Question 51. Indirect costs: a. often comprise a large percentage of overall costs assign

51. Indirect costs:

a. often comprise a large percentage of overall costs assigned to a cost object

b. specifically exclude marketing costs

c. cannot be used for external reporting

d. are treated as period costs and not as product costs

52. All of the following illustrate purposes for allocating costs to cost objects EXCEPT to:

a. provide information for economic decisions

b. motivate managers and employees

c. determine a selling price the market will bear

d. measure income and assets for reporting to external parties

53. The costs of all six value-chain functions should be included when determining:

a. whether to add a new product line

b. the selling price of a service

c. whether to make or buy a component part from another manufacturer

d. All of these answers are correct.

54. R&D costs are used for which purpose of cost allocation?

a. to provide information for economic decisions

b. to report to external parties when using generally accepted accounting

principles

c. to calculate costs of a government contract

d. All of these answers are correct.

55. Which purpose of cost allocation is used to encourage sales representatives to push high-margin products or services?

a. to provide information for economic decisions

b. to motivate managers and other employees

c. to justify costs or compute reimbursement

d. to measure income and assets for reporting to external parties

56. Which purpose of cost allocation is used to decide on the selling price for a customized product or service?

a. to provide information for economic decisions

b. to motivate managers and other employees

c. to justify costs or compute reimbursement

d. to measure income and assets for reporting to external parties

57. To guide cost allocation decisions, the cause-and-effect criterion:

a. is used less frequently than the other criteria

b. is the primary criterion used in activity-based costing

c. is a difficult criterion on which to obtain agreement

d. may allocate corporate salaries to divisions based on profits

58. To guide cost allocation decisions, the benefits-received criterion:

a. generally uses the cost driver as the cost allocation base

b. results in subsidizing products that are not profitable

c. is the primarily used criterion in activity-based costing

d. may use an allocation base of division revenues to allocate advertising costs

59. To guide cost allocation decisions, the fairness or equity criterion is:

a. the criterion often cited in government contracts

b. superior when the purpose of cost allocation is for economic decisions

c. used more frequently than the other criteria

d. the primary criterion used in activity-based costing

60. To guide cost allocation decisions, the ability to bear criterion:

a. is likely to be the most credible to operating personnel

b. allocates costs in proportion to the benefits received

c. results in subsidizing products that are not profitable

d. is the criterion often cited in government contracts

61. Which cost-allocation criterion is appropriate when making an economic decision?

a. the fairness or equity criterion

b. the ability to bear criterion

c. the cause-and-effect criterion

d. All of these answers are correct.

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