Multiple Choice Answers

Question 1 of 20
In comparing management accounting with financial accounting, which of the following statements is FALSE?
A. Management accounting is primarily used by managers, employees, and supply chain partners.
B. The report format for financial accounting is based on generally accepted accounting principles.
C. The purpose of management accounting reports is to provide information for planning, control, performance measurement, and decision making.
D. Financial accounting reports are prepared as needed.
Question 2 of 20
The unit of measurement used in management accounting is:
A. primarily the future dollar.
B. monetary at historical and current market values.
C. monetary at historical or current market or projected values.
D. the measurement unit used by competing companies.

Question 3 of 20
When preparing a report, it is sometimes necessary to sacrifice accuracy for:
A. timeliness.
B. personal feelings.
C. profits.
D. expectations.

Question 4 of 20
Primary processes:
A. apply only to a just-in-time environment.
B. include information systems and human resources.
C. add value to a product or service.
D. limit bottlenecks during production.

Question 5 of 20
Primary processes are comprised of accounting.
A. marketing, legal, and accounting services.
B. research and development, marketing, supply, design, production, distribution, and information systems.
C. research and development, design, supply, production, marketing, distribution, and customer service.
D. human resources, legal services, information systems, and management

Question 6 of 20
An advantage of value chain analysis is that it allows a company to:
A. evaluate ethical conduct.
B. focus on its core competencies.
C. use the four “w’s.”
D. increase sales to customers.
Question 7 of 20
The just-in-time philosophy emphasizes:
A. completing products on schedule.
B. increasing production.
C. finishing all products before starting new ones.
D. eliminating waste.
Question 8 of 20
Activity-based management’s primary goal is to reduce:
A. nonvalue-adding costs.
B. defects.
C. inventory size.
D. machine setup time.

Question 9 of 20
The balanced scorecard:
A. is rarely used.
B. produces formal reports.
C. only applies to manufacturing companies.
D. links the organization’s perspectives with stakeholders.
Question 10 of 20
If a management accountant confides to a relative that his or her company has a confidential plan to merge with another company in the near future, the accountant has:
A. not violated ethical standards.
B. violated ethical standards only if the relative owns stock in the company.
C. violated ethical standards because the accountant and relative could stand to gain personally from that information.
D. not violated ethical standards because the information was relayed to a family member.

Question 11 of 20
An example of a period cost is:
A. advertising costs.
B. indirect materials.
C. product design costs.
D. direct materials.
Question 12 of 20
Which of the following is a value-adding cost?
A. Depreciation on personnel department equipment
B. Depreciation on factory equipment
C. Depreciation on office equipment
D. Depreciation on sales department equipment
Question 13 of 20
All manufacturing costs incurred and assigned to products that are being produced are classified as:
A. variable costs.
B. allocated costs.
C. product costs.
D. overhead costs.
Question 14 of 20
Which of the following is the formula used to compute a product’s unit cost?
A. (Direct Materials + Direct Labor) / Number of Units Produced
B. (Direct Materials + Direct Labor + Overhead) / Number of Units Produced
C. (Direct Labor + Overhead) / Number of Units Produced
D. (Indirect Materials + Indirect Labor + Overhead) / Number of Units Produced

Question 15 of 20
In a manufacturing environment, direct labor costs initially flow:
A. into the Materials Inventory account.
B. directly to Cost of Goods Sold.
C. into the Work in Process Inventory account.
D. into the Finished Goods Inventory account.

Question 16 of 20
Cost of goods manufactured is equal to:
A. Direct Materials + Direct Labor + Overhead.
B. Beginning Work in Process Inventory + Total Manufacturing Costs – Ending Work in Process Inventory.
C. Beginning Work in Process Inventory + Period Costs – Ending Work in Process Inventory.
D. Beginning Work in Process Inventory + Product Costs.

