Multiple Choice Answers

Which of the following is a problem inherent in charging revenue centers for usage of service centers?
1 It is difficult to determine the amount that each revenue center should be charged for services.
2 The usage among the revenue centers could vary widely.
3 A particular revenue center may not use any of the support of a specific service center.
4 The revenue centers could choose to use services from outside the company instead.
Another name for the simultaneous equation method is the:
1 reciprocal method.
2 two-step method.
3 step down method.
4 indirect method.
Which of the following methods allocates each service center’s costs to all centers supported?
1 Simultaneous equation method
2 Step method
3 Direct method
4 None of the above
Activity-based overhead rates differ from departmental overhead rates in that:
1 they are not used to help determine the full cost of a product or service.
2 they do not include any costs allocated from service centers in their calculation.
3 there are more than one per department.
4 they lessen a manager’s ability to control costs.
The cost allocation method that assigns joint costs to products based on their relative market value at the split-off point is the:
1 simultaneous equation method.
2 relative sales value method.
3 net realizable value method.
4 physical units method.
Joint costs are:
1 incurred prior to the separation of joint products.
2 incurred after separation of joint products.
3 incurred prior and after separation of joint products.
4 None of the above
Which of the following is an example of a by-product?
1 Sawdust from a lumber mill used to make fireplace logs
2 Broken cookies used in cookies-and-cream ice cream
3 Pineapple skins from processing pineapple used for animal feed
4 None of the above
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

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.
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.
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.

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.

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.

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