The allocation of corporate-sustaining costs is useful for

ACCOUNTING

Multiple Choice

The allocation of corporate-sustaining costs is useful for

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. none of the above.

Click here for the SOLUTION

Corporate-sustaining costs

ACCOUNTING

Multiple Choice

Corporate-sustaining costs

a. are common to all individual customers.

b. have a clear cause-and-effect relationship with several cost-allocation bases.

c. should be allocated for decisions regarding reducing customer costs.

d. apply to all of the above.

Click here for the SOLUTION

To reduce distribution-channel costs, a company could

ACCOUNTING

Multiple Choice

To reduce distribution-channel costs, a company could

a. improve the efficiency of the ordering process.

b. make fewer customer visits.

c. eliminate distribution to retailers and only service wholesalers.

d. do any of the above.

Click here for the SOLUTION

Customer actions will LEAST affect

ACCOUNTING

Multiple Choice

Customer actions will LEAST affect

a. customer output unit-level costs.

b. customer batch-level costs.

c. customer-sustaining costs.

d. distribution-channel costs.

Click here for the SOLUTION

An advantage of using a bar chart to visualize customer profitability is that

ACCOUNTING

Multiple Choice

An advantage of using a bar chart to visualize customer profitability is that

a. differences in commissions paid to sales persons stand out.

b. loss customers stand out.

c. trends in the volume of purchases become apparent.

d. all of the above are advantages.

Click here for the SOLUTION

_______________ categorizes costs related to customers into different cost pools on the basis of either different classes of cost drivers or different

ACCOUNTING

Multiple Choice

_______________ 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.

a. Customer-profitability analysis

b. Customer revenues

c. Customer cost hierarchy

d. Price discounting

Click here for the SOLUTION

Costs incurred to handle each unit sold would MOST likely be classified as

ACCOUNTING

Multiple Choice

Costs incurred to handle each unit sold would MOST likely be classified as

a. a customer output unit-level cost.

b. a customer batch-level cost.

c. a customer-sustaining cost.

d. a corporate-sustaining cost.

Click here for the SOLUTION

The cost of visiting customers would MOST likely be classified as

ACCOUNTING

Multiple Choice

The cost of visiting customers would MOST likely be classified as

a. a customer output unit-level cost.

b. a customer batch-level cost.

c. a customer-sustaining cost.

d. a corporate-sustaining cost.

Click here for the SOLUTION

Top management and general administration costs would MOST likely be classified as

ACCOUNTING

Multiple Choice

Top management and general administration costs would MOST likely be classified as

a. a customer output unit-level cost.

b. a customer batch-level cost.

c. a customer-sustaining cost.

d. a corporate-sustaining cost.

Click here for the SOLUTION

Costs incurred to process orders would MOST likely be classified as

ACCOUNTING

Multiple Choice

Costs incurred to process orders would MOST likely be classified as

a. a customer output unit-level cost.

b. a customer batch-level cost.

c. a customer-sustaining cost.

d. a corporate-sustaining cost.

Click here for the SOLUTION

A customer cost hierarchy categorizes costs related to customers into different cost pools on the basis of

ACCOUNTING

Multiple Choice

A customer cost hierarchy categorizes costs related to customers into different cost pools on the basis of

a. different types of cost drivers.

b. different benefits-received relationships.

c. different levels of cause-and-effect relationships.

d. all of the above.

Click here for the SOLUTION

To improve customer profitability, companies should

ACCOUNTING

Multiple Choice

To improve customer profitability, companies should

a. strictly enforce their volume-based price discounting policy.

b. track discounts by customer.

c. track discounts by sales person.

d. both (b) and (c).

Click here for the SOLUTION

To improve customer profitability, companies should track

ACCOUNTING

Multiple Choice

To improve customer profitability, companies should track

a. only the final invoice price of a sale.

b. the volume of the products purchased by each customer.

c. discounts taken by each customer.

d. both (b) and (c).

Click here for the SOLUTION

Price discounts are influenced by

ACCOUNTING

Multiple Choice

Price discounts are influenced by

a. the volume of product purchased.

b. a desire to sell to a customer in an area with high-growth potential.

c. negotiating skills of the sales person.

d. all of the above.

