Cost Accounting Chapter 14

What is the total sales-quantity variance in terms of the contribution margin? A) $200,000 unfavorable B) $540,000 favorable C) $960,000 unfavorable D) $1,560,000 favorable

D

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

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

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

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

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

A

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 (F)

A

For May, the company will report a(n) ________. A) favorable sales-mix variance B) unfavorable sales-mix variance C) favorable sales-volume variance D) unfavorable sales-volume variance

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

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

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

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

A

What is the total sales-volume variance in terms of the contribution margin? A) $260,000 unfavorable B) $260,000 favorable C) $530,000 unfavorable D) $790,000 favorable

D

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

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

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

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

A

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

A

What is the budgeted sales-mix percentage for the Standard and the Super vacuum cleaners, respectively? A) 0.80 and 0.20 B) 0.70 and 0.30 C) 0.20 and 0.80 D) 0.30 and 0.70

A

What is the total sales-volume variance in terms of the contribution margin? A) $1,170,000 favorable B) $1,260,000 favorable C) $850,000 unfavorable D) $320,000 unfavorable

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

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

A

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

D

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

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

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

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

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

B

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

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

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

B

For May, Woodruff will report a(n) ________. A) favorable sales-mix variance B) unfavorable sales-mix variance C) favorable sales-volume variance D) unfavorable sales-volume variance

B

For the contribution margin, what is the total flexible-budget variance? A) $330 favorable B) $220 favorable C) $550 favorable D) $1,000 unfavorable

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

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

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

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

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

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

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

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

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

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

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

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

B

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

B

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

What is the budgeted contribution margin per composite unit for the budgeted mix? A) $13.80 B) $15.00 C) $15.36 D) $15.80

B

What is the contribution margin for the flexible budget? A) $9,900 B) $9,680 C) $10,560 D) $9,350

B

What is the total sales-mix variance in terms of the contribution margin? A) $200,000 unfavorable B) $390,000 unfavorable C) $900,000 favorable D) $1,260,000 favorable

B

What is the total sales-mix variance in terms of the contribution margin? A) $290,000 favorable B) $260,000 favorable C) $530,000 favorable D) $790,000 favorable

B

What is the total static-budget variance in terms of the contribution margin? A) $900,000 favorable B) $850,000 favorable C) $250,000 unfavorable D) $450,000 unfavorable

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

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

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

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

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

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

B

3) What is the allocated corporate costs for Division A? A) $500,000 B) $600,000 C) $300,000 D) $200,000

C

4) What is the allocated corporate costs for Division B? A) $700,000 B) $200,000 C) $500,000 D) $300,000

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

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

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

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

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

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

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

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

C

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

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

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

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

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

C

What is the total flexible-budget variance in terms of the contribution margin? A) $900,000 favorable B) $850,000 favorable C) $320,000 unfavorable D) $360,000 unfavorable

C

What is the total sales-quantity variance in terms of the contribution margin? A) $260,000 favorable B) $790,000 favorable C) $530,000 favorable D) $290,000 favorable

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

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

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

C

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

D

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

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

D

For the contribution margin, what is the total static-budget variance? A) $220 favorable B) $330 unfavorable C) $1,000 favorable D) $550 favorable

D

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)

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

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)

D

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)

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

D

What is the budgeted contribution margin per composite unit for the budgeted mix? A) $19.00 B) $19.40 C) $20.00 D) $20.30

D

What is the contribution margin for the flexible budget? A) $1,250,000 B) $4,200,000 C) $5,250,000 D) $5,850,000

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 for the budgeted mix

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

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

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

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

D

What is the actual contribution margin for the month? A) $9,680 B) $9,350 C) $10,560 D) $9,900

D

What is the budgeted contribution margin per composite unit for the actual mix? A) $13.80 B) $15.00 C) $15.36 D) $15.80

D

What is the budgeted contribution margin per composite unit for the actual mix? A) $19.00 B) $20.30 C) $19.40 D) $20.00

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

D