Deck 5: Estimating the Cost of Producing Services

Question 1

After identifying the purposes for which costs are to be allocated,managers and management accountants must decide on how to:

A)allocate them.
B)trace them.
C)accumulate them.
D)estimate them.

Answer 1

A

Question 2

A cost object is anything for which an estimation of costs is sought.

Answer 2

True

Question 3

What type of costs is related to the cost object that managers and management accountants cannot trace to it in an economically feasible way?

A)Indirect
B)Estimated
C)Direct
D)Actual

Answer 3

A

Question 4

A cost driver is a grouping of individual indirect cost items that have the same cost driver.

Question 5

Indirect costs of a cost object are costs related to the cost object that managers and management accountants can trace to it in an economically feasible way.

Question 6

What type of costs is related to the cost object that managers and management accountants can trace to it in an economically feasible (cost-effective)way?

A)Indirect
B)Estimated
C)Direct
D)Actual

Question 7

A(n)________ driver is used to allocate costs from an activity-cost pool to a cost object.

A)activity-cost
B)resource-cost
C)target price
D)primary

Question 8

Direct costs of a cost object are costs related to that cost object that managers and management accountants can trace to it in an economically feasible (cost-effective)way.

Question 9

To motivate people to make decisions and to take actions that are congruent with the goals of the organisation,senior managers often include costs from more than one,but not necessarily all,business functions to emphasise that costs in some functions potentially affect costs in other functions.

Question 10

A cost driver causes a change in the cost of an activity and has an effect on costs.Managers
use cost drivers to allocate overhead costs to cost objects.

Question 11

A _______________ driver is used to allocate costs from a resource-cost pool to activity-cost pools.

A)activity-cost
B)resource-cost
C)target price
D)primary

Question 12

Management accountants form and use cost ________ so that they do not have to allocate each cost to the cost object(s)individually.

A)drivers
B)allocations
C)tracers
D)pools

Question 13

The difference between the normal wage rate and the overtime rate is called a(n):

A)wage rate.
B)bonus.
C)overtime premium.
D)merit pay.

Question 14

A cost ________ is anything for which an estimation of costs is sought.

A)object
B)allocation
C)tracer
D)accumulation

Question 15

What is the amount of productive capacity available over and above that used to meet consumer demand in the current period called?

A)Bonus time
B)Idle time
C)Waste
D)Budgetary slack

Question 16

Whether a management accountant classifies overtime premium as direct or indirect depends on the circumstances.

Question 17

Used labour capacity,the amount of productive capacity available over and above that used to meet consumer demand in the current period.

Question 18

What are indirect labour costs frequently divided into?

A)Jobs.
B)Sub-classifications.
C)Systems.
D)Processes.

Question 19

A cost _______ causes a change in the cost of an activity and has an effect on costs.

A)driver
B)pool
C)allocation
D)tracer

Question 20

The way in which a manager estimates costs depends on the nature of the outputs,the processes underlying them and the purpose for which the manager is estimating the costs.

Question 21

What are the defining characteristics of services?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 22

In a(n)_______________ system,individual jobs differ in the extent to which they use quantities of production resources,so it would be incorrect to use average production costs for different jobs.

A)job-costing
B)process costing
C)hybrid
D)accounting

Question 23

In general,the more complex the cost allocations,the higher the education costs.

Question 24

What central factor in both strategic and operating decisions,and estimating costs,is important for making pricing,performance evaluation,continuous improvement and other decisions?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 25

What does the extent of the impact of inventory on the reported results of service providers depends on?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 26

Fairness and ability-to-bear are more problematic criteria than cause-and-effect or benefits received,and are thus less frequently used.

Question 27

Managers use a(n)_____________ system when the output comprises many homogenous (identical or almost identical)units.

A)process-costing
B)job
C)hybrid
D)accounting

Question 28

All direct materials are generally added to the process at one time and all __________ costs are generally added to the process evenly through time.

A)conversion
B)labour
C)overhead
D)activity

Question 29

What type of costing system blends characteristics of both job-costing and process costing systems?

A)Conversion
B)Hybrid
C)Labour
D)Activity

Question 30

A resource-cost driver is used to allocate costs from an activity-cost pool to a cost object.

Question 31

Managers use a(n)___________ system when the cost object is a distinct output called a job.

A)job-costing
B)actual costing
C)hybrid costing
D)process costing

Question 32

When management accountants use ______________ systems,they separate costs into cost categories according to when they are introduced into the process.

A)job-costing
B)process-costing
C)hybrid
D)accounting

Question 33

What can choices among costing systems significantly affect?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 34

In job costing,managers trace costs to a specific ___________.

A)process.
B)job.
C)activity.
D)product

Question 35

Before identifying the purposes for which costs are to be allocated,managers and management accountants must decide on how to allocate them.

Question 36

What type of reporting is costing important for?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 37

A major difference between job costing and process costing is the extent of ___________ used to calculate the unit costs of products or services.

A)estimation
B)analysis
C)strategy
D)averaging

Question 38

When a job continues across accounting periods,where do costs remain until the job has been completed?

