Why do managers care about the costs allocated to their individual departments?

A) Unit's performance has a higher stake in managers' performance evaluations compared to overall firm performance.

B) Cautiously chosen allocation methods can dissuade undesired behavior.

C) All of the other answer choices are the reasons why managers care about the costs allocated to their individual departments.

D) Wisely chosen allocation methods can induce desired behavior.

E) The cost allocated plays a significant role in the department's reported profit

To comply with GAAP, which of the following costs are allocated to units produced?

A) All Variable costs.

B) All fixed costs.

C) All Variable manufacturing costs and fixed period costs.

D) All manufacturing costs and period costs.

E) Variable manufacturing costs and fixed manufacturing costs.

The following unit information is available for the Company for 2023:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Production	7,000	11,000	9,000	13,000
Sales	6,000	12,000	10,000	12,000

For the entire year of 2023:

A) It cannot be determined with the information provided

B) Net operating income will be greater under absorption costing

C) Net operating income will be the same under either method

D) Net operating income will be greater under variable costing

The ABC Company started the month of April with no inventory. During the month, it produced 80,000 units but only sold 60,000 units. Costs incurred were:

Direct materials	$20,000
Direct labor	$35,000
Variable manufacturing overhead	$19,000
Variable selling & administrative	$15,000
Fixed manufacturing overhead	$20,000
Fixed selling & administrative	$12,000
Total	$121,000

If the company uses absorption costing, the value in the finished goods inventory account at the end of April will be:

A) $18,500

B) $5,000

C) $23,500

D) $27,250

E) $30,250

ABC Fitness Equipment produces a dumbbell set with a selling price of $1,000 per set. The costs to produce each set include: direct materials, $400; direct labor, $100; and variable manufacturing overhead, $100. The fixed manufacturing overhead per year is $12,000. There is no beginning inventory. If ABC produces 250 sets and sells 210 sets, and income under variable costing is $42,500, how much is income under absorption costing?

A) $44,788

B) $96,500

C) $48,788

D) $40,580

E) $44,420

XYZ Fitness Equipment produces a dumbbell set with a selling price of $1,000 per set. The costs to produce each set include: direct materials, $400; direct labor, $100, and variable manufacturing overhead, $100. The fixed manufacturing overhead per year is $12,000. There is no beginning inventory. If XYZ produces 250 sets and sells 210 sets, how much is operating income under variable costing? Assume no taxes.

A) $72,000

B) $88,000

C) $84,000

D) $100,000

E) $73,920

Administrative costs are currently split equally among 4 different product lines at DM Wit Company. To encourage the managers of each of the product lines to implement a new material waste policy aimed at reducing materials used in manufacturing, which of the following would best achieve this goal?

A) Allocating administrative costs based on the number of labor hours used in manufacturing.

B) Allocating administrative costs based on the amount of scrap produced from manufacturing.

C) Allocating administrative costs based on the cost per unit of materials used in production.

D) Allocating administrative costs based on the speed of production.

The following information is available for the XYZ Co., which produces two types of high-end coffee makers.

	Type 1	Type 2	Total
Sales volume (units)	300	400	700
Revenue	$70,000	$78,000	$148,000
Variable Costs:
	Direct materials	$6,000	$8,000	$14,000
	Direct labor	$15,000	$20,000	$35,000
	Contribution Margin	$49,000	$50,000	$99,000
Fixed Costs:
	Manufacturing			$30,000
	Administrative			$20,000
	Profit Before Tax			$49,000

To derive product line profitability, management feels that the fixed manufacturing costs should be allocated based on direct labor costs and fixed administrative costs should be allocated based on units sold. The amount of fixed manufacturing costs and fixed administrative costs that should be allocated to the Type 1 coffeemaker is:

A) $11,624 and $8,234, respectively

B) $12,857 and $8,571, respectively

C) $7,957 and $3,673, respectively

D) $17,143 and $11,428, respectively

E) $14,641 and $9,374, respectively