foChapter 06 Testbank

Student: ___________________________________________________________________________

1. Service organisations are characterised by:

i. intangible outputs
ii. zero inventories
iii. high labour costs 
 

A. i and iii

B. i and ii
C.  ii and iii
D. ii
i
 
2. Service costs include:
i. design
ii. production
iii. purchasing 
 

A. ii and iii

B. i and iii
C.  i and ii
D. i
i
 
3. Service entity costs can be classified as: 
 

A. manufacturing/non-manufacturing
B. production/non-production
C.  direct/indirect
D. upstream/downstream
 
4. The value chain for a merchandising entity is most likely to include which of the following costs. 
 

A. Marketing
B. Design
C.  Research
D. Conversion
 
5. Travel agencies would be classified as: 
 

A. mass services
B. wholesaler
C.  retailer
D. professional service
 
6. Auto repairers would be classified as: 
 

A. mass services
B. wholesaler
C.  service shop
D. professional service
 
7. Car hire companies would be classified as: 
 

A. mass services
B. service shop
C.  retailer
D. professional service
 
8. Professional entities are likely to use: 
 

A. process costing
B. product costing
C.  job costing
D. operational costing
 
9. Job costing for service entities applies when: 
 

A. customer contact is low

B. there is significant back office involvement
C.  the number of services produced is low
D. the number of services produced is high
 
10. Process costing for service entities applies when: 
 

A. customer contact is low

B. the primary input is labour
C.  the number of services produced is not very high
D. there is a high level of discretion in service production
 
11. An entity where professional labour is $60 000 and all other costs are $24 000, has a predetermined overhead rate per labour
dollar of: 
 

A. $2.50
B. 0.45c
C.  0.40c
D. 0.50c
 
12. Overhead rates developed for service organisations usually include:
i. upstream costs
ii. downstream costs
iii. production costs 
 

A. i
B. i
i
C.  i and ii
D. i, ii and iii
 
13. The accuracy of service costs for the categories of (i) professional services, (ii) service shops and (iii) mass services is low,
medium or high. For each service category (i), (ii) and (iii), it is: 
 

A. high, low, low

B. low, medium, low
C.  low, high, low
D. high, medium, low
 
14. The complexity of service costs for the categories of (i) professional services, (ii) service shops and (iii) mass services is low,
medium or high. For each service category (i), (ii) and (iii), it is: 
 

A. high, low, low

B. low, medium, low
C.  low, high, low
D. high, medium, low
 
15. The costs of services may be estimated as:
i. a basis of setting prices
ii. a basis to determine which services to promote
iii. a basis of cost control
iv. an alternative to actual cost analysis 
 

A. i, ii, iii and iv

B. i, ii and iii
C.  ii, iii and iv
D. i, iii and iv
 
16. Service costs incur indirect costs, and the basis of allocating indirect costs requires the identification of: 
 

A. cost centres
B. responsible departments
C.  cost drivers
D. service products
 
17. A medical practice bulk billing for patient services does not usually cost specific services because:
i. it does not control service—product mix
ii. it cannot control costs
iii. it does not determine prices 
 

A. ii and iii

B. i and ii
C.  i and iii
D. i, ii and iii
 
18. Service product costs are inaccurate in mass service operations because of the: 
 

A. difficulty of identifying cost drivers

B. high level of variable costs
C.  high level of fixed costs
D. low level of fixed costs
 
19. Non-repetitive services for retailers can be more appropriately costed using: 
 

A. job costing
B. process costing
C.  hybrid costing
D. activity-based costing
 
20. Back office is a term used to identify activities where: 
 

A. staff lie on their backs all day

B. staff do not come into direct contact with customers
C.  staff have no interest in customers while there
D. access is only possible through the back doo.
 
21. Front office is a term used to identify activities where: 
 

A. staff avoid customers

B. customers have to wait to be served
C.  staff seek to satisfy customer requirements
D. the office faces the street
 
22. A motor vehicle spare parts store is classified as: 
 

A. a service shop

B. a mass service
C.  a retailer
D. a wholesaler
 
23. Which of the following characteristics do merchandisers have?
i. They trade in physical products.
ii. They do not hold inventories.
iii. They purchase goods for resale.
iv. Their outputs have low customisation. 
 

