Chapter 15 (cost accounting) allocation of support -department costs, common costs, and revenues, Chapter 16 Cost Accounting Cost Allocation: Joint Products and Byproducts, Chapter 18 Cost Accounting

Which of the following is true of the physical-measure approach of allocating joint costs? A) Costs cannot be allocated if the measurement basis for each product are different. B) Physical measures usually result in less costs being allocated to the product that weighs the most. C) The physical measure reflects a product's ability to generate revenues. D) Obtaining comparable physical measures for all products is always straightforward.

A) Costs cannot be allocated if the measurement basis for each product are different

8) 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.

A) It allocates fixed costs on the basis of budgeted long run usage may tempt some managers to underestimate their planned usage.

5) 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

A) It is less costly to implement.

Which of the following sentences is true of normal spoilage and abnormal spoilage? A) Normal spoilage costs are inventoriable and are added to the cost of good units produced, while abnormal spoilage costs are deducted from the cost of good units produced. B) Abnormal spoilage costs are inventoriable and are deducted from the cost of good units produced, while normal spoilage costs are expensed in the accounting period in which they occur. C) Abnormal spoilage costs are inventoriable and are added to the cost of good units produced, while normal spoilage costs are expensed in the accounting period in which they occur. D) Normal spoilage costs are inventoriable and are deducted from the cost of good units produced, while abnormal spoilage costs are expensed in the accounting period in which they occur.

A) Normal spoilage costs are inventoriable and are added to the cost of good units produced, while abnormal spoilage costs are deducted from the cost of good units produced

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

A) rate regulation requlation requirements

Which of the following statements is true of normal spoilage and abnormal spoilage? A) Normal spoilage is inherent in a particular production process, whereas abnormal spoilage is not inherent in a particular production process. B) Abnormal spoilage arises even when the process is carried out in an efficient manner, whereas normal spoilage does not arise when the process is carried out in an efficient manner. C) Normal spoilage is usually regarded as avoidable and controllable, whereas abnormal spoilage is unavoidable and uncontrollable. D) The costs of normal spoilage are recorded as a loss as a separate line item in an income statement, whereas costs of abnormal spoilage are included as a component of the costs of good units manufactured.

A) Normal spoilage is inherent in a particular production process, whereas abnormal spoilage is not inherent in a particular production process

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.

A) The costs of a production process that yields multiple products simultaneously are called joint costs

The cost per good unit in the weighted-average method is equal to the ________. A) total cost of direct materials and conversion costs per equivalent unit, plus a share of normal spoilage B) sum of the costs per equivalent unit of direct materials and conversion costs C) total costs divided by total equivalent units D) total costs transferred out divided by total abnormal spoilage

A) Total cost of direct materials and conversion costs per equivalent unit, plus a share of normal spoilage

If a company set a standard of zero rework ________. A) all rework is treated as abnormal and is written off as a cost of the current period B) all rework is treated as normal and is written off as a cost of the current period C) all rework is treated as abnormal and is shown as a liability of the current period D) all rework is treated as normal and is shown as a liability of the current period

A) all rework is treated as abnormal and is written off as a cost of the current period

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

A) allocates joint costs to joint products on the basis of the relative total sales value at the splitoff point

4) 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) cost of vacation for executives

A) costs of economy class airfares

When spoiled goods have a disposal value, the net cost of the spoilage is computed by ________. A) deducting disposal value from the costs of the spoiled goods accumulated to the inspection point B) adding the costs to complete a saleable product to the costs accumulated to the inspection point C) deducting the costs to complete a saleable product from the costs accumulated to the inspection point D) adding disposal value to the costs of the good units transferred

A) deducting disposal value from the costs of the spoiled goods accumulated to the inspection point

7) 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

A) does not allocate support department costs to other support departments

Normal spoilage is computed on the basis of the number of ________. A) good units that pass inspection during the current period B) units that pass the inspection point during the current period C) units that are in ending work in process D) units that started during the particular period

A) good units that pass inspection during the current period

4) 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

A) increase customer exposure

3) 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

A) master budget capacity utilization

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

A) selling prices revenue allocation method because the weights explicitly consider the prices customers are willing to pay for the individual products

Which of the following is an example of scrap? A) short lengths from woodworking operations B) defective units of laptops detected after the production process but reworked before the units are sold as good products to customers C) defective aluminum cans sold to aluminum manufacturers for remelting to produce other aluminum products D) defective shirts, jeans, shoes, and carpeting sold as seconds

A) short lengths from woodworking operations

The inspection point is the ________. A) stage of the production cycle where products are checked to determine whether they are acceptable or unacceptable units B) point at which costs are allocated between normal and abnormal spoilage C) point at which the calculation of equivalent units is made D) stage of allocating total costs transferred out to good units completed and transferred

