Question

Instructions: Read each question carefully before answering. Exam will be completed on an individual basis. Final answer should be clearly identified. Calculators are permitted True/False questions worth 4 points each. 1. Common fixed costs should not be charged to the individual segments when preparing a segmented income statement. 2. Activity-based costing uses a number of activity cost pools, each of which may have a different allocation base. 3. The costs of idle capacity should be assigned to products in activity-based costing. 4. Wait time is considered non-value time. 5. A profit center is responsible for generating revenue and for controlling costs. Multiple choice questions worth 3 points each. 1. Contribution margin is the amount remaining after: (A) Variable expenses have been deducted from sales revenue. B. Fixed expenses have been deducted from sales revenue. C. Fixed expenses have been deducted from variable expenses. D. Cost of goods sold has been deducted from sales revenue. 2. The margin of safety is: A The excess of budgeted or actual sales over budgeted or actual variable expenses. B. The excess of budgeted or actual sales over budgeted or actual fixed expenses. C. The excess of budgeted or actual sales over the break-even volume of sales. D. The excess of budgeted net operating income over actual net operating income. 3. Which of the following costs should not be included in product costs for internal management reports that are used for decision-making? A. Costs of unit-level activities. B. Costs of batch-level activities. C. Costs of product-level activities. D. Costs of organization-sustaining activities. In order to reduce its overall quality costs, a company should focus most of its efforts on: A. Prevention costs B. Appraisal costs C. Internal failure costs D. External failure costs

Answer 1

Ans:

1. The correct option for the answer is option A i.e. Variable expenses have been deducted from sales revenue

Contribution margin is calculated by deducting variable expenses from sales revenue

2. The correct option for the answer is option C i.e. The excess of budgeted or actual sales over the break even volume of sales.

The margin of safety formula shows the total number of sales above the break-even point. Also the total number of sales dollars that can be lost before the company loses money

3.  The correct option for the answer is option C i.e. Costs of organisation - sustaining activities because these activities are not directly related to the product

4. The correct option for the answer is option A i.e. Prevention costs

As these costs are associated with the design, implementation, and maintenance of the quality management system