A. All the given answers

B. i, ii and iii
C.  i, iii and iv
D. ii, iii and iv
 
24. The value chain for a service entity includes:
i. design
ii. purchasing
iii. marketing
iv. distribution 
 

A. i, ii and iv
B. ii and iii
C.  i and iii
D. i, ii and iii
 
25. The value chain for a merchandising entity includes:
i. design
ii. purchasing
iii. marketing
iv. distribution 
 

A. i and ii
B. ii, iii and iv
C.  ii and iv
D. i, ii and iii
 
26. Downstream costs for a service entity include:
i. design
ii. research and development
iii. distribution
iv. customer support 
 

A. i
B. i and ii
C.  i, ii and iii
D. i
v
 
27. Downstream costs for a merchandising entity include:
i. design
ii. research and development
iii. distribution
iv. customer support 
 

A. iii and iv
B. i and ii
C.  i, iii and iv
D. ii, iii and iv
 
28. Upstream costs for a merchandising entity include:
i. design
ii. research and development
iii. distribution
iv. customer support 
 

A. iii and iv
B. i and iii
C.  i, ii and iii
D. None of the given answers
 
29. Upstream costs for a service entity include:
i. design
ii. research and development
iii. distribution
iv. customer support 
 

A. ii and iii

B. i and iv
C.  i and ii
D. ii and iv
 
30. In an accounting practice, wages paid to audit clerks are classified as: 
 

A. customer support costs

B. direct labour costs
C.  support services costs
D. indirect costs
 
31. In a fast food outlet, the cost of advertising is classified as: 
 

A. design
B. marketing
C.  production/delivery
D. customer support
 
32. Which of the following statements are false?
i. Professional entities provide standardised service.
ii. Professional entities provide customised service.
iii. Mass service entities provide standardised service.
iv. Mass service entities provide customised service. 
 

A. i and iv
B. ii and iv
C.  iii and iv
D. i and ii
 
33. Which of the following statements are true? 
 

A. Professional service entities employ process costing.

B. Mass service entities employ job costing.
C.  Service shops generally employ hybrid costing.
D. Merchandising entities employ job costing for customer services.
 
34. An architectural entity is likely to base its service costing on: 
 

A. activity-based costing
B. process costing
C.  job costing
D. hybrid costing
 
35. If the direct labour is 10 000 hours at $12 per hour and all other costs are $240 000, what is the overhead rate per hour in
dollars? 
 

A. $2
B. $20
C.  $24
D. $36
 
36. What is the charge rate for engineers if direct labour is $30 per hour and the overhead is calculated at 60 per cent of direct
labour? 
 

A. $18
B. $30
C.  $36
D. $48
 
37. If the engineer worked for 20 hours on a job, Z, and the rates were overhead 125 per cent on direct labour cost and the direct
labour rate was $25 per hour, what is the total cost of the job? 
 

A. $500
B. $625
C.  $1000
D. $1125
 
38. Underapplied and overapplied overhead is not usually required to be adjusted in service costing systems. Why? 
 

A. It is immaterial.
B. The costing system is not integrated with the accounting system.
C.  Underapplied and overapplied overhead has no impact on decision making.
D. It does not affect the accuracy of the service costs.
 
39. Which of the following characteristics apply to service organisations?
i. They produce intangible outputs.
ii. Services cannot be stored.
iii. They purchase goods for sale.
iv. Services are consumed as they are produced. 
 

A. i, ii and iv
B. ii, iii and iv
C.  i, ii and iii
D. All of the given answers
 
40. Which of the following characteristics apply to merchandising organisations?
i. They purchase goods for sale.
ii. Outputs can be stored.
iii. They produce intangible outputs.
iv. Services are consumed as they are produced. 
 

A. i and iii

B. ii and iii
C.  i and ii
D. i and iv
 
41. Which of the following cost classifications do not apply to service organisations?
i. Direct/indirect
ii. Fixed/variable
iii. Production/non-production
iv. Controllable/uncontrollable 
 

A. i and ii
B. i
i
C.  ii
i
D. iii and iv
 
42. Which of the following does the cost of inventories in a merchandising entity includes?
i. Purchase price of goods
ii. A deduction for all trade discounts
iii. The cost of transport to the entity
iv. Labour cost of customer service personnel 
 

A. All of the given answers

B. i, ii and iii
C.  ii iii and
iv
D. i, ii and iv
 
43. Which of the following are repetitive services for a retail hardware store? 
 

A. Special delivery services

B. Check-out services
C.  Advice to customers on the use of equipment
D. Processing customer complaints
 
44. Mass service entities are characterised by:
i. high contact time
ii. high levels of customisation
iii. low levels of discretion
iv. front office orientation 
 

A. i
B. ii and iv
C.  ii
i
D. None of the given answers
 
45. Professional services are characterised by:
i. high contact time
ii. high levels of customisation
iii. low levels of discretion
iv. front office orientation 
 