Question 17 of 20
To reconcile total manufacturing costs with the total cost of goods manufactured during the period:
A. subtract out all period costs from total manufacturing costs to arrive at cost of goods manufactured.
B. add beginning and subtract ending finished goods inventory to total manufacturing costs.
C. you must know how many goods were sold during the period.
D. add beginning and subtract ending work in process inventory to total manufacturing costs.
Question 18 of 20
If the estimated cost driver level is overstated, the: predetermined overhead rate will be understated.
A. predetermined overhead rate will be overstated.
B. product cost will be overstated.
C. cost pool will be understated.

Question 19 of 20
The activity base that would be most appropriate in a capital-intensive industry is:
A. direct labor dollars.
B. direct labor hours.
C. sales volume.
D. machine hours.
Question 20 of 20
In an activity-based costing system, the first step in assigning costs is to:
A. accumulate costs for each activity.
B. identify the appropriate activities for each function.
C. separate nonvalue-adding activities from value-adding activities.
D. analyze all nonvalue-adding activities to determine if they are necessary support areas.

Part 2
Question 1 of 20
Which of the following products probably would be manufactured using a job order costing system?
A. Paper
B. Baseball cards
C. Computer monitors
D. Company business cards
Question 2 of 20
Applied overhead exceeds actual overhead when the:
A. Overhead account has a credit balance.
B. journal entry to account for the difference involves a debit to Cost of Goods Sold.
C. Overhead account has a debit balance.
D. company has overspent in the overhead cost area.

Question 3 of 20
The total of the dollar amounts on the job order cost cards that have not been completed would be equal to the:
A. cost of goods completed.
B. balance in the Finished Goods Inventory account.
C. Cost of Goods Sold account.
D. balance in the Work in Process Inventory account.
Question 4 of 20
The basic document for keeping track of costs in a job order costing system is a:
A. job order cost card.
B. labor time card.
C. process cost report.
D. materials requisition form.
Question 5 of 20
When direct materials are issued from inventory to production under a job order costing system, an increase is recorded in:
A. Overhead.
B. Work in Process Inventory.
C. Materials Inventory.
D. Finished Goods Inventory.
Question 6 of 20
Unit costs for each job are computed by dividing:

A. estimated total costs by planned units to be produced.
B. actual costs by actual units sold.
C. cost of materials, direct labor, and overhead by number of units produced.
D. estimated total costs by actual units produced.
Question 7 of 20
In cost-plus contracts, the “plus” represents:
A. sales price.
B. profit, based on the amount of costs incurred.
C. overapplied overhead costs.
D. the amount of any cost overruns.

Question 8 of 20
The balance in the Work in Process Inventory account equals the:
A. balance in the Finished Goods inventory account.
B. balance in the Cost of Goods Sold account.
C. total of the balances on the job order cost sheets of uncompleted jobs.
D. balance in the Overhead account.

Question 9 of 20
Which of the following entities probably would use a process costing system?
A. An oil refinery
B. A yacht builder
C. A custom furniture company
D. A custom screw manufacturer



Question 10 of 20
Process costing is applicable to production operations that:
A. utilize several processes, departments, or work cells in a series.
B. do not assign overhead costs to operations.
C. produce large and unique machines.
D. are found in only a few industries.

Question 11 of 20
Which of the following accurately describes a difference between job order and process costing systems?
A. In job order costing systems, overhead costs are treated as product costs, whereas in process costing systems, overhead costs are treated as period costs.
B. Job order costing systems do not need to assign costs to production, whereas process costing systems do.
C. In job order costing systems, costs are traced to products, whereas in process costing systems, a FIFO method may be used.
D. Since costs are assigned to products in a job order costing system, selling costs are treated as product costs in the job order costing system, whereas they are treated as period costs in process costing systems.

Question 12 of 20
The reason for combining direct labor and overhead costs together and calling them “conversion costs” is that:
A. they both are direct costs of production.
B. the equivalent unit amount for direct materials will be the same as that for direct labor and overhead costs.
C. both types of costs usually are incurred uniformly throughout the production process.
D. the costs for direct labor and overhead are not accounted for separately.

