Question 1

Why is using a single plantwide predetermined overhead allocation rate not always accurate?

Accepted Answer

Using a single plantwide predetermined o

Question 2

The production manager is responsible for ________.

Accepted Answer

A)  all product costs 
B)  decisions to acquire new equipment 
C)  his or her own salary 
D)  efficiently and effectively producing quality products 
A)  all product costs 
B)  decisions to acquire new equipment 
C)  his or her own salary 
D)  efficiently and effectively producing quality products

Question 3

Botanica Beauty,Inc.sells cosmetic products in the United States.Which one of the following is most likely to be a revenue center for Botanica?

Accepted Answer

A)  a Botanica retail store in Dallas 
B)  the Botanica human resource department 
C)  a Botanica kiosk at a mall for selling its products 
D)  the Botanica product lines 
A)  a Botanica retail store in Dallas 
B)  the Botanica human resource department 
C)  a Botanica kiosk at a mall for selling its products 
D)  the Botanica product lines

Question 4

In general,calculating ROI based on the gross book value of assets gives managers an incentive to continue using old,outdated equipment.

Accepted Answer

A) True 
 B)False

Question 5

Traditional costing systems employ multiple allocation rates for manufacturing overhead costs,but an activity-based costing system uses only one rate for allocating manufacturing overhead costs.

Accepted Answer

A) True 
 B)False

Question 6

Fill in the blanks:
Direct materials cost and direct labor cost can be ________ ________ to products.Manufacturing overhead costs are ________ in cost pools and then ________ to products.

Accepted Answer

Direct materials cost and dire

Question 7

The return on investment of a company is a measure of profitability and efficiency.

Accepted Answer

A) True 
 B)False

Question 8

A company may prefer to use residual income over return on investment for performance evaluation because ________.

Accepted Answer

A)  residual income is a ratio but return on investment is an absolute figure 
B)  residual income is more likely to lead to goal congruence than return on investment 
C)  residual income is easier to calculate than return on investment 
D)  residual income considers three elements but return on investment considers only two elements 
A)  residual income is a ratio but return on investment is an absolute figure 
B)  residual income is more likely to lead to goal congruence than return on investment 
C)  residual income is easier to calculate than return on investment 
D)  residual income considers three elements but return on investment considers only two elements

Question 9

Which of the following would most likely be evaluated using residual income?

Accepted Answer

A)  cost center 
B)  profit center 
C)  revenue center 
D)  investment center 
A)  cost center 
B)  profit center 
C)  revenue center 
D)  investment center

Question 10

Indirect costs allocated to products using activity-based costing are more accurate than traditional allocation systems.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would most likely be treated as an activity in an activity-based costing system?

Accepted Answer

A)  direct labor cost 
B)  machine processing 
C)  direct materials cost 
D)  sales revenues 
A)  direct labor cost 
B)  machine processing 
C)  direct materials cost 
D)  sales revenues

Question 12

Nora Kelly,one of the managers of a multi-national company,is responsible for generating revenues and controlling costs in order to increase the operating income of her division.However,she is not concerned about investment-related decisions.Nora is most likely to be the manager of a(n)________.

Accepted Answer

A)  cost center 
B)  investment center 
C)  profit center 
D)  revenue center 
A)  cost center 
B)  investment center 
C)  profit center 
D)  revenue center

Question 13

Long-term investments are made by the investment center manager for the purpose of ________.

Accepted Answer

A)  increasing profits 
B)  decreasing profits 
C)  increasing interest expense 
D)  decreasing plant assets 
A)  increasing profits 
B)  decreasing profits 
C)  increasing interest expense 
D)  decreasing plant assets

Question 14

Which of the following can increase a company's return on investment?

Accepted Answer

A)  decrease in operating income 
B)  decrease in total assets 
C)  decrease in asset turnover ratio 
D)  decrease in residual income 
A)  decrease in operating income 
B)  decrease in total assets 
C)  decrease in asset turnover ratio 
D)  decrease in residual income

Question 15

Centralized companies split their operations into segments and top management delegates decision making to the segment managers.

