Cost Accounting Quiz

Which of the following customer related costs are NOT economically feasible to trace but are related to a customer?

• the additional cost of selling one more unit to a new customer who has never done business with the firm before

• the direct material costs of a product that a customer has purchased

• the allocation of the cost of travel, lodgings, and meals that result from visiting customers at their locations

• the shipping costs that result from shipping a package by Fed Ex to a customer when the technology allows a direct match of that cost to the direct material and direct labor costs of the product

Which of the following is a reason to gather data, associate revenues with each customer and develop a system of allocating costs to each customer?

• GAAP requirements for external reporting including 10K disclosures

• to assure that highly profitable customers get the appropriate level of care and attention

• ABC systems cannot be implemented without customer-profitability reporting

• to assure that more resources are committed to loss-making customers in an attempt to retain all customers

Segmenting customers as a result of customer profitability analysis would be done by which of the following groupings?

• geography such as state or by zip code

• operating income

• gross margin

• total direct costs

Which of the following classifications would be the most appropriate for the cost of the manager of a retail distribution channel?

• customer-sustaining cost

• distribution-channel cost

• customer batch-level cost

• corporate-sustaining cost

Which of the following classifications would be the most relevant for the costs incurred to process orders?

• customer output unit-level cost

• customer batch-level cost

• customer-sustaining cost

• corporate-sustaining cost

To improve customer profitability, companies should track which of the following?

• only the final invoice price of a sale

• the volume of the products purchased by each customer

• the location of each customer

• the customer profile

Customers making large contributions to the profitability of the company should:

• be treated the same as other customers because all customers are important

• receive a higher level of attention from the company than less profitable customers

• be charged higher prices for the same products than less profitable customers

• not be offered the volume-based price discounts offered to less profitable customers

To reduce distribution-channel costs, a company could:

• improve the efficiency of the ordering process

• make fewer customer visits

• eliminate distribution to retailers and only service wholesalers

• reduce product-handling costs

Price discounts are most influenced by:

• the volume of product purchased

• the prime cost of production

• the operational budget

• the contribution -margin per unit

Managers use a customer-profitability analysis report to ensure that:

• unpaid invoices are categorized according to age by due date

• costs related to customers are segmented into different cost pools on the basis of different types of cost drivers or cost-allocation bases

• customers making large contributions to the operating income of a company receive a high level of attention from the company

• cost allocation of indirect cost is in place