A. i, ii and iii

B. ii, iii and iv
C.  i, ii and iv
D. None of the given answers
 
46. Which of the following does the value chain for a service shop include?
i. Design
ii. Customer support
iii. Purchasing
iv. Production/delivery 
 

A. ii and iii

B. i and iv
C.  i, ii and iv
D. ii, iiii and
iv
 
47. Which of the following does the value chain for a merchandising entity include?
i. Design
ii. Customer support
iii. Purchasing
iv. Production/sales transaction 
 

A. i, ii and iii

B. ii, iii and iv
C.  i and iv
D. iii and iv
 
48. Which type of costing for their services are mass service entities likely to use? 
 

A. Job costing
B. Process costing
C.  Activity-based costing
D. Hybrid costing
 
49. Hybrid costing of services is appropriate where:
i. there is significant front office involvement
ii. equipment is a key input
iii. there is no discretion in service production
iv. there is a very low number of services produced 
 

A. i
B. ii and iii
C.  iii and iv
D. None of the given answers
 
50. A professional audit firm charged juniors at $50 per hour, seniors at $200 per hour and the overhead rate for both was 100 per
cent on direct labour. The firm added 5 per cent on total cost to arrive at a fee to be charged. If a job took 10 junior hours and 2
senior hours, what was the total cost? 
 

A. $800
B. $1090
C.  $1890
D. $1800
 
51. Which of the following statements regarding the service industry and/or the application of management accounting techniques to
the service industry is incorrect? 
 

A. Many of the techniques used in manufacturing firms can be adapted to suit service industries.
B. Resources used in all service firms are predominantly variable.
C.  Direct materials are frequently a comparatively small part of the total cost.
D. Activity based costing is not applicable to service industries.
 
52. Which of the following statements regarding the service industry and/or the application of management accounting techniques to
the service industry is incorrect? 
 

A. Service output is much more difficult to define than manufacturing output.

B. Many of the activity measures chosen for service firms tend to be different from those chosen by manufacturing firms.
C.  Firms in the service industry should use process costing systems rather than job costing systems.
D. Many service firms use a hybrid costing system.
 
53. The realisation rate for a firm equals: 
 

A. the firm's chargeout rate/industry average chargeout rate

B. the industry average chargeout rate/firm's chargeout rate
C.  the firm's billing system fee/actual fee charged
D. the actual fee charged/the firm's billing system fee
 
54. Which of the following statements best completes the following sentence? ‘A realisation rate below 100 per cent indicates that
the firm …' 
 

A. has been unable to earn its required profit margin.

B. has been inefficient in the provision of its service.
C.  has set chargeout rates too high.
D. has set chargeout rates too low.
 
55. Which of the following correctly describes the way firms would set their chargeout rates per billable hour? 
 

A. Rates are set to cover costs.

B. Rates are set to match competitors' rates.
C.  Rates are set in line with the profession's recommendation.
D. Any or all of the given answers.
 
56. Which of the following statements is most correct with respect to chargeout rates? 
 

A. A chargeout rate is always set to cover the cost of labour and overheads and the required profit margin.
B. If the firm does not base its chargeout rate on costs, it will not survive.
C.  A chargeout rate is typically set to cover costs of materials, labour and overhead only.
D. A chargeout rate is typically set to cover costs, but may be varied in the short term to match competitors' actions.
 
57. Which of the following descriptions best explains the difference between a billing system and a costing system for a service
firm? 
 

A. A costing system accumulates the amounts that the service costs the firm to provide.
B. A billing system estimates the fees to be charged to the client for the service based on chargeout rates per billable hour.
C.  A billing system accumulates the amounts that the client is to be charged for the service rather than the costs of the service.
D. A billing system estimates the fees to be charged to the client for the service based on chargeout rates per billable hour AND
a billing system accumulates the amounts that the client is to be charged for the service rather than the costs of the service.
 
58. Which of the following statements describe a difference between the value chain of a service firm and the value chain of a
merchandising firm? 
 

A. Human resource as a support activity only appears in a service firm value chain.
B. Research and development activity only appears in a service firm value chain.
C.  Marketing only appears in a merchandising firm value chain.
D. Customer support only appears in a service firm value chain.
 
