Question;Review;Questions and Exercises;Completion Statements;Fill;in the blank(s) to complete each statement.;1.;In a ___ cost pool, all of the costs in the cost pool have the same or a;similar cause-and-effect or benefits-received relationship with the;cost-allocation base.;2.;The reduction in selling price below list selling price in order to encourage;customers to purchase more is called a;3.;A _____ ________ categorizes costs related to customers into different cost;pools on the basis of different types of cost drivers (or cost-allocation;bases) or different degrees of difficulty in determining cause and- effect or;benefits-received relationships.;4.;A __ unit is a hypothetical unit with weights based on the mix of individual;units.;5.;The sales-volume variance subdivides into which two variances? __ ____ and;6.;(Appendix) The direct materials (DM) efficiency variance subdivides into which;two variances? __ and __ __________.;True-False;Indicate;whether each statement is true (T) or false (F).;1. One of the four purposes of cost allocation is to measure income and assets;for reporting to external parties.;2. The fairness criterion is superior to other criteria used for guiding cost-allocation;decisions when the purpose of the allocation is either to provide information for;economic decisions or to motivate managers and other employees.;3. When the degree of homogeneity is greater among costs, more cost pools are required;to explain accurately the differences in how products use the resources of a;company.;4. Customer-profitability analysis often shows that a small percentage of;customers accounts for a large percentage of the company?s operating income.;5. In the customer cost hierarchy, delivery cost for a customer order is a;customer sustaining cost.;6. An unfavorable sales-mix variance arises for an individual product when its;actual sales-mix percentage is less than its budgeted sales-mix percentage.;7. (Appendix) When multiple inputs of direct materials can be combined in;varying proportions within specified limits, they are called substitutable;inputs.;8. (Appendix) An unfavorable direct materials mix variance for an individual;type of direct material arises when its actual mix percentage is less than its;budgeted mix percentage.;Multiple Choice;Select;the best answer to each question. Space is provided for computations after the;quantitative questions.;B;1. (CPA) Of most relevance in deciding how indirect costs should be allocated;to products is the degree of;b.;causality.;C;2. In a customer cost hierarchy, the cost of a sales visit to a customer is;c.;a customer-sustaining cost.;A;3. The following information is for Eucha Corp. for the first quarter of the;current fiscal year;Actual;Results;Static;Budget;Unit;sales;Product X;15,000;40,000;Product Y;65,000;60,000;Total;80,000;100,000;Contribution;margin per unit;Product X;$4 $5;Product Y $3 $2;The;sales-mix variance for both products together is;a.;$51,000 unfavorable.;4. Using the information in question 3, the sales-quantity variance for Product;Y is;5. Using the information in question 3, the amount of the budgeted contribution;margin per composite unit is;6. (Appendix) The following information is for Kershaw Company for last month;Budgeted;direct labor mix at budgeted prices for actual output produced;3,825 skilled hours at $16 per hour;1,275 unskilled hours at $12 per hour;5,100;total hours;Actual;results;4,000 skilled hours at $19 per hour;1,000 unskilled hours at $9 per hour;5,000;total hours;The;direct labor yield variance for both types of labor together is;7. (Appendix) Using the information in question 6, the mix variance for skilled;labor is;Review Exercises;1.;(CMA) Cosmo Inc.?s income statement by segments for November 2011 is as;follows;Total;Mall;Store;Town;Store;Revenues;$200,000;$80,000;$120,000;Variable;costs;116,000;32,000;84,000;Contribution;margin;84,000;48,000;36,000;Direct;fixed costs;60,000;20,000;40,000;Contribution;by store;24,000;28,000;(4,000);Indirect;fixed costs;10,000;4,000;6,000;Operating;income;$ 14,000;$24,000;$(10,000);Additional;information regarding Cosmo?s operations is as follows;?One-fourth of each store?s direct fixed costs will continue;through December 31, 2012, even if either;store;is closed.;?Cosmo allocates indirect fixed costs to each store on the basis;of revenues. These costs are regarded;as;unavoidable.;?Management estimates that closing the Town Store would result in;a 10% decrease in the Mall;Store?s;sales volume, whereas closing the Mall Store would not affect the Town Store?s;sales volume.;?The operating results for November 2011 represent the average;for all months.;a.;Compute the increase/decrease in Cosmo?s monthly operating income for 2012 if;the Town Store is;closed.;b.;Cosmo is considering a promotion campaign at the Town Store that would not;affect the Mall Store.;Compute;the increase/decrease in Cosmo?s monthly operating income in 2012, assuming;annual promotion;costs;at the Town Store are increased by $60,000 and its sales volume increases by;10%.;c.;One-half of Town Store?s revenues are from items sold at variable cost in order;to attract customers;to;the store. Cosmo is considering discontinuing these items, a decision that;would reduce the Town;Store?s;direct fixed costs by 15% and result in the loss of 20% of its remaining;revenues and variable;costs.;This change would not affect the Mall Store. Compute the increase/decrease in;Cosmo?s;monthly operating income for 2012, assuming;the items sold at variable cost are discontinued.;2.;(CMA) Given the following information for Xerbert Company (in thousands);Static Budget for 2008;Actual Results for 2008;Xenox;Xeon;Total;Xenox;Xeon;Total;Units sold;150;100;250;130;130;260;Revenues;$900;$1,000;$1,900;$780;$1,235;$2,015;Variable costs;450;750;1,200;390;975;1,365;Contribution margin;$450;$;250;$;700;$390;$;260;$;650;Fixed costs;Manufacturing;200;190;Marketing;153;140;Customer service;95;90;Total fixed costs;448;420;Operating income;$;252;$;230;a.;Compute the sales-volume variance for both products together.;b.;Compute the sales-mix variance for both products together.;c. Compute the sales-quantity variance for;both products together.
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