Question 1

Which of the following statements are true?

Accepted Answer

A)  Professional service entities employ process costing. 
B)  Mass service entities employ job costing. 
C)  Service shops generally employ hybrid costing. 
D)  Merchandising entities employ job costing for customer services. 
A)  Professional service entities employ process costing. 
B)  Mass service entities employ job costing. 
C)  Service shops generally employ hybrid costing. 
D)  Merchandising entities employ job costing for customer services. C

Question 2

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 C

Question 3

Which of the following statements regarding the service industry and/or the application of management accounting techniques to the service industry is incorrect?

Accepted Answer

A)  Many of the techniques used in manufacturing firms can be adapted to suit service industries. 
B)  Resources used in all service firms are predominantly variable. 
C)  Direct materials are frequently a comparatively small part of the total cost. 
D)  Activity based costing is not applicable to service industries. 
A)  Many of the techniques used in manufacturing firms can be adapted to suit service industries. 
B)  Resources used in all service firms are predominantly variable. 
C)  Direct materials are frequently a comparatively small part of the total cost. 
D)  Activity based costing is not applicable to service industries. B

Question 4

Upstream 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 iii 
C)  i,ii and iii 
D)  None of the given answers 
A)  iii and iv 
B)  i and iii 
C)  i,ii and iii 
D)  None of the given answers

Question 5

Underapplied/overapplied overhead
How are underapplied and overapplied overhead dealt with in service industries?

Accepted Answer

Because costing systems in service firms

Question 6

Which of the following cost classifications do not apply to service organisations?
i.Direct/indirect
ii.Fixed/variable
iii.Production/non-production
iv.Controllable/uncontrollable

Accepted Answer

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

Question 7

Service businesses wanting to monitor efficiency and plan resource requirements will generally maintain information about service costs.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is most correct with respect to chargeout rates?

Accepted Answer

A)  A chargeout rate is always set to cover the cost of labour and overheads and the required profit margin. 
B)  If the firm does not base its chargeout rate on costs,it will not survive. 
C)  A chargeout rate is typically set to cover costs of materials,labour and overhead only. 
D)  A chargeout rate is typically set to cover costs,but may be varied in the short term to match competitors' actions. 
A)  A chargeout rate is always set to cover the cost of labour and overheads and the required profit margin. 
B)  If the firm does not base its chargeout rate on costs,it will not survive. 
C)  A chargeout rate is typically set to cover costs of materials,labour and overhead only. 
D)  A chargeout rate is typically set to cover costs,but may be varied in the short term to match competitors' actions.

Question 9

Professional entities are likely to use:

Accepted Answer

A)  process costing 
B)  product costing 
C)  job costing 
D)  operational costing 
A)  process costing 
B)  product costing 
C)  job costing 
D)  operational costing

Question 10

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 11

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 12

Service costs incur indirect costs,and the basis of allocating indirect costs requires the identification of:

Accepted Answer

A)  cost centres 
B)  responsible departments 
C)  cost drivers 
D)  service products 
A)  cost centres 
B)  responsible departments 
C)  cost drivers 
D)  service products

Question 13

Service costs include:
i.design
ii.production
iii.purchasing

Accepted Answer

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

Question 14

Service product costs are inaccurate in mass service operations because of the:

Accepted Answer

A)  difficulty of identifying cost drivers 
B)  high level of variable costs 
C)  high level of fixed costs 
D)  low level of fixed costs 
A)  difficulty of identifying cost drivers 
B)  high level of variable costs 
C)  high level of fixed costs 
D)  low level of fixed costs

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

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

Question 17

A financial planning business will generally consume three types of resources: overhead costs,direct material costs and professional labour costs.

Accepted Answer

A) True 
 B)False

Question 18

Professional service firms will often use a billing system that is based on chargeout rates per billable hour.

Accepted Answer

A) True 
 B)False

Question 19

The value chain for a service entity includes:
i.design
ii.purchasing
iii.marketing
iv.distribution

Accepted Answer

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

Question 20

If the engineer worked for 20 hours on a job,Z,and the rates were overhead 125 per cent on direct labour cost and the direct labour rate was $25 per hour,what is the total cost of the job?

Accepted Answer

A)  $500 
B)  $625 
C)  $1000 
D)  $1125 
A)  $500 
B)  $625 
C)  $1000 
D)  $1125

Exam 6: Service Costing

Which of the following statements are true?

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 statements regarding the service industry and/or the application of management accounting techniques to the service industry is incorrect?

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

Underapplied/overapplied overhead How are underapplied and overapplied overhead dealt with in service industries?

Which of the following cost classifications do not apply to service organisations? i.Direct/indirect ii.Fixed/variable iii.Production/non-production iv.Controllable/uncontrollable

Service businesses wanting to monitor efficiency and plan resource requirements will generally maintain information about service costs.

Which of the following statements is most correct with respect to chargeout rates?

Professional entities are likely to use:

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

Car hire companies would be classified as:

Service costs incur indirect costs,and the basis of allocating indirect costs requires the identification of:

Service costs include: i.design ii.production iii.purchasing

Service product costs are inaccurate in mass service operations because of the:

Job costing for service entities applies when:

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

A financial planning business will generally consume three types of resources: overhead costs,direct material costs and professional labour costs.

Professional service firms will often use a billing system that is based on chargeout rates per billable hour.

The value chain for a service entity includes: i.design ii.purchasing iii.marketing iv.distribution

If the engineer worked for 20 hours on a job,Z,and the rates were overhead 125 per cent on direct labour cost and the direct labour rate was $25 per hour,what is the total cost of the job?

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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