Question : 14.3 Analyze how the selection of the single or dual : 1186028

Accounting

14.3 Analyze how the selection of the single or dual cost allocation rate affects the calculation of the efficiency variance.

1) The user department is responsible for any unfavourable cost variances during the budgeting period if budgeted prices and quantities are used for cost allocation.

2) User departments will be able to determine their allocated costs for each category in advance if budgeted usage is the allocation base.

3) A budgeted rate helps to motivate the manager of a support department.

4) A support department adds value directly to a product or service, which is observable by the customer.

5) When budgeted cost-allocation rates are used, managers of the supplier division are motivated to improve efficiency.

6) When budgeted cost-allocation rates are used, variations in actual usage by one division affect the costs allocated to other divisions.

7) When choosing between budgeted usage and actual usage as allocation bases, which of the following is true?

A) Actual rates let users know in advance what their costs are.

B) When budgeted rates are used, users must wait till the end of the budget period to know what their costs are.

C) With actual rates, a support department, rather than a user department, bears the risk of unfavourable cost variances.

D) Budgeted rates may lead to user departments outsourcing needed work, rather than relying on an internal support department.

E) Budgeted rates may help the manager of a support department to improve efficiency.

8) Fixed costs

A) should be allocated according to past production capacity.

B) should be allocated according to current usage.

C) should be allocated according to short-term expected usage.

D) should be allocated according to long-term expected usage.

E) should be allocated using actual usage as the allocation base.

Use the information below to answer the following question(s).

We Be Warehouse Fitness Equipment incurred $80,000 of common fixed costs and $120,000 of common variable costs. Data are provided below for the capacity allowed and the capacity used.

Department

Capacity

Provided in Hours

Capacity

Used in Hours

Barbell Department

500

400

Sauna Department

300

400

For both departments, common fixed costs are to be allocated on the basis of capacity provided and common variable costs are to be allocated on the basis of capacity used.

9) The fixed and variable costs allocated to the Barbell Department are

A) $50,000 and $75,000, respectively.

B) $50,000 and $60,000, respectively.

C) $30,000 and $75,000, respectively.

D) $30,000 and $60,000, respectively.

E) $30,000 and $50,000 respectively.

10) The fixed and variable costs allocated to the Sauna Department are

A) $50,000 and $75,000, respectively.

B) $50,000 and $60,000, respectively.

C) $30,000 and $75,000, respectively.

D) $30,000 and $50,000, respectively.

E) $30,000 and $60,000 respectively

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July 1, 2023

Multiple Choice Questions

66.A merchandiser:

A.Earns net income by buying and selling merchandise.

B.Receives fees only in exchange for services.

C.Earns profit from commissions only.

D.Earns profit from fares only.

E.Buys products from consumers.

67.Cost of goods sold:

A.Is another term for merchandise sales.

B.Is the term used for the expense of buying and preparing merchandise for sale.

C.Is another term for revenue.

D.Is also called gross margin.

E.Is a term only used by service firms.

68.A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:

A.$(417,000).

B.$695,000.

C.$278,000.

D.$417,000.

E.$973,000.

69.A company has sales of $375,000 and its gross profit is $157,500. Its cost of goods sold equals:

A.$(217,000).

B.$375,000.

C.$157,500.

D.$217,500.

E.$532,500.

70.The following statements regarding gross profit are true except:

A.Gross profit is also called gross margin.

B.Gross profit less other operating expenses equals income from operations.

C.Gross profit is not calculated on the multiple-step income statement.

D.Gross profit must cover all operating expenses to yield a return for the owner of the business.

E.Gross profit equals net sales less cost of goods sold.

71.The following statements regarding merchandise inventory are true except:

A.Merchandise inventory is reported on the balance sheet as a current asset.

B.Merchandise inventory refers to products a company owns and intends to sell.

C.Merchandise inventory may include the costs of freight in and making them ready for sale.

D.Merchandise inventory appears on the balance sheet of a service company.

E.Purchasing merchandise inventory is part of the operating cycle for a business.

72.The following statements are true regarding the operating cycle of a merchandising company except:

A.The operating cycle begins with the purchase of merchandise.

B.The operating cycle is shortened by credit sales.

C.The operating cycle ends with the collection of cash from the sale of merchandise.

D.The operating cycle can vary in length among different merchandising companies.

E.The operating cycle sometimes involves accounts receivable.

73.Merchandise inventory:

A.Is a long-term asset.

B.Is a current asset.

C.Includes supplies the company will use in future periods.

D.Is classified with investments on the balance sheet.

E.Must be sold within one month.

74.The operating cycle for a merchandiser that sells only for cash moves from:

A.Purchases of merchandise to inventory to cash sales.

B.Purchases of merchandise to inventory to accounts receivable to cash sales.

C.Inventory to purchases of merchandise to cash sales.

D.Accounts receivable to purchases of merchandise to inventory to cash sales.

E.Accounts receivable to inventory to cash sales.

75.The current period's ending inventory is:

A.The next period's beginning inventory.

B.The current period's cost of goods sold.

C.The prior period's beginning inventory.

D.The current period's net purchases.

E.The current period's beginning inventory.