. The most usefiul allocation basis for the departmental costs of an advertising
ID: 2339829 • Letter: #
Question
. The most usefiul allocation basis for the departmental costs of an advertising campaign for a storewide sale is ikely to be: A. Floor space of each department 8. Relative number of items each department had on sake. C. Proportion of sakes of cach department D. An equal amount of cost for each department E. Number of customers to enter each department 6. What is another name for a service type department? A. operating department B. line department. C. production department D. extemal department E. support department. 7. What are three advantages of activity-based costing over traditional volume-based allocation methods? A. Ease of use, more accurate product costing, and more effective cost control. B. Fewer allocation bases, ease of use, and a direct correlation to production volume C. More accurate product costing, ease of use, less costly to implement D. More accurate product costing, fewer cost objects, and a direct correlation to production volume E. More accurate product costing, more effective cost control, and better focus on the relevant factors for decision making. 8 A cost center is a unit of a business that incurs costs but does not directly generate revenues Which of the following would not be consádered a cost center A. Accounting department B. Purchasing department. C. Research department D. Advertising department E. Al of these could be considered cost centers. 9. A company uses activity-based costing to determine the costs of its three products: A, B, and c The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table ted ost Pool Cost ProductA BI Product C ivity 1 $70,000 6, 9, y 2S45,0007 3 $82,000 What are the activity rates for the three activities under activity based costing? A. (1) $2.00; (2) $3.00; (3) $3.50 B. (1)$3.50;(2) $1.50; (3) $32,80 C. (1) $3.50; (2) $3.00;(3) $16.00 D. (1) $2.00; (2) $1.50, (3) $16.00 E. (1) S2.00; (2) $1.50 (3) $32.80Explanation / Answer
Solution 5:
The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be "Proportion of Sale of each department"
Hence option C is correct.
Solution 6:
Another name of service type department is "Support Department"
Hence option E is correct.
Solution 7:
The three advantages of activity based costing over traditional costing are:
1. More accurate product costing
2. More effective cost control
3. Better focus on the relevant factors for decision making
Hence option E is correct.
Solution 8:
Accounting department, Purchasing department, Research department and advertising department, all are considered as cost centre as these department are not involved directly in generating revenue.
Hence option E is correct.
Solution 9:
Activity rate = Activity cost / Budgeted activity
Activity 1 = $70,000 / 35000 = $2
Activity 2 = $45,000 / 3000 = $1.50
Activity 3 = $82,000 / 5125 = $16
Hence option D is correct.
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