Exam 14: Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

The Conity Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $16,000,000 bond issuance, the Electric Mixer Division used $9,600,000 and the Electric Lamp Division used $6,400,000 for expansion. Interest costs on the bond totaled $1,000,000 for the year. What amount of interest costs should be allocated to the Electric Lamp Division? (Round any intermediary calculations two decimal places and your final answer to the nearest dollar.)

Why would a manager perform customer-profitability analysis?

Customer-sustaining costs is the costs of activities to support individual customers, regardless of the number of units or batches of product delivered to the customer.

Costs of activities related to a group of units sold to a customer is termed as customer batch-level costs.

Homogeneous cost pool leads to which of the following?

Costs in a homogeneous cost pools have the same or a similar cause-and-effect or benefits-received relationship with the cost-allocation base.

The Fortise Corporation manufactures two types of vacuum cleaners, the Victor for commercial building use and the House-Mate for residences. Budgeted and actual operating data for the year 2017 were as follows: What is the total sales-quantity variance in terms of the contribution margin? (Round any intermediary calculations two decimal places.)

The benefits of implementing a more-complex cost allocation system are relatively easy to quantify for application of the cost-benefit approach.

The sales-quantity variance occurs in a multi-product company from a change in the sales mix.

Archoid's Flowering Plants provides the following information for the month of May: What is the budgeted contribution margin per composite unit for the actual mix? (Round any intermediary calculations two decimal places.)

The market-share variance is the difference in actual contribution margin for actual market size in units caused solely by actual market share being different from budgeted market share.

A company sets up cost pools for indirect cost allocation. Management sees clear cause-and-effect relationships between the incurrence of costs and the chosen the cost-allocation base. What other common relationships or basis with a cost allocation base might management utilize to allocate costs?

Corporate brand advertising and general administration costs are examples of corporate costs.

Explain the importance of customer-profitability analysis.

Corporate-sustaining costs are costs of activities to support individual customers, regardless of the number of units or batches of product delivered to the customer.

Which of the following is the formula for the sales-quantity variance?

Which of the following classifications of costs in the customer-cost hierarchy would be most appropriate for the costs of activities to sell each unit to a customer?

NOT allocating some corporate costs to divisions and products results in which of the following?

The flexible-budget variance is the difference between an actual result and the flexible-budget amount based on the level of output actually achieved in the budget period.

To guide cost allocation decisions, the fairness or equity criterion ________.