A) stage of the production cycle where products are checked to determine whether they are acceptable or unacceptable units

A production process which involves spoilage and rework occurs in ________. A) the manufacture of high precision machine tools B) the manufacture of semiconductor units C) the manufacture of clothing D) the mining industry

A) the manufacture of high precision machine tools

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

A) the manufacturer may allocate a large portion of its other costs to these products

Rework refers to ________. A) units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units B) products of a joint production process that have low total sales values relative to the total sales value of the main product C) units of production whether fully or partially completed, that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices D) residual material that results from manufacturing a product

A) units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units

5) 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

A) uses product specific information on the products in the bundle as weights for allocating the bundled revenues to the individual products

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

B) added to joint production costs and allocated to joint or main products

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.

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

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.

B) It is the preferred method because of the matching principle

6) 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) It may lead operating department managers to make sub optimal decisions that are in their own best interest.

If scrap is reused as direct material rather than sold as scrap ________. A) Accounts Receivable is debited at its estimated net realizable value and then credited when the scrap is reused B) Materials Control is debited at its estimated net realizable value and then credited when the scrap is reused C) Manufacturing Overhead Control is debited at its estimated net realizable value and then credited when the scrap is reused D) Work-in-Process Control is debited at its estimated net realizable value and then credited when the scrap is reused

B) Materials Control is debited at its estimated net realizable value and then credited when the scrap is reused

To recognize the disposal value of normal spoilage, ________. A) Manufacturing Overhead Control account is debited with spoiled goods at current net disposal value. B) Materials Control account is debited with spoiled goods at current net disposal value. C) Work-in-Process Control account is debited with spoiled goods at current net disposal value. D) Manufacturing Overhead Control account is credited with spoiled goods at current net disposal value

B) Materials control account is debited with spoiled goods at the current net disposal value

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

B) NRV method

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

B) NRV method

1) ________ 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

B) Revenue allocation

Which of the following is true of unit costs of normal and abnormal spoilage when they are detected at the same inspection point? A) Unit cost of normal spoilage is more than unit cost of abnormal spoilage. B) Unit cost of normal spoilage is equal to unit cost of abnormal spoilage. C) Unit cost of abnormal spoilage is more than unit cost of normal spoilage. D) Addition of unit cost of normal spoilage and unit cost of abnormal spoilage is equal to unit cost of good units produced and transferred.

B) Unit cost of normal spoilage is equal to unit cost of abnormal spoilage

Costs of normal spoilage are usually accounted for as ________. A) a deduction from the cost of goods sold B) a component of the costs of good units manufactured C) a "loss from normal spoilage account" in income statement D) a liability on a balance sheet

B) a component of the costs of good units manufactured

Cost of spoiled units equals ________. A) all costs incurred in producing them up to the point of delivery B) all costs incurred in producing them up to the point of inspection C) all costs incurred in producing them up to the point of selling D) all costs incurred in producing them up to the point of packaging

B) all costs incurred in producing them up to the point of inspection

5) 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) allocate support department costs based upon user department usage

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

B) allocates joint costs to joint products on the basis of a compatable physical measure at the splitoff point

4) 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

B) budgeted usuage

Under the FIFO method, all spoilage costs are assumed to be related to the units ________. A) in beginning inventory, plus the units completed during the period B) completed during the period C) in ending inventory D) in both beginning and ending inventory plus the units completed during the period

B) completed during the period

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

B) computes gross margin before allocating the costs to the products

Normal spoilage rates are computed by ________. A) dividing the units of normal spoilage by total actual units started into production B) dividing the units of normal spoilage by total good units completed C) dividing total actual units started into production by the units of normal spoilage D) dividing total good units completed by the units of normal spoilage

B) dividing the units of normal spoilage by total good units completed

6) 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

B) does not recognize the total services that support departments provide to each other

Excluding spoiled units in the equivalent-unit calculation results in ________. A) lower cost per good unit. B) higher cost per good unit C) better management information D) higher cost for spoiled units

B) higher cost per good unit

The costs of normal spoilage are allocated to the units in ending work-in-process inventory, in addition to completed units if the units ________. A) in ending inventory have not passed the inspection point B) in ending work-in-process inventory have passed the inspection point C) in ending work in process inventory are more than 25% complete D) in ending work-in-process inventory are less than 25% complete

B) in ending work-in-process inventory have passed the inspection point

9) 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

B) include the support department s costs plus any interdepartmental cost allocations

7) 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

B) incremental revenue allocation method

9) 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

B) is that it focuses management s attention on managing unused capacity

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

B) it assumes the profit margin to be identical across all products

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 C) main cost D) separable cost