59. Which of the following is NOT a description of a mass service provider? 
 

A. It has a high number of standardised services.

B. It has some customisation of services, with mostly repetitive processes.
C.  Employees have very little contact time with customers, with the main production processes happening in the back office.
D. Equipment is a key input, with emphases on minimising discretion by employees
 
60. Jane Maxwell is a financial planner at Trifle Consulting. Jane's annual salary (including on-costs) is $100 000. It is estimated she
works 37 hours a week and 45 weeks per year (the other weeks relate to annual leave and public holidays). She also spends 100
hours a year on non-client related work, including administrative duties (30 hours), attending training (60 hours) and idle time
(10 hours). To cover both overhead costs and profit, Trifle Consulting requires a margin of 30 per cent of labour cost when
calculating billable rate. What is Jane's charge out rate per billable hour (rounded to nearest dollar)? 
 

A. $83
B. $78
C.  $64
D. $60
 
61. When calculating billable hours, which of the following should be included?
i the number of hours a employee has available to service customers
ii the number of hours a employee spends on training that is related to improving customer services
iii annual leave and sick leave 
 

A. i only
B. i and ii
C.  i and iii
D. i, ii and iii
 
62. Jane Maxwell is a financial planner at Trifle Consulting. Her estimated salary cost per billable hour is $100. The estimated
overhead cost per professional labour dollar for Trifle Consulting is 20 per cent and the required profit margin is 40 per cent of
cost. What is Jane's charge out rate per billable hour? 
 

A. $100
B. $120
C.  $140
D. $168
 
63. The realisation rate is: 
 

A. the ratio of non-client work related labour cost to client work related labour cost
B. the non-client work related professional labour cost as a percentage of the professional's annual salary
C.  the professional labour cost as a percentage of the professional's annual salary
D. the final fee charged to the client as a percentage based on the firm's charge out rate
 
64. Which of the following items may be included in a service firm's overhead cost?
i upstream costs such as research and development
ii downstream costs such as marketing
iii professional labour costs 
 

A. i only
B. i and ii
C.  i and iii
D. i, ii and iii
 
65. Net realisable value of inventory refers to: 
 

A. estimated selling price of the inventory

B. estimated selling price of the inventory less estimated costs of completion
C.  estimated selling price of the inventory less estimated costs of completion and the estimated costs necessary to make the sale
D. estimated cost of acquiring the inventory
 
66. For non-profit entities that are also merchandisers, inventory is valued at: 
 

A. lower of cost and current replacement cost

B. lower of cost and net realisable cost
C.  lower of cost and estimated selling price of the inventory
D. net reliable cost
 
67. A personal trainer working for the local health club is providing health advice to one of the gym's customers. This activity relates
to the health club's: 
 

A. Front office
B. Back office
C.  Communication office
D. Customer service office
 
68. Implementing service costing
What are the factors likely to influence a firm in the decision to implement service costing? 
 

 
69. Underapplied/overapplied overhead
How are underapplied and overapplied overhead dealt with in service industries? 
 

 
70. Cost of goods in merchandising entities
What costs should be included in the cost of goods in merchandising firms? 
 

 
71. The costs and benefits associated with service costing are influenced by the complexity of the costing system, the accuracy of the
service cost information and the relevance of service cost information to managing resources and creating value. 
 
True    False
 
72. According to the accounting standards, the cost of inventories should include all costs incurred in getting the inventory to the
point where it can be sold as intended. 
 
True    False
 
73. Support processes in the service firm value chain include human resources and customer support. 
 
True    False
 
74. The mass services do not have high contact time or high customisation. 
 
True    False
 
75. In a merchandising business, purchases can be calculated by taking the cost of goods sold minus the cost of beginning inventory
plus the cost of ending inventory. 
 
True    False
 
76. Service businesses wanting to monitor efficiency and plan resource requirements will generally maintain information about
service costs. 
 
True    False
 
77. Professional service firms will often use a billing system that is based on chargeout rates per billable hour. 
 
True    False
 
78. A financial planning business will generally consume three types of resources: overhead costs, direct material costs and
professional labour costs. 
 
True    False
 
79. The production environment of a service shop includes extensive contact with the customer and the number of services produced
is relatively low. 
 
True    False
 
80. Fixed costs can be classified further as either committed or discretionary. 
 
True    False
 
 Chapter 06 Testbank Key
 
1. Service organisations are characterised by:
(p. 232) i. intangible outputs
ii. zero inventories
iii. high labour costs 
 

A.  i and iii

B.  i and ii
C.  ii and iii
D.  ii
i
 
AACSB: Reflective
Difficulty: Easy
Learning Objective: 06-01 Describe the features of service organisations and explain how they differ from manufacturers
 
2. Service costs include:
(p. 232) i. design
ii. production
iii. purchasing 
 

A.  ii and iii

B.  i and iii
C.  i and ii
D.  i
i
 
AACSB: Reflective
Difficulty: Easy
Learning Objective: 06-01 Describe the features of service organisations and explain how they differ from manufacturers
 
