15. 19. 20. Suppose that Ligt, inc. produces only two products: A and B. If the new costing system used by the company reveals that product A was undercosted by its previous costing system, then managers at Ligt can conclude that: The previous system traced too many direct costs to products A and B The new costing system is an improvement over the previous costing system Product B was overcosted by the previous costing system ProductA was unprotable under the previous costing system In general, if inventory increases during an accounting period, both variable costing and absorption costing will show losses variable costing will report less operating income than absorption costing variable costing and absorption costing will report the same operating income absorption costing will report less operating income than variable costing When allocating the indirect cost of support departments to operating departments The support departments will typically be overcosted, and the operating departments will typically be undercosted The reciprocal method results in higher estimates of total indirect costs compared to the direct method The direct method leads to less accurate estimates of the resources consumed by operating departments compared to the reciprocal method Total direct costs increase by the amount of support department overhead costs traced to operating departments Compared to other approaches to budgeting Kaizen budgeting is more likely to Push managers to build budgetary slack Motivate employees through progressive, small, and ultimately achievable targets Discourage middle managers by setting unrealistic targets over a medium-term horizon All ofthe above Suppose that luancua, Ltd. completes two jobs in lanuary - X and Y - and uses iob costing. The actual indirect cost rate is equal to 3$, while the budgeted indirect cost rate is equal to 4$. Then The amount of indirect costs allocated to job K under normal costing is going to be higher than under actual costing The amount of indirect costs allocated to job K under normal costing is going to be lower than under actual costing The amount of indirect costs allocated to job X is the same under both normal and actual costing Insufcient information Dusan Manufacturing, Co. produces a single product that sells for $215. Variable costs per unit equal $163. The company expects total xed costs to be $82,127 for the next month at the projected sales level of 1,521 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. One alternative is to spend $11,126 in advertising expenses. What would be the effect of an increase of advertising expenses? Operating income will decrease by $11,12 6 Gross margin will decrease by $1 1,126 Both gross margin and operating will decrease by $11,126 None of the above