Cost Accounting Concepts
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Questions and Answers

What is the contribution margin per unit for the XR7?

  • $150
  • $18
  • $25 (correct)
  • $100

    • Which of the following is an example of a traceable fixed cost?

  • Rent for a multiple-store location
  • Salary of a regional manager not linked to a segment
  • Salary of a specific product line manager (correct)
  • Office supplies shared across divisions

    • Why should segmented income statements use the contribution format?

  • To calculate total fixed costs
  • To eliminate need for traceable costs
  • To separate fixed from variable costs and calculate contribution margin (correct)
  • To maximize selling prices

    • In segment reporting, what should be done with common fixed costs?

    <p>They should be excluded from segment margin calculations.</p> Signup and view all the answers

    When considering sales strategies, what might influence the choice between the XR7 and Turbo models?

    <p>The cost of commissions based on selling prices rather than CM</p> Signup and view all the answers

    What is the primary focus of a company’s strategy?

    <p>Attracting customers by distinguishing itself</p> Signup and view all the answers

    Which strategy emphasizes understanding and responding to individual customer needs?

    <p>Customer Intimacy Strategy</p> Signup and view all the answers

    What is the primary benefit of Lean Production?

    <p>Fewer defects and less waste</p> Signup and view all the answers

    Which of the following is classified as a direct cost?

    <p>Salary of a sales manager in Tokyo</p> Signup and view all the answers

    What is the definition of manufacturing overhead?

    <p>All manufacturing costs except direct materials and direct labor</p> Signup and view all the answers

    What is commonly used in Enterprise Risk Management to reduce risks?

    <p>Through specific control implementations</p> Signup and view all the answers

    What does a Corporate Social Responsibility (CSR) perspective include beyond legal compliance?

    <p>Voluntary actions that satisfy stakeholder expectations</p> Signup and view all the answers

    Which component is NOT a step in the business process management?

    <p>Competition analysis</p> Signup and view all the answers

    What type of cost cannot be easily traced to a specific cost object?

    <p>Indirect cost</p> Signup and view all the answers

    Which factor does NOT influence employee behavior according to the leadership section?

    <p>Market trends</p> Signup and view all the answers

    What is the primary purpose of charging service department costs to operating departments?

    <p>To motivate operating departments to utilize service resources wisely</p> Signup and view all the answers

    Variable Service Department Costs (VSDC) are charged based on what factor?

    <p>The activity or cost driver that caused the incurrence</p> Signup and view all the answers

    Which method of charging Fixed Service Department Costs (FSDC) is recommended?

    <p>Predetermined lump-sum amounts based on capacity needs</p> Signup and view all the answers

    What is a major pitfall in allocating fixed costs?

    <p>Using a variable allocation base that changes frequently</p> Signup and view all the answers

    What is included in conversion costs?

    <p>Direct labor and manufacturing overhead</p> Signup and view all the answers

    Which of the following describes nonmanufacturing costs?

    <p>Costs associated with the management of an organization</p> Signup and view all the answers

    What criteria does the Balanced Scorecard NOT include as a performance measure?

    <p>Market share growth</p> Signup and view all the answers

    What type of costs are included in product costs?

    <p>Direct materials, direct labor, and manufacturing overhead</p> Signup and view all the answers

    How are fixed costs to service departments primarily determined?

    <p>According to predicted peaks per department</p> Signup and view all the answers

    Which type of performance measure focuses on internal processes within a business?

    <p>Internal business processes metrics</p> Signup and view all the answers

    Which of these costs are classified as period costs?

    <p>Selling and administrative expenses</p> Signup and view all the answers

    Which of the following is an example of variable costs?

    <p>Commissions based on sales</p> Signup and view all the answers

    What factor influences the service department costs allocated to other departments?

    <p>Sales generated by one department</p> Signup and view all the answers

    How are finished goods recorded in financial statements?

    <p>As inventory on the balance sheet</p> Signup and view all the answers

    What is the role of indirect materials in manufacturing costs?

    <p>They support the production process but are not directly traceable</p> Signup and view all the answers

    Which option best describes administrative costs?

    <p>Costs associated with the management of the organization</p> Signup and view all the answers

    What accurately characterizes work in process costs?

    <p>Costs of partially completed goods needing further work</p> Signup and view all the answers

    How do variable costs behave in relation to activity levels?

    <p>They increase in direct proportion to activity changes</p> Signup and view all the answers

    How is price variance calculated in material variances?

    <p>On the total quantity purchased</p> Signup and view all the answers

    What is a disadvantage of standard cost variance reports?

    <p>They may become outdated if prepared monthly</p> Signup and view all the answers

    Which of the following statements about decentralized organizations is true?

    <p>They can lead to a lack of coordination among managers</p> Signup and view all the answers

    What characterizes a profit center in responsibility accounting?

    <p>Managers control costs and revenues</p> Signup and view all the answers

    In the calculation of Return on Investment (ROI), what does the formula consist of?

    <p>Net Operating Income divided by Average Operating Assets</p> Signup and view all the answers

    What is a key criticism of using ROI for performance evaluation?

    <p>It can lead to the rejection of profitable investment opportunities</p> Signup and view all the answers

    What is the impact of excessive emphasis on meeting standards in standard costing?

    <p>It may overshadow other important objectives</p> Signup and view all the answers

    What does residual income measure as opposed to ROI?

    <p>Net operating income minus minimum required return on investment</p> Signup and view all the answers

    Which of the following is an advantage of standard costs?

    <p>They provide benchmarks that can promote efficiency</p> Signup and view all the answers

    What is a cost center tasked with managing?

    <p>Only costs under their control</p> Signup and view all the answers

    What is the purpose of including a financial perspective in the balanced scorecard?

    <p>To ensure improvements in nonfinancial performance translate to financial results</p> Signup and view all the answers

    Which category of quality costs focuses on preventing defects?

    <p>Prevent Costs</p> Signup and view all the answers

    Which of the following is NOT a use of quality cost information?

    <p>Ensure timely implementation of quality improvements</p> Signup and view all the answers

    How is Manufacturing Cycle Efficiency (MCE) calculated?

    <p>Value-added time / Manufacturing cycle time</p> Signup and view all the answers

    What does Overall Equipment Effectiveness (OEE) measure?

    <p>Productivity of a piece of equipment</p> Signup and view all the answers

    Which of the following costs is associated with defects that are identified before products are shipped?

    <p>Internal Failure Costs</p> Signup and view all the answers

    What is a limitation of quality cost reports?

    <p>They usually lag behind quality improvement programs</p> Signup and view all the answers

    What role does Corporate Social Responsibility (CSR) play in organizational decision-making?

    <p>It considers the needs of all stakeholders beyond financial results</p> Signup and view all the answers

    What is the primary focus of differential analysis in decision making?

    <p>Evaluating the relevance and cost implications of alternatives</p> Signup and view all the answers

    Which organization is known for its work in environmental and social performance measurement?

    <p>Global Reporting Initiative</p> Signup and view all the answers

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