Question 1

Discontinuing an unprofitable customer should be solely done on the basis of profitability.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is a challenge to using cost-benefit criteria for allocating costs?

Accepted Answer

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 
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

Question 3

The sales-mix variance can be explained in terms of the budgeted contribution margin per composite unit of the sales mix.

Accepted Answer

A) True 
 B)False

Question 4

The sales-quantity variance will be unfavorable when which of the following occurs?

Accepted Answer

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 
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

Question 5

Which of the following classifications would costs incurred to handle each unit sold fit into?

Accepted Answer

A)  customer output unit-level cost 
B)  customer batch-level cost 
C)  customer-sustaining cost 
D)  corporate-sustaining cost 
A)  customer output unit-level cost 
B)  customer batch-level cost 
C)  customer-sustaining cost 
D)  corporate-sustaining cost

Question 6

Managers can gain more insight about the static-budget variance by subdividing it into the flexible-budget variance and the sales-volume variance.

Accepted Answer

A) True 
 B)False

Question 7

A composite unit is a hypothetical unit with weights based on the mix of individual units.

Accepted Answer

A) True 
 B)False

Question 8

Should a company allocate its corporate costs to divisions?

Accepted Answer

Some companies allocate all corporate co

Question 9

Under the cause and effect criterion, reasonableness is a matter of judgment rather than an operational
criterion.

Accepted Answer

A) True 
 B)False

Question 10

When individual activities within a cost pool have a similar relationship with the cost driver, which of the following could be said about the cost pool?

Accepted Answer

A)  the costs accumulated in the cost pool are not used for customer-profitability analysis 
B)  there is a need for need multiple cost drivers to allocate costs from the pool to customers 
C)  the cost pool is considered a homogeneous cost pool 
D)  the cost pool is considered contains only direct variable costs 
A)  the costs accumulated in the cost pool are not used for customer-profitability analysis 
B)  there is a need for need multiple cost drivers to allocate costs from the pool to customers 
C)  the cost pool is considered a homogeneous cost pool 
D)  the cost pool is considered contains only direct variable costs

Question 11

If one of five distribution channels is discontinued, corporate-sustaining costs such as general administration costs will most likely be reduced by 20%.

Accepted Answer

A) True 
 B)False

Question 12

The Corata Appliance Manufacturing Corporation manufactures two vacuum cleaners, the Standard and the Super. The following information was gathered about the two products:
 
What is the total sales-quantity variance in terms of the contribution margin? (Round intermediary calculations to two decimal places.)

Accepted Answer

A)  $316,000 favorable 
B)  $179,760 favorable 
C)  $495,760 favorable 
D)  $136,240 favorable 
A)  $316,000 favorable 
B)  $179,760 favorable 
C)  $495,760 favorable 
D)  $136,240 favorable

Question 13

Customer-profitability analysis is the reporting and assessment of revenues earned from customers and the costs incurred to earn those revenues.

Accepted Answer

A) True 
 B)False

Question 14

A favorable sales-mix variance arises when the actual sales-mix percentage exceeds the budgeted sales-mix percentage.

Accepted Answer

A) True 
 B)False

Question 15

The sales-mix variance is the difference between budgeted contribution margin for the actual sales mix and the budgeted contribution margin for the budgeted sales mix.

Accepted Answer

A) True 
 B)False

Question 16

Colise Services is a repair-service company specializing in small household jobs. Each client pays a fixed monthly service fee based on the number of rooms in the house. Records are kept on the time and material costs used for each repair. The following profitability data apply to five customers:
   
Required:
a.Compute the operating income for each of the five customers.
b.What options should Colise Services consider in light of the customer-profitability results?
c.What problems might Colise Services encounter in accurately estimating the operating costs of each customer?

Accepted Answer

@#IMG-DLM& 
b.1.Pay increased attention to the pro

Question 17

A customer cost hierarchy categorizes costs related to customers into different cost pools on the basis of different cost drivers.

