Organizations with largely fixed costs tend to be highly profitable
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
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
Standard costing develops "benchmarks" or "norms" that are used by management to monitor for discrepancies.
True
False
0.5 points
QUESTION 4
Financial Mgt
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
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
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
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
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"). |
-
Rating:
/5
Solution: Organizations with largely fixed costs tend to be highly profitable