3. Service entity costs can be classified as: 
(p. 234)  

A.  manufacturing/non-manufacturing
B.  production/non-production
C.  direct/indirect
D.  upstream/downstream
 
Difficulty: Easy
Learning Objective: 06-02 Apply cost classifications, such as fixed and variable costs, direct and indirect costs and controllable and uncontrollable costs, to analyse
costs in service organisations
 
4. The value chain for a merchandising entity is most likely to include which of the following costs. 
(p. 236)  

A.  Marketing
B.  Design
C.  Research
D.  Conversion
 
Difficulty: Easy
Learning Objective: 06-04 Describe the value chain of retailers and wholesalers
 
5. Travel agencies would be classified as: 
(p. 238)  

A.  mass services

B.  wholesaler
C.  retailer
D.  professional service
 
AACSB: Reflective
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-05 Use the service firm continuum to describe the production environments of various types of service entities, ranging from professional
service firms to service shops and mass service businesses
 
6. Auto repairers would be classified as: 
(p. 238)  

A.  mass services

B.  wholesaler
C.  service shop
D.  professional service
 
AACSB: Reflective
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-05 Use the service firm continuum to describe the production environments of various types of service entities, ranging from professional
service firms to service shops and mass service businesses
 
7. Car hire companies would be classified as: 
(p. 238)  

A.  mass services

B.  service shop
C.  retailer
D.  professional service
 
AACSB: Reflective
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-05 Use the service firm continuum to describe the production environments of various types of service entities, ranging from professional
service firms to service shops and mass service businesses
 
8. Professional entities are likely to use: 
(p. 240)  

A.  process costing

B.  product costing
C.  job costing
D.  operational costing
 
Difficulty: Easy
Learning Objective: 06-06 Identify whether job, process or hybrid costing is most appropriate for the various types of service entities
 
9. Job costing for service entities applies when: 
(p. 240)  

A.  customer contact is low

B.  there is significant back office involvement
C.  the number of services produced is low
D.  the number of services produced is high
 
AACSB: Reflective
Difficulty: Easy
Graduate Attribute: Problem Solving
Learning Objective: 06-06 Identify whether job, process or hybrid costing is most appropriate for the various types of service entities
 
10. Process costing for service entities applies when: 
(p. 240)  

A.  customer contact is low

B.  the primary input is labour
C.  the number of services produced is not very high
D.  there is a high level of discretion in service production
 
AACSB: Reflective
Difficulty: Easy
Graduate Attribute: Problem Solving
Learning Objective: 06-06 Identify whether job, process or hybrid costing is most appropriate for the various types of service entities
 
11. An entity where professional labour is $60 000 and all other costs are $24 000, has a predetermined overhead rate per labour
(p. 243) dollar of: 
 

A.  $2.50
B.  0.45c
C.  0.40c
D.  0.50c
 
AACSB: Analytical
Difficulty: Easy
Graduate Attribute: Problem Solving
Learning Objective: 06-07 Estimate service costs in a job costing environment
 
12. Overhead rates developed for service organisations usually include:
(p. 243) i. upstream costs
ii. downstream costs
iii. production costs 
 

A.  i
B.  i
i
C.  i and ii
D.  i, ii and iii
 
Difficulty: Easy
Learning Objective: 06-07 Estimate service costs in a job costing environment
 
13. The accuracy of service costs for the categories of (i) professional services, (ii) service shops and (iii) mass services is low,
(p. 254) medium or high. For each service category (i), (ii) and (iii), it is: 
 

A.  high, low, low

B.  low, medium, low
C.  low, high, low
D.  high, medium, low
 
Difficulty: Easy
Learning Objective: 06-11 Assess when a service entity should implement service costing by considering the costs and benefits of information about service costs
 
14. The complexity of service costs for the categories of (i) professional services, (ii) service shops and (iii) mass services is low,
(p. 254) medium or high. For each service category (i), (ii) and (iii), it is: 
 

A.  high, low, low

B.  low, medium, low
C.  low, high, low
D.  high, medium, low
 
Difficulty: Easy
Learning Objective: 06-11 Assess when a service entity should implement service costing by considering the costs and benefits of information about service costs
 
15. The costs of services may be estimated as:
(p. 243) i. a basis of setting prices
ii. a basis to determine which services to promote
iii. a basis of cost control
iv. an alternative to actual cost analysis 
 

A.  i, ii, iii and iv

B.  i, ii and iii
C.  ii, iii and iv
D.  i, iii and iv
 
AACSB: Reflective
Difficulty: Easy
Learning Objective: 06-07 Estimate service costs in a job costing environment
 
