Acct Ch 6

Costs are allocated

A. To provide information useful for decision making
B. To reduce frivolous use of resources
C. To encourage evaluation of internally provided services
D. To calculate the "full cost" of products/services for GAAP reporting
E. All of the above are reasons to allocate costs

An important concern in forming a cost pool is to

A. Avoid placing similar costs in the same pool
B. Limit the number of costs that make up the pool
C. Ensure that the costs int he pool are homogenous
D. None of the above

In the cost allocation process, an allocation base

A. Must be some characteristic that is common to all of the cost objectives
B. Both a and b
C. Ideally should result in the cost being allocated based on a cause and effect relationship
D. None of the above

The direct method of allocating costs

A. Both b and c
B. Allocates service department costs to producing departments only
C. Allocates service department costs to other service departments
D. Allocates only direct costs

When fixed costs are stated on a per unit basis

A. Both a and b
B. Fixed costs are said to be "unitized"
C. May appear to be variable to managers receiving allocations
D. Decision making is greatly improved

One way to avoid the problems associated with unitized fixed costs is to

A. Not allocate fixed costs
B. Use a lump sum method of allocating fixed costs
C. Combine fixed and variable costs in a single cost pool
D. None of the above

Controllable costs for the manager of Producation Department A include:

A. Costs of material and labor used in Department A
B. All costs related to Department A's final product
C. Costs of the finance department
D. All of the above

In allocating costs to products, more accurate costing is generally obtained by

A. Always using allocation bases that are based on production volume
B. Allocating costs using labor hours as the allocation base
C. Having more than one cost pool
D. None of the above

Costs drivers in activity based costing

A. Are workers who influence cost control
B. Are always related to production volume
C. Often assign more costs to low volume products than traditional allocation methods
D. None of the above

Most companies that use an activity based costing system use

A. More than five cost pools
B. Two to five cost pools
C. No cost pools
D. One or two cost pools

Cost allocation refers to

What is a cost objective

Why is it generally a good idea to allocate budgeted, rather than actual, service department costs?

What is a responsiblity accounting system?

Why might noncontrollable costs be allocated to a department?

How would traditional methods of allocating overhead to products underallocate costs to low production volume products?

How does activity based costing differ from the traditional costing approach?

When would activity based costing give more accurate costs than traditional costing systems?

In the cost allocation process, the cost objective is the

A. A grouping of individual costs whose total is allocated using one allocation base
B. The allocation based used to allocate the costs
C. The product, service or department that is to receive the allocation
D. None of the above