Question 13 of 20
Which of the following statements is true?
A. The Work in Process Inventory account is the focal point of process costing.
B. To compute unit costs using the FIFO costing method, total costs of direct materials, direct labor, and overhead that have been accumulated in the Work in Process Inventory account or accounts are divided by the units worked on during the period.
C. Equivalent units usually are computed for direct materials and manufacturing overhead combined.
D. Labor costs are accounted for differently from manufacturing overhead costs in a process costing system.

Question 14 of 20
Equivalent units of production usually are determined for:
A. direct materials only.
B. direct materials and conversion costs.
C. direct materials and direct labor costs only.
D. conversion costs only.

Question 15 of 20
Measures of equivalent production are necessary in process costing because:
A. job order costing procedures cannot be applied.
B. unit costs are computed by departments or processes at fixed time intervals.
C. perpetual inventories are not employed in process plants.
D. production methods are more complex than in job order costing systems.

Question 16 of 20
Which of the following applies to process costing but NOT to job order costing?
A. Only one Work in Process Inventory account
B. Equivalent production units
C. Production of unique items
D. Multiple unit job order

Question 17 of 20
An advantage of using the average costing method to process costing as opposed to the FIFO costing method is that it:
A. is a little easier to work with.
B. is more accurate.
C. costs less to utilize.
D. requires little knowledge of process costing.

Question 18 of 20
The computation of equivalent units is exactly the same under the FIFO costing method and the average costing method when there is no:
A. ending work in process inventory.
B. ending finished goods inventory.
C. beginning finished goods inventory.
D. beginning work in process inventory.
Question 19 of 20
To find cost per equivalent unit of production using the average costing method, the: amount of equivalent units is divided:
A. by costs from the current period.
B. into costs from the current period.
C. into total costs to be accounted for.
D. by total costs to be accounted for.

Question 20 of 20
Which of the following statements about a department’s costs per equivalent unit calculated using the average costing method compared with a FIFO costing method is true?
A. They could be higher or lower.
B. They would be the same.
C. They would be lower.
D. They would be higher.

Part 3
Question 1 of 20
Customer relations are usually part of:
A. the supply chain.
B. the value chain.
C. both the value chain and the supply chain.
D. neither the value chain nor the supply chain.

Question 2 of 20
Which of the following statements is true?
A. A company’s value chain is not part of its supply chain.
B. A manufacturer’s supply chain typically includes research and development and customer service.
C. A company’s supply chain includes the value chains of its suppliers.
D. Your supplier’s suppliers are part of your value chain.
Question 3 of 20
Process value analysis (PVA) identifies all activities of a production and/or assembly operation for the purpose of:
A. preparing budgets based on activity centers.
B. determining the value of the process.
C. replacing cost drivers used in cost assignment analyses with activities.
D. relating cost assignment to the activities that caused the cost to be incurred.

Question 4 of 20
A nonvalue-adding activity is defined as a(n):
A. administrative or support activity that adds overhead cost to the product and increases its market value.
B. activity that adds cost to a product but does not increase its market value.
C. activity that adds no cost to the product but increases its market value.
D. wasteful but unavoidable production activity.

Question 5 of 20
Product unit costs computed using activity-based costing compared to product unit costs computed using a traditional costing approach will:
A. sometimes be the same.
B. always be higher.
C. always be the same.
D. always be lower.

