Question 1

Which of the following descriptions best explains the difference between a billing system and a costing system for a service firm?

Accepted Answer

A)  A costing system accumulates the amounts that the service costs the firm to provide. 
B)  A billing system estimates the fees to be charged to the client for the service based on chargeout rates per billable hour. 
C)  A billing system accumulates the amounts that the client is to be charged for the service rather than the costs of the service. 
D)  A billing system estimates the fees to be charged to the client for the service based on chargeout rates per billable hour AND a billing system accumulates the amounts that the client is to be charged for the service rather than the costs of the service. 
A)  A costing system accumulates the amounts that the service costs the firm to provide. 
B)  A billing system estimates the fees to be charged to the client for the service based on chargeout rates per billable hour. 
C)  A billing system accumulates the amounts that the client is to be charged for the service rather than the costs of the service. 
D)  A billing system estimates the fees to be charged to the client for the service based on chargeout rates per billable hour AND a billing system accumulates the amounts that the client is to be charged for the service rather than the costs of the service.

Question 2

Upstream costs for a service entity include:
i. design.
ii. research and development.
iii. distribution.
iv. customer support.

Accepted Answer

A)  ii and iii 
B)  i and iv 
C)  i and ii 
D)  ii and iv 
A)  ii and iii 
B)  i and iv 
C)  i and ii 
D)  ii and iv

Question 3

Car hire companies would be classified as:

Accepted Answer

A)  mass services. 
B)  service shop. 
C)  retailer. 
D)  professional service. 
A)  mass services. 
B)  service shop. 
C)  retailer. 
D)  professional service.

Question 4

Downstream costs for a merchandising entity include:
i. design.
ii. research and development.
iii. distribution.
iv. customer support.

Accepted Answer

A)  iii and iv 
B)  i and ii 
C)  i, iii and iv 
D)  ii, iii and iv 
A)  iii and iv 
B)  i and ii 
C)  i, iii and iv 
D)  ii, iii and iv

Question 5

An entity where professional labour is $60 000 and all other costs are $24 000, has a predetermined overhead rate per labour dollar of:

Accepted Answer

A)  $2.50. 
B)  $0.45. 
C)  $0.40. 
D)  $0.50. 
A)  $2.50. 
B)  $0.45. 
C)  $0.40. 
D)  $0.50.

Question 6

The accuracy of service costs for the categories of (i) professional services, (ii) service shops and (iii) mass services is low, medium or high. For each service category (i), (ii) and (iii), it is:

Accepted Answer

A)  high, low, low. 
B)  low, medium, low. 
C)  low, high, low. 
D)  high, medium, low. 
A)  high, low, low. 
B)  low, medium, low. 
C)  low, high, low. 
D)  high, medium, low.

Question 7

The complexity of service costs for the categories of (i) professional services, (ii) service shops and (iii) mass services is low, medium or high. For each service category (i), (ii) and (iii), it is:

Accepted Answer

A)  high, low, low. 
B)  low, medium, low. 
C)  low, high, low. 
D)  high, medium, low. 
A)  high, low, low. 
B)  low, medium, low. 
C)  low, high, low. 
D)  high, medium, low.

Question 8

The value chain for a merchandising entity is most likely to include which of the following costs.

Accepted Answer

A)  Marketing 
B)  Design 
C)  Research 
D)  Conversion 
A)  Marketing 
B)  Design 
C)  Research 
D)  Conversion

Question 9

The production environment of a service shop includes extensive contact with the customer and the number of services produced is relatively low.

Accepted Answer

A) True 
 B)False

Question 10

Non-repetitive services for retailers can be more appropriately costed using:

Accepted Answer

A)  job costing. 
B)  process costing. 
C)  hybrid costing. 
D)  activity-based costing. 
A)  job costing. 
B)  process costing. 
C)  hybrid costing. 
D)  activity-based costing.

Question 11

Which of the following characteristics do merchandisers have?
i. They trade in physical products.
ii. They do not hold inventories.
iii. They purchase goods for resale.
iv. Their outputs have low customisation.

Accepted Answer

A)  All the given answers 
B)  i, ii and iii 
C)  i, iii and iv 
D)  ii, iii and iv 
A)  All the given answers 
B)  i, ii and iii 
C)  i, iii and iv 
D)  ii, iii and iv

Question 12

Which of the following is NOT a description of a mass service provider?

Accepted Answer

A)  It has a high number of standardised services. 
B)  It has some customisation of services, with mostly repetitive processes. 
C)  Employees have very little contact time with customers, with the main production processes happening in the back office. 
D)  Equipment is a key input, with emphasis on minimising discretion by employees. 
A)  It has a high number of standardised services. 
B)  It has some customisation of services, with mostly repetitive processes. 
C)  Employees have very little contact time with customers, with the main production processes happening in the back office. 
D)  Equipment is a key input, with emphasis on minimising discretion by employees.

