MULTIPLE CHOICE.
Choose the one alternative that best completes the statement or answers the question. 21) Using a broad average to allocate costs to products is called 21) ______ A) refined costing. B) job costing. C) activity-based costing. D) product undercoating. E) cost smoothing.
22) Which of the following statements is FALSE concerning product costing systems? 22) ______ A) under costing or over costing can result in product cost cross-subsidization B) companies that over cost run the risk of losing customers C) peanut butter costing is another term for cost smoothing D) companies that under cost products always sell products at a loss E) companies that over cost may be able to reduce selling prices and still make a profit
23) Uniformly assigning the costs of resources to cost objects when those resources are actually used in a non-uniform way is called 23) ______ A) peanut-butter costing. B) menu-based costing. C) full product cost allocate. D) variable product-cost allocation. E) consistent cost index.
24) A product that consumes a relatively low level of resources but is reported to have a relatively high cost, may result in 24) ______ A) product-cost cross-subsidization. B) product over costing. C) product under costing. D) product marketing. E) product sub optimization
25) Which of the following is NOT a sign that a “smoothing out” costing system exists? 25) ______ A) The company loses bids they believed were priced competitively. B) The company wins bids they thought were priced “low”. C) The company loses customers they didn’t expect. D) Managers don’t rely on data originated by the cost system. E) The cost system has not been upgraded with the company.
26) 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 26) ______ A) product marketing. B) product sub optimization. C) product under costing. D) product over costing. E) product-cost cross-subsidization.
27) Provided a single allocation base is used, jobs are typically overcosted if 27) ______ A) jobs require more travel and communication between the two parties. B) jobs require more employees. C) jobs consume relatively more of the resources than the revenue they bring in. D) jobs consume proportionately less resources than the revenue they bring in. E) jobs cannot be overcosted; only products or service can be overscosted.
Use the information below to answer the following question(s).
A taxi company provides bussing service and limo service as well as taxi service.
Taxi drivers are paid $15 per hour and limo drivers are paid $25 per hour.
The company charges $2.00 per kilometre for taxi service and $3.50 per kilometre for limo service.
Two individual clients, the school board and the city government offices use the majority of the limo service on a contract agreement.. Bussing services are billed at $350 per day, for 38 buses used almost exclusively by the school board, and the taxi service is used almost exclusively by the general public, although the school board uses the taxi services when individual students have to be transported on occasion.
Indirect costs [the on-site repair garage] are accumulated on internal records at $1.50 per kilometre for limo use and $1.00 per kilometre for taxi use, and $195 per day for each bus.
The company’s costing system has tracked the following activities for the month:
Client Limo Km Taxi Km Bus Days
School board3609019
City gov’t1,943125n/a
28) Required: Compute the billing to each major client for the month. 28) ______ A) School Board$254,052.00City Gov’t$7,050.50 B) $7,685.00$7,050.50 C) $7,050,50 $7,685.00 D) $8,090.00 $7,050.50 E) $7,050.50 $254,052.00
29) Suppose the company simply added up the cost of the repair garage and charged it equally to the billing for each client.
How would you describe this situation? 29) ______ A) cross-subsidization of limo costs by the taxi customers B) cross-subsidization of taxi costs by the limo customers C) typical ABC costing D) departmental costing system E) a refined costing system
30) Required: What indirect costs were accumulated for each major client for the month? 30) ______ A) School Board$141,420.00City Gov’t$3,039.50 B) $3,039.50$141,420.00 C) $7,050,50 $7,685.00 D) $7,050.50 $254,052.00 E) $7,685.00 $7,050.50
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