1-Answer the following questions using the information below:
Luzent Corporation has two departments, Small and Large. Central costs could be allocated to the two departments in various ways.
|
Small Department
|
Large Department
|
|
Square footage
|
6,750
|
17,250
|
|
Number of employees
|
1,120
|
480
|
|
Sales
|
$350,000
|
$1,750,000
|
If advertising expense of $483,000 is allocated on the basis of sales, the cost per cost driver rate would be ________.
A. $0.23 per dollar of sales
B. $0.22 per dollar of sales
C. $0.25 per dollar of sales
D. $0.24 per dollar of sales
2-Which of the following statements is true of costing systems?
- ABC systems classify some indirect costs as direct costs helping to improve processes
- Singleminus-indirect cost pool systems always result in overcosting of products.
- ABC systems always result in overcosting of products.
- Singleminus-indirect
3-cost pool systems classify some direct costs as indirect costs.
4-Productminus-cost crossminus-subsidization
- means that if a company undercosts one of its products, it will overcost at least one of its other products
- exists only when one overcosted product results in all other products being overcosted
- exists when one overcosted product results in more than one other product being overcosted
- means that if a company undercosts more than one of its products, it will overcost more than one of its other products
4-Which of the following statements is true of a peanutminus-butter costing system?
- A peanutminus-butter costing system typically has moreminus-homogeneous indirect cost pools.
- In a peanutminus-butter costing system, costs of activities are used to assign costs to other cost objects such as products or services based on the activities the products or services consume.
- A peanutminus-butter costing system broadly averages or spreads the cost of resources uniformly to cost objects.
- A peanutminus-butter costing system assumes that all costs are variable.
5-Which of the following statements is true of activity minus-based costing?
- In activity minus-based costing, direct laborminus-hours is always the best allocation base to allocate all nonminus-manufacturing indirect costs.
- The main advantage of activityminus-based costing over peanutminus-butter costing is the accurate distribution of all direct costs to the products.
- Activity based costing is more suited to companies with high product diversity than companies with single product line.
- Activity based costing broadly averages or spreads the cost of resources uniformly to cost objects such as products or services.