Exam (elaborations)
FMGT 4210 - Chapter 15_ _Period Cost Application_ Review (1).
- Course
- Bible 10/12
- Institution
- Bible 10/12
FMGT 4210 - Chapter 15_ _Period Cost Application_ Review (1).
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FMGT 4210 - Chapter 15: "Period Cost Application"Review
What are the 4 important benefits provided by careful costing of products and services? -
ANS-1) It will result in more accurate full product pricing.
2) It will improve the budgeting process.
3) It will allow feedback in the form of periodic variance analysis.
4) It enables managers to select the most profitable among existing opportunities.
What type of costs do upstream business activities incur? - ANS-preproduction costs
What type of costs do downstream business activities incur? - ANS-poseproduction costs
What are 4 possible reasons to allocate period costs appropriately? - ANS-* Provide information
for economic decisions.
* Motivate managers and employees.
* Justify either costs or reimbursement internally or externally.
* Measure ASPE/IFRS-compliant income and assets for reports to external parties.
What are the 4 criteria for cost-allocation decisions? - ANS-1) Cause and Effect
2) Benefits Received
3) Fairness or Equity
4) Ability to Bear
Criteria (1) and (2) are superior (in that order), expecially when the purpose of cost allocation is
to provide information for economic decision or to motivate managers and employees.
What are the costs and benefits that must be weighed when designing and implementing their
cost allocations? - ANS-* Costs incurred not only in collecting data, but also taking the taime to
educate managers about cost allocations. The more complex the cost allocations, the higher
these education costs.
* The costs of designing and implementing complex cost allocations are highly visible but the
benefits form using them are difficult to measure.
What are the 2 questions faced by managers when allocating the costs of a support department
to operating departments or divisions? - ANS-1) Should fixed costs of support departments be
allocated to operating divisions?
2) If fixed costs are allocated, should variable and fixed costs be allocated in the same way?
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