Question 1

How does Schmenner classify services?
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Accepted Answer

The answer of How does Schmenner classify services?
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Question 2

What is under-costing?
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Accepted Answer

The answer of What is under-costing?
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Question 3

In a heterogeneous resource-cost pool,all of the costs have the same or a similar cause-and-effect relationship with a single cost driver.

Accepted Answer

In a heterogeneous resource-cost pool, the costs have diverse causes and are not necessarily related to a single cost driver.

Question 4

Where management uses a single cost-driver rate to allocate indirect production costs to outputs,___________ cost data are often the result.

Accepted Answer

When management uses a single cost-driver rate to allocate indirect production costs to outputs, the resulting cost data can often be unreliable. This is because indirect production costs are not always proportional to a single cost driver, so using a single cost driver rate may not accurately represent the true amount of indirect costs incurred by each output.

Question 5

Hammond and Jarrett provide tax consulting for estates and trusts.Their job-costing system has a single direct-cost category (professional labour)and a single indirect-cost pool (research support).The indirect-cost pool contains all the costs except direct personnel costs.All budgeted indirect costs are allocated to individual jobs using actual professional labour-hours.
Required:
a.Discuss the reasons a consulting firm might use a normal costing system rather than an actual costing system.
b.What might be some reasons for the firm to change from a one-pool to a multiple-pool allocation concept?
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Accepted Answer

The answer of Hammond and Jarrett provide tax consulting for...

Question 6

In what type of resource-cost pool do all of the costs have the same or a similar cause-and-effect relationship with a single cost driver?

Accepted Answer

In a homogeneous resource-cost pool, all costs have the same or a similar cause-and-effect relationship with a single cost driver. This allows for a more accurate allocation of costs to products or services based on the usage of the cost driver.

Question 7

Over-costed outputs lead to overpricing,causing these outputs to lose market share to competitors producing similar outputs.

Accepted Answer

When outputs are overpriced, it becomes difficult for the company to compete with other companies producing similar outputs. This may lead to a decline in market share and profits. Hence, over-costed outputs can lead to overpricing and loss of market share to competitors.

Question 8

Output-cost cross-subsidisation means that if management under-costs one of its outputs,then it will over-cost at least one of its other outputs.

Accepted Answer

Output-cost cross-subsidisation involves balancing the costs of different outputs within an organization. If one output is under-costed, the costs of other outputs may be raised to compensate, achieving balance. Therefore, the statement is true.

Question 9

If you identify as many direct costs as is economically feasible,this ____________ the amount of costs classified as indirect.

Accepted Answer

Direct costs are those that can be specifically identified with a particular product or service whereas indirect costs cannot be easily traced to a specific product or service. Therefore, identifying more direct costs will decrease the amount of costs classified as indirect.

Question 10

When does output-cost cross-subsidisation commonly occur?
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Accepted Answer

The answer of When does output-cost cross-subsidisation commonly occur?
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Question 11

If you identify as many direct costs as is economically feasible,this increases the amount of costs classified as indirect,thereby minimising the extent to which costs have to be allocated rather than traced.

Accepted Answer

If you identify more direct costs, the amount of indirect costs will decrease, which would increase the extent to which costs have to be allocated rather than traced. Therefore, the statement is false.

Question 12

A local engineering firm is bidding on a design project for a new client.The total budgeted direct-labour costs for the firm are $800 000.The total budgeted indirect costs are $1 200 000.It is estimated that there are 16 000 billable hours in total.
Required:
a.What is the budgeted direct-labour cost rate?
b.What is the budgeted indirect-cost rate assuming direct-labour cost is the allocation base?
c.If the firm has a 20% mark-up percentage,what should it bid on the project if the direct labour hours are estimated at 500 hours?
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Accepted Answer

The answer of A local engineering firm is bidding on...

Question 13

What does output-cost cross-subsidisation mean?
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Accepted Answer

The answer of What does output-cost cross-subsidisation mean?
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Question 14

In a homogeneous resource-cost pool,all of the costs have the same or a similar _________________ relationship with a single cost driver.

Accepted Answer

In a homogeneous resource-cost pool, all the costs are related to a single cost driver in a cause-and-effect manner. This means that any change in the level of activity in the cost driver will directly impact the total cost of the pool. For example, if the cost driver is the number of units produced, then the cost of the pool will increase when more units are produced, and decrease when fewer units are produced. Therefore, choice A) cause-and-effect is the best option.

Question 15

What does over-costed output lead to?
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Accepted Answer

The answer of What does over-costed output lead to?
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Question 16

A local solicitor employs 15 full-time professionals.The budgeted compensation per employee is
$100 000.The maximum billable hours for each client are 400.Clients always receive their full amount of time.All professional labour costs are included in a single direct-cost category and are traced to jobs on a per-hour basis.Any other costs are included in a single indirect-cost pool,allocated according to professional labour-hours.Budgeted indirect costs for the year are $600 000 and the firm had 30 clients.
Required:
a.What is the direct-labour-cost rate per hour?
b.What is the indirect-cost rate per hour?
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Accepted Answer

The answer of A local solicitor employs 15 full-time professionals.The...