Click here for the SOLUTION

Customers making large contributions to the profitability of the company should

ACCOUNTING

Multiple Choice

Customers making large contributions to the profitability of the company should

a. be treated the same as other customers since all customers are important.

b. receive a higher level of attention from the company than less profitable customers.

c. be charged higher prices for the same products than less profitable customers.

d. not be offered the volume-based price discounts offered to less profitable customers.

Click here for the SOLUTION

The above interest costs would be considered a(n)

ACCOUNTING

Multiple Choice

The Hassan Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $20,000,000 bond issuance, the Electric Mixer Division utilized $14,000,000 and the Electric Lamp Division utilized $6,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year.



The above interest costs would be considered a(n)

a. output unit-level cost.

b. facility-sustaining cost.

c. product-sustaining cost.

d. batch-level cost.

Click here for the SOLUTION

What amount of interest costs should be allocated to the Electric Lamp Division?

ACCOUNTING

Multiple Choice

The Hassan Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $20,000,000 bond issuance, the Electric Mixer Division utilized $14,000,000 and the Electric Lamp Division utilized $6,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year.



What amount of interest costs should be allocated to the Electric Lamp Division?

a. $450,000

b. $1,050,000

c. $4,200,000

d. $6,000,000

Click here for the SOLUTION

What amount of interest costs should be allocated to the Electric Mixer Division?

ACCOUNTING

Multiple Choice

The Hassan Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $20,000,000 bond issuance, the Electric Mixer Division utilized $14,000,000 and the Electric Lamp Division utilized $6,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year.



What amount of interest costs should be allocated to the Electric Mixer Division?

a. $450,000

b. $1,050,000

c. $4,200,000

d. $14,000,000

Click here for the SOLUTION

To manage setup costs, a corporation might focus on

ACCOUNTING

Multiple Choice

To manage setup costs, a corporation might focus on

a. the number of setup-hours.

b. the number of units included in each production run.

c. the batch-level costs incurred per setup-hour.

d. both (a) and (c).

Click here for the SOLUTION

Corporate administrative costs allocated to a division cost pool are MOST likely

ACCOUNTING

Multiple Choice

Corporate administrative costs allocated to a division cost pool are MOST likely

a. output unit-level costs.

b. facility-sustaining costs.

c. product-sustaining costs.

d. batch-level costs.

Click here for the SOLUTION

To allocate corporate costs to divisions, the allocation base used should

ACCOUNTING

Multiple Choice

To allocate corporate costs to divisions, the allocation base used should

a. be an output unit-level base.

b. have the best cause-and-effect relationship with the costs.

c. combine administrative costs and human resource management costs.

d. allocate the full costs.

Click here for the SOLUTION

Identifying homogeneous cost pools

ACCOUNTING

Multiple Choice

Identifying homogeneous cost pools

a. requires judgment and should be reevaluated on a regular basis.

b. should include the input of management.

c. should include a cost-benefit analysis.

d. should include all of the above.

Click here for the SOLUTION

Homogeneous cost pools lead to

ACCOUNTING

Multiple Choice

Homogeneous cost pools lead to

a. more accurate costs of a given cost object.

b. more resources being assigned to that cost object.

c. the need for more cost drivers.

d. both (a) and (c).

Click here for the SOLUTION

When individual activities within a cost pool have a similar relationship with the cost driver, those costs

ACCOUNTING

Multiple Choice

When individual activities within a cost pool have a similar relationship with the cost driver, those costs

a. need to be reallocated.

b. need multiple cost drivers.

c. are considered a homogeneous cost pool.

d. are considered an allocated cost pool.

Click here for the SOLUTION

The greater the degree of homogeneity,

ACCOUNTING

Multiple Choice

The greater the degree of homogeneity,

a. the greater the number of needed cost pools.

b. the fewer the number of needed cost pools.

c. the less accurate the costs of a particular cost object.

d. the greater the variety of cause-and-effect relationships with the cost driver.

Click here for the SOLUTION

Not allocating some corporate costs to divisions and products results in

ACCOUNTING

Multiple Choice

Not allocating some corporate costs to divisions and products results in

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.

Click here for the SOLUTION

Some companies only allocate corporate costs to divisions that

ACCOUNTING

Multiple Choice

Some companies only allocate corporate costs to divisions that

a. are planned and under the control of division managers.

b. are output unit-level costs.

c. are perceived as causally related to division activities.

d. are direct costs.

Click here for the SOLUTION

The MOST likely reason for NOT allocating corporate costs to divisions include that

ACCOUNTING

Multiple Choice

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.

