Question 1

Under absorption costing, the value of a unit of a product includes all product costs.

Accepted Answer

A) True 
 B)False

Question 2

Firms must prepare income statements and balance sheets in accordance with Generally Accepted Accounting Principles which requires firms to use:

Accepted Answer

A) Variable costing. 
B) Absorption costing. 
C) Cost-based reporting. 
D) Variance analysis. 
E) None of the above. 
A) Variable costing. 
B) Absorption costing. 
C) Cost-based reporting. 
D) Variance analysis. 
E) None of the above.

Question 3

Cost allocations provide subtle, ineffective means to achieve change.

Accepted Answer

A) True 
 B)False

Question 4

Changing a product mix is an example of a short-term decision.

Accepted Answer

A) True 
 B)False

Question 5

Brown Corporation produced 2,200 units during the most recent period.Brown's costs were as follows: $$\begin{array} { l r } 
\text { Direct material } & \$ 1,000 \
\text { Direct labor } & 2,000 \
\text { Variable manufacturing overhead } & 500 \
\text { Variable marketing and sales } & 300 \
\text { Fixed manufacturing overhead } & 900 \
\text { Fixed marketing and sales } & 400
\end{array}$$ Sales totaled 1,800 units ($10,800).If Brown uses absorption costing, the ending inventory would be valued at:

Accepted Answer

A) $0 
B) $928 
C) $544 
D) $800 
E) $856 
A) $0 
B) $928 
C) $544 
D) $800 
E) $856

Question 6

At the end of an accounting period, using absorption costing, the cost of goods sold account will include:

Accepted Answer

A) Direct material, direct labor, variable manufacturing overhead. 
B) Direct material, direct labor, variable manufacturing overhead, and variable marketing and sales. 
C) Direct material, direct labor, variable manufacturing overhead, and fixed manufacturing overhead. 
D) Direct material, direct labor, variable manufacturing overhead, fixed manufacturing overhead, and variable marketing and sales. 
E) Direct material, direct labor, variable manufacturing overhead, fixed manufacturing overhead, variable marketing and sales, and fixed marketing and sales. 
A) Direct material, direct labor, variable manufacturing overhead. 
B) Direct material, direct labor, variable manufacturing overhead, and variable marketing and sales. 
C) Direct material, direct labor, variable manufacturing overhead, and fixed manufacturing overhead. 
D) Direct material, direct labor, variable manufacturing overhead, fixed manufacturing overhead, and variable marketing and sales. 
E) Direct material, direct labor, variable manufacturing overhead, fixed manufacturing overhead, variable marketing and sales, and fixed marketing and sales.

Question 7

A driver that is appropriate for some resources may not be appropriate for other resources.The solution to the problem is:

Accepted Answer

A) Use capacity resources in different proportions. 
B) Do not allocate the resources. 
C) Allocate the resources only if they are variable. 
D) Use a separate cost pool for each class of similar resources. 
E) None of the above are solutions to the problem. 
A) Use capacity resources in different proportions. 
B) Do not allocate the resources. 
C) Allocate the resources only if they are variable. 
D) Use a separate cost pool for each class of similar resources. 
E) None of the above are solutions to the problem.

Question 8

Accounting for fixed manufacturing overhead is the only difference between variable and absorption costing.

Accepted Answer

A) True 
 B)False

Question 9

Capacity costs are controllable over the long-term.

Accepted Answer

A) True 
 B)False

Question 10

While profit margin is the appropriate measure of value for short-term decisions, contribution margin is the appropriate measure for long-term decisions.

Accepted Answer

A) True 
 B)False

Question 11

An example of allocations to justify costs and reimbursements is when government entities contract to compensate their suppliers on a fixed negotiated contract amount.

Accepted Answer

A) True 
 B)False

Question 12

Why do managers care about the costs allocated to their individual departments?

Accepted Answer

A) Managers' performance evaluations frequently depend on their unit's performance more than overall firm performance. 
B) The cost allocated is an integral part of the department's reported profit. 
C) Carefully chosen allocation methods can induce desired behavior. 
D) Carefully chosen allocation methods can dissuade undesired behavior. 
E) All of the above are reasons managers care about the costs allocated to their individual departments. 
A) Managers' performance evaluations frequently depend on their unit's performance more than overall firm performance. 
B) The cost allocated is an integral part of the department's reported profit. 
C) Carefully chosen allocation methods can induce desired behavior. 
D) Carefully chosen allocation methods can dissuade undesired behavior. 
E) All of the above are reasons managers care about the costs allocated to their individual departments.

