Assignment: Scotia Credit Checks produces two styles of credit reports: Individual and Corporate. The difference between the two is the amount of background information and data collection required. The Corporate report uses more skilled personnel because additional checking and data are required. The relevant figures for the year just completed follow: Total support service costs to be allocated are $3,200,000.
Allocation base Individual Corporate
Data purchased $40,000 $80,000
Research hours 24,000 30,000
Interview hours 1,000 10,000
Number of reports 16,000 3,000
Question 1: Which cost-allocation based would the manager of the Individual Department prefer the most?
A) Data purchased
B) Research hours
C) Interview hours
D) Number of reports
Question 2: The manager of the Corporate Report Department would least prefer which method of allocation?
A) Data purchased
B) Research hours
C) Interview hours
D) Number of reports
Question 3: If service costs are allocated according to the number of reports, the service department cost to be allocated to the Individual report department will be:
A) $2,694,737
B) $505,263
C) $1,066,667
D) $290,909
Question 4: If service department costs are allocated by data purchased, the Corporate report department will receive an allocation of:
A) $1,777,778
B) $1,066,667
C) $505,263
D) $2,133,333
Question 5: Using the high-low method, which of the following could be used to calculate the intercept?
A) Total cost at highest cost driver level - (Variable cost per unit times the highest level).
B) Total cost at lowest cost driver level - (Variable cost per unit times the lowest level).
C) Either of the above.
D) Neither of the above.
Question 6: Which of the following represent data problems when using regression or account analysis techniques?
A) Outliers.
B) Inflation.
C) Mismatched time periods.
D) All of the above.
Question 7: Which cost estimation method is based on both past and future data?
A) Engineering method.
B) Regression method.
C) Account analysis method.
D) All of the above.
Question 8: Which of the following would not be a reason that a company would use cost estimation?
A) Determining opportunities for reducing costs without reducing value to customers.
B) Determining how much to pay an employee.
C) Determining a pricing policy to discourage particular customers and attract others.
D) All of the above.
Question 9: Which of the following is not a reason for padding a budget with slack?
A) People often perceive their performance will look better in their superior's eyes if they can "beat the budget".
B) The budget was developed by top management who have no idea of what goes on in the various units of the company.
C) Budgetary slack is often used to cope with uncertainty.
D) Budgetary cost projections often are cut in the resource allocation process.
Question 10: Unfavorable material quantity variances
A) could be caused by normal spoilage.
B) mean that smaller quantity discounts were taken on purchases.
C) mean that more direct materials were used than expected for actual output.
D) mean that less indirect materials were used than expected for actual output.