8) Homogeneous cost pool leads to ________.
A) more accurate costs of a given cost object
B) more resources being assigned to that cost object
C) the need for more cost drivers
D) the need for different cost allocation bases to allocate the costs
9) In cost allocation, R&D costs are used ________.
A) to provide information for economic decisions
B) to report to external parties when using generally accepted accounting principles
C) to calculate costs of a government contract
D) to calculate prime cost of a product
10) To allocate corporate costs to divisions, the allocation base used should ________.
A) be an output unit-level base
B) have the best cause-and-effect relationship with the costs
C) combine administrative costs and human resource management costs
D) allocate the fixed costs only
11) Corporate administrative costs allocated to a division cost pool are most likely to be ________.
A) output unit-level costs
B) facility-sustaining costs
C) product-sustaining costs
D) batch-level costs
Answer the following questions using the information below:
The Conity Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $13,000,000
bond issuance, the Electric Mixer Division used $9,100,000 and the Electric Lamp Division used $3,900,000
for expansion. Interest costs on the bond totaled $975,000 for the year.
12) What amount of interest costs should be allocated to the Electric Mixer Division?
A) $292,500
B) $682,500
C) $9,100,000
D) $2,730,000
13) What amount of interest costs should be allocated to the Electric Lamp Division?
A) $292,500
B) $682,500
C) $2,730,000
D) $3,900,000
14) The above interest costs would be considered a(n) ________.
A) output unit-level cost
B) facility-sustaining cost
C) product-sustaining cost
D) batch-level cost
15) Which corporate costs should be allocated to divisions?
A) costs incurred to process orders
B) cost related to homogeneous cost pools only
C) product-handling costs
D) both fixed and variable costs
16) Corporate brand advertising and general administration costs are examples of corporate costs.
17) Allocating all corporate costs motivates division managers to examine how corporate costs are
planned and controlled.
18) Companies that want to calculate the full cost of products must allocate all corporate costs to
divisions.
19) When there is a lesser degree of homogeneity, fewer cost pools are required to accurately explain the
use of company resources.
20) If a cost pool is homogeneous, the cost allocations using that pool will be the same as they would be if
costs of each individual activity in that pool were allocated separately.
21) Costs in a homogeneous cost pools have the same or a similar cause-and-effect or benefits-received
relationship with the cost-allocation base.
22) An individual cost item can be simultaneously a direct cost of one cost object and an indirect cost of
another cost object.
23) Advances in information-gathering technology make it more likely that multiple cost-pool systems
will pass the cost-benefit test.
24) Once a cost pool has been established, it should NOT need to be revisited or revised.
25) Should a company allocate its corporate costs to divisions?
26) For each cost pool listed select an appropriate allocation base from the list below. An allocation base
may be used only once. Assume a manufacturing company.
Allocation bases for which the information system can provide data:
1. Number of employees per department
2. Employee wages and salaries per department
3. Number of sales orders
4. Hours of operation of each production department
5. Machine hours by department
6. Operations costs of each department
7. Hours of computer use per month per department
8. Number of units sold
Cost pools:
________ a. Vice President of Finance’s office expenses
________ b. Computer operations used in conjunction with manufacturing
________ c. Personnel Department
________ d. Sales-order costs
________ e. Energy costs
Objective 14.6
1) The sales-quantity variance can be decomposed into ________.
A) sales-mix variance and sales-volume variance
B) static-budget variance and flexible-budget variance
C) flexible-budget variance and sales-volume variance
D) market-share variance and market-size variance
2) Flexible budget contribution margin is equal to ________.
A) actual contribution margin per unit times actual units sold of each product
B) actual contribution margin per unit times budgeted units sold of each product
C) budgeted contribution margin per unit times budgeted units sold of each product
D) budgeted contribution margin per unit times actual units sold of each product
3) Sales-mix variance = $250,000 (F), sales-volume variance = $4,50,000 (U), flexible-budget variance =
$200,000(F), market-size variance = $30,000(U), calculate the sales-quantity variance.
A) $170,000 (U)
B) $200,000 (U)
C) $30,000 (U)
D) $700,000 (U)
4) Market-share variance = $350,000 (U); Market-size variance = $300,000 (F); Sales-mix variance =
$600,000 (F); calculate the sales-quantity variance.
