Question : 6) Which of the following capacity levels should a company : 1212182

6) Which of the following capacity levels should a company choose, from a long-run product costing perspective, to allocate budgeted fixed manufacturing costs to products?

A) master-budget capacity utilization to highlight unused capacity

B) normal capacity utilization for benchmarking purposes

C) practical capacity for pricing decisions

D) theoretical capacity for performance evaluation

7) Customers expect to pay a price that includes ________.

A) the cost of unused capacity

B) only the cost of actual capacity used

C) variable costs but not capacity costs

D) both actual and unused capacity costs

8) The marketing manager’s performance evaluation is most fair when based on a denominator level using ________.

A) practical capacity

B) theoretical capacity

C) master-budget capacity utilization

D) normal capacity utilization

9) ________ is the continuing reduction in the demand for a company’s products that occurs when competitor prices are not met.

A) Downward demand spiral

B) Competitor pricing pressure

C) Continuous step down demand

D) Super-variable costing

10) Using master-budget capacity to set selling prices ________.

A) avoids the recalculation of unit costs when expected demand levels change

B) spreads fixed costs over available capacity

C) can result in a downward demand spiral

D) uses the perspective of long-run product pricing

11) Using ________ as the denominator level also gives the manager a more accurate idea of the resources needed and used to produce a unit by excluding the cost of unused capacity.

A) practical capacity

B) normal capacity utilization

C) theoretical capacity

D) master-budget capacity utilization

12) The effect of spreading fixed manufacturing costs over a shrinking master-budget capacity utilization amount results in ________.

A) greater utilization of capacity

B) increased unit costs

C) more competitive selling prices

D) greater demand for the product

13) The higher the denominator level, the ________.

A) higher the budgeted fixed manufacturing cost rate

B) lower the amount of fixed manufacturing costs allocated to each unit produced

C) higher the favorable production-volume variance

D) more likely actual output will exceed the denominator level

14) Operating income reported on the end-of-period financial statements is changed when ________ is used to handle the production-volume variance at the end of the accounting period.

A) the adjusted allocation-rate approach

B) the proration approach

C) the write-off variances to cost of goods sold approach

D) the reinstatement approach 

15) Which of the following approaches spreads underallocated or overallocated overhead among ending balances in Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold? 

A) the adjusted allocation-rate approach

B) the proration approach

C) the write-off variances to cost of goods sold approach

D) the reinstatement approach