Question 6 of 20
A framework for classifying value-adding and nonvalue-adding activities according to the level at which their costs are incurred is called a:
A. bill of activities.
B. full product cost.
C. value chain.
D. cost hierarchy.
Question 7 of 20
Which one of the four levels of the cost hierarchy would be used by a dress manufacturer that uses activity-based management for sewing seams on a garment?
A. Unit-level activity
B. Batch-level activity
C. Product-level activity
D. Facility-level activity
Question 8
The initial step in achieving the efficiency of a just-in-time system is to:
A. redesign the plant layout.
B. replace laborers with machines.
C. stop ordering materials for inventory.
D. identify products that are not profitable.
Question 9 of 20
Backflush costing aims at reducing waste in the:
A. accounting system.
B. cost of goods sold.
C. storage of raw materials.
D. production process.
Question 10 of 20
The typical relationship between variable costs and volume may be described best as which of the following?
A. Costs increase in an erratic, unpredictable fashion with changes in volume.
B. Costs stay fairly constant with changes in volume.
C. Costs increase with changes in volume up to a certain point and then remain constant.
D. Costs increase in direct proportion to increases in volume.
Question 11 of 20
The variable cost per unit __________ as the number of sales increase.
A. decreases
B. changes
C. remains constant
D. increases
Question 12 of 20
The level of operating capacity that is needed to meet expected sales demand is called:
A. practical capacity.
B. normal capacity.
C. ideal capacity.
D. excess capacity.
Question 13 of 20
Theoretical capacity reduced by normal and anticipated work stoppages is called:
A. practical capacity.
B. normal capacity.
C. ideal capacity.
D. excess capacity.
Question 14 of 20
Theoretical capacity refers to:
A. extra machinery and equipment kept on hand.
B. the maximum productive output possible.
C. an output level that allows for normal work stoppages.
D. the operating capacity that will meet expected sales demand.
Question 15 of 20
The high-low method:
A. calculates variable costs per unit by dividing the difference in the high and low activity levels by the high and low costs.
B. assumes that the fixed portion of the mixed cost is the lowest monthly cost incurred during the period under consideration.
C. allows differentiation between fixed and variable costs when dealing with mixed costs.
D. combines the fixed and variable portions of a cost to determine the total cost.
Question 16 of 20
The equation for finding the breakeven point may be written as:
A. S – VC – FC = 0.
B. VC – FC = S.
C. S + FC = VC.
D. S + VC + FC = 0.
Question 17 of 20
The breakeven point is:
A. where fixed and variable costs reach the upper level of the relevant range.
B. the level of activity where all fixed costs are recovered.
C. where total revenue equals total costs.
D. where fixed costs meet variable costs.
Question 18 of 20
The equation that will provide the breakeven point in units (SP = selling price) is:
A. BE units = (SP – VC) ÷ FC per unit.
B. VC per unit + FC = SP per unit x BE units.
C. BE units = FC ÷ CM per unit.
D. SP per unit – VC per unit = FC ÷ BE units.
Question 19 of 20
Contribution margin equals sales minus:
A. cost of goods sold.
B. total costs.
C. fixed costs.
D. variable costs.
Question 20 of 20
For every unit that a company produces and sells above the breakeven point, its profitability is improved (ignoring taxes) by the unit’s:
A. gross margin.
B. selling price minus fixed cost.
C. variable cost.
D. contribution margin.
Part 4
Question 1 of 20
A purpose of standard costing is to:
A. control costs.
B. allocate costs more accurately.
C. replace subjective decision making.
D. compute the breakeven point.
Question 2 of 20
A(n) __________ cost is synonymous with the product cost calculated in a conventional standard cost accounting system.
A. fixed
B. direct
C. joint
D. expected
Question 3 of 20
An expression of the hourly labor pay cost per function or job classification that is expected to exist during the next accounting period is the definition of a:
A. direct labor time standard.
B. direct materials quantity standard.
C. direct labor rate standard.
D. variable overhead rate.
Question 4 of 20
Multiplying the standard price of direct materials by the standard quantity for direct materials yields:
A. the direct materials price variance.
B. the direct materials quantity variance.
C. the standard direct materials cost.
D. nothing; the two components should be added together.
Question 5 of 20
Which of the following provides an explanation of why the variable overhead rate is separated from the fixed overhead rate in standard costing?
A. There is no justifiable reason; their separation is merely to simplify entries.
B. Both calculations divide by the same direct labor hours, but the numerator is different for each calculation.
C. The variable overhead rate is calculated using actual direct labor hours, whereas the fixed overhead rate is calculated using normal capacity direct labor hours.
D. Different application bases are generally appropriate.
Question 6 of 20
The primary difference between a fixed (static) budget and a flexible budget is that a fixed budget:
A. cannot be changed after the period begins, whereas a flexible budget can be changed after the period begins.
B. is concerned only with future acquisitions of fixed assets, whereas a flexible budget is concerned with expenses that vary with sales.
C. is a plan for a single level of production, whereas a flexible budget is several plans (one for each of several production levels).
D. includes only fixed costs, whereas a flexible budget includes only variable costs.
Question 7 of 20
The formula used to compute budgeted total cost at any level of activity is presented in the:
A. flexible budget.
B. performance report.
C. static budget.
D. cash flow forecast.
Question 8 of 20
The difference between the standard quantity allowed and the actual quantity used multiplied by standard price is the equation for computing the:
A. direct labor efficiency variance.
B. direct materials price variance.
C. direct labor rate variance.
D. direct materials quantity variance.
Question 9 of 20
The overhead variance is equal to the difference between:
A. fixed overhead costs and flexible overhead costs.
B. estimated overhead rate and applied overhead rate.
C. actual overhead costs and variable overhead costs.
D. actual overhead costs and standard overhead costs.
Question 10 of 20
A favorable fixed overhead volume variance for a manufacturing company could indicate:
A. the creation of excess inventory.
B. the actual overhead exceeded the budgeted overhead.
C. sales exceeded production.
D. variable overhead costs were less than fixed overhead costs.
Question 11 of 20
Irrelevant costs include costs that are:
A. different among alternatives.
B. avoidable.
C. sunk.
D. opportunity costs.
Question 12 of 20
The difference in total costs between two alternatives is referred to as the:
A. direct cost.
B. incremental cost.
C. sunk cost.
D. opportunity cost.
Question 13 of 20
The purpose of incremental analysis is to find the alternative:
A. that contributes the most to operating income.
B. that brings in the most revenue.
C. with the lowest fixed costs.
D. with the fewest relevant costs.
Question 14 of 20
In a special-order decision, which of the following costs would normally be irrelevant?
A. Packaging costs
B. Direct labor
C. Variable overhead
D. Fixed selling expenses


