ACCT 3121 CH 15
3) Cost-plus contracts negotiated with suppliers of the government usually involves ________.A) a price that allows the contractor to break-evenB) a price that covers the contract's cost plus other noncash benefits
C) the supplier's cost to perform the
C) the supplier's cost to perform the contact (provide the product or service) plus a fee
4) Which of the following is an example of an allowable cost considered by U.S. government contract?A) supervision costsB) costs of lobbying activitiesC) costs of alcoholic beverages
D) costs of vacation for executives
5) In certain high-cost defense contracts involving new weapons and equipment, contracts are rarely subject to competitive bidding because ________.
A) the government taxes the defense companies at a higher level than that of other public sector companies
D) no contractor is willing to assume all the risk of receiving a fixed price for the contract
1) Revenue allocation is used when ________.A) revenues cannot be estimated but can be traced to specific cost objectsB) revenues are related to a particular revenue object but cannot be traced to it in an economically feasible way
C) revenues are not r
B) revenues are related to a particular revenue object but cannot be traced to it in an economically feasible way
2) Which of the following is an example of a revenue object?A) suppliersB) productsC) labor
D) duration to complete a given task
3) Which of the following is an example of a bundled product?A) a checking accountB) A complete mechanics tool kitC) an accounting textbook with an access code to a homework/study system
D) Microsoft Excel
C) an accounting textbook with an access code to a homework/study system
4) Which of the following is not one of the methods used to to allocate the revenues of a bundled product?A) direct revenue methodB) stand-alone selling prices methodC) Stand-alone physical units method
D) incremental revenue method
5) Which of the following best describes the stand-alone revenue-allocation method?A) uses product-specific information on the products in the bundle as weights for allocating the bundled revenues to the individual products
B) ranks individual products i
A) uses product-specific information on the products in the bundle as weights for allocating the bundled revenues to the individual products
1) The method that allocates costs in each cost pool using the same rate per unit is known as the ________.A) incremental cost-allocation methodB) reciprocal cost-allocation methodC) single-rate cost allocation method
D) dual-rate cost-allocation metho
C) single-rate cost allocation method
2) The dual-rate cost-allocation method classifies costs in each cost pool into a ________.A) budgeted-cost pool and an actual-cost poolB) variable-cost pool and a fixed-cost poolC) direct-cost pool and an indirect-cost pool
D) direct-cost pool and a r
B) variable-cost pool and a fixed-cost pool
3) Which of the following departments would not be considered a service or support department?A) assemblyB) information systemsC) shipping
D) plant maintenance
4) When using the dual-rate method, the fixed cost allocation is based on ________.A) actual rateB) budgeted usageC) incremental cost allocation
D) prime cost allocation
6) Which of the following is a disadvantage of single-rate method?A) It is very costly to implement.B) It may lead operating department managers to make sub-optimal decisions that are in their own best interest.
C) It does not signal to department manag
B) It may lead operating department managers to make sub-optimal decisions that are in their own best interest.
7) Which of the following is an advantage of a dual-rate method?A) It is the most widely used method in practice.B) It is less costly to implement.C) It avoids the expensive analysis for categorizing costs as either fixed or variable.
D) It allocates f
D) It allocates fixed cost as per the budgeted usage that helps in short and long-run planning.
8) Which of the following is a disadvantage of a dual-rate method?A) It allocates fixed costs on the basis of budgeted long-run usage, which may tempt some managers to underestimate their planned usage.
B) It may lead operating department managers to mak
A) It allocates fixed costs on the basis of budgeted long-run usage, which may tempt some managers to underestimate their planned usage.
9) Which of the following is an advantage of using practical capacity to allocate costs?A) is that it allows a downward supply spiral to developB) is that it focuses management's attention on managing unused capacity
C) is that budgets are much easier t
B) is that it focuses management's attention on managing unused capacity
10) Which of the following would be considered the biggest advantage of using practical capacity to allocate costs?A) focuses the user's division with the costs of overused capacityB) never causes over or under-allocated overhead
C) burdens the user div
D) focuses management's attention on unused capacity
1) When budgeted cost-allocations rates are used ________.A) user departments are not informed about the charges until the end of the period which makes decision making during the period difficult
B) user departments can determine the amount of service t
B) user departments can determine the amount of service to request and if allowed, can determine whether to use an internal or external resource
2) When actual cost-allocations rates are used, which of the following would be true?A) user divisions pay for costs that exceed budgeted amountsB) managers of the supplier division are motivated to improve efficiency
C) user divisions are unaware of th
C) user divisions are unaware of the allocated amounts until the end of the budget period
3) Under the dual-rate cost-allocation method, when fixed costs are allocated based on actual usage then ________.A) user-division managers are motivated to make accurate long-run usage forecasts
B) user-division managers can better plan for the short-ru
D) variations in one division's usage affect another division's allocation
4) The costs of unused capacity are highlighted when ________.A) actual usage based allocations are usedB) budgeted usage allocations are usedC) practical capacity-based allocations are used
D) the dual-rate cost-allocation method allocates fixed costs
C) practical capacity-based allocations are used
5) To discourage unnecessary use of a support department, management might ________.A) allocate user department costs based upon support department usageB) allocate support department costs based upon user department usage
C) allocate a fixed amount of
B) allocate support department costs based upon user department usage
1) Special cost-allocation problems arise when ________.A) support department costs exceed budgetary estimatesB) practical capacity is used as the allocation base
C) support departments provide reciprocal services to each other and operating departments
C) support departments provide reciprocal services to each other and operating departments
2) Which of the following describes reciprocal support?A) the accounting department provides services to productionB) molding provides services to production and accounting provides services to both molding and production
C) assembling department provid
D) the materials management department provides support to all departments including the production control department which also provides services to the materials management department
