Reference no: EM132517647

Question 1: Which of the following is a major advantage of using the contribution margin approach with variable costing instead of with absorption costing?

a) Cost-volume-profit information is available on the income statement.

b) Accounting information is available on the balance sheet.

c) Profits can be generated solely by increasing the inventory level.

d) There is no need to assume users are sophisticated.

Question 2: Warson Ltd. is considering closing its Alberta division. Which of the following would NOT be relevant to the closure decision?

a) All variable costs

b) Contribution margin on lost sales

c) Site cleanup costs

d) The salary of the branch manager to be transferred

Question 3: BBG Ltd.'s weekly production output is 400 units of a product that sells for $20 perunit and has variable costs of $16 per unit. Maximum capacity is 500 units per month. Total fixed costs per month are $3,400. A special order is received for 100 units at a price of $18 per unit. In deciding whether to accept or reject the order at this price, what should BBG consider?

a) The difference between the offered price and the variable cost per unit

b) The old fixed cost of $8.50 per unit

c) The new fixed cost of $6.80 per unit

d) The difference between the offered price per unit and fixed price per unit

Question 4: In inventory management, which of the following would be included in carrying costs?

a) Inspecting costs

b) Internal failure costs

c) Obsolescence costs

d) Stockout costs

Question 5: Which of the following methods of allocating service department costs results in the most accurate product cost?

a) Direct method

b) Step method

c) Reciprocal method

d) Activity-based costing method

Question 7: Which of the following statements best describes a cost driver?

a) It is a variable that causes an activity to increase or decrease.

b) It is always based on direct labour-hours.

c) It is used for manufacturing and merchandising activities only.

d) It changes during the operating cycle.

Question 8: Which of the following statements about activity-based costing is not true?

a) Activity-based costing is useful for allocating distribution costs.

b) Activity-based costing is useful for allocating marketing costs.

c) Activity-based costing is more likely to result in major differences from traditional costing systems for firms that produce one product rather than multiple products.

d) In activity-based costing, it is cost drivers that cause costs to be incurred.