Click here for the SOLUTION

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

ACCOUNTING

Multiple Choice

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.

Click here for the SOLUTION

Corporate overhead costs can be allocated

ACCOUNTING

Multiple Choice

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.

Click here for the SOLUTION

A challenge to using cost-benefit criteria for allocating costs is that

ACCOUNTING

Multiple Choice

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.

Click here for the SOLUTION

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

ACCOUNTING

Multiple Choice

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

Click here for the SOLUTION

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

ACCOUNTING

Multiple Choice

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

Click here for the SOLUTION

To guide cost allocation decisions, the ability to bear criterion

ACCOUNTING

Multiple Choice

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.

Click here for the SOLUTION

To guide cost allocation decisions, the fairness or equity criterion

ACCOUNTING

Multiple Choice

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.

Click here for the SOLUTION

To guide cost allocation decisions, the benefits-received criterion

ACCOUNTING

Multiple Choice

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.

Click here for the SOLUTION

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

ACCOUNTING

Multiple Choice

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.

Click here for the SOLUTION

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

ACCOUNTING

Multiple Choice

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

Click here for the SOLUTION

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

ACCOUNTING

Multiple Choice

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

Click here for the SOLUTION

R&D costs are used for which purpose of cost allocation?

ACCOUNTING

Multiple Choice

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

Click here for the SOLUTION

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

ACCOUNTING

Multiple Choice

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.

Click here for the SOLUTION

All of the following illustrate purposes for allocating costs to cost objects EXCEPT

ACCOUNTING

Multiple Choice

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.

Click here for the SOLUTION

Indirect costs

ACCOUNTING

Multiple Choice

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.

Click here for the SOLUTION

Any item for which a separate measurement of cost is desired is known as

ACCOUNTING

Multiple Choice

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.

Click here for the SOLUTION

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

ACCOUNTING

Multiple Choice

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.

Click here for the SOLUTION

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

ACCOUNTING

True or False

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

Click here for the SOLUTION

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

ACCOUNTING

True or False

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

Click here for the SOLUTION

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

ACCOUNTING

True or False

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

Click here for the SOLUTION

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

ACCOUNTING

True or False

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

Click here for the SOLUTION

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

ACCOUNTING

True or False

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

Click here for the SOLUTION

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

ACCOUNTING

True or False

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

Click here for the SOLUTION

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

ACCOUNTING

True or False

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

Click here for the SOLUTION

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

ACCOUNTING

True or False

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

Click here for the SOLUTION

A composite unit is a hypothetical unit with weights based on the mix of individual units

ACCOUNTING

True or False

A composite unit is a hypothetical unit with weights based on the mix of individual units

Click here for the SOLUTION

A favorable sales-mix variance arises when the actual sales-mix percentage is less than the budgeted sales-mix percentage

ACCOUNTING

True or False

A favorable sales-mix variance arises when the actual sales-mix percentage is less than the budgeted sales-mix percentage

Click here for the SOLUTION

Additional insight can be gained by dividing the sales-mix variance into the flexible-budget variance and the sales-volume variance

ACCOUNTING

True or False

Additional insight can be gained by dividing the sales-mix variance into the flexible-budget variance and the sales-volume variance

Click here for the SOLUTION

The flexible-budget variance is the difference between an actual result and the flexible-budget amount based on the level of output actually achieved

ACCOUNTING

True or False

The flexible-budget variance is the difference between an actual result and the flexible-budget amount based on the level of output actually achieved in the budget period

Click here for the SOLUTION

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

ACCOUNTING

True or False

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

Click here for the SOLUTION

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

ACCOUNTING

True or False

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

Click here for the SOLUTION

To more accurately assess customer profitability, corporate-sustaining costs should be allocated

ACCOUNTING

True or False

To more accurately assess customer profitability, corporate-sustaining costs should be allocated

Click here for the SOLUTION

What is the direct manufacturing labor partial productivity, assuming 10,000 units were produced during 20x1 and 40,000 direct manufacturing labor

ACCOUNTING

Multiple Choice

What is the direct manufacturing labor partial productivity, assuming 10,000 units were produced during 20x1 and 40,000 direct manufacturing labor-hours were used?

a. 0.25 unit per direct manufacturing labor-hour

b. 0.50 unit per direct manufacturing labor-hour

c. 0.75 unit per direct manufacturing labor-hour

d. 1.00 unit per direct manufacturing labor-hour

Click here for the SOLUTION

If one of four distribution channels is discontinued, corporate-sustaining costs such as general administration costs will most likely be reduced

