Question 1

The chart used to express customer profitability is called the whale curve because ________.

Accepted Answer

A)  it is forward-bending at the point where customers start to become profitable and thus resembles a humpback whale 
B)  it is forward-bending at the point where customers start to become unprofitable and thus resembles a humpback whale 
C)  it is backward-bending at the point where customers start to become profitable and thus resembles a humpback whale 
D)  it is backward-bending at the point where customers start to become unprofitable and thus resembles a humpback whale 
A)  it is forward-bending at the point where customers start to become profitable and thus resembles a humpback whale 
B)  it is forward-bending at the point where customers start to become unprofitable and thus resembles a humpback whale 
C)  it is backward-bending at the point where customers start to become profitable and thus resembles a humpback whale 
D)  it is backward-bending at the point where customers start to become unprofitable and thus resembles a humpback whale

Question 2

Which cost-allocation criterion is most likely to subsidize poor performers at the expense of the best performers?

Accepted Answer

A)  the fairness or equity criterion 
B)  the benefits-received criterion 
C)  the ability to bear criterion 
D)  the cause-and-effect criterion 
A)  the fairness or equity criterion 
B)  the benefits-received criterion 
C)  the ability to bear criterion 
D)  the cause-and-effect criterion

Question 3

Managers use customer-profitability analysis report to ensure that ________.

Accepted Answer

A)  unpaid invoices are categorized according to age by due date 
B)  costs related to customers are segmented into different cost pools on the basis of different types of cost drivers or cost-allocation bases 
C)  customers making large contributions to the operating income of a company receive a high level of attention from the company 
D)  cost allocation of indirect cost is in place 
A)  unpaid invoices are categorized according to age by due date 
B)  costs related to customers are segmented into different cost pools on the basis of different types of cost drivers or cost-allocation bases 
C)  customers making large contributions to the operating income of a company receive a high level of attention from the company 
D)  cost allocation of indirect cost is in place

Question 4

All customers are equally important to a company and should receive equal levels of attention.

Accepted Answer

A) True 
 B)False

Question 5

To reduce distribution-channel costs,a company could ________.

Accepted Answer

A)  improve the efficiency of the ordering process 
B)  make fewer customer visits 
C)  eliminate distribution to retailers and only service wholesalers 
D)  reduce product-handling costs 
A)  improve the efficiency of the ordering process 
B)  make fewer customer visits 
C)  eliminate distribution to retailers and only service wholesalers 
D)  reduce product-handling costs

Question 6

Costs of displays at customer sites is an example of customer batch-level costs.

Accepted Answer

A) True 
 B)False

Question 7

Discontinuing an unprofitable customer ________.

Accepted Answer

A)  will eliminate all corporate costs assigned to and may result in losing more revenues relative to costs saved 
B)  will eliminate all costs assigned to and may result in gaining more revenues relative to costs saved 
C)  will not eliminate all costs assigned to and may result in losing more revenues relative to costs saved 
D)  will not eliminate all corporate costs assigned to and may result in gaining more revenues relative to costs saved 
A)  will eliminate all corporate costs assigned to and may result in losing more revenues relative to costs saved 
B)  will eliminate all costs assigned to and may result in gaining more revenues relative to costs saved 
C)  will not eliminate all costs assigned to and may result in losing more revenues relative to costs saved 
D)  will not eliminate all corporate costs assigned to and may result in gaining more revenues relative to costs saved

Question 8

A customer cost hierarchy categorizes costs related to customers into different cost pools on the basis of different cost drivers.

Accepted Answer

A) True 
 B)False

Question 9

A favorable sales-mix variance arises when the actual sales-mix percentage exceeds the budgeted sales-mix percentage.

Accepted Answer

A) True 
 B)False

Question 10

Sales-mix variance = $250,000 (F),sales-volume variance = $4,50,000 (U),flexible-budget variance = $200,000(F),market-size variance = $30,000(U),calculate the sales-quantity variance.

Accepted Answer

A)  $170,000 (U) 
B)  $200,000 (U) 
C)  $30,000 (U) 
D)  $700,000 (U) 
A)  $170,000 (U) 
B)  $200,000 (U) 
C)  $30,000 (U) 
D)  $700,000 (U)

Question 11

The sales-quantity variance results from a difference between ________.