A) $350,000 (F)
B) $650,000 (F)
C) $550,000 (F)
D) $50,000 (U)
5) Sales-mix variance = $300,000 (F), sales-quantity variance = $200,000(F), flexible-budget variance =
$100,000(F), market-size variance = $50,000(U), calculate the sales-volume variance.
A) $650,000 (F)
B) $450,000 (F)
C) $550,000 (F)
D) $500,000 (F)
6) Flexible-budget variance = $200,000 (F); sales-volume variance = $350,000 (U); sales-mix variance =
$300,000 (F); calculate the static-budget variance.
A) $150,000 (U)
B) $300,000 (U)
C) $300,000 (F)
D) $250,000 (F)
7) The sales-volume variance is subdivided into ________.
A) sales-mix variance and static-budget variance
B) sales-mix variance and sales-quantity variance
C) flexible-budget variance and fixed-budget variance
D) market-share variance and static-budget variance
8) The sales-mix variance is calculated by ________.
A) deducting budgeted contribution margin based on actual units at budgeted mix from budgeted
contribution margin based on actual units sold at the actual mix
B) deducting budgeted contribution margin based on budgeted units at actual mix from budgeted
contribution margin based on actual units sold at the budgeted mix
C) deducting budgeted contribution margin based on actual units at actual mix from budgeted
contribution margin based on budgeted units sold at the budgeted mix
D) deducting budgeted contribution margin based on actual units at actual mix from budgeted
contribution margin based on actual units sold at the actual mix
9) The static-budget variance is the difference between ________.
A) an actual result and the corresponding budgeted amount in the static budget
B) the budget amount in the static budget and the amount in the flexible budget
C) an actual result and the flexible budget amount
D) the static budget amount and the sales-volume variance
10) More insight into the static-budget variance can be gained by subdividing it into ________.
A) the sales-mix variance and the sales-quantity variance
B) the market-share variance and the market-size variance
C) the flexible-budget variance and the sales-volume variance
D) the flexible-budget variance and the sales-mix variance
11) The static-budget variance will be favorable, when ________.
A) budgeted unit sales are more than actual unit sales
B) the actual contribution margin is less than the static-budget contribution margin
C) the actual sales mix shifts toward the less profitable units
D) the flexible-budget and the sales-volume variance are favorable
12) More insight into the sales-volume variance can be gained by subdividing it into ________.
A) the sales-mix variance and the sales-quantity variance
B) the market-share variance and the sales-mix variance
C) the flexible-budget variance and the market-size variance
D) the flexible-budget variance and the sales-mix variance
13) The budgeted contribution margin per composite unit for the budgeted sales mix can be computed by
dividing the ________.
A) total budgeted contribution margin by the actual total units
B) total budgeted contribution margin by the total budgeted units
C) actual total contribution margin by the total actual total units
D) actual total contribution margin by the total budgeted units
14) The difference between budgeted contribution margin per composite unit for the actual mix and the
budgeted contribution margin per composite unit for the budgeted mix is the ________.
A) material-mix variance
B) flexible-budget variance
C) sales-mix variance
D) sales-volume variance
15) The sales-mix variance will be unfavorable when ________.
A) the actual sales mix shifts toward the less profitable units
B) the contribution margin per composite unit for the actual mix is greater than the budgeted mix
C) the actual unit sales are less than the budgeted unit sales
D) the actual contribution margin is less than the static-budget contribution margin
16) The sales-mix variance will be favorable when ________.
A) the actual contribution margin is greater than the static-budget contribution margin
B) actual unit sales are more than budgeted unit sales
C) the actual sales mix shifts toward the less profitable units
D) the budgeted contribution margin for actual sales mix is greater than for the budgeted mix
17) An unfavorable sales-mix variance would most likely be caused by ________.
A) a new competitor providing better service in the high-margin product sector
B) a competitor having distribution problems with high-margin products
C) the company offering low-margin products at a higher price
D) the company experiencing quality-control problems that get negative media coverage of low-margin
products
18) A shift towards a mix of products with a lower contribution margin per unit will most likely result in
a(n) ________.
A) unfavorable sales-mix variance
B) unfavorable sales-quantity variance
C) favorable sales-mix variance
D) favorable sales-quantity variance
19) The sales-quantity variance will be favorable when ________.