ACCOUNTING

True or False

If one of four distribution channels is discontinued, corporate-sustaining costs such as general administration costs will most likely be reduced by 25%

Click here for the SOLUTION

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

ACCOUNTING

True or False

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

Click here for the SOLUTION

The cost of visiting customers is an example of a customer output unit-level cost

ACCOUNTING

True or False

The cost of visiting customers is an example of a customer output unit-level cost

Click here for the SOLUTION

A customer cost hierarchy may include distribution-channel costs

ACCOUNTING

True or False

A customer cost hierarchy may include distribution-channel costs

Click here for the SOLUTION

An activity-based costing system may focus on customers rather than products

ACCOUNTING

True or False

An activity-based costing system may focus on customers rather than products

Click here for the SOLUTION

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

ACCOUNTING

True or False

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

Click here for the SOLUTION

There are two elements that influence customer profitability – revenues and costs

ACCOUNTING

True or False

There are two elements that influence customer profitability – revenues and costs

Click here for the SOLUTION

The purpose of price discounting is to encourage increases in customer purchases

ACCOUNTING

True or False

The purpose of price discounting is to encourage increases in customer purchases

Click here for the SOLUTION

All customers are equally important to a company and should receive equal levels of attention

ACCOUNTING

True or False

All customers are equally important to a company and should receive equal levels of attention

Click here for the SOLUTION

An individual cost item can be simultaneously a direct cost of one cost object and an indirect cost of another cost object

ACCOUNTING

True or False

An individual cost item can be simultaneously a direct cost of one cost object and an indirect cost of another cost object

Click here for the SOLUTION

Facility-sustaining costs do not have a cause-and-effect relationship with individual products

ACCOUNTING

True or False

Facility-sustaining costs do not have a cause-and-effect relationship with individual products

Click here for the SOLUTION

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

ACCOUNTING

True or False

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

Click here for the SOLUTION

When there is a lesser degree of homogeneity, fewer cost pools are required to accurately explain the use of company resources

ACCOUNTING

True or False

When there is a lesser degree of homogeneity, fewer cost pools are required to accurately explain the use of company resources

Click here for the SOLUTION

Full allocation of corporate costs to divisions is justified when the notion of controllability is applied

ACCOUNTING

True or False

Full allocation of corporate costs to divisions is justified when the notion of controllability is applied

Click here for the SOLUTION

Each company must decide which corporate cost categories should be included in the indirect costs of the divisions -- all, only a subset, or none

ACCOUNTING

True or False

Each company must decide which corporate cost categories should be included in the indirect costs of the divisions -- all, only a subset, or none

Click here for the SOLUTION

The benefits of implementing a more-complex cost allocation system are relatively easy to quantify for application of the cost-benefit approach

ACCOUNTING

True or False

The benefits of implementing a more-complex cost allocation system are relatively easy to quantify for application of the cost-benefit approach

Click here for the SOLUTION

The ability-to-bear criterion is considered superior when the purpose of cost allocation is motivation

ACCOUNTING

True or False

The ability-to-bear criterion is considered superior when the purpose of cost allocation is motivation

Click here for the SOLUTION

When using the cause-and-effect criterion, cost drivers are selected as the cost allocation bases

ACCOUNTING

True or False

When using the cause-and-effect criterion, cost drivers are selected as the cost allocation bases

Click here for the SOLUTION

Today, companies are simplifying their cost systems and moving toward less-detailed and less-complex cost allocation bases

ACCOUNTING

True or False

Today, companies are simplifying their cost systems and moving toward less-detailed and less-complex cost allocation bases

Click here for the SOLUTION

For external reporting, inventoriable costs under GAAP sometimes include R&D costs

ACCOUNTING

True or False

For external reporting, inventoriable costs under GAAP sometimes include R&D costs

Click here for the SOLUTION

To motivate engineers to design simpler products, costs for production, distribution, and customer service may be included in product-cost estimates

ACCOUNTING

True or False

To motivate engineers to design simpler products, costs for production, distribution, and customer service may be included in product-cost estimates

Click here for the SOLUTION

Indirect costs are costs that cannot be traced to cost objects in an economically feasible way

ACCOUNTING

True or False

Indirect costs are costs that cannot be traced to cost objects in an economically feasible way

Click here for the SOLUTION

The average number of student credit hours taught per faculty member is an example of

ACCOUNTING

Multiple Choice

The average number of student credit hours taught per faculty member is an example of

a. an expected performance measure.

b. a budgeted productivity measure.

c. a standard productivity measure.

d. a partial productivity measure.

