Question 1

What actions might be taken with an unprofitable customer?

Accepted Answer

An unprofitable customer might be dropped as a customer, might be charged more for some of the resources of the company that it is using in excess of other customers, or he/she might be counseled on how to use less resources and be restored to profitability in the future.

Question 2

Use the information below to answer the following question(s).
Teddy Bear Company sold a total of 30,000 stuffed tigers and lions. During August the following information was gathered:
  
-What is the total sales-volume variance?

Accepted Answer

A)  $9,250 favourable 
B)  $9,250 unfavourable 
C)  $26,100 favourable 
D)  $7,850 unfavourable 
E)  $7,850 favourable 
A)  $9,250 favourable 
B)  $9,250 unfavourable 
C)  $26,100 favourable 
D)  $7,850 unfavourable 
E)  $7,850 favourable B

Question 3

It is most appropriate to base revenue allocation on the number of physical units when individual products in the bundle are of unequal value.

Accepted Answer

A) True 
 B)False  False

Question 4

Customer-specific costs are costs that are traceable or allocated to individual customers.

Accepted Answer

A) True 
 B)False

Question 5

________ categorizes costs related to customers into different cost pools on the basis of either different classes of cost drivers or different degrees of difficulty in determining the cause-and-effect (or benefits-received) relationships.

Accepted Answer

A)  Customer-profitability analysis 
B)  Customer revenues 
C)  Customer cost hierarchy 
D)  Price discounting 
E)  Zero sum game 
A)  Customer-profitability analysis 
B)  Customer revenues 
C)  Customer cost hierarchy 
D)  Price discounting 
E)  Zero sum game

Question 6

________ occurs where revenues, related but not traceable to individual products (service, customer, and so on), are assigned to those individual products.

Accepted Answer

A)  Revenue tracing 
B)  Revenue allocation 
C)  A bundled product 
D)  Joint product costing 
E)  Revenue shedding 
A)  Revenue tracing 
B)  Revenue allocation 
C)  A bundled product 
D)  Joint product costing 
E)  Revenue shedding

Question 7

Use the information below to answer the following question(s).
John's Video Game Outlet encounters revenue-allocation decisions with its bundled product sales. Here, two or more of the video games are sold as a single package. Managers at John's are keenly interested in individual product-profitability figures. Information pertaining to its three bundled products and the stand-alone prices of its individual products is as follows:
   The unit manufacturing costs are $3.60, $4.00, and $5.00 for games A, B, and C, respectively.
-Calculate the allocation of packaged price for Game A in Package 1, using unit costs as the base.

Accepted Answer

A)  $12.57 
B)  $13.97 
C)  $20.84 
D)  $22.00 
E)  $23.16 
A)  $12.57 
B)  $13.97 
C)  $20.84 
D)  $22.00 
E)  $23.16

Question 8

Use the information below to answer the following question(s).
Special Tea Products (STP) has an exclusive contract with Tea Distributors. Two brands of Teas are imported, Strong and Mild, and sold to retail outlets. The monthly budget for the contract is based on a combination of last year's performance, a forecast of general industry sales, and the company's expected share of the Canadian market for imported Tea. The following information is provided for the month of May:
   Budgeted fixed costs are $1,750. Actual fixed costs are $2,000.
-What is the static budget variance (contribution margin) for Mild Tea?

Accepted Answer

A)  $2,250 U 
B)  $2,250 F 
C)  $900 U 
D)  $1,350 F 
E)  $1,350 U 
A)  $2,250 U 
B)  $2,250 F 
C)  $900 U 
D)  $1,350 F 
E)  $1,350 U

Question 9

Customer specific costs are costs that

Accepted Answer

A)  are traceable to or allocated to individual customers. 
B)  are not traceable to individual customers. 
C)  are the same as customer support costs. 
D)  would not include cost of goods sold. 
E)  would not include selling-related costs. 
A)  are traceable to or allocated to individual customers. 
B)  are not traceable to individual customers. 
C)  are the same as customer support costs. 
D)  would not include cost of goods sold. 
E)  would not include selling-related costs.

Question 10

Under the incremental revenue-allocation method, there is an incentive to be the first-ranked user.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is NOT a factor that managers should consider in deciding how to allocate resources across customers?

Accepted Answer

A)  short-run and long-run customer profitability 
B)  customer retention likelihood 
C)  economic forecasts 
D)  customer growth potential 
E)  increases in overall demand from having well-known customers 
A)  short-run and long-run customer profitability 
B)  customer retention likelihood 
C)  economic forecasts 
D)  customer growth potential 
E)  increases in overall demand from having well-known customers

Question 12

The cost of visiting customers is an example of a customer output unit-level cost.

Accepted Answer

A) True 
 B)False

Question 13

The difference between (the budgeted contribution margin for the budgeted sales mix and budgeted volume) and (the budgeted contribution margin for the budgeted sales mix and the actual volume) is the

Accepted Answer

A)  sales mix variance. 
B)  sales quantity variance. 
C)  sales-volume variance. 
D)  market size variance. 
E)  market share variance. 
A)  sales mix variance. 
B)  sales quantity variance. 
C)  sales-volume variance. 
D)  market size variance. 
E)  market share variance.

Question 14

Max's DVD Store encounters revenue-allocation decisions with its bundled product sales. Here, two or more of the DVDs are sold as a single package. Managers at Max's are keenly interested in individual product-profitability figures. Information pertaining to its three bundled products and the stand-alone selling prices of its individual products is as follows:
   Required:
a. With selling prices as the weights, allocate the $25 packaged price of "All Three" to the three videos using the stand-alone revenue-allocation method.
b. Allocate the $25 packaged price of "All Three" to the three types of videos using the incremental revenue-allocation method. Assume New Releases is the primary product, followed by Older Releases, and then Classics.

