Question : Objective 5.1 1) Which of the following statements true of a : 1212080

Objective 5.1

1) Which of the following statements is true of a peanut-butter costing system?

A) A peanut-butter costing system typically has more-homogeneous indirect cost pools.

B) A peanut-butter costing system broadly averages or spreads the cost of resources uniformly to cost objects.

C) A peanut-butter costing system assumes that all costs are variable.

D) In a peanut-butter costing system, costs of activities are used to assign costs to other cost objects such as products or services based on the activities the products or services consume.

2) Overcosting a particular product may result in ________.

A) loss of market share

B) pricing the product too low

C) operating efficiencies

D) understating total product costs

3) For a company with diverse products, undercosting overhead of a product will lead to ________.

A) misallocating direct labor costs of the product.

B) misallocating direct material costs of the product

C) misallocating indirect costs of another product

D) misallocating direct costs of another product

4) Aqua Company produces two products–Alpha and Beta. Alpha has a high market share and is produced in bulk. Production of Beta is based on customer orders and is custom designed. Also, 55% of Beta’s cost is shared between design and setup costs, while Alpha’s major portions of costs are direct costs. Alpha is using a single cost pool to allocate indirect costs. Which of the following statements is true of Aqua?

A) Aqua will overcost Beta’s direct costs as it is using a single cost pool to allocate indirect costs.

B) Aqua will undercost Alpha’s indirect costs because alpha has high direct costs.

C) Aqua will overcost Alpha’s indirect costs as it is using a single cost pool to allocate indirect costs.

D) Aqua will overcost Beta’s indirect costs because beta has high indirect costs.

5) Product-cost cross-subsidization ________.

A) exists when one overcosted product results in more than one other product being overcosted

B) means that if a company undercosts more than one of its products, it will overcost more than one of its other products

C) means that if a company undercosts one of its products, it will overcost at least one of its other products

D) exists only when one overcosted product results in all other products being overcosted

6) An accelerated need for refined cost systems is due to ________.

A) global monopolies

B) rising prices

C) intense competition

D) a shift toward increased direct costs

7) Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called ________.

A) activity-based costing

B) uniform costing

C) peanut-butter costing

D) department costing

8) Product-cost cross-subsidization is very common when costs are uniformly spread across various products.

9) Companies that overcost products will most likely lose market share.

10) If companies increase market share in a given product line because their reported costs are less than their actual costs, they will become more profitable in the long run.