Organizations with largely fixed costs tend to be highly profitable durin

1. Organizations
with largely fixed costs tend to be highly profitable during boom years because
costs do not rise (much) with increases in volume, but the reverse also true.
During bust years, costs remain high despite drops in volume.
True
False
0.5 points
QUESTION 2
1. What does
“economies of scale” mean?

Groups
of companies with similar valuations.

Gaining
a cost advantage with an increase in size or output.

Management
of available resources and the costs associated with them.
0.5 points
QUESTION 3
1. Standard
costing develops “benchmarks” or “norms” that are used by
management to monitor for discrepancies.
True
False
0.5 points
QUESTION 4
1. Copy of
Select all the true statements about standard costing.

Estimates
the overall cost by using previous actuals.

Estimates
the overall cost to create a standard through analyis and averaging costs over
time.

Enables
a company to more quickly create cost forecasts and react to unexpected
variances.

Can
only be used to account for materials and labor (not for overhead costs).
0.5 points
QUESTION 5
1. The ABC
Company, maker of birdhouses, has decided to implement an ABC system. The Cost
Accountant has been provided the following data for the past month:
Birdhouse Models
Quantity Produced Total Machine
Hours Total Labor Hours
Basic 100 10 25
Standard
100
20 40
Deluxe
25 40 60
The Spend pools are provided as:
Material
$3,000
Direct Labor $5,000
Overhead $2,000
If Overhead is allocated based on the activity of Quantity
Produced, how much of the $2,000 cost will be allocated to the Deluxe
Birdhouse?

$222

$888

$960

$1,142
0.5 points
QUESTION 6
1. The ABC
Company, maker of birdhouses, has decided to implement an ABC system. The Cost Accountant has been provided the
following data for the past month:
Birdhouse Models
Quantity Produced Total Machine
Hours Total Labor Hours
Basic 100 10 25
Standard
100 20 40
Deluxe
25
40 60

The Spend pools are provided as:
Material
$3,000
Direct Labor $5,000

Overhead $2,000
If Overhead is allocated based on the activity of Total
Machine Hours, how much of the $2,000 cost will be allocated to the Deluxe
Birdhouse?

$1,142

$222

$960

$667
0.5 points
QUESTION 7
1. The ABC
Company, maker of birdhouses, has decided to implement an ABC system. The Cost Accountant has been provided the
following data for the past month:
Birdhouse Models Quantity Produced Total Machine Hours Total Labor Hours
Basic 100 10 25
Standard
100
20 40
Deluxe
25
40 60

The Spend pools are provided as:
Material
$3,000
Direct Labor $5,000
Overhead $2,000
If Direct Labor Hours is allocated based on Total Machine
Hours, which birdhouse model will have the most expensive Direct Labor
component of total cost?

Deluxe
Model

Standard
Model

Basic
Model

All
three will have the same cost since the total spending remains constant at
$5,000

0.5 points
QUESTION 8
1. Cost
allocation is the process of spreading or assigning indirect costs to a
finished product. Assume that the cost of an overhead item is $100. There are 3
products that benefit from this overhead item and during this period 10 units
of A, 20 units of B and 70 units of C are produced.
If the allocation of overhead expense is based on units of
production, which product will absorb the most of the $100?

Product
A

Product
B

Product
C

All
products will receive the same amount of overhead (called “fair
share”).
0.5 points
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