Accepted Answer

a.
New $15 + Older $

Question 15

Use the information below to answer the following question(s).
Special Tea Products (STP) has an exclusive contract with Tea Distributors. Two brands of Teas are imported, Strong and Mild, and sold to retail outlets. The monthly budget for the contract is based on a combination of last year's performance, a forecast of general industry sales, and the company's expected share of the Canadian market for imported Tea. The following information is provided for the month of May:
   Budgeted fixed costs are $1,750. Actual fixed costs are $2,000.
-What is the STP total static-budget variance for revenues?

Accepted Answer

A)  $50 favourable 
B)  $250 favourable 
C)  $50 unfavourable 
D)  $250 unfavourable 
E)  $800 unfavourable 
A)  $50 favourable 
B)  $250 favourable 
C)  $50 unfavourable 
D)  $250 unfavourable 
E)  $800 unfavourable

Question 16

A customer cost hierarchy may include distribution-channel costs.

Accepted Answer

A) True 
 B)False

Question 17

Clarke Industries collects information on two customers for the past year:
   Clarke estimates the following activity-based costs:
   An in-stock order is an order for which all the items included are in inventory at the time the order is received.
Required:
Compute the customer specific contribution of each customer for the year using:
a. 16% of revenues as the allocation rate for customer-related costs.
b. The activity based costing approach.

Accepted Answer

a.
 @#IMG-DLM& Costs

Question 18

The sales-quantity variance is favorable when budgeted unit sales exceed actual unit sales.

Accepted Answer

A) True 
 B)False

Question 19

Use the information below to answer the following question(s).
Special Tea Products (STP) has an exclusive contract with Tea Distributors. Two brands of Teas are imported, Strong and Mild, and sold to retail outlets. The monthly budget for the contract is based on a combination of last year's performance, a forecast of general industry sales, and the company's expected share of the Canadian market for imported Tea. The following information is provided for the month of May:
   Budgeted fixed costs are $1,750. Actual fixed costs are $2,000.
-What is the STP total sales-quantity variance for revenues?

Accepted Answer

A)  $0 
B)  $150.00 unfavourable 
C)  $150.00 favourable 
D)  $300.00 unfavourable 
E)  $450.00 favourable 
A)  $0 
B)  $150.00 unfavourable 
C)  $150.00 favourable 
D)  $300.00 unfavourable 
E)  $450.00 favourable

Question 20

Revenue allocation occurs where revenues can be identified with an individual product (service, customer, and so on) in an economically feasible (cost-effective) way.

Accepted Answer

A) True 
 B)False

What actions might be taken with an unprofitable customer?

Use the information below to answer the following question(s). Teddy Bear Company sold a total of 30,000 stuffed tigers and lions. During August the following information was gathered: -What is the total sales-volume variance?

It is most appropriate to base revenue allocation on the number of physical units when individual products in the bundle are of unequal value.

Customer-specific costs are costs that are traceable or allocated to individual customers.

________ categorizes costs related to customers into different cost pools on the basis of either different classes of cost drivers or different degrees of difficulty in determining the cause-and-effect (or benefits-received) relationships.

________ occurs where revenues, related but not traceable to individual products (service, customer, and so on), are assigned to those individual products.

Customer specific costs are costs that

Under the incremental revenue-allocation method, there is an incentive to be the first-ranked user.

Which of the following is NOT a factor that managers should consider in deciding how to allocate resources across customers?

The cost of visiting customers is an example of a customer output unit-level cost.

The difference between (the budgeted contribution margin for the budgeted sales mix and budgeted volume) and (the budgeted contribution margin for the budgeted sales mix and the actual volume) is the

A customer cost hierarchy may include distribution-channel costs.

The sales-quantity variance is favorable when budgeted unit sales exceed actual unit sales.

Revenue allocation occurs where revenues can be identified with an individual product (service, customer, and so on) in an economically feasible (cost-effective) way.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Quantitative Analyses of Cost Functions

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 16: Revenue and Customer Profitability Analysis

What actions might be taken with an unprofitable customer?

Use the information below to answer the following question(s). Teddy Bear Company sold a total of 30,000 stuffed tigers and lions. During August the following information was gathered: -What is the total sales-volume variance?

It is most appropriate to base revenue allocation on the number of physical units when individual products in the bundle are of unequal value.

Customer-specific costs are costs that are traceable or allocated to individual customers.

________ categorizes costs related to customers into different cost pools on the basis of either different classes of cost drivers or different degrees of difficulty in determining the cause-and-effect (or benefits-received) relationships.

________ occurs where revenues, related but not traceable to individual products (service, customer, and so on), are assigned to those individual products.

Customer specific costs are costs that

Under the incremental revenue-allocation method, there is an incentive to be the first-ranked user.

Which of the following is NOT a factor that managers should consider in deciding how to allocate resources across customers?

The cost of visiting customers is an example of a customer output unit-level cost.

The difference between (the budgeted contribution margin for the budgeted sales mix and budgeted volume) and (the budgeted contribution margin for the budgeted sales mix and the actual volume) is the

A customer cost hierarchy may include distribution-channel costs.

The sales-quantity variance is favorable when budgeted unit sales exceed actual unit sales.

Revenue allocation occurs where revenues can be identified with an individual product (service, customer, and so on) in an economically feasible (cost-effective) way.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Quantitative Analyses of Cost Functions

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters