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The amount of income that would result from an alternative use of cash is called:
opportunity cost
Contractors who sell to government agencies would be most likely to use which of the following cost concepts in pricing their products?
total costs
When using the total cost concept of applying the cost-plus approach to product pricing, what is included in the markup?
desired profit
Target costing is arrived at by
taking the selling price and subtracting desired profit.
What cost concept used in applying the cost-plus approach to product pricing covers selling expenses, administrative expenses, and desired profit in the "markup"?
Product cost concept
A practical approach which is frequently used by managers when setting normal long-run prices is the:
cost-plus approach
Which of the following would be considered a sunk cost?
Net book value of equipment that has no market value
The amount of increase or decrease in revenue that is expected from a particular course of action as compared with an alternative is termed:
differential revenue
Which of the following reasons would cause a company to reject an offer to accept business at a special price?
The additional sales will increase fixed expenses
Relevant revenues and costs focus on:
differences between the alternatives being considered
Heston and Burton, CPAs, currently work a five-day week. They estimate that net income for the firm would increase by $45,000 annually if they worked an additional day each month. The cost associated with the decision to continue the practice of a five-day work week is an example of:
opportunity cost
What pricing concept considers the price that other providers charge for the same product?
competition-based concept
A cost that will not be affected by later decisions is termed a(n):
sunk cost
Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be:
In evaluating the profit center manager, the income from operations should be compared:
to historical performance or budget
Which of the following is not a disadvantage of decentralized operation?
Top management freed from everyday tasks to do strategic planning
Which of the following would be most effective in a small owner/manager-operated business?
Responsibility accounting reports for profit centers will include
revenues, expenses, net income or loss from operations
Managers of what type of decentralized units have authority and responsibility for revenues, costs, and assets invested in the unit?
investment center
The investment turnover is the:
ratio of sales to invested assets
A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called a(n):
profit center
In a cost center, the manager has responsibility and authority for making decisions that affect:
The best measure of managerial efficiency in the use of investments in assets is:
investment turnover
Identify the formula for the rate of return on investment.
Income From Operations/Invested Assets
The costs of services charged to a profit center on the basis of its use of those services are called:
service department charges
Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are termed:
direct expenses
The profit margin is the:
ratio of income from operations to sales
Which of the following is not one of the common types of responsibility centers?
revenue center
Everest Co. uses a plantwide factory overhead rate based on direct labor hours. Overhead costs would be overcharged to which of the following departments?
a labor-intensive department
Common allocation bases are
direct labor dollars, direct labor hours, machine hours
If selling and administrative expenses are allocated to different products, they should be reported as a
period cost
All of the following can be used as an allocation base for calculating factory overhead rates except:
total overhead costs
Which two are the most common allocation bases for factory overhead?
Direct labor hours and machine hours
Which of the following is not a factory overhead allocation method?
traditional costing
Activity based costing for selling and administrative expenses can also be beneficial in allocating expenses to various products. Which of the following is the best allocation base for help desk costs?
number of calls
Using multiple department factory overhead rates instead of a single plantwide factory overhead rate:
results in more accurate product costs
Shubelik Company is changing to an activity-based costing method. They have determined that they will use three cost pools. They are setups, inspections, and assembly. Which of the following would be used as the activity base for assembly?
number of direct labor hours
Activity rates are determined by
dividing the cost budgeted for each activity pool by the estimated activity base for that pool.