Question : 31) A busy law office has a central administration set : 1196246

31) A busy law office has a central administration set up, with the admin 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 admin 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 admin services, and so her year end bonus should be larger than those who require the admin services.

Therefore they are considering tracking the admin work done for each lawyer separately so that they know how many hours of admin 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 admin services s/he used in the year.

If the firm institutes this new approach, this will mean that: 31) ______ A) there will still be cross-subsidization between clients but not between lawyers. B) they will be using a departmental costing system. C) the new information gathered will enable the firm to be able to reduce its costs. D) there will be no more cross subsidization. E) there will still be cross-subsidization between lawyers but not between their clients.

32) All of the following are guidelines for costing system refinement EXCEPT 32) ______ A) budget costing allocation. B) indirect-cost pools. C) variable cost pools. D) cost allocation bases. E) direct-cost tracing.

33) A cost accounting system should be revised when 33) ______ A) the existing cost accounting system provides information that is representative of operations. B) the existing cost accounting system could be updated, just to keep ahead. C) the existing cost accounting system does not produce information that reflects the way various products use scarce resources. D) a new system would be easier to understand but would not be reliable. E) management wants to change the system, even though the information is relevant and correct.

34) Which of the following statements is FALSE concerning refining a cost system? 34) ______ A) All cost pools should have the same cause-and-effect or benefits-received relationship with the cost-allocation base. B) It requires identification of the preferred-cost allocation base for each indirect-cost pool. C) It requires direct-cost tracing. D) It should result in a more measure of the nonuniformnity in the use of resources by the company’s products. E) The number of indirect-cost pools should be expanded until each of the pools is homogeneous.

35) Direct cost tracing will accomplish which of the following? 35) ______ A) identifies homogeneous costs B) expands the number of indirect cost pools C) focuses on the cause-and-effect criterion when choosing allocation bases D) classifies more costs as indirect E) classifies as many of the costs as direct costs, as is economically feasible

36) When using activity-based costing in a manufacturing setting, its’ distinctive feature is the focus on 36) ______ A) materials sorting. B) activities as the fundamental cost objects. C) minimizing the number of journal entries related to the manufacturing process. D) materials handling. E) minimizing manufacturing costs.

37) Which of the following statements about activity-based costing is FALSE? 37) ______ A) It provides more accurate product costs. B) It provides less information than prior cost systems. C) Indirect cost allocation bases are likely to be cost drivers. D) It is one of the best tools for refining a cost system. E) It promotes cost control.

38) In ABC costing, an activity includes all of the following EXCEPT 38) ______ A) indirect cost. B) an event. C) a unit of work. D) a task. E) a process.

39) Which of the following would NOT be an activity under an ABC system? 39) ______ A) distributing products B) setting up equipment C) designing products D) engineering E) customers

40) A costing system which focuses on individual event or tasks as the fundamental cost objects is called 40) ______ A) normal costing. B) activity-based costing. C) direct costing. D) job costing. E) process costing.