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| 1.
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The first stage of a two-stage cost allocation is the computation of predetermined overhead rates for each cost centre. |
| | A) | True |
| | B) | False |
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| 2.
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Activity-based costing is an attempt to overcome the distortions of overhead allocation that uses volume-based bases, such as machine hours or direct-labour hours. |
| | A) | True |
| | B) | False |
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| 3.
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Assigning costs to departments and products on the basis of a variety of activities instead of only one is known as activity-based costing. |
| | A) | True |
| | B) | False |
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| 4.
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A factor that affects the amount of a component of overhead, and is used in activity-based costing (ABC), is a cost driver. |
| | A) | True |
| | B) | False |
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| 5.
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Activity-based costing is a system of assigning costs to departments and products on the basis of a single activity. |
| | A) | True |
| | B) | False |
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| 6.
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The differences between traditional allocation methods and activity-based costing are mainly due to how many production departments are involved in the processing of a product. |
| | A) | True |
| | B) | False |
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| 7.
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Activity-based management is a result of activity-based costing. |
| | A) | True |
| | B) | False |
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| 8.
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The first goal of departmental accounting is to assign costs and expenses to managers who are responsible for managing each department. |
| | A) | True |
| | B) | False |
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| 9.
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The two basic categories of departments are service and production. |
| | A) | True |
| | B) | False |
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| 10.
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The manufacturing departments of a factory and the accounting and advertising service departments are profit centres. |
| | A) | True |
| | B) | False |
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| 11.
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The supplies used in only one department are a direct expense of that department. |
| | A) | True |
| | B) | False |
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| 12.
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Direct expenses and common costs are allocated to service departments on some reasonable basis, such as time, space occupied, or levels of activity. |
| | A) | True |
| | B) | False |
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| 13.
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The bases for allocating indirect costs among departments are influenced by standards set within the industry in which the company operates. |
| | A) | True |
| | B) | False |
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| 14.
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Preparing a departmental income statement requires three basic steps: (1) accumulating direct expenses for each department, (2) allocating indirect expenses across all departments, and (3) allocating service department expenses to selling departments. |
| | A) | True |
| | B) | False |
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| 15.
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Departmental income statements that are prepared without regard as to whether expenses are direct or indirect are often not the best tools for evaluating department performance. |
| | A) | True |
| | B) | False |
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| 16.
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It is possible for a sales department to show a net loss on a departmental income statement but have a positive contribution to overhead. |
| | A) | True |
| | B) | False |
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| 17.
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Departmental contribution to overhead is determined for each profit centre by subtracting from the profit centre's net sales the direct expenses of that profit centre. |
| | A) | True |
| | B) | False |
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| 18.
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It is not possible for a firm to have a higher contribution percentage than one of its selling departments. |
| | A) | True |
| | B) | False |
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| 19.
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When a department manager cannot control or influence a cost assigned to the department, within a given accounting period, that cost is known as an inescapable expense with reference to the manager and the department. |
| | A) | True |
| | B) | False |
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| 20.
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A responsibility accounting budget is a report that shows comparisons of actual costs of the previous accounting period with the budgeted costs of the subsequent accounting period. |
| | A) | True |
| | B) | False |
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| 21.
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A key to successful responsibility budgets and the subsequent responsibility accounting reports is the noninvolvement of lower-level managers in establishing the budget. |
| | A) | True |
| | B) | False |
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| 22.
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A performance report accumulates costs and expenses, by manager, for those costs for which the manager is responsible. |
| | A) | True |
| | B) | False |
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| 23.
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In the food processing industry, the cost of chickens for the purpose of processing chicken legs, breasts, and thighs is a joint cost. |
| | A) | True |
| | B) | False |
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| 24.
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The physical allocation approach to assigning joint costs to products will result in each product showing a profit from its sales. |
| | A) | True |
| | B) | False |
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| 25.
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One outcome of the value-based method of allocating costs to finished products is that each product will have the same percentage of gross profit. |
| | A) | True |
| | B) | False |
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| 26.
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An investment centre incurs investments and generates profits. |
| | A) | True |
| | B) | False |
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| 27.
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The objective of a cost center manager is to control its costs and is not to generate revenue. |
| | A) | True |
| | B) | False |
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| 28.
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The difference between a cost center and a profit center is that a cost center does not generate revenues, but a profit center does generate revenues. |
| | A) | True |
| | B) | False |
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| 29.
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Performance reports used to evaluate managers include data about controllable expenses. |
| | A) | True |
| | B) | False |
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| 30.
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There are two steps in allocating expenses to profit centers: (1) allocating indirect expenses to all departments, and (2) allocating the service department expenses to the operating departments. |
| | A) | True |
| | B) | False |
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