ACCT 3121
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
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
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.
A
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
The dual-rate cost-allocation method classifies costs in each cost pool into a ________. A) budgeted-cost pool and an actual-cost pool B) variable-cost pool and a fixed-cost pool C) direct-cost pool and an indirect-cost pool D) direct-cost pool and a reciprocal-cost pool
B
To discourage unnecessary use of a support department, management might ________. A) allocate user department costs based upon support department usage B) allocate support department costs based upon user department usage C) allocate a fixed amount of support department costs to each and every department D) allocate a fixed amount of user department costs to each and every department
B
When budgeted cost-allocations rates are used ________. A) user departments are not informed about the charges until the end of the period 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
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
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
The costs of unused capacity are highlighted when ________. A) actual usage based allocations are used B) budgeted usage allocations are used C) practical capacity-based allocations are used D) the dual-rate cost-allocation method allocates fixed costs based on actual usage
C
The method that allocates costs in each cost pool using the same rate per unit is known as the ________. A) incremental cost-allocation method B) reciprocal cost-allocation method C) single-rate cost allocation method D) dual-rate cost-allocation method
C
When actual cost-allocations rates are used ________. 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
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
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
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