Question : 11) As product diversity and indirect costs increase, it usually : 1212094

 

11) As product diversity and indirect costs increase, it is usually best to switch away from a broad averaging system to an activity-based cost system.

 

12) Peanut-butter costing system is a more refined costing system compared to activity-based costing system.

 

13) Explain how a top-selling product may actually result in losses for the company.

Objective 5.2

 

1) Refining a cost system includes ________.

A) classifying as many costs as indirect costs as is feasible

B) creating as many cost pools as possible

C) identifying the activities involved in a process

D) seeking a lesser level of detail

 

2) Which of the following is true of refinement of a costing system?

A) While refining a costing system, companies should identify as many indirect costs as is economically feasible.

B) A homogeneous cost pool will use multiple cost drivers to allocate costs.

C) It reduces the use of broad averages for assigning the cost of resources to cost objects.

D) It is likely to yield the most decision-making benefits when direct costs are a high percentage of total costs.

 

3) Which of the following is a reason that has accelerated the demand for refinements to the costing system?

A) The declining demand for customized products has led managers to decrease the variety of products and services their companies offer.

B) The use of product and process technology has led to an increase in indirect costs and a decrease in direct costs.

C) The increased of automated processes has led to the increase in direct manufacturing cost leading to a decrease in breakeven point.

D) The increasing competition in product markets has led to an increase in contribution margin resulting in a decrease of breakeven point.

 

4) Demand for refinements to the costing system has accelerated due to ________.

A) increase in direct costs

B) decrease in product diversity

C)  decrease in indirect costs

D) competition in product markets

5) Collin Inc. produces hospital equipment and the setup requirements vary from product to product. Collin produces its products based on customer orders and uses ABC costing. In one of its indirect cost pools, setup costs and distribution costs are pooled together. Costs in this pool are allocated using number of customer orders for the easiness of costing operations. Based on the information provided, which of the following arguments is valid?

A) Collin has clearly failed to identify as many direct costs as is economically feasible.

B) All costs in a homogeneous cost pool have the same or a similar cause-and-effect relationship with the single cost driver that is used as the cost-allocation base for Collin.

C) Collin has unnecessarily wasted resources by classifying setup and distribution costs as they could have been considered as direct costs.

D) Collin has failed to use the correct cost driver as the cost-allocation base for setup costs.

 

6) When refining a costing system, a company should classify as many costs as possible as indirect costs, thereby minimizing the extent to which costs have to be traced rather than allocated.

 

 

 

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