16. Service costs incur indirect costs, and the basis of allocating indirect costs requires the identification of: 
(p. 243)  

A.  cost centres

B.  responsible departments
C.  cost drivers
D.  service products
 
Difficulty: Easy
Learning Objective: 06-07 Estimate service costs in a job costing environment
 
17. A medical practice bulk billing for patient services does not usually cost specific services because:
(p. 247) i. it does not control service—product mix
ii. it cannot control costs
iii. it does not determine prices 
 

A.  ii and iii

B.  i and ii
C.  i and iii
D.  i, ii and iii
 
AACSB: Reflective
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-08 Explain the concepts of billable hours, chargeout rates and realisation and their use in estimating service costs, prices and profits
 
18. Service product costs are inaccurate in mass service operations because of the: 
(p. 254)  

A.  difficulty of identifying cost drivers

B.  high level of variable costs
C.  high level of fixed costs
D.  low level of fixed costs
 
AACSB: Reflective
Difficulty: Easy
Learning Objective: 06-11 Assess when a service entity should implement service costing by considering the costs and benefits of information about service costs
 
19. Non-repetitive services for retailers can be more appropriately costed using: 
(p. 259)  

A.  job costing

B.  process costing
C.  hybrid costing
D.  activity-based costing
 
AACSB: Reflective
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-13 Estimate the costs of the goods (and services) provided by retailers and wholesalers
 
20. Back office is a term used to identify activities where: 
(p. 238)  

A.  staff lie on their backs all day

B.  staff do not come into direct contact with customers
C.  staff have no interest in customers while there
D.  access is only possible through the back doo.
 
AACSB: Reflective
Difficulty: Easy
Graduate Attribute: Problem Solving
Learning Objective: 06-05 Use the service firm continuum to describe the production environments of various types of service entities, ranging from professional
service firms to service shops and mass service businesses
 
21. Front office is a term used to identify activities where: 
(p. 238)  

A.  staff avoid customers

B.  customers have to wait to be served
C.  staff seek to satisfy customer requirements
D.  the office faces the street
 
AACSB: Reflective
Difficulty: Easy
Graduate Attribute: Problem Solving
Learning Objective: 06-05 Use the service firm continuum to describe the production environments of various types of service entities, ranging from professional
service firms to service shops and mass service businesses
 
22. A motor vehicle spare parts store is classified as: 
(p. 259)  

A.  a service shop

B.  a mass service
C.  a retailer
D.  a wholesaler
 
AACSB: Reflective
Difficulty: Easy
Graduate Attribute: Problem Solving
Learning Objective: 06-13 Estimate the costs of the goods (and services) provided by retailers and wholesalers
 
23. Which of the following characteristics do merchandisers have?
(p. 232) i. They trade in physical products.
ii. They do not hold inventories.
iii. They purchase goods for resale.
iv. Their outputs have low customisation. 
 

A.  All the given answers

B.  i, ii and iii
C.  i, iii and iv
D.  ii, iii and iv
 
AACSB: Reflective
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-01 Describe the features of service organisations and explain how they differ from manufacturers
 
24. The value chain for a service entity includes:
(p. 234) i. design
ii. purchasing
iii. marketing
iv. distribution 
 

A.  i, ii and iv
B.  ii and iii
C.  i and iii
D.  i, ii and iii
 
Difficulty: Easy
Learning Objective: 06-03 Describe the value chain of service organisations, explaining the relevance of various upstream, downstream and production functions
 
25. The value chain for a merchandising entity includes:
(p. 236) i. design
ii. purchasing
iii. marketing
iv. distribution 
 

A.  i and ii
B.  ii, iii and iv
C.  ii and iv
D.  i, ii and iii
 
Difficulty: Easy
Learning Objective: 06-04 Describe the value chain of retailers and wholesalers
 
26. Downstream costs for a service entity include:
(p. 234) i. design
ii. research and development
iii. distribution
iv. customer support 
 

A.  i
B.  i and ii
C.  i, ii and iii
D.  i
v
 
Difficulty: Easy
Learning Objective: 06-03 Describe the value chain of service organisations, explaining the relevance of various upstream, downstream and production functions
 
27. Downstream costs for a merchandising entity include:
(p. 236) i. design
ii. research and development
iii. distribution
iv. customer support 
 

A.  iii and iv

B.  i and ii
C.  i, iii and iv
D.  ii, iii and iv
 
Difficulty: Easy
Learning Objective: 06-04 Describe the value chain of retailers and wholesalers
 
28. Upstream costs for a merchandising entity include:
(p. 236) i. design
ii. research and development
iii. distribution
iv. customer support 
 

