Criteria for cost allocation decisions

Quiz

Question 1.1. (TCO 9) To guide cost allocation decisions, the fairness or equity criterion is (Points : 3)

the criterion often cited in government contracts. superior when the purpose of cost allocation is for economic decisions. used more frequently than the other criteria. the primary criterion used in activity-based costing.

Question 2.2. (TCO 9) Which cost-allocation criterion is MOST likely to subsidize poor performers at the expense of the best performers? (Points : 3)

Cause-and-effect criterion Ability-to-bear criterion Fairness-or-equity criterion Benefits-received criterion

Question 3.3. (TCO 9) The MOST likely reason for allocating all corporate costs to divisions include that (Points : 3)

divisions receive benefits from all corporate costs. division managers make decisions that ultimately control corporate costs. the hierarchy of costs promotes cost management. it is best to use multiple cost objects.

Question 4.4. (TCO 9) Corporate administrative costs allocated to a division cost pool are MOST likely to be (Points : 3)

batch-level costs. product-sustaining costs. output unit-level costs. facility-sustaining costs.

Question 5.5. (TCO 9) The Hassan Corporation has an electric mixer division and an electric lamp division. Of a $20,000,000 bond issuance, the electric mixer division used $14,000,000 and the electric lamp division used $6,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year. What amount of interest costs should be allocated to the electric mixer division? (Points : 3)

$4,200,000 $14,000,000 $1,050,000 $450,000

Question 6.6. (TCO 10) All of the following are methods that aid management in analyzing the expected results of capital budgeting decisions EXCEPT the (Points : 3)

payback method. future-value cash-flow method. discounted cash-flow method. accrual accounting rate-of-return method.

Question 7.7. (TCO 10) Assume your goal in life is to retire with $1 million. How much would you need to save at the end of each year if investment rates average 9% and you have a 15-year work life? (Points : 3)

$41,286 $37,853 $25,554 $34,059

Question 8.8. (TCO 10) If the net present value for a project is zero or positive, this means that the (Points : 3)

project should be accepted. project should not be accepted. expected rate of return is below the required rate of return. Both 1 and 3 are correct.

Question 9.9. (TCO 10) A "what-if" technique that examines how a result will change if the original predicted data are not achieved or if an underlying assumption changes is called (Points : 3)

adjusted rate-of-return analysis. internal rate-of-return analysis. sensitivity analysis. net-present-value analysis.

Question 10.10. (TCO 10) Upper Darby Park Department is considering a new capital investment. The following information is available on the investment. The cost of the machine will be $150,000. The annual cost savings if the new machine is acquired will be $40,000. The machine will have a five-year life, at which time the terminal disposal value is expected to be $20,000. Upper Darby Park Department is assuming no tax consequences. If Upper Darby Park Department has a required rate of return of 10%, which of the following is closest to the present value of the project? (Points : 3)

$1,632 $150,000 $14,060 $12,418