Question 15 of 20
Avoidable costs are important for:
A. product mix decisions.
B. sell or process-further decisions.
C. decisions to eliminate unprofitable segments.
D. pricing decisions for special orders.

Question 16 of 20
Direct costs include:
A. all product costs.
B. variable product costs.
C. some identifiable fixed costs and variable product costs.
D. some identifiable fixed costs.

Question 17 of 20
As a general rule, a segment should not be eliminated if:
A. the company is profitable.
B. its direct fixed costs exceed its contribution margin.
C. the segment’s fixed costs equal its variable costs.
D. its contribution margin exceeds direct fixed costs.
Question 18 of 20
The point at which products are separated in a joint production process is the:
A. split-off point.
B. joint product point.
C. separation point.
D. breakeven point.
Question 19 of 20
Relevant costs in a sell or process-further decision include:
A. costs of additional processing.
B. both additional revenues and additional costs.
C. revenues after additional processing.
D. joint product costs.
Question 20 of 20
The objective of the sell or process-further decision is to:
A. maximize production.
B. maximize joint costs.
C. minimize processing.
D. maximize operating income.
Part 5
Question 1 of 20
The pricing objective of maximizing profits:
A. has not been affected by other, more socially focused concerns.
B. is to be implemented under any and all circumstances.
C. has not always been considered the underlying objective of any pricing policy.
D. must be considered when determining the price needed to increase market share.
Question 2 of 20
To stay in business, a company must have a selling price that is:
A. acceptable to the customer.
B. able to recover the variable costs of production.
C. the highest in the marketplace.
D. equal to or lower than the company’s costs per unit.