A.  iii and iv

B.  i and iii
C.  i, ii and iii
D.  None of the given answers
 
Difficulty: Easy
Learning Objective: 06-04 Describe the value chain of retailers and wholesalers
 
29. Upstream costs for a service entity include:
(p. 234) i. design
ii. research and development
iii. distribution
iv. customer support 
 

A.  ii and iii

B.  i and iv
C.  i and ii
D.  ii and iv
 
Difficulty: Easy
Learning Objective: 06-03 Describe the value chain of service organisations, explaining the relevance of various upstream, downstream and production functions
 
30. In an accounting practice, wages paid to audit clerks are classified as: 
(p. 234)  

A.  customer support costs

B.  direct labour costs
C.  support services costs
D.  indirect costs
 
AACSB: Reflective
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-03 Describe the value chain of service organisations, explaining the relevance of various upstream, downstream and production functions
  
31. In a fast food outlet, the cost of advertising is classified as: 
(p. 234)  

A.  design
B.  marketing
C.  production/delivery
D.  customer support
 
AACSB: Reflective
Difficulty: Easy
Graduate Attribute: Problem Solving
Learning Objective: 06-03 Describe the value chain of service organisations, explaining the relevance of various upstream, downstream and production functions
 
32. Which of the following statements are false?
(p. 232) i. Professional entities provide standardised service.
ii. Professional entities provide customised service.
iii. Mass service entities provide standardised service.
iv. Mass service entities provide customised service. 
 

A.  i and iv
B.  ii and iv
C.  iii and iv
D.  i and ii
 
Difficulty: Easy
Learning Objective: 06-01 Describe the features of service organisations and explain how they differ from manufacturers
 
33. Which of the following statements are true? 
(p. 240)  

A.  Professional service entities employ process costing.

B.  Mass service entities employ job costing.
C.  Service shops generally employ hybrid costing.
D.  Merchandising entities employ job costing for customer services.
 
Difficulty: Easy
Learning Objective: 06-06 Identify whether job, process or hybrid costing is most appropriate for the various types of service entities
 
34. An architectural entity is likely to base its service costing on: 
(p. 240)  

A.  activity-based costing

B.  process costing
C.  job costing
D.  hybrid costing
 
AACSB: Reflective
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-06 Identify whether job, process or hybrid costing is most appropriate for the various types of service entities
 
35. If the direct labour is 10 000 hours at $12 per hour and all other costs are $240 000, what is the overhead rate per hour in
(p. 243) dollars? 
 

A.  $2
B.  $20
C.  $24
D.  $36
 
AACSB: Analytical
Difficulty: Easy
Graduate Attribute: Problem Solving
Learning Objective: 06-07 Estimate service costs in a job costing environment
 
36. What is the charge rate for engineers if direct labour is $30 per hour and the overhead is calculated at 60 per cent of direct
(p. 243) labour? 
 

A.  $18
B.  $30
C.  $36
D.  $48
 
AACSB: Analytical
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-07 Estimate service costs in a job costing environment
 
37. If the engineer worked for 20 hours on a job, Z, and the rates were overhead 125 per cent on direct labour cost and the direct
(p. 243) labour rate was $25 per hour, what is the total cost of the job? 
 

A.  $500
B.  $625
C.  $1000
D.  $1125
 
AACSB: Analytical
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-07 Estimate service costs in a job costing environment
 
38. Underapplied and overapplied overhead is not usually required to be adjusted in service costing systems. Why? 
(p. 257)  

A.  It is immaterial.
B.  The costing system is not integrated with the accounting system.
C.  Underapplied and overapplied overhead has no impact on decision making.
D.  It does not affect the accuracy of the service costs.
 
AACSB: Reflective
Difficulty: Easy
Graduate Attribute: Problem Solving
Learning Objective: 06-12 Describe the flow of costs in service firms including accounting for overhead and the recording of inventory where appropriate
 
39. Which of the following characteristics apply to service organisations?
(p. 232) i. They produce intangible outputs.
ii. Services cannot be stored.
iii. They purchase goods for sale.
iv. Services are consumed as they are produced. 
 

A.  i, ii and iv
B.  ii, iii and iv
C.  i, ii and iii
D.  All of the given answers
 
AACSB: Reflective
Difficulty: Easy
Learning Objective: 06-01 Describe the features of service organisations and explain how they differ from manufacturers
 
40. Which of the following characteristics apply to merchandising organisations?
(p. 232) i. They purchase goods for sale.
ii. Outputs can be stored.
iii. They produce intangible outputs.
iv. Services are consumed as they are produced. 
 

