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Which of the following is a disadvantage of the departmental overhead rate method?

The departmental overhead rate method assigns overhead on the basis of volume-related measures.

ABC Systems

highlight the different levels of activities

Costs incurred in detecting poor quality products are referred to as:

appraisal costs

ABC assumes all costs are ________ because over the long run the company can adjust the amount of assets utilized.


Which of the following are advantages of using the plantwide overhead rate method

The necessary information is readily available.

The use of departmental overhead rates will generally result in:

The use of a separate cost allocation base for each department in the shop

Which of the following would not be considered a product cost?

Budget accountant’s salary

Which of the following statements is true with regard to the departmental overhead rate method?

It is logical to use this method when overhead resources are consumed by various products in substantially different ways throughout multiple departments.

Which of the following is true?

Overhead costs are often affected by many issues and are frequently too complex to be explained by any one factor.

Which of the following statements is true with regard to activity-based costing rates?

The premise of ABC is that activities are what cause costs to be incurred.

_____________ costs support the company as a whole.


Overhead costs:

Cannot be traced to units of product in the same way that direct labor can.

A company estimates that overhead costs for the next year will be $8,320,000 for indirect labor and $155,500 for factory utilities. The company uses machine hours as its overhead allocation base. If 400,000 machine hours are planned for this next year, what is the company’s plantwide overhead rate? (Round to two decimal places)

$21.19 per machine hour.

Which of the following statements is true with regard to the plantwide overhead rate method?

The rate is determined using volume-related measures

What are the main advantages of traditional volume-based allocation methods compared to activity-based costing?

traditional volume-based methods are easier to use and less costly to implement and maintain.

A cost that remains unchanged in total despite variations in volume of activity within a relevant range is a:

Fixed cost

In cost-volume-profit analysis, the unit contribution margin is

Sales price per unit less total variable cost per unit.

The sales level at which a company neither earns a profit nor incurs a loss is the:

Break-even point.

A cost that includes both fixed and variable cost components is called a:

Mixed cost.

A cost with a flat cost line within a relevant range that shifts to another level when volume significantly changes is a(n):

Step-wise cost.

Total contribution margin in dollars divided by pretax income is the:

Degree of operating leverage.

A cost that changes in proportion to changes in volume of activity is a(n):

Variable cost.

The margin of safety is the excess of:

Expected sales over break-even sales.

Cost-volume-profit analysis is based on necessary assumptions. Which of the following is not one of these assumptions?

Relevant range includes all possible levels of activity that a company might experience.

A graph used to analyze past cost behaviors by displaying costs and unit data for each period as points on the diagram is called a:

Scatter diagram

The contribution margin ratio:

Is the percent of each sales dollar that remains after deducting the total unit variable cost.

The least-squares regression method is

A statistical method to identify cost behavior.

The contribution margin per unit expressed as a percentage of the product’s selling price is the:

Contribution margin ratio.

A company’s product sells at $12 per unit and has a $5 per unit variable cost. The company’s total fixed costs are $98,000.The contribution margin per unit is:


The excess of expected sales over the sales level at the break-even point is known as the:

Margin of safety.

A method of assigning overhead costs to a product using a single overhead rate is:

Plantwide overhead rate method.

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