Question 1

The sales-mix variance will be favorable when ________.

Accepted Answer

A)  the actual contribution margin is greater than the static-budget contribution margin 
B)  actual unit sales are more than budgeted unit sales 
C)  the actual sales mix shifts toward the less profitable units 
D)  the budgeted contribution margin for actual sales mix is greater than for the budgeted mix

Question 2

A financial analyst for Simon Manufacturing prepared the following report:

What is the cumulative customer-level operating income as a percentage of customer level operating income for the top 4 most profitable (operating income) customers?

Accepted Answer

A)  17.4% 
B)  89.7% 
C)  85.0% 
D)  79.1%

Question 3

In general, distribution-channel costs are more easily influenced by customer actions than customer batch-level costs.

Accepted Answer

A) True 
 B)False

Question 4

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)  reduce product-handling costs

Question 5

A customer cost hierarchy may include customer-sustaining costs.

Accepted Answer

A) True 
 B)False

Question 6

When the purpose of cost allocation is to provide information for economic decisions or to motivate managers and employees, which of the following would be the best criteria?

Accepted Answer

A)  the cause-and-effect and the ability-to bear criteria 
B)  the cause-and-effect and the benefits-received criteria 
C)  the benefits-received and the fairness criteria 
D)  the fairness and the ability-to-bear criteria

Question 7

Which of the following is an example of division-sustaining costs?

Accepted Answer

A)  research and development cost 
B)  corporate administration costs 
C)  corporate brand advertising 
D)  shipment costs

Question 8

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

Accepted Answer

The answer of What are the two components of the...

Question 9

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)

Question 10

Which cost-allocation criterion is most likely to subsidize poor performers at the expense of the best performers?

Accepted Answer

A)  the fairness or equity criterion 
B)  the benefits-received criterion 
C)  the ability to bear criterion 
D)  the cause-and-effect criterion

Question 11

Allocation of corporate-sustaining costs is useful for which of the following?

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)  motivating division managers to examine how corporate costs are planned and controlled

Question 12

To guide cost allocation decisions, the benefits-received criterion ________.

Accepted Answer

A)  generally uses the cost driver as the cost allocation base 
B)  advocates allocating costs in proportion to the cost object's ability to bear costs allocated to it 
C)  is the primarily used criterion in activity-based costing 
D)  may use an allocation base of division revenues to allocate advertising costs

Question 13

The Chair Company manufactures two modular types of chairs: one for the residential market, and the other for the office market. Budgeted and actual operating data for the year 2015 are:
  
Required:
Compute the following variances in terms of contribution margin:
a.Compute the total static-budget variance, the total flexible-budget variance, and the total sales-volume variance.
b.Compute the sale-mix variance and the sales-quantity variance by type of chair, and in total.

Accepted Answer

The answer of The Chair Company manufactures two modular types...

Question 14

The difference between budgeted contribution margin per composite unit for the actual mix and the budgeted contribution margin per composite unit for the budgeted mix is the ________.

Accepted Answer

A)  material-mix variance 
B)  flexible-budget variance 
C)  sales-mix variance 
D)  sales-volume variance

Question 15

The static-budget variance is the difference between an actual result and the corresponding budgeted amount in the static budget.

Accepted Answer

A) True 
 B)False

Question 16

To guide cost allocation decisions, the cause-and-effect criterion ________.

Accepted Answer

A)  is used less frequently than the other criteria 
B)  is the primary criterion used in activity-based costing 
C)  considers fairness as a matter of judgment rather than an operational criterion 
D)  advocates allocating costs in proportion to the cost object's ability to bear costs allocated to it

Question 17

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

Accepted Answer

A)  sales-volume variance and flexible-budget variance are favorable 
B)  actual units of all products sold exceed budgeted units of all products sold 
C)  the actual sales mix shifts towards the more profitable units 
D)  static-budget variance and flexible-budget variance are favorable

Question 18

The chart used to express customer profitability is called the whale curve because it is backward-bending at the point where customers start to become unprofitable and thus resembles a humpback.

Accepted Answer

A) True 
 B)False

Question 19

Blue States Coffee, Inc., sells two types of coffee, Colombian and Blue Mountain. The monthly budget for U.S. coffee sales is based on a combination of last year's performance, a forecast of industry sales, and the company's expected share of the U.S. market. The following information is provided for March:
  
Budgeted and actual fixed corporate-sustaining costs are $60,000 and $72,000, respectively.
Required:
a.Calculate the actual contribution margin for the month.
b.Calculate the contribution margin for the static budget.
c.Calculate the contribution margin for the flexible budget.
d.Determine the total static-budget variance, the total flexible-budget variance, and the total sales-volume variance in terms of the contribution margin.

Accepted Answer

The answer of Blue States Coffee, Inc., sells two types...

Question 20

Corporate administrative costs allocated to a division cost pool are most likely to be ________.

Accepted Answer

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

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

The sales-mix variance will be favorable when ________.

A financial analyst for Simon Manufacturing prepared the following report: What is the cumulative customer-level operating income as a percentage of customer level operating income for the top 4 most profitable (operating income) customers?

In general, distribution-channel costs are more easily influenced by customer actions than customer batch-level costs.

To reduce distribution-channel costs, a company could ________.

A customer cost hierarchy may include customer-sustaining costs.

When the purpose of cost allocation is to provide information for economic decisions or to motivate managers and employees, which of the following would be the best criteria?

Which of the following is an example of division-sustaining costs?

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

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

Which cost-allocation criterion is most likely to subsidize poor performers at the expense of the best performers?

Allocation of corporate-sustaining costs is useful for which of the following?

To guide cost allocation decisions, the benefits-received criterion ________.

The difference between budgeted contribution margin per composite unit for the actual mix and the budgeted contribution margin per composite unit for the budgeted mix is the ________.

The static-budget variance is the difference between an actual result and the corresponding budgeted amount in the static budget.

To guide cost allocation decisions, the cause-and-effect criterion ________.

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

The chart used to express customer profitability is called the whale curve because it is backward-bending at the point where customers start to become unprofitable and thus resembles a humpback.

Corporate administrative costs allocated to a division cost pool are most likely to be ________.