Question 1

It is possible that the smallest customer in terms of revenue is the most profitable customer.

Accepted Answer

A) True 
 B)False

Question 2

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 3

The sales quantity variance is the difference between budgeted contribution margin based on actual units sold of all products at the budgeted mix,and contribution margin in the flexible budget.

Accepted Answer

A) True 
 B)False

Question 4

Once a cost pool has been established,it should NOT need to be revisited or revised.

Accepted Answer

A) True 
 B)False

Question 5

Companies that only record the invoice price can usually track the magnitude of price discounting.

Accepted Answer

A) True 
 B)False

Question 6

Dropping an unprofitable customer will ________.

Accepted Answer

A) eliminate long-run costs assigned to that customer 
B) eliminate most short-run costs assigned to that customer 
C) decrease long-run profitability 
D) increase the potential to cross-sell other products that are more desirable 
A) eliminate long-run costs assigned to that customer 
B) eliminate most short-run costs assigned to that customer 
C) decrease long-run profitability 
D) increase the potential to cross-sell other products that are more desirable

Question 7

If a cost pool is homogeneous,the cost allocations using that pool will be the same as they would be if costs of each individual activity in that pool were allocated separately.

Accepted Answer

A) True 
 B)False

Question 8

________ categorizes costs related to customers into different cost pools on the basis of either different classes of cost drivers or different degrees of difficulty in determining the cause-and-effect (or benefits-received)relationships.

Accepted Answer

A) Customer-profitability analysis 
B) Customer revenues 
C) Customer cost hierarchy 
D) Price discounting 
A) Customer-profitability analysis 
B) Customer revenues 
C) Customer cost hierarchy 
D) Price discounting

Question 9

What are the two components of the sales-quantity variance?

Accepted Answer

The two components of the the sales-quan

Question 10

Costs of displays at customer sites is an example of customer batch-level costs.

Accepted Answer

A) True 
 B)False

Question 11

Additional insight can be gained by dividing the sales-volume variance into the sales-mix variance and the sales-quantity variance.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following illustrates a purpose for allocating costs to cost objects?

Accepted Answer

A) to provide information for cost-control and pricing decisions 
B) to provide information to customers 
C) to determine marginal cost 
D) to measure capital expenditure 
A) to provide information for cost-control and pricing decisions 
B) to provide information to customers 
C) to determine marginal cost 
D) to measure capital expenditure

Question 13

Market-share variance = $380,000 (U);Market-size variance = $250,000 (F);Sales-mix variance = $640,000 (F);calculate the sales-quantity variance.

Accepted Answer

A) $380,000 (F) 
B) $630,000 (F) 
C) $10,000 (F) 
D) $130,000 (U) 
A) $380,000 (F) 
B) $630,000 (F) 
C) $10,000 (F) 
D) $130,000 (U)

Question 14

To analyze customer profitability,corporate-sustaining costs should be allocated to customers.

Accepted Answer

A) True 
 B)False

Question 15

Flexible-budget variance = $260,000 (F);sales-volume variance = $350,000 (U);sales-mix variance = $320,000 (F);calculate the static-budget variance.

Accepted Answer

A) $90,000 (U) 
B) $320,000 (U) 
C) $320,000 (F) 
D) $290,000 (F) 
A) $90,000 (U) 
B) $320,000 (U) 
C) $320,000 (F) 
D) $290,000 (F)

Question 16

There are two elements that influence customer profitability - revenues and costs.

Accepted Answer

A) True 
 B)False

Question 17

The sales-volume variance is subdivided into ________.

Accepted Answer

A) sales-mix variance and static-budget variance 
B) sales-mix variance and sales-quantity variance 
C) flexible-budget variance and fixed-budget variance 
D) market-share variance and static-budget variance 
A) sales-mix variance and static-budget variance 
B) sales-mix variance and sales-quantity variance 
C) flexible-budget variance and fixed-budget variance 
D) market-share variance and static-budget variance

Question 18

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 19

Segmenting customers as a result of customer profitability analysis would be done by which of the following groupings?

Accepted Answer

A) geography such as state or by zip code 
B) operating income 
C) gross margin 
D) total direct costs 
A) geography such as state or by zip code 
B) operating income 
C) gross margin 
D) total direct costs

Question 20

Which of the following is a reason to gather data,associate revenues with each customer and develop a system of allocating costs to each customer?

Accepted Answer

A) GAAP requirements for external reporting including 10K disclosures 
B) to assure that highly profitable customers get the appropriate level of care and attention 
C) ABC systems cannot be implemented without customer-profitability reporting 
D) to assure that more resources are committed to loss-making customers in an attempt to retain all customers 
A) GAAP requirements for external reporting including 10K disclosures 
B) to assure that highly profitable customers get the appropriate level of care and attention 
C) ABC systems cannot be implemented without customer-profitability reporting 
D) to assure that more resources are committed to loss-making customers in an attempt to retain all customers

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

It is possible that the smallest customer in terms of revenue is the most profitable customer.

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.

The sales quantity variance is the difference between budgeted contribution margin based on actual units sold of all products at the budgeted mix,and contribution margin in the flexible budget.

Once a cost pool has been established,it should NOT need to be revisited or revised.

Companies that only record the invoice price can usually track the magnitude of price discounting.

Dropping an unprofitable customer will ________.

If a cost pool is homogeneous,the cost allocations using that pool will be the same as they would be if costs of each individual activity in that pool were allocated separately.

________ categorizes costs related to customers into different cost pools on the basis of either different classes of cost drivers or different degrees of difficulty in determining the cause-and-effect (or benefits-received)relationships.

What are the two components of the sales-quantity variance?

Costs of displays at customer sites is an example of customer batch-level costs.

Additional insight can be gained by dividing the sales-volume variance into the sales-mix variance and the sales-quantity variance.

Which of the following illustrates a purpose for allocating costs to cost objects?

Market-share variance = $380,000 (U);Market-size variance = $250,000 (F);Sales-mix variance = $640,000 (F);calculate the sales-quantity variance.

To analyze customer profitability,corporate-sustaining costs should be allocated to customers.

Flexible-budget variance = $260,000 (F);sales-volume variance = $350,000 (U);sales-mix variance = $320,000 (F);calculate the static-budget variance.

There are two elements that influence customer profitability - revenues and costs.

The sales-volume variance is subdivided into ________.

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

Segmenting customers as a result of customer profitability analysis would be done by which of the following groupings?

Which of the following is a reason to gather data,associate revenues with each customer and develop a system of allocating costs to each customer?

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

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