Question 13

Which of the following would be considered a non-standard process in a banking organisation?

Accepted Answer

A)  Issuing credit cards 
B)  Home loans 
C)  Deposits and withdrawals 
D)  Opening accounts 
A)  Issuing credit cards 
B)  Home loans 
C)  Deposits and withdrawals 
D)  Opening accounts

Question 14

When a bank's customer used an ATM for their transactions, they are being provided with

Accepted Answer

A)  an individual service. 
B)  a mass service. 
C)  a professional service. 
D)  a retail service. 
A)  an individual service. 
B)  a mass service. 
C)  a professional service. 
D)  a retail service.

Question 15

Job costing for service entities applies when:

Accepted Answer

A)  customer contact is low. 
B)  there is significant back office involvement. 
C)  the number of services produced is low. 
D)  the number of services produced is high. 
A)  customer contact is low. 
B)  there is significant back office involvement. 
C)  the number of services produced is low. 
D)  the number of services produced is high.

Question 16

Which of the following does the value chain for a merchandising entity include?
i. Design
ii. Customer support
iii. Purchasing
iv. Production/sales transaction

Accepted Answer

A)  i, ii and iii 
B)  ii, iii and iv 
C)  i and iv 
D)  iii and iv 
A)  i, ii and iii 
B)  ii, iii and iv 
C)  i and iv 
D)  iii and iv

Question 17

Which of the following links is common in both the service firm and the merchandising value chains?

Accepted Answer

A)  Purchasing 
B)  Design 
C)  Marketing 
D)  Distribution 
A)  Purchasing 
B)  Design 
C)  Marketing 
D)  Distribution

Question 18

Underapplied and overapplied overhead is not usually required to be adjusted in service costing systems. Why?

Accepted Answer

A)  It is immaterial. 
B)  The costing system is not integrated with the accounting system. 
C)  Underapplied and overapplied overhead has no impact on decision making. 
D)  It does not affect the accuracy of the service costs. 
A)  It is immaterial. 
B)  The costing system is not integrated with the accounting system. 
C)  Underapplied and overapplied overhead has no impact on decision making. 
D)  It does not affect the accuracy of the service costs.

Question 19

A medical practice bulk billing for patient services does not usually cost specific services because:
i. it does not control service-product mix.
ii. it cannot control costs.
iii. it does not determine prices.

Accepted Answer

A)  ii and iii 
B)  i and ii 
C)  i and iii 
D)  i, ii and iii 
A)  ii and iii 
B)  i and ii 
C)  i and iii 
D)  i, ii and iii

Question 20

Which of the following are repetitive services for a retail hardware store?

Accepted Answer

A)  Special delivery services 
B)  Check-out services 
C)  Advice to customers on the use of equipment 
D)  Processing customer complaints 
A)  Special delivery services 
B)  Check-out services 
C)  Advice to customers on the use of equipment 
D)  Processing customer complaints

Exam 6: Service Costing

Which of the following descriptions best explains the difference between a billing system and a costing system for a service firm?

Upstream costs for a service entity include: i. design. ii. research and development. iii. distribution. iv. customer support.

Car hire companies would be classified as:

Downstream costs for a merchandising entity include: i. design. ii. research and development. iii. distribution. iv. customer support.

An entity where professional labour is $60 000 and all other costs are $24 000, has a predetermined overhead rate per labour dollar of:

The accuracy of service costs for the categories of (i) professional services, (ii) service shops and (iii) mass services is low, medium or high. For each service category (i), (ii) and (iii), it is:

The complexity of service costs for the categories of (i) professional services, (ii) service shops and (iii) mass services is low, medium or high. For each service category (i), (ii) and (iii), it is:

The value chain for a merchandising entity is most likely to include which of the following costs.

The production environment of a service shop includes extensive contact with the customer and the number of services produced is relatively low.

Non-repetitive services for retailers can be more appropriately costed using:

Which of the following characteristics do merchandisers have? i. They trade in physical products. ii. They do not hold inventories. iii. They purchase goods for resale. iv. Their outputs have low customisation.

Which of the following is NOT a description of a mass service provider?

Which of the following would be considered a non-standard process in a banking organisation?

When a bank's customer used an ATM for their transactions, they are being provided with

Job costing for service entities applies when:

Which of the following does the value chain for a merchandising entity include? i. Design ii. Customer support iii. Purchasing iv. Production/sales transaction

Which of the following links is common in both the service firm and the merchandising value chains?

Underapplied and overapplied overhead is not usually required to be adjusted in service costing systems. Why?

A medical practice bulk billing for patient services does not usually cost specific services because: i. it does not control service-product mix. ii. it cannot control costs. iii. it does not determine prices.

Which of the following are repetitive services for a retail hardware store?

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

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