Question 3 of 20
An internal issue to be considered when setting a price is:
A. whether the process is labor-intensive or automated.
B. the customer’s preferences for quality versus price.
C. current prices of competing products or services.
D. the life of the product or service.
Question 4 of 20
An external issue to be considered when setting a price is:
A. the variable costs of the product or service.
B. the desired rate of return.
C. the quality of materials and labor.
D. the number of competing products or services.
Question 5 of 20
Fixed costs that change for activity outside the relevant range would include:
A. supervision costs.
B. electricity costs.
C. production supplies costs.
D. raw materials costs.
Question 6 of 20
When gross margin pricing is used, the markup percentage includes:
A. desired profits plus total selling, general, and administrative expenses.
B. only the desired profit factor.
C. total costs and expenses.
D. desired profits plus total fixed production costs plus total selling, general, and administrative expenses.

Question 7 of 20
The return on assets pricing method:
A. has very little appeal and support.
B. has a primary objective of earning a minimum rate of return on assets.
C. is a crude approach to pricing and should be used as a last resort.
D. replaces the desired rate of return used in cost-based pricing methods with a desired profit objective.
Question 8 of 20
The pricing method that establishes selling prices based on a stipulated rate above total production costs is: return on assets pricing.
A. target cost pricing.
B. gross margin pricing.
C. time and materials pricing.
Question 9 of 20
A major advantage of the target costing approach to pricing is that target costing:
A. allows a company to analyze the potential profit of a product before spending money to produce the product.
B. is not dependent on customers’ quality versus price decisions.
C. identifies unproductive assets.
D. anticipates the product’s profitability midway through its life cycle.
Question 10 of 20
Use of market transfer prices: is the only acceptable approach in a free enterprise economy.
A. usually does not cause the selling division to ignore negotiating attempts by the buying division.
B. may cause an internal shortage of materials.
C. usually does not work against the operating objectives of the company as a whole.
Question 11 of 20
The variables to be considered in the capital investment decision are:
A. expected life, estimated cash flow, and investment cost.
B. expected life, estimated cost, and projected capital budget.
C. estimated cash flow, investment cost, and corporate objectives.
D. economic conditions, economic policies, and corporate objectives.
Question 12 of 20
Another term for the minimum rate of return is the:
A. payback rate.
B. discounted rate.
C. capital rate.
D. hurdle rate.
Question 13 of 20
The after-tax amount is used for which of the following components of the cost of capital?
A. Cost of debt
B. Cost of common stock
C. Cost of preferred stock
D. Cost of retained earnings
Question 14 of 20
Capital investment proposals should be ranked in decreasing order of:
A. length in years.
B. dollar amount required.
C. residual value expected.
D. rate of return.
Question 15 of 20
Which of the following items is irrelevant to capital investment analysis?
A. Investment cost
B. Residual value
C. Carrying value
D. Net cash flows
Question 16 of 20
The carrying value of a fixed asset is equal to its:
A. current disposal value.
B. current replacement cost.
C. original cost.
D. undepreciated balance.
Question 17 of 20
Which of the following items can be described as a noncash expense?
A. Wages
B. Advertising
C. Income taxes
D. Depreciation
Question 18 of 20
The time value of money concept is given consideration in long-range investment decisions by:
A. assuming equal annual cash flow patterns.
B. assigning greater value to more immediate cash flows.
C. weighting cash flows with subjective probabilities.
D. investing only in short-term projects.
Question 19 of 20
The net present value method of evaluating proposed investments:
A. discounts cash flows at the minimum rate of return.
B. ignores cash flows beyond the payback period.
C. applies only to mutually exclusive investment proposals.
D. measures a project’s time-adjusted rate of return.
Question 20 of 20
The payback period is defined as the amount of time in years for the sum of:
A. future net incomes to equal the original investment.
B. net future cash inflows to equal the original investment.
C. net present value of future cash inflows to equal the original investment.
D. net future cash outflows to equal the original investment.

Part 6
Question 1 of 20
How does an ERP system differ from an MIS?
A. The ERP system informally links the different areas of management for specific purposes.
B. There is no difference.
C. The ERP system combines all areas of management into one centralized data warehouse.
D. The ERP system can be used only in a service business.