Accepted Answer

A) True 
 B)False

Question 18

When using the cause-and-effect criterion, cost drivers are selected as the cost allocation bases.

Accepted Answer

A) True 
 B)False

Question 19

Briefly describe the four criteria used to guide cost-allocation decisions.

Accepted Answer

1.Cause and effect - managers identify t

Question 20

The Conity Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $15,000,000 bond issuance, the Electric Mixer Division used $9,400,000 and the Electric Lamp Division used $5,600,000 for expansion. Interest costs on the bond totaled $980,000 for the year.
The above interest costs would be considered a(n) ________.

Accepted Answer

A)  output unit-level cost 
B)  facility-sustaining cost 
C)  product-sustaining cost 
D)  batch-level cost 
A)  output unit-level cost 
B)  facility-sustaining cost 
C)  product-sustaining cost 
D)  batch-level cost

Discontinuing an unprofitable customer should be solely done on the basis of profitability.

Which of the following is a challenge to using cost-benefit criteria for allocating costs?

The sales-mix variance can be explained in terms of the budgeted contribution margin per composite unit of the sales mix.

The sales-quantity variance will be unfavorable when which of the following occurs?

Which of the following classifications would costs incurred to handle each unit sold fit into?

Managers can gain more insight about the static-budget variance by subdividing it into the flexible-budget variance and the sales-volume variance.

A composite unit is a hypothetical unit with weights based on the mix of individual units.

Should a company allocate its corporate costs to divisions?

Under the cause and effect criterion, reasonableness is a matter of judgment rather than an operational criterion.

When individual activities within a cost pool have a similar relationship with the cost driver, which of the following could be said about the cost pool?

If one of five distribution channels is discontinued, corporate-sustaining costs such as general administration costs will most likely be reduced by 20%.

Customer-profitability analysis is the reporting and assessment of revenues earned from customers and the costs incurred to earn those revenues.

A favorable sales-mix variance arises when the actual sales-mix percentage exceeds the budgeted sales-mix percentage.

The sales-mix variance is the difference between budgeted contribution margin for the actual sales mix and the budgeted contribution margin for the budgeted sales mix.

A customer cost hierarchy categorizes costs related to customers into different cost pools on the basis of different cost drivers.

When using the cause-and-effect criterion, cost drivers are selected as the cost allocation bases.

Briefly describe the four criteria used to guide cost-allocation decisions.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

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

Discontinuing an unprofitable customer should be solely done on the basis of profitability.

Which of the following is a challenge to using cost-benefit criteria for allocating costs?

The sales-mix variance can be explained in terms of the budgeted contribution margin per composite unit of the sales mix.

The sales-quantity variance will be unfavorable when which of the following occurs?

Which of the following classifications would costs incurred to handle each unit sold fit into?

Managers can gain more insight about the static-budget variance by subdividing it into the flexible-budget variance and the sales-volume variance.

A composite unit is a hypothetical unit with weights based on the mix of individual units.

Should a company allocate its corporate costs to divisions?

Under the cause and effect criterion, reasonableness is a matter of judgment rather than an operational criterion.

When individual activities within a cost pool have a similar relationship with the cost driver, which of the following could be said about the cost pool?

If one of five distribution channels is discontinued, corporate-sustaining costs such as general administration costs will most likely be reduced by 20%.

Customer-profitability analysis is the reporting and assessment of revenues earned from customers and the costs incurred to earn those revenues.

A favorable sales-mix variance arises when the actual sales-mix percentage exceeds the budgeted sales-mix percentage.

The sales-mix variance is the difference between budgeted contribution margin for the actual sales mix and the budgeted contribution margin for the budgeted sales mix.

A customer cost hierarchy categorizes costs related to customers into different cost pools on the basis of different cost drivers.

When using the cause-and-effect criterion, cost drivers are selected as the cost allocation bases.

Briefly describe the four criteria used to guide cost-allocation decisions.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters