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Question 1
Free
Multiple Choice

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

Choose correct answer/s
A

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

B

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

C

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

D

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

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Question 2
Free
Multiple Choice

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?

Choose correct answer/s
A

GAAP requirements for external reporting including 10K disclosures

B

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

C

ABC systems cannot be implemented without customer-profitability reporting

D

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

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Question 3
Free
Multiple Choice

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

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A

geography such as state or by zip code

B

operating income

C

gross margin

D

total direct costs

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Question 4
Free
Multiple Choice

Which of the following classifications would the cost of visiting customers would most likely fit into?

Choose correct answer/s
A

customer output unit-level cost

B

customer batch-level cost

C

customer-sustaining cost

D

corporate-sustaining cost

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Question 5
Free
Multiple Choice

Which of the following classifications would costs incurred to handle each unit sold fit into?

Choose correct answer/s
A

customer output unit-level cost

B

customer batch-level cost

C

customer-sustaining cost

D

corporate-sustaining cost

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Question 6
Multiple Choice

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

Choose correct answer/s
A
customer-sustaining cost
B
distribution-channel cost
C
customer batch-level cost
D
corporate-sustaining cost
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Question 7
Multiple Choice

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

Choose correct answer/s
A
customer output unit-level cost
B
customer batch-level cost
C
customer-sustaining cost
D
corporate-sustaining cost
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Question 8
Multiple Choice

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

Choose correct answer/s
A
only the final invoice price of a sale
B
the volume of the products purchased by each customer
C
the location of each customer
D
the customer profile
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Question 9
Multiple Choice

Customers making large contributions to the profitability of the company should ________ .

Choose correct answer/s
A
be treated the same as other customers because all customers are important
B
receive a higher level of attention from the company than less profitable customers
C
be charged higher prices for the same products than less profitable customers
D
not be offered the volume-based price discounts offered to less profitable customers
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Question 10
Multiple Choice

To reduce distribution-channel costs, a company could ________ .

Choose correct answer/s
A
improve the efficiency of the ordering process
B
make fewer customer visits
C
eliminate distribution to retailers and only service wholesalers
D
reduce product-handling costs
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Question 11
Multiple Choice

Price discounts are influenced by ________ .

Choose correct answer/s
A
the volume of product purchased
B
the prime cost of production
C
the operational budget
D
the contribution -margin per unit
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Question 12
Multiple Choice

Managers use a customer-profitability analysis report to ensure that ________ .

Choose correct answer/s
A
unpaid invoices are categorized according to age by due date
B
costs related to customers are segmented into different cost pools on the basis of different types of cost drivers or cost-allocation bases
C
customers making large contributions to the operating income of a company receive a high level of attention from the company
D
cost allocation of indirect cost is in place
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Question 13
Multiple Choice

Which of the following illustrates a purpose for allocating costs to cost objects?

Choose correct answer/s
A
to provide information for cost-control and pricing decisions
B
to provide information to customers
C
to determine marginal cost
D
to measure capital expenditure
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Question 14
Multiple Choice

How is value-engineering relevant to a well done customer profitability analysis, especially when an ABC system is utilized to calculate customer profits (or losses)?

Choose correct answer/s
A
ABC will satisfy GAAP and provide input into value-engineering decisions
B
ABC offers the opportunity to analyze the costs of activities assigned to each customer and to determine if improvements can be made to optimize profits
C
customer profitability analysis will reveal that the cost drivers of less profitable customers are the problem and that value-engineering is the solution
D
Only value-added activities will be shown in the cost analysis and thus all other costs will be eliminated via value-engineering
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Question 15
Multiple Choice

Which purpose of cost allocation is used to encourage sales representatives to push high-margin products or services?

Choose correct answer/s
A
to provide information for economic decisions
B
to motivate managers and other employees
C
to justify costs or compute reimbursement
D
to measure income and assets for reporting to external parties
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Question 16
Multiple Choice

Which of the following classifications of costs in the customer-cost hierarchy would be most appropriate for the costs of activities to sell each unit to a customer?

Choose correct answer/s
A
customer-sustaining costs
B
division-sustaining costs
C
customer output unit-level costs
D
distribution-channel costs
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Question 17
Multiple Choice

________ categorizes costs related to customers into different cost pools on the basis of either different classes of cost drivers or different degrees of difficulty in determining the cause-and-effect (or benefits-received) relationships.

Choose correct answer/s
A
Customer-profitability analysis
B
Customer revenues
C
Customer cost hierarchy
D
Price discounting
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Question 18
True/False

To analyze customer profitability, corporate-sustaining costs should be allocated to customers.

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True
False
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Question 19
True/False

Costs of activities related to a group of units sold to a customer is termed as customer batch-level costs.

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True
False
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Question 20
True/False

A price discount is the reduction in selling price below list selling price to encourage customers to
purchase more quantities.

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True
False
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