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Cost Accounting 101 Practice Test: Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis
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Cost allocation is the process of identifying, aggregating, and assigning costs to cost objects. Cost objects can be activities or items, such as a product, research project, customer, sales region, or department. Cost allocation is used for financial reporting to help inventory or spread costs among different departments.  Customer profitability analysis (CPA): A management accounting and credit underwriting method that allows businesses and lenders to determine the profitability of each customer or segments of customers. CPA looks at the revenue (or profit) that each individual customer... Show more
Cost Accounting 101 Practice Test: Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis
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25 Questions

1. The costs of all six value-chain functions should be included when determining:
2. The direct materials mix variance will be favorable when:
3. A customer cost hierarchy may include customer-sustaining costs.
4. Corporate overhead costs can be allocated:
5. It is possible that the smallest customer in terms of revenue is the most profitable customer.
6. The above interest costs would be considered a(n):
7. Which of the following illustrates a purpose for allocating costs to cost objects?
8. An activity-based costing system may focus on customers rather than products.
9. To guide cost allocation decisions, the cause-and-effect criterion:
10. More insight into the static-budget variance can be gained by subdividing it into:
11. Which cost-allocation criterion is appropriate when making an economic decision?
12. Indirect costs are costs that CANNOT be traced to cost objects in an economically feasible way.
13. A favorable direct materials yield variance results when less direct materials are used than planned.
14. To guide cost allocation decisions, the fairness or equity criterion is:
15. Loss-causing customers:
16. The cost of the manager of a retail distribution channel would most likely be classified as a:
17. All customers are equally important to a company and should receive equal levels of attention.
18. To improve customer profitability, companies should:
19. The most likely reason for allocating all corporate costs to divisions include that:
20. Corporate administrative costs allocated to a division cost pool are most likely to be:
21. The sales mix variance is the difference between budgeted contribution margin for the actual sales mix and the budgeted contribution margin for the budgeted sales mix.
22. Managers can gain more insight about the static-budget variance by subdividing it into the flexible-budget variance and the sales-volume variance.
23. The direct materials mix variance is the:
24. Using the fairness criterion, the costs are allocated among the beneficiaries in proportion to the benefits each receives.
25. A challenge to using cost-benefit criteria for allocating costs is that:

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