CHAPTER 14: COST ALLOCATION, CUSTOMER-PROFITABILITY ANALYSIS, AND SALES-VARIANCE ANALYSIS

31. The
sales-quantity variance is favorable when budgeted unit sales exceed actual
unit sales.

32. The
market-share variance is caused solely by the actual market share being
different than the budgeted market share.

33. A
favorable market-size variance results with a decrease in market size.

34. The
flexible-budget variance can be further divided into the sales-mix variance and
the sales-quantity variance.

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

36. An
unfavorable direct materials mix variance results when cheaper direct materials
are substituted for more expensive direct materials.

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

MULTIPLE CHOICE

38. Costs
which are not economically feasible to trace but are related to a cost object
are known as
a. fixed costs.
b. direct costs.
c. indirect costs.
d. variable costs.

39. Any
item for which a separate measurement of cost is desired is known as
a. cost allocation.
b. a cost object.
c. a direct cost.
d. an indirect cost.

40. Indirect
costs
a. often comprise a large percentage of
overall costs assigned to a cost object.
b. specifically exclude marketing costs.
c. cannot be used for external reporting.
d. are treated as period costs and not as
product costs.

41. All
of the following illustrate purposes for allocating costs to cost objects
EXCEPT
a. to provide information for economic
decisions.
b. to motivate managers and employees.
c. to determine a selling price the market
will bear.
d. to measure income and assets for reporting
to external parties.

42. The
costs of all six value-chain functions should be included when determining
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 the above.

43. R&D
costs are used for which purpose of cost allocation?
a. To provide information for economic
decisions
b. To report to external parties when using
generally accepted accounting principles
c. To calculate costs of a government
contract
d. All of the above purposes

44. Which
purpose of cost allocation is used to encourage sales representatives to push
high-margin products or services?
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

45. Which
purpose of cost allocation is used to decide on the selling price for a
customized product or service?
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

46. To guide
cost allocation decisions, the cause-and-effect criterion
a. is used less frequently than the other
criteria.
b. is the primary criterion used in
activity-based costing.
c. is a difficult criterion on which to
obtain agreement.
d. may allocate corporate salaries to
divisions based on profits.

47. To guide
cost allocation decisions, the benefits-received criterion
a. generally uses the cost driver as the cost
allocation base.
b. results in subsidizing products that are
not profitable.
c. is the primarily criterion used in
activity-based costing.
d. may use an allocation base of division
revenues to allocate advertising costs.

48. To guide
cost allocation decisions, the fairness or equity criterion
a. is the criterion often cited in government
contracts.
b. is superior when the purpose of cost
allocation is for economic decisions.
c. is used more frequently than the other criteria.
d. is the primary criterion used in
activity-based costing.

49. To guide
cost allocation decisions, the ability to bear criterion
a. is likely to be the most credible to
operating personnel.
b. allocates costs in proportion to the
benefits received.
c. results in subsidizing products that are
not profitable.
d. is the criterion often cited in government
contracts.

50. Which cost-allocation
criterion is appropriate when making an economic decision?
a. The fairness or equity criterion
b. The ability to bear criterion
c. The cause-and-effect criterion
d. Any of the above criteria are appropriate

51. Which
cost-allocation criterion is MOST likely to subsidize poor performers at the
expense of the best performers?
a. The fairness or equity criterion
b. The benefits-received criterion
c. The ability to bear criterion
d. The cause-and-effect criterion

52. A
challenge to using cost-benefit criteria for allocating costs is that
a. the costs of designing and implementing
complex cost allocations are not readily apparent.
b. the benefits of making better-informed
pricing decisions are difficult to measure.
c. cost systems are being simplified and
fewer multiple cost-allocation bases are being used.
d. the costs of collecting and processing
information keep spiraling upward.

53. Corporate
overhead costs can be allocated
a. using a single cost pool.
b. to divisions using one cost pool and then
reallocating costs to products using multiple cost pools.
c. using numerous individual corporate cost
pools.
d. using any of the above methods.

54. The MOST
likely reason for allocating all corporate costs to divisions include that
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.

55. The MOST
likely reason for NOT allocating corporate costs to divisions include that
a. these costs are not controllable by
division managers.
b. these costs are incurred to support
division activities, not corporate activities.
c. division resources are already used to
attain corporate goals.
d. divisions receive no benefits from
corporate costs.