A)Finished goods
B)Raw materials
C)Work in process
D)Overhead

Question 39

When designing costing systems,managers and management accountants must compare the benefits derived from allocating costs with the costs incurred in making these allocations.

Question 40

An activity-cost driver is used to allocate costs from a resource-cost pool to activity-cost pools.

Question 41

Managers use a job-costing system when the output comprises many homogenous (identical or almost identical)units.

Question 42

Managers use a process-costing system when the cost object is a distinct output called a job.

Question 43

The actual cost-driver rate measures _____________ capacity utilisation.

A)budgeted
B)actual
C)estimated
D)past

Question 44

In job costing,managers trace costs to a specific job.

Question 45

A major difference between job costing and process costing is the extent of averaging used to calculate the unit costs of products or services.

Question 46

Within each operation,all product units are treated ______________,using identical amounts of the operation's resources.

A)differently
B)exactly alike
C)similarly
D)uniquely

Question 47

An operation is a standardised method or technique performed repetitively,often on different materials,resulting in different finished goods.

Question 48

A(n)_______________ is a standardised method or technique performed repetitively,often on different materials,resulting in different finished goods.

A)process
B)job
C)operation
D)hybrid

Question 49

The shorter the period used to calculate the cost-driver rate,the ______________ the influence of seasonal patterns and of non-seasonal,sporadic costs on the dollar-amount of the cost pool (the numerator).

A)greater
B)lesser
C)more irrelevant is
D)less irrelevant is

Question 50

When identical or similar units of products or services are mass-produced rather than processed as individual jobs,managers use process costing to calculate an average production cost for all units produced.

Question 51

A(n)_________________system is a hybrid costing system applied to batches of similar,but not identical,products.

A)operation-costing
B)hybrid
C)activity-based
D)process costing

Question 52

Multiple operations are usually conducted within a(n):

A)department.
B)organisation.
C)process.
D)job.

Question 53

When the job continues across accounting periods,costs remain in work in process until the job has been completed.

Question 54

In a process-costing system,individual jobs differ in the extent to which they use quantities of production resources,so it would be incorrect to use average production costs for different jobs.

Question 55

Irrespective of the costing system that a manager or management accountant might select,the _________ rate is calculated in the same way.

A)overhead
B)activity
C)cost-driver
D)hourly

Question 56

When management accountants use process-costing systems,they separate costs into cost categories according to when they are introduced into the process.

Question 57

A hybrid costing system blends characteristics of both job-costing and process costing systems.

Question 58

Costing systems typically fall neatly into either job-costing or process-costing categories.

Question 59

Many managers believe that calculating the indirect cost rate ________________ provides a more representative and reasonable way to assign indirect costs to jobs.

A)monthly
B)biweekly
C)daily
D)annually

Question 60

Few production systems are a hybrid because they rarely have some custom-order production features and some mass-production features.

Question 61

Normal costing is a costing system that traces actual direct costs to a cost object and allocates indirect costs based on the budgeted cost-driver rate.

Question 62

When do managers use a job-costing?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 63

By using a matrix initially to match a service category with a type of costing system,managers and management accountants are able to refine the design of the system to suit the requirements of their organisation.

Question 64

Schmenner classifies services into four categories-professional service,service shop,mass service and service factory.

Question 65

Compare job-costing and process-costing systems.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 66

What is normal costing?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 67

Actual costing is a costing system that traces budgeted direct costs to the cost object and allocates indirect costs based on the actual cost-driver rate.

Question 68

Schmenner classifies services according to two dimensions: degree of variation and relative throughput time.

Question 69

The throughput time for a service transaction as compared with others in the industry is known as:

A)process time.
B)relative throughput time.
C)degree of variation.
D)hybrid time.

Question 70

An operation-costing system is a hybrid costing system applied to batches of similar,but not identical,products.

Question 71

What system to manager use when the output comprises many homogenous (identical or almost identical)units?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 72

The budgeted cost-driver rate measures actual capacity utilisation.

Question 73

Degree of variation captures the extent to which the service provider customises its services and interacts with its customers.

Question 74

Are job costing and process costing mutually exclusive?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 75

Variation time as the measure of the time that a molecule in a production process takes 'from when the molecule is ready to have value added to it until it is a part of the finished product'.

Question 76

The actual cost-driver rate measures the budgeted capacity utilisation.

Question 77

When calculating the budgeted rate for direct professional time,the numerator is:

A)budgeted number of professional hours.
B)actual number of professional hours.
C)budgeted cost of professional time.
D)actual cost of professional time.

Question 78

When calculating the budgeted rate for direct professional time,the denominator is:

A)budgeted number of professional hours.
B)actual number of professional hours.
C)budgeted cost of professional time.
D)actual cost of professional time.

Question 79

__________________ captures the extent to which the service provider customises its services and interacts with its customers.

A)Degree of variation
B)Throughput time
C)Process time
D)Wait time

Question 80

Where managers use cost information about outputs to guide pricing decisions,they are likely to __________ outputs that they have under-costed,resulting in increased demand for these outputs while profit will fall.

A)underprice
B)overprice
C)over-cost
D)under-cost