B) joint cost

The standard-costing method ________. A) adds a layer of complexity to the calculation of equivalent-unit costs in a process-costing environment B) makes calculating equivalent-unit costs unnecessary C) requires an analysis of the spoilage costs in beginning inventory D) requires an analysis of the spoilage costs in ending inventory

B) makes calculating equivalent-unit costs unnecessary

Spoilage that is an inherent result of the particular production process and arises even under efficient operating conditions is referred to as ________. A) incremental spoilage B) normal spoilage C) irregular spoilage D) direct spoilage

B) normal spoilage

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

B) physical measure

A reason why a physical-measure to allocate joint costs is less preferred than the sales value at splitoff is because ________. A) a physical measure such as volume is difficult to estimate than sales value B) physical volume usually has little relationship to the revenue producing power of products C) a physical measure usually results in less costs being allocated to the product that weighs the most D) customers will easily understand that the products are overpriced

B) physical volume usually has little relationship to the revenue producing power of products

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

B) products

1) 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

B) the manager of the supplier division bears the risk of unfavorable cost variances

2) 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

B) the terms used, such as what constitutes direct labor

Spoilage refers to ________. A) units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units B) units of production whether fully or partially completed, that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices C) residual material that results from manufacturing a product D) products of a joint production process that have low total sales values relative to the total sales value of the main product

B) units of production whether fully or partially completed, that do not meet the specifications rerquired by customers for good units and are discarded or sold at redudced prices

8) 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

B) using recent data on stand alone sales performance

2) 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) variable cost pool and a fixed cost pool

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

B) volume of the products

When the amount of scrap is material and the scrap is sold immediately after it is produced, which of the following is the journal entry if the scrap attributable to a specific job is sold on account? A) Scrap Revenues Accounts Payable B) Work-in-Process Control Accounts Receivable C) Accounts Receivable Work-in-Process Control D) Work-in-Process Control Accounts Payable

C) Accounts Recievable Work-in-process Control

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

C) Byproduct Inventory Finished Goods - Main product

When the amount of scrap is immaterial, which of the following is the easiest accounting entry when recording scrap sold for cash? A) Sales of Scrap Cash B) Manufacturing Overhead Control Cash C) Cash Scrap Revenues D) Sales of scrap Accounts Receivable

C) Cash Scrap Revenues

Which of the following statement is true of costs of normal and abnormal spoilage? A) Costs of normal spoilage are shown as an asset in a balance sheet; however, abnormal spoilage costs are shown as liabilities in a balance sheet. B) Costs of abnormal spoilage are shown as an asset in a balance sheet; however, normal spoilage costs are shown as liabilities in a balance sheet. C) Costs of abnormal spoilage are separately accounted for as losses of the accounting period in which they are detected. D) Costs of normal spoilage are separately accounted for as losses of the accounting period in which they are detected.

C) Costs of abnormal spoilage are seperately accounted for as losses of the accounting period in which they are detected

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

C) In effect, this practice recognizes income before sales are made

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

C) reciprocal method

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.

C) It is the juncture in a joint production process when two or more products become separately indentifiable

Which of the following statements is true of an abnormal spoilage? A) It is a spoilage which is inherent in a particular production process. B) It arises even when the process is carried out in an efficient manner. C) It is usually regarded as avoidable and controllable. D) The costs of abnormal spoilage are typically included as a component of the costs of good units manufactured.

C) It is usually regarded as avoidable and controllable

________ 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

C) Percentage of total sales value

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

C) Product classifications may change over time

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.

C) The NRV method assumes that none of the markup is attributable to the separable costs

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 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

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

C) a bundled product

Costs of abnormal spoilage are usually accounted for as ________. A) a deduction from the cost of goods sold B) a component of the costs of good units manufactured C) a separate line item in an income statement D) an asset on a balance sheet

C) a separate line item in an income statement

The loss from abnormal spoilage account would appear ________. A) on a balance sheet B) as a detailed item in the retained earnings schedule of a balance sheet C) a separate line item on an income statement D) a deduction from the cost of goods sold

C) a seperate line item on an income statement

Companies that attempt to achieve zero defects in the manufacturing process treat spoilage as ________. A) scrap B) reworked units C) abnormal spoilage D) indirect spoilage

C) abnormal spoilage

Spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions is referred to as ________. A) incremental spoilage B) usual spoilage C) abnormal spoilage D) indirect spoilage

C) abnormal spoilage

3) 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

C) allocates each support department s costs to operating departments only

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

C) at the splitoff point

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

C) byproducts

2) 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) each party bears a proportionate share of the total costs in relation to their individual stand alone costs

8) 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 department

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

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

C) main product becomes technologically obsolete

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

C) main products and byproducts

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

C) managers can be tempted to stockpile byproducts

3) 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

C) pass the majority of risk to the buyer

1) 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

C) permissible cost allocation bases

4) 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) practical capacity based allocations are used

