Subject: Business    / Accounting

1-Answer the following questions using the information below:

Luzent Corporation has two departments, Small and Large. Central costs could be allocated to the two departments in various ways.

Small Department

Large Department

Square footage

6,750

17,250

Number of employees

1,120

480

Sales

$350,000

$1,750,000

If advertising expense of $483,000 is allocated on the basis of sales, the cost per cost driver rate would be ________.

A. $0.23 per dollar of sales

B. $0.22 per dollar of sales

C. $0.25 per dollar of sales

D. $0.24 per dollar of sales

2-Which of the following statements is true of costing systems?

ABC systems classify some indirect costs as direct costs helping to improve processes
Singleminus?indirect cost pool systems always result in overcosting of products.
ABC systems always result in overcosting of products.
Singleminus?indirect

3-cost pool systems classify some direct costs as indirect costs.

4-Productminus?cost crossminus?subsidization

________.

means that if a company undercosts one of its products, it will overcost at least one of its other products

exists only when one overcosted product results in all other products being overcosted
exists when one overcosted product results in more than one other product being overcosted
means that if a company undercosts more than one of its products, it will overcost more than one of its other products

4-Which of the following statements is true of a

peanutminus?butter

costing system?

A peanutminus?butter costing system typically has moreminus?homogeneous indirect cost pools.
In a peanutminus?butter costing system, costs of activities are used to assign costs to other cost objects such as products or services based on the activities the products or services consume.
A peanutminus?butter costing system broadly averages or spreads the cost of resources uniformly to cost objects.
A peanutminus?butter costing system assumes that all costs are variable.

5-Which of the following statements is true of activity minus?based costing?

In activity minus?based costing, direct laborminus?hours is always the best allocation base to allocate all nonminus?manufacturing indirect costs.
The main advantage of activityminus?based costing over peanutminus?butter costing is the accurate distribution of all direct costs to the products.
Activity based costing is more suited to companies with high product diversity than companies with single product line.
Activity based costing broadly averages or spreads the cost of resources uniformly to cost objects such as products or services.

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