Question 1

Which purpose of cost allocation is used to cost inventories for reporting to tax authorities?

Accepted Answer

A) to provide information for economic decisions 
B) to motivate managers and other employees 
C) to justify costs or compute reimbursement 
D) to measure income and assets for reporting to external parties 
A) to provide information for economic decisions 
B) to motivate managers and other employees 
C) to justify costs or compute reimbursement 
D) to measure income and assets for reporting to external parties

Question 2

Top management and general administration costs 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 3

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 4

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 5

List at least three different levels of costs in a customer-cost hierarchy and an example of each.

Accepted Answer

List any three of the following:
1. Cust

Question 6

It is common to find that a small number of customers generate a high percentage of operating income.

Accepted Answer

A) True 
 B)False

Question 7

Costs which are NOT economically feasible to trace but which are related to a cost object are known as:

Accepted Answer

A) fixed costs 
B) direct costs 
C) indirect costs 
D) variable costs 
A) fixed costs 
B) direct costs 
C) indirect costs 
D) variable costs

Question 8

NOT allocating some corporate costs to divisions and products results in:

Accepted Answer

A) an increase in overall corporate profitability 
B) the sum of individual product profitability being less than overall company profitability 
C) the sum of individual product profitability being greater than overall company profitability 
D) a decrease in overall corporate profitability 
A) an increase in overall corporate profitability 
B) the sum of individual product profitability being less than overall company profitability 
C) the sum of individual product profitability being greater than overall company profitability 
D) a decrease in overall corporate profitability

Question 9

More insight into the flexible-budget variance for direct materials can be gained by subdividing it into the direct materials:

Accepted Answer

A) mix and volume variances 
B) market-share and market-size variances 
C) mix and yield variances 
D) price and efficiency variances 
A) mix and volume variances 
B) market-share and market-size variances 
C) mix and yield variances 
D) price and efficiency variances

Question 10

Answer the following questions using the information below:
The Sarasota 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 2012 were as follows:
    
-What is the total static-budget variance in terms of the contribution margin?

Accepted Answer

A) $900,000 favorable 
B) $700,000 favorable 
C) $200,000 unfavorable 
D) $360,000 unfavorable 
A) $900,000 favorable 
B) $700,000 favorable 
C) $200,000 unfavorable 
D) $360,000 unfavorable

Question 11

Which purpose of cost allocation is used to cost products at a "fair" price?

Accepted Answer

A) to provide information for economic decisions 
B) to motivate managers and other employees 
C) to justify costs or compute reimbursement 
D) to measure income and assets for reporting to external parties 
A) to provide information for economic decisions 
B) to motivate managers and other employees 
C) to justify costs or compute reimbursement 
D) to measure income and assets for reporting to external parties

Question 12

Managers who utilize customer profitability charts should drop customers that generate a negative customer operating income, since dropping an unprofitable customer will automatically cause overall income to increase.

Accepted Answer

A) True 
 B)False

Question 13

Why would a manager perform customer-profitability analysis?

Accepted Answer

Customer profitability analysis highligh

Question 14

The Omega Corporation manufactures two types of vacuum cleaners: the ZENITH for commercial building use and the House-Helper for residences. Budgeted and actual operating data for the year 20X5 are as follows:
     Required:
Compute the sales-mix variance and the sales-quantity variance by type of vacuum cleaner, and in total. (in terms of the contribution margin)

Accepted Answer

Budgeted sales-mix percentage:

Question 15

The sales-quantity variance will be favorable when:

Accepted Answer

A) budgeted units of all products sold exceed actual units of all products sold 
B) actual units of all products sold exceed budgeted units of all products sold 
C) the actual sales mix shifts towards the less profitable units 
D) the static budget contribution is greater than the actual contribution margin 
A) budgeted units of all products sold exceed actual units of all products sold 
B) actual units of all products sold exceed budgeted units of all products sold 
C) the actual sales mix shifts towards the less profitable units 
D) the static budget contribution is greater than the actual contribution margin

Question 16

Which cost-allocation criterion is appropriate when making an economic decision?

Accepted Answer

A) the fairness or equity criterion 
B) the ability to bear criterion 
C) the cause-and-effect criterion 
D) All of these answers are correct. 
A) the fairness or equity criterion 
B) the ability to bear criterion 
C) the cause-and-effect criterion 
D) All of these answers are correct.

Question 17

The budgeted contribution margin per composite unit for the budgeted mix can be computed by dividing the:

Accepted Answer

A) total budgeted contribution margin by the actual total units 
B) total budgeted contribution margin by the total budgeted units 
C) actual total contribution margin by the total actual total units 
D) actual total contribution margin by the total budgeted units 
A) total budgeted contribution margin by the actual total units 
B) total budgeted contribution margin by the total budgeted units 
C) actual total contribution margin by the total actual total units 
D) actual total contribution margin by the total budgeted units

Question 18

The costs of all six value-chain functions should be included when determining:

Accepted Answer

A) whether to add a new product line 
B) the selling price of a service 
C) whether to make or buy a component part from another manufacturer 
D) All of these answers are correct. 
A) whether to add a new product line 
B) the selling price of a service 
C) whether to make or buy a component part from another manufacturer 
D) All of these answers are correct.

Question 19

When corporate-sustaining costs are fully allocated to distribution channels, then the sum of the distribution-channel operating incomes is:

Accepted Answer

A) less than company-wide operating income 
B) equal to company-wide operating income 
C) greater than company-wide operating income 
D) indeterminable 
A) less than company-wide operating income 
B) equal to company-wide operating income 
C) greater than company-wide operating income 
D) indeterminable

Question 20

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

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

Which purpose of cost allocation is used to cost inventories for reporting to tax authorities?

Top management and general administration costs would most likely be classified as a:

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

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

List at least three different levels of costs in a customer-cost hierarchy and an example of each.

It is common to find that a small number of customers generate a high percentage of operating income.

Costs which are NOT economically feasible to trace but which are related to a cost object are known as:

NOT allocating some corporate costs to divisions and products results in:

More insight into the flexible-budget variance for direct materials can be gained by subdividing it into the direct materials:

Which purpose of cost allocation is used to cost products at a "fair" price?

Managers who utilize customer profitability charts should drop customers that generate a negative customer operating income, since dropping an unprofitable customer will automatically cause overall income to increase.

Why would a manager perform customer-profitability analysis?

The sales-quantity variance will be favorable when:

Which cost-allocation criterion is appropriate when making an economic decision?

The budgeted contribution margin per composite unit for the budgeted mix can be computed by dividing the:

The costs of all six value-chain functions should be included when determining:

When corporate-sustaining costs are fully allocated to distribution channels, then the sum of the distribution-channel operating incomes is:

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

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

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