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17 the benefits of implementing a more complex cost allocation system are relatively 4301291

 

17) The benefits of implementing a more-complex cost allocation system are relatively easy to quantify for application of the cost-benefit approach.

18) Briefly describe the four criteria used to guide cost-allocation decisions.

 

Objective 14.5

 

1) Costs in the cost pool having the same or a similar cause-and-effect or benefits-receiving relationship

with the cost-allocation base can be achieved in adopting ________.

A) indirect cost pools

B) homogeneous cost pools

C) hetrogeneous cost pools

D) direct cost pools

 

2) While allocating corporate costs to divisions ________.

A) only fixed costs should be allocated

B) no homogeneous cost pools should be constructed

C) all the costs in the cost pool should not have the same or a similar cause-and-effect or benefits-received relationship with the cost-allocation base

D) allocate both variable and fixed costs to divisions and then to customers

Animer Inc. provides the following information.

 

Corporate advertising costs = $800,000

Division A – $4,500,000

Division B – $7,500,000

 

Assume that customers with higher revenues benefited more from corporate advertising costs than customers with lower revenues.

 

3) What is the allocated corporate costs for Division A?

A) $500,000

B) $600,000

C) $300,000

D) $200,000

$800,000 = $300,000

 

4) What is the allocated corporate costs for Division B?

A) $700,000

B) $200,000

C) $500,000

D) $300,000

 

5) NOT allocating some corporate costs to divisions and products results in ________.

A) an increase in overall corporate profitability

B) the sum of individual product profitability being less than overall company profitability

C) the sum of individual product profitability being greater than overall company profitability

D) a decrease in overall corporate profitability

6) When the cost pools are homogeneous ________.

A) the number of needed cost pools  will be more

B) the costs in the cost pool have a similar cause-and-effect or benefits-received relationship with the cost-allocation base

C) managers should not allocate both variable costs and costs that are fixed in the short-run

D) there will be a greater variety of cause-and-effect, benefits-received, or fair-and-equitable

relationship with the cost-allocation base

 

 

 

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