in joint-cost allocations are incremental costs. C) Separable costs incurred before the splitoff point are irrelevant in deciding whether to process the product further. D) Costs that differ between the alternatives of selling products or processing further are relevant.

Answer: D

Which of the following statements is true of the methods for allocating joint costs? A) Constant gross-margin percentage method results in same joint production cost per unit products. B) Estimated net realizable value method results in same gross margin percentage for all products. C) Present value allocation method is the least preferred method due to its complex calculations. D) Sales value at splitoff method uses the sales value of the entire production of the accounting period to allocate costs.

Answer: D

Which of the following statements is true of the methods for allocating joint costs? A) Under the cause-and-effect criterion, the physical-measure method is highly desirable. B) Byproducts are never excluded from the denominator used in the physical-measure method. C) The NRV method is never used when the selling prices of joint products vary frequently. D) The sales value at splitoff method follows the benefits-received criterion of cost allocation.

Answer: D

While allocating corporate costs to divisions ________. A) only fixed costs should be allocated B) no homogeneous cost pools should be constructed C) all the costs in the cost pool should not have the same or a similar cause-and-effect or benefits-received relationship with the cost-allocation base D) allocate both variable and fixed costs to divisions and then to customers

Answer: D

Sales-mix variance = $250,000 (F), sales-volume variance = $4,50,000 (U), flexible-budget variance = $200,000(F), market-size variance = $30,000(U), calculate the sales-quantity variance. A) $170,000 (U) B) $200,000 (U) C) $30,000 (U) D) $700,000 (U)

Answer: D Explanation: D) Sales-quantity variance = $450,000 (U) - $250,000 (F) = $700,000 (U)

Market-share variance = $350,000 (U); Market-size variance = $300,000 (F); Sales-mix variance = $600,000 (F); calculate the sales-quantity variance. A) $350,000 (F) B) $650,000 (F) C) $550,000 (F) D) $50,000 (U)

Answer: D Explanation: D) Sales-quantity variance = $350,000 (U) + $300,000(F) = $50,000 (U)

Sales-mix variance = $300,000 (F), sales-quantity variance = $200,000(F), flexible-budget variance = $100,000(F), market-size variance = $50,000(U), calculate the sales-volume variance. A) $650,000 (F) B) $450,000 (F) C) $550,000 (F) D) $500,000 (F)

Answer: D Explanation: D) Sales-volume variance = $300,000 (F) + $200,000(F) = $500,000 (F)

Answer the following questions using the information below: The Conity Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $13,000,000 bond issuance, the Electric Mixer Division used $9,100,000 and the Electric Lamp Division used $3,900,000 for expansion. Interest costs on the bond totaled $975,000 for the year. 12) What amount of interest costs should be allocated to the Electric Mixer Division? A) $292,500 B) $682,500 C) $9,100,000 D) $2,730,000

B) Costs allocated to the Electric Mixer Division = ($9,100,000 / $13,000,000) × $975,000= $682,500

Answer the following questions using the information below: The Conity Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $13,000,000 bond issuance, the Electric Mixer Division used $9,100,000 and the Electric Lamp Division used $3,900,000 for expansion. Interest costs on the bond totaled $975,000 for the year. 13) What amount of interest costs should be allocated to the Electric Lamp Division? A) $292,500 B) $682,500 C) $2,730,000 D) $3,900,000

Explanation: A) Costs allocated to the Electric Lamp Division = $3,900,000 / $13,000,000 × $975,000= $292,500

Animer Inc. provides the following information. Corporate advertising costs = $800,000 Division A - $4,500,000 Division B - $7,500,000 Assume that customers with higher revenues benefited more from corporate advertising costs than customers with lower revenues. 3) What is the allocated corporate costs for Division A?

Explanation: C) Allocated corporate cost for Division A = $4,500,000 / ($4,500,000 + $7,500,000) ×