A) sales-volume variance and flexible-budget variance are favorable
B) actual units of all products sold exceed budgeted units of all products sold
C) the actual sales mix shifts towards the more profitable units
D) static-budget variance and flexible-budget variance are favorable
20) The sales-quantity variance will be unfavorable when ________.
A) the composite unit for the actual mix is less than for the budgeted mix
B) the actual unit sales are less than the budgeted unit sales
C) the actual contribution margin per unit is less than the static-budget contribution margin
D) the actual sales mix shifts toward the less profitable units
21) The sales-volume variance is the difference between ________.
A) a sales-mix variance and the corresponding sales-quantity variance
B) a flexible-budget amount and the corresponding static-budget amount
C) a market-share variance and the corresponding market-size variance
D) a sales-mix variance and the corresponding market size variance
22) The sales-quantity variance is calculated by ________.
A) deducting budgeted contribution margin based on actual units at actual mix from budgeted
contribution margin based on actual units sold at the actual mix
B) deducting budgeted contribution margin based on actual units at actual mix from budgeted
contribution margin based on actual units sold at the budgeted mix
C) deducting budgeted contribution margin based on budgeted units at actual mix from budgeted
contribution margin based on actual units sold at the budgeted mix
D) deducting budgeted contribution margin based on budgeted units at budgeted mix from budgeted
contribution margin based on actual units sold at the budgeted mix
23) The sales-quantity variance results from a difference between ________.
A) the actual sales mix and the budgeted sales mix
B) the actual quantity of units sold and the budgeted quantity of unit sales in the static budget
C) actual contribution margin and the budgeted contribution margin
D) actual market size in units and the budgeted market size in units
Answer the following questions using the information below:
Capity Tea Products has an exclusive contract with British Distributors. Calamine and Capity are two
brands of teas that are imported and sold to retail outlets. The following information is provided for the
month of March:
Actual Budget
Calamine Capity Calamine Capity
Sales in pounds 3,740 lbs. 3,960 lbs. 4,400 lbs. 3,300 lbs
Price per pound $2.80 $2.80 $2.00 $3.00
Variable cost per pound 1.00 2.00 1.00 1.50
Contribution margin $1.80 $0.80 $1.00 $1.50
Budgeted and actual fixed corporate-sustaining costs are $1,850 and $2,300, respectively.
24) What is the actual contribution margin for the month?
A) $9,680
B) $9,350
C) $10,560
D) $9,900
25) What is the contribution margin for the flexible budget?
A) $9,900
B) $9,680
C) $10,560
D) $9,350
26) For the contribution margin, what is the total static-budget variance?
A) $220 favorable
B) $330 unfavorable
C) $1,000 favorable
D) $550 favorable
27) For the contribution margin, what is the total flexible-budget variance?
A) $330 favorable
B) $220 favorable
C) $550 favorable
D) $1,000 unfavorable
Answer the following questions using the information below:
Archoid’s Flowering Plants provides the following information for the month of May:
Actual Budget
Tulips Geraniums Tulips Geraniums
Sales in units 4,420 4,080 4,950 3,300
Contribution margin per unit $12 $19 $11 $21
28) What is the budgeted contribution margin per composite unit for the actual mix?
A) $13.80
B) $15.00
C) $15.36
D) $15.80
29) What is the budgeted contribution margin per composite unit for the budgeted mix?
A) $13.80
B) $15.00
C) $15.36
D) $15.80
30) For May, the company will report a(n) ________.
A) favorable sales-mix variance
B) unfavorable sales-mix variance
C) favorable sales-volume variance
D) unfavorable sales-volume variance
Answer the following questions using the information below:
Woodruff Flowering Plants provides the following information for the month of May:
Actual Budget
Fuchsia Dogwood Fuchsia Dogwood
Sales in units 18,000 4,500 17,000 3,000
Contribution margin per unit $20 $17 $21 $16
31) What is the budgeted contribution margin per composite unit for the actual mix?
A) $19.00
B) $20.30
C) $19.40
D) $20.00
32) What is the budgeted contribution margin per composite unit for the budgeted mix?
A) $19.00
B) $19.40
C) $20.00
D) $20.30
33) For May, Woodruff will report a(n) ________.
A) favorable sales-mix variance
B) unfavorable sales-mix variance
C) favorable sales-volume variance
D) unfavorable sales-volume variance