Click here for the SOLUTION

Which of the following statements about productivity measures is FALSE?

ACCOUNTING

Multiple Choice

Which of the following statements about productivity measures is FALSE?

a. It may be stated in terms of dollars.

b. It provides a convenient and easily interpreted means of

aggregating across different physical outputs.

c. The productivity measure may not be made for companies with multiple products.

d. The key is the identification of cost drivers.

Click here for the SOLUTION

The partial productivity of overhead resources can be measured by considering the cost driver as

ACCOUNTING

Multiple Choice

The partial productivity of overhead resources can be measured by considering the cost driver as

a. budgeted input.

b. the denominator.

c. the fixed input.

d. the numerator.

Click here for the SOLUTION

__________ is the ratio of the quantity of output produced to the costs of all inputs used, where the inputs are combined on the basis of current

ACCOUNTING

Multiple Choice

__________ is the ratio of the quantity of output produced to the costs of all inputs used, where the inputs are combined on the basis of current period prices.

a. Total factor productivity

b. Partial productivity

c. Productivity

d. Product yield variance

Click here for the SOLUTION

One problem with total factor productivity revolves around which of the following?

ACCOUNTING

Multiple Choice

One problem with total factor productivity revolves around which of the following?

a. The measurement of combined productivity of all inputs

b. The control operations personnel have over inputs

c. The control operations personnel have over outputs

d. The marketing mix determined by management

Click here for the SOLUTION

Total factor productivity will increase if

ACCOUNTING

Multiple Choice

Total factor productivity will increase if

a. technical productivity occurs.

b. the company uses more total inputs per output.

c. the company incurs fewer costs per input.

d. current technology becomes obsolete.

Click here for the SOLUTION

What terms describe the relationship between different quantities of inputs consumed and the quantities of output produced?

ACCOUNTING

Multiple Choice

What terms describe the relationship between different quantities of inputs consumed and the quantities of output produced?

a. Budgeted costs or actual costs

b. Production technology or production function

c. Static budget or flexible budget

d. Production technology or production setup

Click here for the SOLUTION

What is the direct manufacturing labor partial productivity, assuming 20,000 widgets were produced during 20x1 and 80,000 direct manufacturing labor

ACCOUNTING

Multiple Choice

What is the direct manufacturing labor partial productivity, assuming 20,000 widgets were produced during 20x1 and 80,000 direct manufacturing labor-hours were used?

a. 0.25 unit per direct manufacturing labor-hour

b. 0.50 unit per direct manufacturing labor-hour

c. 0.75 unit per direct manufacturing labor-hour

d. 1.00 unit per direct manufacturing labor-hour

Click here for the SOLUTION

Which of the following statements is TRUE?

ACCOUNTING

Multiple Choice

Which of the following statements is TRUE?

a. The lower the partial productivity ratio, the greater the produc tivity.

b. Productivity has increased when the partial productivity is high.

c. Prices of inputs are incorporated in the partial productivity ratio.

d. The partial productivity ratio measures the number of outputs produced per multiple input.

Click here for the SOLUTION

Melik Company provided the following information

ACCOUNTING

Multiple Choice

Melik Company provided the following information.

Budgeted input 12,000 pounds

Actual input 15,000 pounds

Budgeted production 5,000 units

Actual production 4,750 units



What is the partial productivity ratio?

a. 0.32 units per pound

b. 0.33 units per pound

c. 0.40 units per pound

d. 3.16 units per pound

Click here for the SOLUTION

Germaine Company provided the following information

ACCOUNTING

Multiple Choice

Germaine Company provided the following information.

Budgeted input 9,750 gallons

Actual input 8,950 gallons

Budgeted production 10,000 units

Actual production 9,500 units



What is the partial productivity ratio?

a. 0.97 units per gallon

b. 1.02 units per gallon

c. 1.06 units per gallon

d. 1.12 units per gallon

Click here for the SOLUTION

Frazier Company provided the following information

ACCOUNTING

Multiple Choice

Frazier Company provided the following information.

