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.
