Cost Allocation Techniques Paper 1

1

Which of the following statements is true for a firm that uses variable costing?






2

When a firm prepares financial reports by using absorption costing,






3

Which method of inventory costing treats direct manufacturing costs and manufacturing overhead costs, both variable and fixed, as inventoriable costs?






4

The contribution margin is the excess of revenues over






5

Which one of the following statements is true regarding absorption costing and variable costing?






6

Jansen, Inc., pays bonuses to its managers based on operating income. The company uses absorption costing, and overhead is applied on the basis of direct labor hours. To increase bonuses, Jansen’s managers may do all of the following except






7

The costing method that is properly classified for both external and internal reporting purposes is
External Reporting ... Internal Reporting






8

Absorption costing and variable costing are two different methods of assigning costs to units produced. Of the four cost items listed below, identify the one that is not correctly accounted for as a product cost. Part of Product Cost Under
Absorption Costing
Variable Costing






9

Which one of the following is an advantage of using variable costing?






10

Huntington Corporation pays bonuses to its managers based on operating income, as calculated under variable costing. It is now 2 months before year end, and earnings have been depressed for some time. Which one of the following actions should Wanda Richards, production manager, definitely implement if she desires to maximize her bonus for this year?






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