Budgeted input 19,500 gallons

Actual input 17,900 gallons

Budgeted production 20,000 units

Actual production 19,000 units



What is the partial productivity ratio?

a. 0.97 units per gallon

b. 1.02 units per gallon

c. 1.06 units per gallon

d. 1.12 units per gallon

Click here for the SOLUTION

__________ compares the quantity of output produced with the quantity of a single input used

ACCOUNTING

Multiple Choice

__________ compares the quantity of output produced with the quantity of a single input used.

a. Total factor productivity

b. Partial productivity

c. Productivity

d. Product yield variance

Click here for the SOLUTION

__________ measures the relationship between actual inputs used and actual outputs achieved

ACCOUNTING

Multiple Choice

__________ measures the relationship between actual inputs used and actual outputs achieved.

a. Total factor productivity

b. Partial productivity

c. Productivity

d. Product yield variance

Click here for the SOLUTION

Partial productivity multiplied by the quantity of input used results in

ACCOUNTING

Multiple Choice

Partial productivity multiplied by the quantity of input used results in

a. expected production.

b. budgeted output.

c. actual output.

d. a ratio.

Click here for the SOLUTION

Yield variances

ACCOUNTING

Multiple Choice

Yield variances

a. reveal the effect of substitution within a single factor of production.

b. address the productivity of a single component of one factor of production.

c. capture both substitutions between factors of production as well as within factors of production.

d. reveal the effect of substitution within multiple factors of production.

Click here for the SOLUTION

The lower the inputs for a given set of outputs or the higher the outputs for a given set of inputs, the higher the level of

ACCOUNTING

Multiple Choice

The lower the inputs for a given set of outputs or the higher the outputs for a given set of inputs, the higher the level of

a. standard costs.

b. sales.

c. productivity.

d. labor costs.

Click here for the SOLUTION

Downsizing

ACCOUNTING

Multiple Choice

Downsizing

a. may include eliminating jobs.

b. should be done within the context of a company’s overall strategy.

c. is most difficult with discretionary costs.

d. is all of the above.

Click here for the SOLUTION

To effectively deal with unused capacity a company

ACCOUNTING

Multiple Choice

To effectively deal with unused capacity a company

a. may downsize.

b. may retain some unused capacity for future growth.

c. should consider it a waste of resources and eliminate all unused capacity.

d. should consider both (a) and (b).

Click here for the SOLUTION

Unused capacity is difficult to determine for

ACCOUNTING

Multiple Choice

Unused capacity is difficult to determine for

a. engineered costs.

b. discretionary costs.

c. both engineered and discretionary costs.

d. neither engineered nor discretionary costs.

Click here for the SOLUTION

1. Engineered costs

ACCOUNTING

Multiple Choice

Engineered costs

a. possess a high of level uncertainty.

b. are nonrepetitive.

c. are from physically observable activities.

d. have processes that are sketchy or unavailable.

Click here for the SOLUTION

1. Discretionary costs

ACCOUNTING

Multiple Choice

Discretionary costs

a. have detailed processes.

b. are physically observable activities.

c. possess a high level of certainty.

d. are usually large total amounts.

Click here for the SOLUTION

A high level of preciseness between resources used and output produced exists with

ACCOUNTING

Multiple Choice

A high level of preciseness between resources used and output produced exists with

a. engineered costs.

b. discretionary costs.

c. both engineered and discretionary costs.

d. neither engineered nor discretionary costs.

Click here for the SOLUTION

A high level of uncertainty is represented in

ACCOUNTING

Multiple Choice

A high level of uncertainty is represented in

a. engineered costs.

b. discretionary costs.

c. both engineered and discretionary costs.

d. neither engineered nor discretionary costs.

Click here for the SOLUTION

Discretionary costs

ACCOUNTING

Multiple Choice

Discretionary costs

a. result from a cause-and-effect relationship between the output and the input.

b. include advertising and executive training costs.

c. can be variable or fixed in the short run.

d. pertain to processes that are detailed

Click here for the SOLUTION

Engineered costs

ACCOUNTING

Multiple Choice

Engineered costs

a. arise from periodic (usually annual) decisions.

b. often incur a delay between when the resource is acquired and when it is used.

c. include R&D and human resource costs.

d. include a high level of certainty.

Click here for the SOLUTION

What is the net effect on operating income as a result of the productivity component?

