Question 1

Support department costs are accounted for in which one of the following ways?

Accepted Answer

A)  They are allocated directly to units of product. 
B)  They are allocated to producing departments and then allocated to units of product. 
C)  They are allocated to units of product and then allocated to the producing departments. 
D)  They are expensed as incurred. 
A)  They are allocated directly to units of product. 
B)  They are allocated to producing departments and then allocated to units of product. 
C)  They are allocated to units of product and then allocated to the producing departments. 
D)  They are expensed as incurred. B

Question 2

Staff Company allocates common Building Department costs to producing departments (P1 and P2) based on space occupied, and it allocates common Personnel Department costs based on the number of employees. Space occupancy and employee data are as follows: Building
Personnel
Dept. P1
Dept. P2
Space occupied
2,000 m.
10,000 m.
120,000 m.
70,000 m.
Employees
6
10
80
50
If Staff Company uses the sequential allocation method and the support department with the highest percentage of interdepartmental services is allocated first, the ratio representing the portion of Personnel Department costs allocated to Department P2 is

Accepted Answer

A)  50/146. 
B)  90/140. 
C)  50/140. 
D)  50/130. 
A)  50/146. 
B)  90/140. 
C)  50/140. 
D)  50/130. C

Question 3

The optimal level in the trade-off between measurement and error costs is when

Accepted Answer

A)  measurement costs are greater than error costs. 
B)  measurement costs are less than error costs. 
C)  measurement costs equal error costs. 
D)  the total of measurement costs and error costs are maximized. 
A)  measurement costs are greater than error costs. 
B)  measurement costs are less than error costs. 
C)  measurement costs equal error costs. 
D)  the total of measurement costs and error costs are maximized. C

Question 4

Which of the following is a reason to accumulate and separately assign costs by departments?

Accepted Answer

A)  The company wants to reduce the complexity of its cost accounting system. 
B)  The company is comprised of multiple departments, each of which exhibit unique cost behaviour patterns. 
C)  The company wishes to implement an activity based costing system. 
D)  The company has a large amount of capital invested in human resource training. 
A)  The company wants to reduce the complexity of its cost accounting system. 
B)  The company is comprised of multiple departments, each of which exhibit unique cost behaviour patterns. 
C)  The company wishes to implement an activity based costing system. 
D)  The company has a large amount of capital invested in human resource training.

Question 5

A possible causal factor to use when allocating cafeteria costs would be

Accepted Answer

A)  number of square feet. 
B)  number of direct labour hours. 
C)  number of employees. 
D)  appraised value of square footage. 
A)  number of square feet. 
B)  number of direct labour hours. 
C)  number of employees. 
D)  appraised value of square footage.

Question 6

The calculation of unit costs is important for

Accepted Answer

A)  inventory valuation. 
B)  income determination. 
C)  pricing. 
D)  all of the above. 
A)  inventory valuation. 
B)  income determination. 
C)  pricing. 
D)  all of the above.

Question 7

More accurate product costing information is produced by assigning costs using

Accepted Answer

A)  volume-based, plantwide rates. 
B)  volume-based, departmental rates. 
C)  activity-based pool rates. 
D)  All of the above produce accurate product costing information. 
A)  volume-based, plantwide rates. 
B)  volume-based, departmental rates. 
C)  activity-based pool rates. 
D)  All of the above produce accurate product costing information.

Question 8

Examples of producing departments include all of the following EXCEPT

Accepted Answer

A)  mixing. 
B)  molding. 
C)  packaging. 
D)  accounting. 
A)  mixing. 
B)  molding. 
C)  packaging. 
D)  accounting.

Question 9

Define the terms cost objectives, cost pools, and allocation bases.

Accepted Answer

A cost objective is anything to which co

Question 10

Which of the following departments is NOT a support department?

Accepted Answer

A)  food services 
B)  bottling 
C)  health services 
D)  security 
A)  food services 
B)  bottling 
C)  health services 
D)  security

Question 11

Which of the following is a key consideration in selecting an allocation base?

Accepted Answer

A)  The allocation base should have an indirect association with the cost objective. 
B)  The allocation base should be difficult to measure. 
C)  There should be logical association between the allocation base and the incidence of costs. 
D)  The allocation base should be out of the control of management. 
A)  The allocation base should have an indirect association with the cost objective. 
B)  The allocation base should be difficult to measure. 
C)  There should be logical association between the allocation base and the incidence of costs. 
D)  The allocation base should be out of the control of management.

Question 12

Which of the following principles should be applied when the step method of allocating service department costs is used?

