Question :
11) Which of the following a sign that a “smoothing : 1186289
11) Which of the following is a sign that a “smoothing out” costing system exists?
A) Managers rely on data originated by the cost system.
B) The company wins bids they thought had low margins.
C) A batch consumes a relatively high level of input materials and conversion activities and is reported to have a relatively high cost.
D) A batch consumes a relatively low level of input materials and conversion activities and is reported to have a relatively low cost.
E) The company loses bids they thought had low margins.
12) The term used to describe a situation when at least one miscosted product causes other products to be miscosted in the organization is known as
A) cross-subsidization.
B) product marketing.
C) product overcosting.
D) product undercosting.
E) product sub-optimization.
13) Provided a single allocation base is used, jobs are typically overcosted if
A) jobs consume proportionately less of the indirect activity but is reported to have higher cost.
B) jobs require more employees.
C) jobs consume proportionately more of the indirect activity and is reported to have higher cost.
D) jobs consume proportionately more of the indirect activity but is reported to have lower cost.
E) jobs cannot be overcosted; only products or service can be overcosted.
14) The use of a single indirect cost rate is more likely to
A) undercost high volume simple products.
B) undercost low volume complex products.
C) undercost lower priced products.
D) overcost higher priced products.
E) overcost low volume complex products.
15) A busy law office has a central administration set up, with the administration work for all lawyers shared by the clerical staff. Clients are billed at the firm’s hourly rate by the firm. The arrangement is that whenever there is administration work to be done, it is assigned to whoever is available at the time. One of the lawyers has complained that she hardly ever uses the administration services, and so her year end bonus should be larger than those who require the administration services. Therefore they are considering tracking the administration work done for each lawyer separately so that they know how many hours of administration services is being used by each lawyer. At the end of the year, the bonus of each lawyer would be reduced by a charge reflecting the administration services she/he used in the year. If the firm institutes this new approach, this will mean that
A) there will be no more cross subsidization.
B) there will still be cross-subsidization between lawyers but not between their clients.
C) the new information gathered will enable the firm to be able to reduce its costs.
D) there will still be cross-subsidization between clients but not between lawyers.
E) they will be using a departmental costing system.
16) Activity-based costing is a technique to improve the reliability of cost assignment
A) to work-in-process inventory.
B) from direct cost pools to distinct types of outputs.
C) from both direct and indirect cost pools to distinct types of outputs.
D) to all types of inventory.
E) from indirect cost pools to distinct types of outputs.
17) Traditional cost systems distort product costs because
A) they do not know how to identify the appropriate units.
B) competitive pricing is ignored.
C) they emphasize financial accounting requirements.
D) they apply average support costs to each unit of product.
E) they assign direct costs using direct cost tracing.
18) Which of the following does not characterize an ABC system, as compared to a traditional costing system?
A) smaller cost pools
B) more cost drivers
C) more homogeneous cost pools
D) focus on activities
E) less expensive to set up and maintain
19) Which of the following is true concerning selecting a cost-allocation base in an ABC system?
A) Cost-allocation bases are not relevant in defining the number of activity pools.
B) All costs can be directly identified with a specific activity.
C) The allocation base chosen may be constrained by the availability of reliable data.
D) Costs may need to be allocated to services first, before the costs of services can be allocated to activities.
E) Output unit-level costs cannot be related to a cost-allocation base.