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

C) production method

Scrap is ________. A) units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units B) products of a joint production process that have low total sales values relative to the total sales value of the main product C) residual material that results from manufacturing a product D) units of production whether fully or partially completed, that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices

C) residual material that results from manufacturing a product

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

C) revenues are usually the best indicators of the benefits recieved

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

C) sales value at splitoff

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

C) selling prices

1) 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) single rate cost allocation method

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) support departments provide reciprocal services to each other and operating departments

2) 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

C) user divisions are unaware of the allocated amounts until the end of the budget period

10) 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

C) view the budgeted rates negatively if unfavorable cost variances occur due to price increases outside of their control

Which of the following sentences is true of classification of spoilage as normal or abnormal when inventories are present? A) Classifying spoilage as normal rather than abnormal results in same current operating income. B) Classifying spoilage as normal rather than abnormal results in an decrease in current operating income. C) Classifying spoilage as abnormal rather than normal results in an increase in current operating income. D) Classifying spoilage as normal rather than abnormal results in an increase in current operating income.

D) Classifying spoilage as normal rather than abnormal results in an increase in current operating income

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.

D) Costs that differ between the alternatives of selling products or processing further are relevant

7) 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) It allocates fixed cost as per the budgeted usage that helps in short and long run planning.

If scrap, common to all jobs, is returned to the storeroom and the time between the scrap being inventoried and its disposal is quite lengthy, the journal entry is ________. A) Accounts Receivable Materials Control B) Materials Control Work-in-Process Control C) Work-in-Process Control Materials Control D) Materials Control Manufacturing Overhead Control

D) Materials Control Manufacturing Overhead Control

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 for all 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.

D) Sales value at splitoff method uses the sales value of the entire production of the accounting period to the allocated costs

Which of the following statements is true of scrap? A) When a production process yields two or more products with high total sales values relative to the total sales values of other products, those are called scrap. B) For accounting purpose, distinction is made between normal and abnormal scrap. C) Scrap refers to units of production, fully or partially completed, that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices D) Scrap is either sold or disposed of quickly or it is stored for later sale, disposal, or reuse.

D) Scrap is either sold or disposed of quickly or it is stored for later sale, disposal, or reuse.

In accounting for scrap, which of the following statements is true? A) Normal scrap is accounted for separately from abnormal scrap. B) In accounting for scrap, there is no distinction between the scrap attributable to a specific job and scrap common to all jobs. C) Initial entries to scrap accounting records are most often made in dollar terms. D) Scrap records not only help measure efficiency, but also help keep track of scrap, and so reduce the chances of theft.

D) Scrap records not only help measure efficenct, but also help keep track of scrap, and so reduce the chances of theft

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.

D) The sales value at splitoff method follows the benefits-recieved criterion of cost allocation

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.

D) There is no cause-and-effect

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.

D) When a joint production process yielfs two or more products with high total sales values relative to the total sales values of other products those products are called joint products/

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

D) accounting

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

D) allocates joint costs to joint products on the basis of relative NRV

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

D) byproducts

1) 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

D) common cost

Which of the following is an example of spoilage? A) short lengths from woodworking operations B) edges from plastic molding operations C) defective units of laptops detected after the production process but reworked before the units are sold as good products to customers D) defective aluminum cans sold to aluminum manufacturers for remelting to produce other aluminum

D) defective aluminum cans sold to aluminum manufacturers for remelting ro produce other aluminum

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

D) extra operating income earned past the splitoff point

10) 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

D) focuses management s attention on unused capacity

Which of the following statements is true of normal spoilage? A) It is a spoilage which is not inherent in a particular production process. B) It occurs due to machine breakdowns and operator errors. C) It is usually regarded as avoidable and controllable. D) It arises even when the process is carried out in an efficient manner.

D) it arises even when the process is carried out in an efficient manner

If the rework is abnormal ________. A) it is debited to Wages Payable Control B) it is credited to Wages Payable Control C) it is credited to Loss from Abnormal Rework D) it is debited to Loss from Abnormal Rework

D) it is debited to Loss from Abnormal Rework

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

D) net realizable value

5) 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) no contractor is willing to assume all the risk of receiving a fixed price for the contract

Early inspections can ________. A) prevent any further conversion costs being wasted on units that are already good B) increase conversion costs on units that are already spoiled C) increase any further costs being spent on units that are already spoiled D) prevent any further costs being wasted on units that are already spoiled

D) prevent any further costs being wasted on units that are already spoiled

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

D) since the selling-price data exists at the splitoff

9) 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

D) stand alone product revenues

5) 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) stepdown method

3) 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) the primary user bears the maximum of the total cost

3) 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) variations in one division s usage affect another division s allocation