Question 1: True or False.

1. Direct costs are allocated to the cost object using a cost-allocation method.

2. Raw materials that can be traced to a cost object are an example of an indirect cost.

3. Fixed and variable costs may be allocated to a cost object

4. Quality control costs may be a direct cost of the Manufacturing Department, but an indirect cost of an individual job.

5. Cost objects may be jobs, products, or customers.

6. The two most common methods of costing inventories in manufacturing companies are variable costing and fixed costing.

7. Absorption costing "absorbs" only variable manufacturing costs.

8. Variable costing includes all variable costs, both manufacturing and non manufacturing in inventory.

9. Under both variable and absorption costing, all variable manufacturing costs are inventoriable costs.

10. The main difference between variable costing and absorption costing is the way in which fixed manufacturing costs are accounted for.

11. The dual cost-allocation method classifies costs into two pools, a budgeted cost pool and an actual cost pool.

12. The single-rate method makes a distinction between fixed and variable costs.

13. Using the single-rate method transforms the fixed costs per hour into a variable cost to users of that facility.

14. The single-rate cost-allocation method provides better information for decision making than the dual-rate method.

15. An advantage of the single-rate method is that it is easier and always the most accurate cost-allocation choice.

16. Retailers generally have a high percentage of net income to revenues.

17. Inventory management is the planning, organizing, and controlling activities that focus on the flow of materials into, through, and from the organization.

Question 2 : choose the best answer.

1. Job costing information is used:
a. To develop strategies.
b. To make pricing decisions.
c. For external financial reporting.
d. All of these answers are correct.

2. In a costing system:
a. Cost tracing allocates indirect costs.
b. Cost allocation assigns direct costs.
c. A cost-allocation base can be either financial or non financial.
d. A cost object should be a product and not a department or a geographic territory.

3. Identifying department costs helps managers:
a. Control the costs for which they are responsible.
b. Evaluate the performance of subordinates.
c. Evaluate the performance of subunits.
d. All of these answers are correct.

4. Job costing:
a. Can only be used in manufacturing.
b. Records the flow of costs for each customer.
c. Allocates an equal amount of cost to each unit made during a time period.
d. Is commonly used when each unit of output is identical.

5. Job-costing may only be used by:
a. Service companies.
b. merchandising companies
c. Manufacturing companies.
d. All of these may use job-costing.

6. Which of the following cost(s) are inventoried when using variable costing?
a. Direct manufacturing costs.
b. Variable marketing costs.
c. Fixed manufacturing costs.
d. Both A and B are correct

7. Absorption costing is required for all of the following EXCEPT:
a. Generally accepted accounting principles.
b. Determining a competitive selling price.
c. External reporting to shareholders.
d. Income tax reporting.

8. Variable costing:
a. Expenses administrative costs as cost of goods sold.
b. Treats direct manufacturing costs as a product cost.
c. Includes fixed manufacturing overhead as an inventoriable cost.
d. Is required for external reporting to shareholders.

9. Variable costing regards fixed manufacturing overhead as a(n):
a. Administrative cost.
b. Inventoriable cost.
c. Period cost.
d. Product cost.

10. The only difference between variable and absorption costing is the expensing of:
a. Direct manufacturing costs.
b. Variable marketing costs.
c. Fixed manufacturing costs.
d. Both A and C are correct.

11. The method that allocates costs in each cost pool using the same rate per unit is known as the:
a. Incremental cost-allocation method.
b. Reciprocal cost-allocation method.
c. Single-rate cost allocation method.
d. Dual-rate cost-allocation method.

12. The dual-rate cost-allocation method classifies costs in each cost pool into a:
a. Budgeted-cost pool and an actual-cost pool.
b. Variable-cost pool and a fixed-cost pool.
c. Used-capacity-cost pool and a practical-capacity-cost pool.
d. Direct-cost pool and a reciprocal-cost pool.

13. The advantage of using practical capacity to allocate costs:
a. Is that it allows a downward demand spiral to develop.
b. Is that it focuses management's attention on managing unused capacity.
c. Is that budgets are much easier to develop.
d. Either A or B are correct.

14. When using the single-rate method, fixed cost allocation may be based on:
a. Actual usage.
b. Budgeted usage.
c. Incremental cost allocation.
d. Either A or B are correct.

15. Benefits of the single-rate method include:
a. The low cost of implementation.
b. Fixed costs that are transformed into variable costs for user decision making.
c. Signals regarding how variable and fixed costs behave differently.
d. Information that leads to outsourcing decisions that benefit the organization as a whole.