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Service department costs are

a) generally treated as period costs rather than product costs.
b) reported as selling and administrative expenses on the income statement.
c) eventually applied by the user departments to the units produced.
d) seldom found in manufacturing organizations.

c) eventually applied by the user departments to the units produced.

Beta Company is preparing its annual profit plan. As part of its analysis of the profitability of its customers, management estimates that the $12,000 for sales support should be assigned to the individual customers from the information given as follows:
Customer A Customer B
Units purchased 100,000 200,000
Purchase orders (annual) 5 20

What is the amount of the sales support costs that should be allocated to Customer A assuming Beta uses activity-based costing (ABC)?


Which of the following statements does not reflect a difficulty in preparing the marketing and administrative budget?

a) Managers have discretion about how much money is spent.
b) Managers have discretion about the timing of when money is spent.
c) Marketing and administrative expenses are made up of fixed and variable items.
d) These costs are period costs and are matched with the revenues they generate.

d) These costs are period costs and are matched with the revenues they generate.

Pardee Company makes 30% of its sales for cash and 70% on account. 60% of the account sales are collected in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The remainder is uncollectible. The following information has been gathered for Pardee's first year of operations:
Month 1 2 3 4
Total sales $60,000 $70,000 $50,000 $30,000

Total cash receipts in Month 3 will be


The amount of resources used in an activity-based costing (ABC) system for a specific activity is computed by multiplying the:

cost driver rate and the actual cost driver volume

If two service departments service the same number of departments, which service department's costs are allocated first when using the step method?

The service department that provides the most service to other service departments.

Which of the following statements is (are) false regarding the effective use of management control systems.
(A) In general, cost allocations should not be used in management control systems because clear control over the cost being allocated cannot be determined.
(B) The primary reason to use a dual rate allocation system is to focus a manager's performance evaluation on factors under the manager's direct control.

Neither A nor B is false

Allocated joint costs are useful for

determining inventory cost for accounting purposes

The controllability concept states that managers should be held responsible for

all items over which they have decision-making authority.

Which of the following activities is most likely to be classified as value-added for a manufacturing company?

a) storing
b) ordering
c) inspecting
d) assembling

d) assembling

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