Accepted Answer

A)  The sequence of allocation among departments should be randomly selected. 
B)  The sequence of allocation among departments should proceed from the largest department as measured by total assets to the smallest. 
C)  The sequence of allocation among departments should proceed from the largest provider of interdepartmental services to the smallest. 
D)  All possible sequences of service department allocations should be computed. The sequence that provides the largest allocation of service costs should then be selected. 
A)  The sequence of allocation among departments should be randomly selected. 
B)  The sequence of allocation among departments should proceed from the largest department as measured by total assets to the smallest. 
C)  The sequence of allocation among departments should proceed from the largest provider of interdepartmental services to the smallest. 
D)  All possible sequences of service department allocations should be computed. The sequence that provides the largest allocation of service costs should then be selected.

Question 13

Explain the key considerations in establishing cost pools and in selecting an allocation base.

Accepted Answer

The key consideration in establishing co

Question 14

Examples of support departments include all of the following EXCEPT

Accepted Answer

A)  maintenance. 
B)  personnel. 
C)  machining. 
D)  data processing. 
A)  maintenance. 
B)  personnel. 
C)  machining. 
D)  data processing.

Question 15

Which of the following allocation methods fully recognizes services that support departments provide to each other?

Accepted Answer

A)  direct method 
B)  sequential method 
C)  reciprocal method 
D)  all of the above 
A)  direct method 
B)  sequential method 
C)  reciprocal method 
D)  all of the above

Question 16

Although adding more activity cost pools to an activity-based costing system may improve the accuracy of product costing, this increase in accuracy must be judged against:

Accepted Answer

A)  the cost of the product. 
B)  the price of the product. 
C)  the cost of developing and maintaining the additional cost pools. 
D)  all of the above. 
A)  the cost of the product. 
B)  the price of the product. 
C)  the cost of developing and maintaining the additional cost pools. 
D)  all of the above.

Question 17

An activity-based costing system uses which of the following procedures?

Accepted Answer

A)  Overhead costs are traced to departments, then costs are traced to products. 
B)  Overhead costs are traced to activities, then costs are traced to products. 
C)  Overhead costs are traced directly to products. 
D)  All overhead costs are expensed as incurred. 
A)  Overhead costs are traced to departments, then costs are traced to products. 
B)  Overhead costs are traced to activities, then costs are traced to products. 
C)  Overhead costs are traced directly to products. 
D)  All overhead costs are expensed as incurred.

Question 18

The method of accounting for inventory that assigns all manufacturing costs to inventory is sometimes referred to as:

Accepted Answer

A)  absorption costing. 
B)  FIFO. 
C)  the weighted average cost method. 
D)  conversion costing. 
A)  absorption costing. 
B)  FIFO. 
C)  the weighted average cost method. 
D)  conversion costing.

Question 19

When actual overhead cost exceeds overhead applied to production,

Accepted Answer

A)  over-absorbed overhead is added to cost of goods sold. 
B)  over-absorbed overhead is deducted from cost of goods sold. 
C)  under-absorbed overhead is added to cost of goods sold. 
D)  under-absorbed overhead is deducted from cost of goods sold. 
A)  over-absorbed overhead is added to cost of goods sold. 
B)  over-absorbed overhead is deducted from cost of goods sold. 
C)  under-absorbed overhead is added to cost of goods sold. 
D)  under-absorbed overhead is deducted from cost of goods sold.

Question 20

Which of the following methods of assigning costs is based on convenience or some assumed linkage, and reduces the overall accuracy of the cost assignments?

Accepted Answer

A)  direct tracing 
B)  cost driver tracing 
C)  allocation 
D)  all of the above 
A)  direct tracing 
B)  cost driver tracing 
C)  allocation 
D)  all of the above

Exam 3: Cost Assignment

Support department costs are accounted for in which one of the following ways?

The optimal level in the trade-off between measurement and error costs is when

Which of the following is a reason to accumulate and separately assign costs by departments?

A possible causal factor to use when allocating cafeteria costs would be

The calculation of unit costs is important for

More accurate product costing information is produced by assigning costs using

Examples of producing departments include all of the following EXCEPT

Define the terms cost objectives, cost pools, and allocation bases.

Which of the following departments is NOT a support department?

Which of the following is a key consideration in selecting an allocation base?

Which of the following principles should be applied when the step method of allocating service department costs is used?

Explain the key considerations in establishing cost pools and in selecting an allocation base.

Examples of support departments include all of the following EXCEPT

Which of the following allocation methods fully recognizes services that support departments provide to each other?

Although adding more activity cost pools to an activity-based costing system may improve the accuracy of product costing, this increase in accuracy must be judged against:

An activity-based costing system uses which of the following procedures?

The method of accounting for inventory that assigns all manufacturing costs to inventory is sometimes referred to as:

When actual overhead cost exceeds overhead applied to production,

Which of the following methods of assigning costs is based on convenience or some assumed linkage, and reduces the overall accuracy of the cost assignments?

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Pricing Decisions and Profitability Analysis

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Standard Costing and Variance Analysis 2: Further Aspects

Divisional Financial Performance Measures

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Management Accounting

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Stocks

The Application of Linear Programming to Management Accounting

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