Accepted Answer

A) True 
 B)False

Question 16

Because Activity-Based Costing considers the resources each product actually uses,it

Accepted Answer

A)  results in product costs being calculated more accurately. 
B)  computes allocation rates based primarily on direct labor rates. 
C)  ultimately calculates a single plantwide allocation rate. 
D)  can only be used in companies which have process costing. 
A)  results in product costs being calculated more accurately. 
B)  computes allocation rates based primarily on direct labor rates. 
C)  ultimately calculates a single plantwide allocation rate. 
D)  can only be used in companies which have process costing.

Question 17

Both the sales volume variance and the flexible budget variance help revenue center managers understand why they have exceeded or fallen short of budgeted revenue.

Accepted Answer

A) True 
 B)False

Question 18

Blade Breeze Company manufactures ceiling fans and uses an activity-based costing system.Each ceiling fan has 20 separate parts.The direct materials cost is $75,and each ceiling fan requires 3.00 hours of machine time to manufacture.Additional information is as follows: $$\begin{array} { | l | l | l | } 
\hline \text { Activity } & \text { Allocation Base } & \begin{array} { l } 
\text { Predetermined Overhead } \
\text { Allocation Rate }
\end{array} \
\hline \text { Materials handling } & \text { Number of parts } & \$ 0.06 \
\hline \text { Machining } & \text { Machine hours } & 6.60 \
\hline \text { Assembling } & \text { Number of parts } & 0.35 \
\hline \text { Packaging } & \text { Number of finished units } & 3.60 \
\hline
\end{array}$$ What is the cost of machining per ceiling fan? (Round any intermediate calculations and your final answer to the nearest cent.)

Accepted Answer

A)  $19.80 
B)  $75.00 
C)  $132.00 
D)  $270.00 
A)  $19.80 
B)  $75.00 
C)  $132.00 
D)  $270.00

Question 19

Return on investment measures the profitability of an investment center but not the efficiency in using its assets.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is the most appropriate cost driver for allocating the cost of warranty services?

Accepted Answer

A)  number of employees 
B)  number of materials purchased 
C)  number of machine hours 
D)  number of service calls 
A)  number of employees 
B)  number of materials purchased 
C)  number of machine hours 
D)  number of service calls

Exam 24: Cost Allocation and Responsibility Accounting

Why is using a single plantwide predetermined overhead allocation rate not always accurate?

The production manager is responsible for ________.

Botanica Beauty,Inc.sells cosmetic products in the United States.Which one of the following is most likely to be a revenue center for Botanica?

In general,calculating ROI based on the gross book value of assets gives managers an incentive to continue using old,outdated equipment.

Traditional costing systems employ multiple allocation rates for manufacturing overhead costs,but an activity-based costing system uses only one rate for allocating manufacturing overhead costs.

Fill in the blanks: Direct materials cost and direct labor cost can be ________ ________ to products.Manufacturing overhead costs are ________ in cost pools and then ________ to products.

The return on investment of a company is a measure of profitability and efficiency.

A company may prefer to use residual income over return on investment for performance evaluation because ________.

Which of the following would most likely be evaluated using residual income?

Indirect costs allocated to products using activity-based costing are more accurate than traditional allocation systems.

Which of the following would most likely be treated as an activity in an activity-based costing system?

Nora Kelly,one of the managers of a multi-national company,is responsible for generating revenues and controlling costs in order to increase the operating income of her division.However,she is not concerned about investment-related decisions.Nora is most likely to be the manager of a(n)________.

Long-term investments are made by the investment center manager for the purpose of ________.

Which of the following can increase a company's return on investment?

Centralized companies split their operations into segments and top management delegates decision making to the segment managers.

Because Activity-Based Costing considers the resources each product actually uses,it

Both the sales volume variance and the flexible budget variance help revenue center managers understand why they have exceeded or fallen short of budgeted revenue.

Return on investment measures the profitability of an investment center but not the efficiency in using its assets.

Which of the following is the most appropriate cost driver for allocating the cost of warranty services?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

Filters

Fill in the blanks: Direct materials cost and direct labor cost can be to products.Manufacturing overhead costs are in cost pools and then to products.