Question 17

Bondi Hospital uses a job-costing system for all patients who have surgery.In March,the pre-operating room (PRE-OP)and operating room (OR)had budgeted allocation bases of 4000 nursing hours and 2000 nursing hours,respectively.The budgeted nursing overhead charges for each department for the month were $168 000 and $132 000,respectively.The hospital floor for surgery patients had budgeted overhead costs of $1 200 000 and 15 000 nursing hours for the month.For patient Fred Adams,actual hours incurred were eight and four hours,respectively,in the PRE-OP and OR rooms.He was in the hospital for 4 days (96 hours).Other costs related to Adams were:
 $\begin{array}{|c|c|c|c|}
\hline & \text { PRE-OP } & \text { OR } & \text { In-room } \
\hline & \text { Costs } & \underline{\text { Costs }} & \text { Costs } \
\hline \text { Patient medicine } & \$ 200 & \$ 500 & \$ 2400 \
\hline \text { Direct nursing time } & \$ 1000 & \$ 2000 & \$ 3000 \
\hline
\end{array}$ 
The hospital uses a budgeted overhead rate for applying overhead to patient stays.
Required:
What is the total cost of the stay of patient Fred Adams?
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Accepted Answer

The answer of Bondi Hospital uses a job-costing system for...

Question 18

_______________ cross-subsidisation means that if management under-costs one of its outputs,then it will over-cost at least one of its other outputs.

Accepted Answer

Cross-subsidisation is a practice in which a firm deliberately overcharges for one product or service to offset the undercharging for another product or service. Here, the question is asking which cost we need to look at. It is about output prices or output costs. In this case, if management under-costs one of its outputs, it will over-cost at least one of its other outputs. So, the best choice is C, which is Output-cost.

Question 19

Why might a costing system that has worked reasonably well in the past might no longer do so?
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Accepted Answer

The answer of Why might a costing system that has...

Question 20

With over-costing,an output consumes a high level of resources but is reported to have a low cost per unit.

Accepted Answer

With over-costing, an output is reported to have a higher cost per unit than the actual resources it consumes, not a low cost per unit.

Quiz 5: Estimating the Cost of Producing Services

How does Schmenner classify services? _ _

What is under-costing? _ _

In a heterogeneous resource-cost pool,all of the costs have the same or a similar cause-and-effect relationship with a single cost driver.

Where management uses a single cost-driver rate to allocate indirect production costs to outputs,___________ cost data are often the result.

In what type of resource-cost pool do all of the costs have the same or a similar cause-and-effect relationship with a single cost driver?

Over-costed outputs lead to overpricing,causing these outputs to lose market share to competitors producing similar outputs.

Output-cost cross-subsidisation means that if management under-costs one of its outputs,then it will over-cost at least one of its other outputs.

If you identify as many direct costs as is economically feasible,this ____________ the amount of costs classified as indirect.

When does output-cost cross-subsidisation commonly occur? _

If you identify as many direct costs as is economically feasible,this increases the amount of costs classified as indirect,thereby minimising the extent to which costs have to be allocated rather than traced.

What does output-cost cross-subsidisation mean? _ _

In a homogeneous resource-cost pool,all of the costs have the same or a similar _________________ relationship with a single cost driver.

What does over-costed output lead to? _ _

_______________ cross-subsidisation means that if management under-costs one of its outputs,then it will over-cost at least one of its other outputs.

Why might a costing system that has worked reasonably well in the past might no longer do so? _ _

With over-costing,an output consumes a high level of resources but is reported to have a low cost per unit.

Quiz 5: Estimating the Cost of Producing Services

How does Schmenner classify services? _____________________________________________________________________________________________ _____________________________________________________________________________________________

What is under-costing? _____________________________________________________________________________________________ _____________________________________________________________________________________________

In a heterogeneous resource-cost pool,all of the costs have the same or a similar cause-and-effect relationship with a single cost driver.

Where management uses a single cost-driver rate to allocate indirect production costs to outputs,___________ cost data are often the result.

In what type of resource-cost pool do all of the costs have the same or a similar cause-and-effect relationship with a single cost driver?

Over-costed outputs lead to overpricing,causing these outputs to lose market share to competitors producing similar outputs.

Output-cost cross-subsidisation means that if management under-costs one of its outputs,then it will over-cost at least one of its other outputs.

If you identify as many direct costs as is economically feasible,this ____________ the amount of costs classified as indirect.

When does output-cost cross-subsidisation commonly occur? _____________________________________________________________________________________________ ____________________________________________________________________________________________

If you identify as many direct costs as is economically feasible,this increases the amount of costs classified as indirect,thereby minimising the extent to which costs have to be allocated rather than traced.

What does output-cost cross-subsidisation mean? _____________________________________________________________________________________________ _____________________________________________________________________________________________

In a homogeneous resource-cost pool,all of the costs have the same or a similar _________________ relationship with a single cost driver.

What does over-costed output lead to? _____________________________________________________________________________________________ _____________________________________________________________________________________________

_______________ cross-subsidisation means that if management under-costs one of its outputs,then it will over-cost at least one of its other outputs.

Why might a costing system that has worked reasonably well in the past might no longer do so? _____________________________________________________________________________________________ _____________________________________________________________________________________________

With over-costing,an output consumes a high level of resources but is reported to have a low cost per unit.

How does Schmenner classify services? _ _

What is under-costing? _ _

When does output-cost cross-subsidisation commonly occur? _

What does output-cost cross-subsidisation mean? _ _

What does over-costed output lead to? _ _

Why might a costing system that has worked reasonably well in the past might no longer do so? _ _