3) Which of the following describes who the direct allocation method allocates support-department costs?A) it allocates support-department costs to operating departments by fully recognizing the mutual services provided among all support departments
B) i
C) it allocates each support-department's costs to operating departments only
4) The method that allocates each department's budgeted costs to operating departments only is called ________.A) direct methodB) step-down methodC) reciprocal method
D) sequential method
5) Under which allocation method are one-way reciprocal support services recognized?A) direct methodB) artificial cost methodC) reciprocal method
D) step-down method
6) Which of the following statements is true about the step-down method?A) it partially recognizes the services provided among support departmentsB) it does not recognize the total services that support departments provide to each other
C) it is concept
B) it does not recognize the total services that support departments provide to each other
7) When using the direct allocation method, a cost accountant would ________.A) not allocate support department costs to other support departments
B) use information about reciprocal services provided among support departments and therefore could generat
A) not allocate support department costs to other support departments
8) The reciprocal allocation method ________.A) is the most widely used because of its simplicityB) requires the ranking of support departments in the order that the allocation is to proceed
C) fully incorporates interdepartmental relationships into the
C) fully incorporates interdepartmental relationships into the support-department cost allocations
9) Which of the following statements is false with regards to departmental cost allocations?A) amounts allocated to departments will most likely differ depending on the cost allocation method used
B) the total amount allocated among departments will diff
B) the total amount allocated among departments will differ in total depending on the cost allocation method used
10) Managers of supplier departments ________.A) view the budgeted rates positively if unfavorable cost variances occur due to price decreases outside of their control
B) view the budgeted rates negatively if favorable cost variances occur due to price d
C) view the budgeted rates negatively if unfavorable cost variances occur due to price increases outside of their control
28) Which of the following is one of the methods of allocating support department costs to operating departments that partially recognizes mutual service provided among all support departments?A) dual-cost allocation methodB) direct method
C) sequential
C) sequential allocation method
performs some initial processing of corn on the cob once it arrives from the corn fields. The corn from that facility will be further processed elsewhere into corn for popping and corn meal. The costs incurred at the Iowa plant would be considered _______
2) Which of the following would be the case under the stand-alone method of allocating common costs?
A) the individual users of a cost object are ranked in the order of users least responsible for the common cost and then uses this ranking to allocate cos
C) each party bears a proportionate share of the total costs in relation to their individual stand-alone costs
3) Under the incremental method of allocating common costs ________.A) the parties are interested in being viewed as primary usersB) each party bears a proportionate share of the total costs in relation to their individual stand-alone costs
C) the first
D) the primary user bears the maximum of the total cost
4) Emrald Corp currently uses a manufacturing facility costing $520,000 per year; 85% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 15% of the facility and increase the overall cos
D) $87,360
Amount allocated = $520,000 � 1.12 � 0.15 = $87,360
5) Emrald Corp currently uses a manufacturing facility costing $560,000 per year; 90% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 10% of the facility and increase the overall cos
B) $61,600
Amount allocated = $560,000 � 11% = $61,600
6) Harbor Corp currently leases a corporate suite in an office building for a cost of $300,000 a year. Only 81% of the corporate suite is currently being used. A start-up business has proposed a plan that would use the other 19% of the suite and increase
C) $62,346
Amount allocated = $328,139 � 0.19 = $62,346
7) Harbor Corp currently leases a corporate suite in an office building for a cost of $360,000 a year. Only 80% of the corporate suite is currently being used. A start-up business has proposed a plan that would use the other 20% of the suite and increase
A) $20,484
Amount allocated = $20,484, the increased cost of maintaining the space
1) Which of the following would be an explicit agreement of reimbursement on a contract?A) contractor will produce a bill at the end of the contract without having disclose costs
B) contractor will seek payment for contract without having to submit a bid
C) contractor agrees with customer before the project begins, on a set price
2) Contract disputes regarding cost allocation can be reduced by defining which of the following?A) the material items allowed for productionB) the terms used, such as what constitutes direct laborC) permissible tax deductions
D) minimum profit level t
B) the terms used, such as what constitutes direct labor
6) The best method to determining weights for the stand-alone revenue-allocation method is ________.A) selling prices revenue-allocation method because the weights explicitly consider the prices customers are willing to pay for the individual products
B)
A) selling prices revenue-allocation method because the weights explicitly consider the prices customers are willing to pay
7) Which of the following methods ranks individual products in a bundle for revenue allocation?A) stand-alone revenue-allocation methodB) incremental revenue-allocation methodC) unit-cost weighting method
D) physical-unit weighting method
B) incremental revenue-allocation method
8) If management wants to choose a method of revenue allocation that best captures the "benefits received" by customers then they would use ________ to allocate revenue to products in a bundle.A) stand-alone revenue -allocation based on unit costs
B) sta
B) stand-alone revenue-allocation based on selling prices
9) To give more weight to the product that most likely drives the sales of the bundled product, the revenue allocation should be weighted using ________.A) selling pricesB) unit costsC) physical units
D) stand-alone product revenues
D) stand-alone product revenues
10) Craylon Corp sells two products X and Y. X sells for $200 and Y sells for $160. Both X and Y sell for $310 as a bundle. What is the revenue allocated to product Y, if product X is termed as the primary product in the bundle?A) $110B) $40C) $80
D) $
A) $110
Revenue allocated to Y = $310 - $200 = $110
19) A company sells a software suite that includes a word processor and spreadsheet applications. The suite sells for $250 and the items are also available separately for $200 (spreadsheet) and $170 (word processor). The spreadsheet app is by far the best
A) $200 of revenue for the spreadsheet and $50 for the word processor