Question 1

The most likely reason for allocating all corporate costs to divisions include that:

Accepted Answer

A) division managers make decisions that ultimately control corporate costs 
B) divisions receive benefits from all corporate costs 
C) the hierarchy of costs promotes cost management 
D) it is best to use multiple cost objects 
A) division managers make decisions that ultimately control corporate costs 
B) divisions receive benefits from all corporate costs 
C) the hierarchy of costs promotes cost management 
D) it is best to use multiple cost objects B

Question 2

More insight into the static-budget variance can be gained by subdividing it into:

Accepted Answer

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) a cost hierarchy 
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) a cost hierarchy C

Question 3

The direct materials mix variance is the sum of the direct materials mix variances for each input.

Accepted Answer

A) True 
 B)False  True

Question 4

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.

Accepted Answer

A) cost hierarchy 
B) cost pool 
C) cost allocation 
D) cost driver 
A) cost hierarchy 
B) cost pool 
C) cost allocation 
D) cost driver

Question 5

The ability-to-bear criterion is considered superior when the purpose of cost allocation is motivation.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

1. Cause and effect - managers identify

Question 7

Under the fairness criterion, cost allocation is NOT viewed as a reasonable means of establishing a selling price.

Accepted Answer

A) True 
 B)False

Question 8

Answer the following questions using the information below:
Michelle'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?

Accepted Answer

A) $13.80 
B) $14.00 
C) $14.36 
D) $14.80 
A) $13.80 
B) $14.00 
C) $14.36 
D) $14.80

Question 9

The cost of visiting customers would most likely be classified as a:

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 10

Corporate-sustaining costs:

Accepted Answer

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) All of these answers are correct. 
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) All of these answers are correct.

Question 11

The allocation of corporate-sustaining costs is useful for:

Accepted Answer

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) None of these answers is correct. 
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) None of these answers is correct.

Question 12

Answer the following questions using the information below:
Shaghai Tea Products has an exclusive contract with British Distributors. Calamine and Shanghai are two brands of teas that are imported and sold to retail outlets. The following information is provided for the month of March:
   Budgeted and actual fixed corporate-sustaining costs are $1,750 and $2,000, respectively.
-What is the contribution margin for the flexible budget?

Accepted Answer

A) $7,500 
B) $8,800 
C) $8,500 
D) $6,900 
A) $7,500 
B) $8,800 
C) $8,500 
D) $6,900

Question 13

To reduce distribution-channel costs, a company could:

Accepted Answer

A) improve the efficiency of the ordering process 
B) make fewer customer visits 
C) eliminate distribution to retailers and only service wholesalers 
D) All of these answers are correct. 
A) improve the efficiency of the ordering process 
B) make fewer customer visits 
C) eliminate distribution to retailers and only service wholesalers 
D) All of these answers are correct.

Question 14

A customer cost hierarchy may include customer-sustaining costs.

Accepted Answer

A) True 
 B)False

Question 15

Today, companies are simplifying their cost systems and moving toward less-detailed and less-complex cost allocation bases.

Accepted Answer

A) True 
 B)False

Question 16

All customers are equally important to a company and should receive equal levels of attention.

Accepted Answer

A) True 
 B)False

Question 17

One of the purposes of allocating direct costs is to justify costs or compute reimbursement amounts.

Accepted Answer

A) True 
 B)False

Question 18

A favorable direct materials yield variance results when less direct materials are used than planned.

Accepted Answer

A) True 
 B)False

Question 19

The static budget variance is:

Accepted Answer

A) the difference between an actual result and the budget amount in the static budget 
B) the difference between the budget amount in the static budget and the amount in the flexible budget 
C) the difference between an actual result and the flexible budget amount 
D) the difference between the static budget amount and the sales volume variance. 
A) the difference between an actual result and the budget amount in the static budget 
B) the difference between the budget amount in the static budget and the amount in the flexible budget 
C) the difference between an actual result and the flexible budget amount 
D) the difference between the static budget amount and the sales volume variance.

Question 20

Answer the following questions using the information below:
Shaghai Tea Products has an exclusive contract with British Distributors. Calamine and Shanghai are two brands of teas that are imported and sold to retail outlets. The following information is provided for the month of March:
   Budgeted and actual fixed corporate-sustaining costs are $1,750 and $2,000, respectively.
-For the contribution margin, what is the total static-budget variance?

Accepted Answer

A) $600 favorable 
B) $1,900 unfavorable 
C) $1,000 favorable 
D) $1,600 unfavorable 
A) $600 favorable 
B) $1,900 unfavorable 
C) $1,000 favorable 
D) $1,600 unfavorable

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

The most likely reason for allocating all corporate costs to divisions include that:

More insight into the static-budget variance can be gained by subdividing it into:

The direct materials mix variance is the sum of the direct materials mix variances for each input.

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.

The ability-to-bear criterion is considered superior when the purpose of cost allocation is motivation.

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

Under the fairness criterion, cost allocation is NOT viewed as a reasonable means of establishing a selling price.

Answer the following questions using the information below: Michelle'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?

The cost of visiting customers would most likely be classified as a:

Corporate-sustaining costs:

The allocation of corporate-sustaining costs is useful for:

To reduce distribution-channel costs, a company could:

A customer cost hierarchy may include customer-sustaining costs.

Today, companies are simplifying their cost systems and moving toward less-detailed and less-complex cost allocation bases.

All customers are equally important to a company and should receive equal levels of attention.

One of the purposes of allocating direct costs is to justify costs or compute reimbursement amounts.

A favorable direct materials yield variance results when less direct materials are used than planned.

The static budget variance is:

The Accountants Role in the Organization

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

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

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

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

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