ACCOUNTING

Multiple Choice

Following a strategy of product differentiation, Lucas Company makes a high-end Appliance, AP15. Lucas Company presents the following data for the years 20x3 and 20x4:



20x3 20x4

Units of AP15 produced and sold 20,000 21,000

Selling price $200 $220

Direct materials (square feet) 60,000 61,500

Direct materials costs per square foot $20 $22

Manufacturing capacity in units of AP15 25,000 25,000

Total conversion costs $1,000,000 $1,110,000

Conversion costs per unit of capacity $40 $44

Selling and customer-service capacity (customers) 60 58

Total selling and customer-service costs $360,000 $362,500

Selling and customer-service capacity cost per customer $6,000 $6,250



Lucas Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in 20x4. Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Lucas Company has 46 customers in 20x3 and 50 customers in 20x4. The industry market size for high-end appliances increased 5% from 20x3 to 20x4.



What is the net effect on operating income as a result of the productivity component?

a. $179,000 F

b. $45,500 F

c. $241,000 U

d. $420,000 F

Click here for the SOLUTION

What is the net effect on operating income as a result of the price-recovery component?

ACCOUNTING

Multiple Choice

Following a strategy of product differentiation, Lucas Company makes a high-end Appliance, AP15. Lucas Company presents the following data for the years 20x3 and 20x4:



20x3 20x4

Units of AP15 produced and sold 20,000 21,000

Selling price $200 $220

Direct materials (square feet) 60,000 61,500

Direct materials costs per square foot $20 $22

Manufacturing capacity in units of AP15 25,000 25,000

Total conversion costs $1,000,000 $1,110,000

Conversion costs per unit of capacity $40 $44

Selling and customer-service capacity (customers) 60 58

Total selling and customer-service costs $360,000 $362,500

Selling and customer-service capacity cost per customer $6,000 $6,250



Lucas Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in 20x4. Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Lucas Company has 46 customers in 20x3 and 50 customers in 20x4. The industry market size for high-end appliances increased 5% from 20x3 to 20x4.



What is the net effect on operating income as a result of the price-recovery component?

a. $179,000 F

b. $179,000 U

c. $241,000 U

d. $420,000 F

Click here for the SOLUTION

What is the cost effect of the price-recovery component?

ACCOUNTING

Multiple Choice

Following a strategy of product differentiation, Lucas Company makes a high-end Appliance, AP15. Lucas Company presents the following data for the years 20x3 and 20x4:



20x3 20x4

Units of AP15 produced and sold 20,000 21,000

Selling price $200 $220

Direct materials (square feet) 60,000 61,500

Direct materials costs per square foot $20 $22

Manufacturing capacity in units of AP15 25,000 25,000

Total conversion costs $1,000,000 $1,110,000

Conversion costs per unit of capacity $40 $44

Selling and customer-service capacity (customers) 60 58

Total selling and customer-service costs $360,000 $362,500

Selling and customer-service capacity cost per customer $6,000 $6,250



Lucas Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in 20x4. Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Lucas Company has 46 customers in 20x3 and 50 customers in 20x4. The industry market size for high-end appliances increased 5% from 20x3 to 20x4.



What is the cost effect of the price-recovery component?

a. $179,000 F

b. $179,000 U

c. $241,000 U

d. $420,000 F

Click here for the SOLUTION

What is the revenue effect of the price-recovery component?

ACCOUNTING

Multiple Choice

Following a strategy of product differentiation, Lucas Company makes a high-end Appliance, AP15. Lucas Company presents the following data for the years 20x3 and 20x4:



20x3 20x4

Units of AP15 produced and sold 20,000 21,000

Selling price $200 $220

Direct materials (square feet) 60,000 61,500

Direct materials costs per square foot $20 $22

Manufacturing capacity in units of AP15 25,000 25,000

Total conversion costs $1,000,000 $1,110,000

Conversion costs per unit of capacity $40 $44

Selling and customer-service capacity (customers) 60 58

Total selling and customer-service costs $360,000 $362,500

Selling and customer-service capacity cost per customer $6,000 $6,250



Lucas Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in 20x4. Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Lucas Company has 46 customers in 20x3 and 50 customers in 20x4. The industry market size for high-end appliances increased 5% from 20x3 to 20x4.



