11) Which of the following illustrates a purpose for allocating costs to cost objects?
A) to provide information for economic decisions
B) to reduce competition
C) to determine employee benefit costs
D) to defer income and reduce taxes payable
E) to motivate employees
12) Deciding whether to make a component part or to purchase it, would be an example of which cost allocation purpose?
A) to provide information for economic decisions
B) to motivate managers
C) to determine employee's wages
D) to measure income and assets for reporting to external parties
E) to motivate employees
13) For the economic decision purpose
A) the costs in all six business functions should be included.
B) costs for only one function is included.
C) period costs are not allocated.
D) costing is only related to product pricing.
E) only inventoriable costs under GAAP/IFRS should be included.
14) Which of the following criteria subsidizes poor performers at the expense of the best performers?
A) ability to bear
B) benefit received
C) causality
D) fairness and equity
E) benefits expended
15) The belief that a corporate division with higher sales ought to be allocated more of the company's advertising costs because it must have derived more benefit from the expenditures than a division with lower sales, is an example of which criteria for cost allocation decisions?
A) ability to bear
B) benefits expended
C) causality
D) fairness and equity
E) benefit received
16) Which of the following is not a common criteria used to guide decisions related to cost allocations?
A) ability to bear
B) benefit received
C) causality
D) fairness and equity
E) stable market prices
17) Which of the following is the first step in the cost-allocation decision process?
A) Calculate the cost-allocation rate for each indirect cost pool.
B) Identify the purpose of the cost allocation.
C) Identify the direct inputs that are already measured.
D) Identify the relevant indirect costs included in the cost pool(s) or numerator(s).
E) Analyze the alternatives and select the best one for the denominator.
18) Which of the following is true concerning cost allocation in a multi-product company?
A) Where the indirect costs are variable and each product is assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
B) Where the indirect costs are fixed and each product is assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
C) Where the indirect costs are variable and each product is not assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
D) Where the indirect costs are fixed and each product is not assembled sequentially, the causality criterion can guide the choice of a cost allocation base.
E) Where the indirect costs are variable and the products are produced jointly, it is not possible to identify specific cause-and-effect relationships between work on an individual product and total costs incurred.
19) Which purpose of cost allocation is used to encourage sales representatives to push high-margin products or services?
A) to provide information for economic decisions
B) to motivate managers and other employees
C) to justify costs
D) to measure income and assets for reporting to external parties
E) to compute reimbursement
20) Which purpose of cost allocation is used to decide on the selling price for a customized product or service?
A) to provide information for economic decisions
B) to motivate managers and other employees
C) to justify costs
D) to measure income and assets for reporting to external parties
E) to compute reimbursement
