Test 1 DSM review questions

Question 1

Which of the following is a denominator reason for using longer periods to calculate the indirect-cost rate?
A. Longer periods avoid dissemination of monthly fixed indirect costs over fluctuating levels of monthly output and fluctuating quantities of the cost-allocation base.

B. Longer periods allow for pooling indirect costs annually and computing one annual indirect cost rate.

C. Levels of total indirect costs are affected by nonseasonal erratic costs.

D. The shorter the time period the greater influence of seasonal patterns on costs.

Answer 1

A. Longer periods avoid dissemination of monthly fixed indirect costs over fluctuating levels of monthly output and fluctuating quantities of the cost-allocation base.

Question 2

What is the difference between actual costing systems and normal costing systems?

Answer 2

Actual costing systems use actual quantities of inputs for tracing indirect costs and normal costing systems use budgeted quantities of inputs for tracing indirect costs.