Accepted Answer

A)  the actual sales mix and the budgeted sales mix 
B)  the actual quantity of units sold and the budgeted quantity of unit sales in the static budget 
C)  actual contribution margin and the budgeted contribution margin 
D)  actual market size in units and the budgeted market size in units 
A)  the actual sales mix and the budgeted sales mix 
B)  the actual quantity of units sold and the budgeted quantity of unit sales in the static budget 
C)  actual contribution margin and the budgeted contribution margin 
D)  actual market size in units and the budgeted market size in units

Question 12

Answer the following questions using the information below:
Archoid's Flowering Plants provides the following information for the month of May:
 $\begin{array}{lrrrr}&\text { Actual }&&\text { Budget }\
&\text { Tulips}&\text { Geraniums }&\text { Tulips}&\text { Geraniums }\
\text { Sales in units } & 4,420 & 4,080 & 4,950 & 3,300 \
\text { Contribution margin per unit } & \$ 12 & \$ 19 & \$ 11 & \$ 21
\end{array}$
-What is the budgeted contribution margin per composite unit for the budgeted mix?

Accepted Answer

A)  $13.80 
B)  $15.00 
C)  $15.36 
D)  $15.80 
A)  $13.80 
B)  $15.00 
C)  $15.36 
D)  $15.80

Question 13

To allocate corporate costs to divisions,the allocation base used should ________.

Accepted Answer

A)  be an output unit-level base 
B)  have the best cause-and-effect relationship with the costs 
C)  combine administrative costs and human resource management costs 
D)  allocate the fixed costs only 
A)  be an output unit-level base 
B)  have the best cause-and-effect relationship with the costs 
C)  combine administrative costs and human resource management costs 
D)  allocate the fixed costs only

Question 14

The sales-mix variance is the difference between budgeted contribution margin for the actual sales mix and the budgeted contribution margin for the budgeted sales mix.

Accepted Answer

A) True 
 B)False

Question 15

Price discounts are influenced by ________.

Accepted Answer

A)  the volume of product purchased 
B)  the prime cost of production 
C)  the operational budget 
D)  the contribution -margin per unit 
A)  the volume of product purchased 
B)  the prime cost of production 
C)  the operational budget 
D)  the contribution -margin per unit

Question 16

Allocating all corporate costs motivates division managers to examine how corporate costs are planned and controlled.

Accepted Answer

A) True 
 B)False

Question 17

Corporate-sustaining costs are costs of activities to support individual customers,regardless of the number of units or batches of product delivered to the customer.

Accepted Answer

A) True 
 B)False

Question 18

If a cost pool is homogeneous,the cost allocations using that pool will be the same as they would be if costs of each individual activity in that pool were allocated separately.

Accepted Answer

A) True 
 B)False

Question 19

Costs of activities related to a group of units sold to a customer is termed as customer batch-level costs.

Accepted Answer

A) True 
 B)False

Question 20

To guide cost allocation decisions,the ability to bear criterion ________.

Accepted Answer

A)  is the primary criterion used in activity-based costing 
B)  allocates cost among the beneficiaries in proportion to the benefits each receives. 
C)  results in subsidizing products that are not profitable 
D)  is used more frequently than any other criteria 
A)  is the primary criterion used in activity-based costing 
B)  allocates cost among the beneficiaries in proportion to the benefits each receives. 
C)  results in subsidizing products that are not profitable 
D)  is used more frequently than any other criteria

Exam 14: Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

The chart used to express customer profitability is called the whale curve because ________.

Which cost-allocation criterion is most likely to subsidize poor performers at the expense of the best performers?

Managers use customer-profitability analysis report to ensure that ________.

All customers are equally important to a company and should receive equal levels of attention.

To reduce distribution-channel costs,a company could ________.

Costs of displays at customer sites is an example of customer batch-level costs.

Discontinuing an unprofitable customer ________.

A customer cost hierarchy categorizes costs related to customers into different cost pools on the basis of different cost drivers.

A favorable sales-mix variance arises when the actual sales-mix percentage exceeds the budgeted sales-mix percentage.

Sales-mix variance = $250,000 (F),sales-volume variance = $4,50,000 (U),flexible-budget variance = $200,000(F),market-size variance = $30,000(U),calculate the sales-quantity variance.

The sales-quantity variance results from a difference between ________.

To allocate corporate costs to divisions,the allocation base used should ________.

The sales-mix variance is the difference between budgeted contribution margin for the actual sales mix and the budgeted contribution margin for the budgeted sales mix.

Price discounts are influenced by ________.

Allocating all corporate costs motivates division managers to examine how corporate costs are planned and controlled.

Corporate-sustaining costs are costs of activities to support individual customers,regardless of the number of units or batches of product delivered to the customer.

If a cost pool is homogeneous,the cost allocations using that pool will be the same as they would be if costs of each individual activity in that pool were allocated separately.

Costs of activities related to a group of units sold to a customer is termed as customer batch-level costs.

To guide cost allocation decisions,the ability to bear criterion ________.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters