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60. Which of the following regarding relevant cost analysis is true? a. A contribution income statement should be prepared as part of every relevant cost analysis. b. A contribution income statement considers all costs and can result in arriving at a different and more accurate answer than that obtained by simply isolating relevant costs. c. A contribution income statement tends to focus the attention of the decision maker directly on the problems critical to the decision at hand. d. All of the above are true. e. None of the above is true.
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Read more29. Which of the following regarding activity-based costing is not true? a. Both departmental overhead rates and activity-based costing rely upon a two-stage allocation process. b. Overhead costing using departmental rates typically utilizes more cost pools than activity-based costing. c. An activity is an event or transaction that acts as a causal factor in the incurrence of cost in an organization. d. Activity-based costing typically will result in more accurate allocation of overhead costs between high-volume and low-volume products.
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Read more“45. During 19×5, Craft Company had a net income of $80,000 using absorption costing and $74,500 using variable costing. The fixed overhead application rate has been $5 per unit for the last three years. If 21,500 units were produced during 19×5, then sales in units for 19×5 were a. 16,000 units. b. 20,400 units. c. 22,600 units. d. 27,000 units.”,”2Difference in Net Income = (Diff in Production and Sales Units x Fixed Overhead Rate per unit $5,500 = ????? x 5 5,500/5 = 1,100 unitsSo …………… 21,500 units – 1,100 units = 20
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Read more61. Which of the following regarding vertical integration is not correct? a. Vertical integration assists a firm in controlling the quality of parts and materials used in the production process. b. Vertical integration could result in a company with insufficient capacity being unable to obtain parts and materials during periods of heavy product demand. c. Vertical integration may tend to direct attention away from periodic review of the make or buy decision for certain parts or materials. d. All of the above are true. e. None of the above is true.
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Read more30. Overhead allocation based on volume alone a. is a key aspect of the activity-based costing model. b. will systematically overcost high-volume products and undercost low-volume products. c. will systematically overcost low-volume products and undercost high-volume products. d. must be used for external financial reporting since an activity-based costing system cannot be designed to generate full product costs for external reporting purposes.
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Read more“46. During 19×4, Roberts Company’s income under absorption costing was $2,000 lower than its income under variable costing. The company sold 8,000 units during the year, and its variable costs were $8 per unit, of which $2 was variable selling expense. If production cost was $10 per unit under absorption costing, then how many units did the company produce during the year? a. 7,500 units. b. 7,000 units. c. 9,000 units. d. 8,500 units.”,”1Production cost per unit under absorption = $10- Variable production cost per unit (8-2) = 6Fix MOH per unit 4Then the difference in income of $2000 is for 500 units (2000 / 4) Absorption income < variable income when units sold is > units produced.Units produced = 8,000 – 500 = 7
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Read more“62. To maximize total contribution margin, a firm should: a. promote those products having the highest unit contribution margins. b. promote those products having the highest contribution margin ratios. c. promote those products having the highest contribution margin per unit of a constrained resource. d. promote those products having the highest contribution margins and contribution margin ratios.”
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Read more31. A cost driver a. is a term that applies only to activity-based costing systems. b. relates only to direct labor-hours or machine-hours. c. is identified only for the first stage in cost assignment. d. is identified for both the first stage and the second stage in cost assignment.
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Read more47. A single-product company prepares income statements using both absorption and variable costing methods. Manufacturing overhead cost applied per unit produced in 1995 was the same as in 1994. The 1995 variable costing statement reported a profit whereas the 1995 absorption costing statement reported a loss. The difference in reported income could be explained by units produced in 1995 being a. Less than units sold in 1995. b. Less than the activity level used for allocating overhead to the product. c. In excess of the activity level used for allocating overhead to the product. d. In excess of units sold in 1995.
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