What is the revenue effect of the price-recovery component?

a. $220,000 F

b. $420,000 F

c. $400,000 F

d. $200,000 F

Click here for the SOLUTION

1. What is the net effect on operating income as a result of the growth component?

ACCOUNTING

Multiple Choice

Following a strategy of product differentiation, Lucas Company makes a high-end Appliance, AP15. Lucas Company presents the following data for the years 20x3 and 20x4:



20x3 20x4

Units of AP15 produced and sold 20,000 21,000

Selling price $200 $220

Direct materials (square feet) 60,000 61,500

Direct materials costs per square foot $20 $22

Manufacturing capacity in units of AP15 25,000 25,000

Total conversion costs $1,000,000 $1,110,000

Conversion costs per unit of capacity $40 $44

Selling and customer-service capacity (customers) 60 58

Total selling and customer-service costs $360,000 $362,500

Selling and customer-service capacity cost per customer $6,000 $6,250



Lucas Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in 20x4. Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Lucas Company has 46 customers in 20x3 and 50 customers in 20x4. The industry market size for high-end appliances increased 5% from 20x3 to 20x4.



What is the net effect on operating income as a result of the growth component?

a. $60,000 U

b. $140,000 F

c. $60,000 F

d. $200,000 F

Click here for the SOLUTION

What is the cost effect of the growth component?

ACCOUNTING

Multiple Choice

Following a strategy of product differentiation, Lucas Company makes a high-end Appliance, AP15. Lucas Company presents the following data for the years 20x3 and 20x4:



20x3 20x4

Units of AP15 produced and sold 20,000 21,000

Selling price $200 $220

Direct materials (square feet) 60,000 61,500

Direct materials costs per square foot $20 $22

Manufacturing capacity in units of AP15 25,000 25,000

Total conversion costs $1,000,000 $1,110,000

Conversion costs per unit of capacity $40 $44

Selling and customer-service capacity (customers) 60 58

Total selling and customer-service costs $360,000 $362,500

Selling and customer-service capacity cost per customer $6,000 $6,250



Lucas Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in 20x4. Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Lucas Company has 46 customers in 20x3 and 50 customers in 20x4. The industry market size for high-end appliances increased 5% from 20x3 to 20x4.



What is the cost effect of the growth component?

a. $60,000 U

b. $140,000 F

c. $60,000 F

d. $200,000 F

Click here for the SOLUTION

1. What is the revenue effect of the growth component?

ACCOUNTING

Multiple Choice

Following a strategy of product differentiation, Lucas Company makes a high-end Appliance, AP15. Lucas Company presents the following data for the years 20x3 and 20x4:



20x3 20x4

Units of AP15 produced and sold 20,000 21,000

Selling price $200 $220

Direct materials (square feet) 60,000 61,500

Direct materials costs per square foot $20 $22

Manufacturing capacity in units of AP15 25,000 25,000

Total conversion costs $1,000,000 $1,110,000

Conversion costs per unit of capacity $40 $44

Selling and customer-service capacity (customers) 60 58

Total selling and customer-service costs $360,000 $362,500

Selling and customer-service capacity cost per customer $6,000 $6,250



Lucas Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in 20x4. Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Lucas Company has 46 customers in 20x3 and 50 customers in 20x4. The industry market size for high-end appliances increased 5% from 20x3 to 20x4.



What is the revenue effect of the growth component?

a. $220,000 F

b. $420,000 F

c. $400,000 F

d. $200,000 F

Click here for the SOLUTION

What is the change in operating income from 20x3 to 20x4?

ACCOUNTING

Multiple Choice

Following a strategy of product differentiation, Lucas Company makes a high-end Appliance, AP15. Lucas Company presents the following data for the years 20x3 and 20x4:



20x3 20x4

Units of AP15 produced and sold 20,000 21,000

Selling price $200 $220

Direct materials (square feet) 60,000 61,500

Direct materials costs per square foot $20 $22

Manufacturing capacity in units of AP15 25,000 25,000

Total conversion costs $1,000,000 $1,110,000

Conversion costs per unit of capacity $40 $44

Selling and customer-service capacity (customers) 60 58

Total selling and customer-service costs $360,000 $362,500

Selling and customer-service capacity cost per customer $6,000 $6,250



Lucas Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in 20x4. Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Lucas Company has 46 customers in 20x3 and 50 customers in 20x4. The industry market size for high-end appliances increased 5% from 20x3 to 20x4.



What is the change in operating income from 20x3 to 20x4?

a. $1,440,000 F

b. $1,804,500 F

c. $364,500 F

d. $200,000 F

Click here for the SOLUTION