TCO 9) To guide cost allocation decisions, the benefits-received criterion (Poin
ID: 2353002 • Letter: T
Question
TCO 9) To guide cost allocation decisions, the benefits-received criterion (Points : 3)may use an allocation base of division revenues to allocate advertising costs.
is the primarily used criterion in activity-based costing.
results in subsidizing products that are not profitable.
generally uses the cost driver as the cost allocation base.
2. (TCO 9) Which cost-allocation criterion is superior when making an economic decision? (Points : 3)
Fairness-or-equity criterion
Ability-to-bear criterion
Cause-and-effect criterion
All of the above
3. (TCO 9) Some companies only allocate corporate costs to divisions that are (Points : 3)
direct costs.
planned and under the control of division managers.
output unit-level costs.
perceived as causally related to division activities.
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.
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. Which corporate costs should be allocated to divisions? (Points : 3)
Variable costs
Fixed costs
Neither fixed nor variable costs
Both fixed and variable costs
6. (TCO 10) The capital budgeting method which calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present using the required rate of return is the (Points : 3)
accrual accounting rate-of-return method.
net-present-value method.
payback method.
sensitivity method.
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
8. (TCO 10) The definition of an annuity is (Points : 3)
similar to the definition of a life insurance policy.
a series of equal cash flows at intervals.
an investment product whose funds are invested in the stock market.
Both 1 and 2 are correct.
9. (TCO 10) In situations where the required rate of return is not constant for each year of the project, it is advantageous to use (Points : 3)
sensitivity analysis.
the net-present-value method.
the adjusted rate-of-return method.
the internal rate-of-return method.
10. (TCO 10) The Zeron Corporation wants to purchase a new machine for its factory operations at a cost of $950,000. The investment is expected to generate $350,000 in annual cash flows for a period of four years. The required rate of return is 14%. The old machine can be sold for $50,000. The machine is expected to have zero value at the end of the four-year period. What is the net present value of the investment? Would the company want to purchase the new machine? Income taxes are not considered. (Points : 3)
$119,550; Yes
$326,750; No
$1,019,550; Yes
$69,550; No
Explanation / Answer
TCO 9) To guide cost allocation decisions, the benefits-received criterion (Points : 3)
may use an allocation base of division revenues to allocate advertising costs.
is the primarily used criterion in activity-based costing.
results in subsidizing products that are not profitable.
generally uses the cost driver as the cost allocation base.
2. (TCO 9) Which cost-allocation criterion is superior when making an economic decision? (Points : 3)
Fairness-or-equity criterion
Ability-to-bear criterion
Cause-and-effect criterion
All of the above
3. (TCO 9) Some companies only allocate corporate costs to divisions that are (Points : 3)
direct costs.
planned and under the control of division managers.
output unit-level costs.
perceived as causally related to division activities.
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.
6. (TCO 10) The capital budgeting method which calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present using the required rate of return is the (Points : 3)
accrual accounting
rate-of-return method.
net-present-value method.
payback method.
sensitivity method.
9. (TCO 10) In situations where the required rate of return is not constant for each year of the project, it is advantageous to use (Points : 3)
sensitivity analysis.
the net-present-value method.
the adjusted rate-of-return method.
the internal rate-of-return method.
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