Question 13

Administrative costs are currently split equally among 4 different product lines at WDT Company.To encourage the managers of each of the product lines to implement a new material waste policy aimed at reducing materials used in manufacturing, which of the following would best achieve this goal?

Accepted Answer

A) Allocating administrative costs based on the cost per unit of materials used in production. 
B) Allocating administrative costs based on the number of labor hours used in manufacturing. 
C) Allocating administrative costs based on the amount of scrap produced from manufacturing. 
D) Allocating administrative costs based on the speed of production. 
A) Allocating administrative costs based on the cost per unit of materials used in production. 
B) Allocating administrative costs based on the number of labor hours used in manufacturing. 
C) Allocating administrative costs based on the amount of scrap produced from manufacturing. 
D) Allocating administrative costs based on the speed of production.

Question 14

By discouraging wasteful use, cost allocations can induce efficient utilization of resources shared by multiple users.

Accepted Answer

A) True 
 B)False

Under absorption costing, the value of a unit of a product includes all product costs.

Firms must prepare income statements and balance sheets in accordance with Generally Accepted Accounting Principles which requires firms to use:

Cost allocations provide subtle, ineffective means to achieve change.

Changing a product mix is an example of a short-term decision.

At the end of an accounting period, using absorption costing, the cost of goods sold account will include:

A driver that is appropriate for some resources may not be appropriate for other resources.The solution to the problem is:

Accounting for fixed manufacturing overhead is the only difference between variable and absorption costing.

Capacity costs are controllable over the long-term.

While profit margin is the appropriate measure of value for short-term decisions, contribution margin is the appropriate measure for long-term decisions.

An example of allocations to justify costs and reimbursements is when government entities contract to compensate their suppliers on a fixed negotiated contract amount.

Why do managers care about the costs allocated to their individual departments?

Administrative costs are currently split equally among 4 different product lines at WDT Company.To encourage the managers of each of the product lines to implement a new material waste policy aimed at reducing materials used in manufacturing, which of the following would best achieve this goal?

By discouraging wasteful use, cost allocations can induce efficient utilization of resources shared by multiple users.

Accounting: Information for Decision Making

Identifying and Estimating Costs and Benefits

Cost Flows and Cost Terminology

Techniques for Estimating Fixed and Variable Costs

Cost-Volume-Profit Analysis

Decision Making in the Short Term

Operating Budgets: Bridging Planning and Control

Budgetary Control and Variance Analysis

Activity-Based Costing Management

Capital Budgeting

Performance Evaluation in Decentralized Organizations

Strategic Planning and Control

Job-Costing Systems

Process-Costing Systems

Refining Systems: Support Activity

Filters

Exam 9: Cost Allocations

Under absorption costing, the value of a unit of a product includes all product costs.

Firms must prepare income statements and balance sheets in accordance with Generally Accepted Accounting Principles which requires firms to use:

Cost allocations provide subtle, ineffective means to achieve change.

Changing a product mix is an example of a short-term decision.

At the end of an accounting period, using absorption costing, the cost of goods sold account will include:

A driver that is appropriate for some resources may not be appropriate for other resources.The solution to the problem is:

Accounting for fixed manufacturing overhead is the only difference between variable and absorption costing.

Capacity costs are controllable over the long-term.

While profit margin is the appropriate measure of value for short-term decisions, contribution margin is the appropriate measure for long-term decisions.

An example of allocations to justify costs and reimbursements is when government entities contract to compensate their suppliers on a fixed negotiated contract amount.

Why do managers care about the costs allocated to their individual departments?

Administrative costs are currently split equally among 4 different product lines at WDT Company.To encourage the managers of each of the product lines to implement a new material waste policy aimed at reducing materials used in manufacturing, which of the following would best achieve this goal?

By discouraging wasteful use, cost allocations can induce efficient utilization of resources shared by multiple users.

Accounting: Information for Decision Making

Identifying and Estimating Costs and Benefits

Cost Flows and Cost Terminology

Techniques for Estimating Fixed and Variable Costs

Cost-Volume-Profit Analysis

Decision Making in the Short Term

Operating Budgets: Bridging Planning and Control

Budgetary Control and Variance Analysis

Activity-Based Costing Management

Capital Budgeting

Performance Evaluation in Decentralized Organizations

Strategic Planning and Control

Job-Costing Systems

Process-Costing Systems

Refining Systems: Support Activity

Filters