Ch 5.1

1. If products are different, then for costing purposes: A. an ABC costing system will yield more accurate cost numbers B. a simple costing system should be used C. a single indirect-cost rate should be used D. None of the above

A. an ABC costing system will yield more accurate cost numbers

4) A company produces three products; if one product is overcosted then: A) one product is undercosted B) one or two products are undercosted C) two products are undercosted D) no products are undercosted

B) one or two products are undercosted

7) The use of a single indirect-cost rate is more likely to: A) undercost high-volume simple products B) undercost low-volume complex products C) undercost lower-priced products D) Both B and C are correct.

B) undercost low-volume complex products

5) Misleading cost numbers are most likely the result of misallocating: A) direct material costs B) direct manufacturing labor costs C) indirect costs D) All of these answers are correct.

C) indirect costs

6) An accelerated need for refined cost systems is due to: A) global monopolies B) rising prices C) intense competition D) a shift toward increased direct costs

C) intense competition

3) Undercosting of a product is most likely to result from: A) misallocating direct labor costs B) underpricing the product C) overcosting another product D) overstating total product costs

C) overcosting another product

8) Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called: A) overcosting B) undercosting C) peanut-butter costing D) department costing

C) peanut-butter costing

11) If companies increase market share in a given product line because their reported costs are less than their actual costs, they will become more profitable in the long run. T or F

False

12) As product diversity and indirect costs increase, it is usually best to switch away from an activity based cost system to a broad averaging system. T or F

False

13) If a company overcosts one of its products, then it will undercost at least one of its other products. T or F

TRUE

10) Companies that overcost products will most likely lose market share. T or F

True

9) A top-selling product might actually result in losses for the company. T or F

True

2. Overcosting a particular product may result in: a. loss of market share b. pricing the product too low c. operating efficiencies d. understating total product costs

a. loss of market share