Question 2 of 20
Quality costs of conformance and costs of nonconformance are related to each other:
A. rarely.
B. directly.
C. indirectly.
D. inversely.
Question 3 of 20
The overall objective of controlling the costs of quality is to eliminate:
A. appraisal costs.
B. costs of nonconformance.
C. costs of conformance.
D. the costs of quality.
Question 4 of 20
Some companies have moved to JIT without changing the substance of their accounting systems. Relying on the former accounting system may present problems for management because:
A. traditional accounting systems are designed to track items (labor efficiency, purchase price, overhead absorption) that are no longer primary concerns of management.
B. control of cost drivers will be lost.
C. managers do not understand the new manufacturing environment.
D. traditional accounting systems discourage the creation of large inventories that are necessary to ensure uninterrupted production runs.

Question 5 of 20
With respect to product quality:
A. quality must be “traded off” against cost considerations.
B. the best quality control systems rely on inspection points to ensure product quality.
C. accountants do not need to be concerned with quality control reporting, as it is entirely nonfinancial in nature.
D. quality output starts with correct product design.
Question 6 of 20
CAD is:
A. a cost allocating decision.
B. computer aided downtime.
C. a computer-based engineering system.
D. an organizational environment.
Question 7 of 20
Which of the following specific measures of vendor quality would be used when evaluating vendors that supply a company with direct materials?
A. Defect-free material as a percentage of total materials received
B. Number of customer complaints
C. Time it takes to make a product
D. All would be considered to assess vendor quality of direct materials
Question 8 of 20
The term given to the act of a company comparing its processes to similar processes in a successful company is called:
A. process mapping.
C. benchmarking.
D. return on quality.
Question 9 of 20
The award given to companies that achieve distinctive results in implementing total quality control is the:
B. Malcolm Baldrige Quality Award.
C. Deming Application Prize.
D. Kaizen Prize.
Question 10 of 20
A producing center is another term for a(n):
A. service center.
B. cost center.
C. revenue center.
D. activity center.
Question 11 of 20
A discretionary cost center is another term for a(n):
A. service center.
B. activity center.
C. cost center.
D. revenue center.
Question 12 of 20
The allocation base used to assign service center costs is called a:
A. service base.
B. cost driver.
C. revenue driver.
D. revenue base.
Question 13 of 20
An organization that does not require precise measurements of the use of services probably would allocate its service center costs by:
A. using some form of the step method.
B. applying the direct method.
C. each revenue center’s ability to absorb the cost.
D. the actual usage of the service by the revenue centers.
Question 14 of 20
Which of the following is a problem inherent in charging revenue centers for usage of service centers?
A. It is difficult to determine the amount that each revenue center should be charged for services.
B. The usage among the revenue centers could vary widely.
C. A particular revenue center may not use any of the support of a specific service center.
D. The revenue centers could choose to use services from outside the company instead.
Question 15 of 20
Another name for the simultaneous equation method is the:
A. reciprocal method.
B. two-step method.
C. step down method.
D. indirect method.
Question 16 of 20
Which of the following methods allocates each service center’s costs to all centers supported?
A. Simultaneous equation method
B. Step method
C. Direct method
D. None of the above
Question 17 of 20
Activity-based overhead rates differ from departmental overhead rates in that:
A. they are not used to help determine the full cost of a product or service.
B. they do not include any costs allocated from service centers in their calculation.
C. there are more than one per department.
D. they lessen a manager’s ability to control costs.

Question 18 of 20
The cost allocation method that assigns joint costs to products based on their relative market value at the split-off point is the:
A. simultaneous equation method.
B. relative sales value method.
C. net realizable value method.
D. physical units method.

Question 19 of 20
Joint costs are:
A. incurred prior to the separation of joint products.
B. incurred after separation of joint products.
C. incurred prior and after separation of joint products.
D. None of the above

Question 20 of 20
Which of the following is an example of a by-product?
A. Sawdust from a lumber mill used to make fireplace logs
B. Broken cookies used in cookies-and-cream ice cream
C. Pineapple skins from processing pineapple used for animal feed
D. None of the above