CPP Costing and Profitability Analysis 2

Question 1

A company uses activity-based costing (ABC). Which of the following is the BEST cost driver for a machine setup activity?

Accepted Answer

Number of setups

Answer

Number of setups directly drives setup costs in ABC, making it the most accurate driver for that cost pool.

Question 2

Which costing method treats fixed manufacturing overhead as a period cost rather than a product cost?

Accepted Answer

Variable costing

Answer

Variable (direct) costing expenses fixed manufacturing overhead in the period incurred, while absorption costing includes it in product cost.

Question 3

A firm's operating profit margin is 12% and its total asset turnover is 2.5. What is its return on assets (ROA)?

Accepted Answer

30%

Answer

ROA = Operating Profit Margin × Asset Turnover = 12% × 2.5 = 30%.

Question 4

When calculating the cost-to-serve for a customer segment, which of the following costs should be INCLUDED?

Accepted Answer

Order processing and delivery costs specific to the segment

Answer

Cost-to-serve includes only the incremental costs directly attributable to serving a specific customer or segment.

Question 5

A product has a selling price of $80, variable cost of $50, and allocated fixed overhead of $20. At what minimum price should the company accept a special one-time order if capacity is available?

Accepted Answer

Any price above $50

Answer

With available capacity, only variable costs are relevant for a special order; any price above $50 contributes positively to profit.

(CPP) Certified Pricing Professional Practice Test

(CPP) Certified Pricing Professional Practice Test

CPP Costing and Profitability Analysis 2