ACCT 3270 EXAM 2 QUESTIONS WITH
COMPLETE SOLUTIONS
/. Which of the following statements is true of a peanut-butter costing system?
A) A peanut-butter costing system typically has more-homogeneous indirect cost pools.
B) A peanut-butter costing system broadly averages or spreads the cost of resources
uniformly to cost objects.
C) A peanut-butter costing system assumes that all costs are variable.
D) In a peanut-butter costing system, costs of activities are used to assign costs to other
cost objects such as products or services based on the activities the products or
services consume. - Answer-✅B
/.Overcosting a particular product may result in:
A) pricing the product too high
B) pricing the product too low
C) operating efficiencies
D) understating total product costs - Answer-✅A
/.For a company with diverse products, undercosting overhead of a product will lead to
product-cross -subsidization which means that:
A) direct labor costs of the product are misallocated
B) direct material costs of the product are misallocated
C) indirect costs of another product are misallocated
D) direct costs of another product are misallocated - Answer-✅C
/.Aqua Company produces two products-Alpha and Beta. Alpha has a high market
share and is produced in bulk. Production of Beta is based on customer orders and is
custom designed. Also, 55% of Beta's cost is shared between design and setup costs,
while Alpha's major portions of costs are direct costs. Alpha is using a single cost pool
to allocate indirect costs. Which of the following statements is true of Aqua?
A) Aqua will overcost Beta's direct costs as it is using a single cost pool to allocate
indirect costs.
B) Aqua will undercost Alpha's indirect costs because alpha has high direct costs.
C) Aqua will overcost Alpha's indirect costs as it is using a single cost pool to allocate
indirect costs.
D) Aqua will overcost Beta's indirect costs because beta has high indirect costs. -
Answer-✅C
/.Product-cost cross-subsidization means that:
A) when one product is overcosted, it results in more than one other product being
overcosted
, B) when a company undercosts more than one of its products, it will overcost more than
one of its other products
C) when a company undercosts one of its products, it will overcost at least one of its
other products
D) when one product is overcosted it results in all other products being overcosted -
Answer-✅C
/.Which of the following has accelerated need for refined cost systems?
A) global monopolies
B) rising prices
C) intense competition
D) a shift toward increased direct costs - Answer-✅C
/.Refining a cost system involves which of the following?
A) classifying as many costs as indirect costs as is feasible
B) creating as many cost pools as possible to capture all costs
C) identifying the activities involved in a process and understanding how those activities
consume resources
D) Seeking an easier and more cost effective way to calculate average costs - Answer-
✅C
/.Which of the following is true of refinement of a costing system?
A) While refining a costing system, companies should identify as many indirect costs as
is economically feasible.
B) A homogeneous cost pool will use multiple cost drivers to allocate costs.
C) It reduces the use of broad averages for assigning the cost of resources to cost
objects.
D) It is likely to yield the most decision-making benefits when direct costs are a high
percentage of total costs. - Answer-✅C
/.Which of the following is a reason that has accelerated the demand for refinements to
the costing system?
A) The declining demand for customized products has led managers to decrease the
variety of products and services their companies offer.
B) The use of product and process technology has led to an increase in indirect costs
and a decrease in direct costs.
C) The increased of automated processes has led to the increase in direct
manufacturing cost leading to a decrease in break even point.
D) The increasing competition in product markets has led to an increase in contribution
margin resulting in a decrease of break even point. - Answer-✅B
/.Johnson Superior Products Inc. produces hospital equipment and the setup
requirements vary from product to product. Johnson produces its products based on
customer orders and uses ABC costing. In one of its indirect cost pools, setup costs and
distribution costs are pooled together. Costs in this pool are allocated using number of
COMPLETE SOLUTIONS
/. Which of the following statements is true of a peanut-butter costing system?
A) A peanut-butter costing system typically has more-homogeneous indirect cost pools.
B) A peanut-butter costing system broadly averages or spreads the cost of resources
uniformly to cost objects.
C) A peanut-butter costing system assumes that all costs are variable.
D) In a peanut-butter costing system, costs of activities are used to assign costs to other
cost objects such as products or services based on the activities the products or
services consume. - Answer-✅B
/.Overcosting a particular product may result in:
A) pricing the product too high
B) pricing the product too low
C) operating efficiencies
D) understating total product costs - Answer-✅A
/.For a company with diverse products, undercosting overhead of a product will lead to
product-cross -subsidization which means that:
A) direct labor costs of the product are misallocated
B) direct material costs of the product are misallocated
C) indirect costs of another product are misallocated
D) direct costs of another product are misallocated - Answer-✅C
/.Aqua Company produces two products-Alpha and Beta. Alpha has a high market
share and is produced in bulk. Production of Beta is based on customer orders and is
custom designed. Also, 55% of Beta's cost is shared between design and setup costs,
while Alpha's major portions of costs are direct costs. Alpha is using a single cost pool
to allocate indirect costs. Which of the following statements is true of Aqua?
A) Aqua will overcost Beta's direct costs as it is using a single cost pool to allocate
indirect costs.
B) Aqua will undercost Alpha's indirect costs because alpha has high direct costs.
C) Aqua will overcost Alpha's indirect costs as it is using a single cost pool to allocate
indirect costs.
D) Aqua will overcost Beta's indirect costs because beta has high indirect costs. -
Answer-✅C
/.Product-cost cross-subsidization means that:
A) when one product is overcosted, it results in more than one other product being
overcosted
, B) when a company undercosts more than one of its products, it will overcost more than
one of its other products
C) when a company undercosts one of its products, it will overcost at least one of its
other products
D) when one product is overcosted it results in all other products being overcosted -
Answer-✅C
/.Which of the following has accelerated need for refined cost systems?
A) global monopolies
B) rising prices
C) intense competition
D) a shift toward increased direct costs - Answer-✅C
/.Refining a cost system involves which of the following?
A) classifying as many costs as indirect costs as is feasible
B) creating as many cost pools as possible to capture all costs
C) identifying the activities involved in a process and understanding how those activities
consume resources
D) Seeking an easier and more cost effective way to calculate average costs - Answer-
✅C
/.Which of the following is true of refinement of a costing system?
A) While refining a costing system, companies should identify as many indirect costs as
is economically feasible.
B) A homogeneous cost pool will use multiple cost drivers to allocate costs.
C) It reduces the use of broad averages for assigning the cost of resources to cost
objects.
D) It is likely to yield the most decision-making benefits when direct costs are a high
percentage of total costs. - Answer-✅C
/.Which of the following is a reason that has accelerated the demand for refinements to
the costing system?
A) The declining demand for customized products has led managers to decrease the
variety of products and services their companies offer.
B) The use of product and process technology has led to an increase in indirect costs
and a decrease in direct costs.
C) The increased of automated processes has led to the increase in direct
manufacturing cost leading to a decrease in break even point.
D) The increasing competition in product markets has led to an increase in contribution
margin resulting in a decrease of break even point. - Answer-✅B
/.Johnson Superior Products Inc. produces hospital equipment and the setup
requirements vary from product to product. Johnson produces its products based on
customer orders and uses ABC costing. In one of its indirect cost pools, setup costs and
distribution costs are pooled together. Costs in this pool are allocated using number of