A.  i and iii

B.  ii and iii
C.  i and ii
D.  i and iv
 
AACSB: Reflective
Difficulty: Easy
Learning Objective: 06-01 Describe the features of service organisations and explain how they differ from manufacturers
 
41. Which of the following cost classifications do not apply to service organisations?
(p. 234) i. Direct/indirect
ii. Fixed/variable
iii. Production/non-production
iv. Controllable/uncontrollable 
 

A.  i and ii
B.  i
i
C.  ii
i
D.  iii and iv
 
AACSB: Reflective
Difficulty: Easy
Learning Objective: 06-03 Describe the value chain of service organisations, explaining the relevance of various upstream, downstream and production functions
 
42. Which of the following does the cost of inventories in a merchandising entity includes?
(p. 257) i. Purchase price of goods
ii. A deduction for all trade discounts
iii. The cost of transport to the entity
iv. Labour cost of customer service personnel 
 

A.  All of the given answers

B.  i, ii and iii
C.  ii iii and
iv
D.  i, ii and iv
 
Difficulty: Easy
Learning Objective: 06-12 Describe the flow of costs in service firms including accounting for overhead and the recording of inventory where appropriate
 
43. Which of the following are repetitive services for a retail hardware store? 
(p. 259)  

A.  Special delivery services

B.  Check-out services
C.  Advice to customers on the use of equipment
D.  Processing customer complaints
 
AACSB: Reflective
Difficulty: Easy
Graduate Attribute: Problem Solving
Learning Objective: 06-13 Estimate the costs of the goods (and services) provided by retailers and wholesalers
 
44. Mass service entities are characterised by:
(p. 232) i. high contact time
ii. high levels of customisation
iii. low levels of discretion
iv. front office orientation 
 

A.  i
B.  ii and iv
C.  ii
i
D.  None of the given answers
 
Difficulty: Easy
Learning Objective: 06-01 Describe the features of service organisations and explain how they differ from manufacturers
 
45. Professional services are characterised by:
(p. 232) i. high contact time
ii. high levels of customisation
iii. low levels of discretion
iv. front office orientation 
 

A.  i, ii and iii

B.  ii, iii and iv
C.  i, ii and iv
D.  None of the given answers
 
Difficulty: Medium
Learning Objective: 06-01 Describe the features of service organisations and explain how they differ from manufacturers
 
46. Which of the following does the value chain for a service shop include?
(p. 234) i. Design
ii. Customer support
iii. Purchasing
iv. Production/delivery 
 

A.  ii and iii

B.  i and iv
C.  i, ii and iv
D.  ii, iiii and
iv
 
Difficulty: Easy
Learning Objective: 06-03 Describe the value chain of service organisations, explaining the relevance of various upstream, downstream and production functions
 
47. Which of the following does the value chain for a merchandising entity include?
(p. 236) i. Design
ii. Customer support
iii. Purchasing
iv. Production/sales transaction 
 

A.  i, ii and iii

B.  ii, iii and iv
C.  i and iv
D.  iii and iv
 
Difficulty: Easy
Learning Objective: 06-04 Describe the value chain of retailers and wholesalers
 
48. Which type of costing for their services are mass service entities likely to use? 
(p. 240)  

A.  Job costing

B.  Process costing
C.  Activity-based costing
D.  Hybrid costing
 
Difficulty: Easy
Learning Objective: 06-06 Identify whether job, process or hybrid costing is most appropriate for the various types of service entities
 
49. Hybrid costing of services is appropriate where:
(p. 240) i. there is significant front office involvement
ii. equipment is a key input
iii. there is no discretion in service production
iv. there is a very low number of services produced 
 

A.  i
B.  ii and iii
C.  iii and iv
D.  None of the given answers
 
Difficulty: Easy
Learning Objective: 06-06 Identify whether job, process or hybrid costing is most appropriate for the various types of service entities
 
50. A professional audit firm charged juniors at $50 per hour, seniors at $200 per hour and the overhead rate for both was 100
(p. 243) per cent on direct labour. The firm added 5 per cent on total cost to arrive at a fee to be charged. If a job took 10 junior hours
and 2 senior hours, what was the total cost? 
 

A.  $800
B.  $1090
C.  $1890
D.  $1800
 
AACSB: Analytical
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-07 Estimate service costs in a job costing environment
 
51. Which of the following statements regarding the service industry and/or the application of management accounting
techniques to the service industry is incorrect? 
 

A.  Many of the techniques used in manufacturing firms can be adapted to suit service industries.
B.  Resources used in all service firms are predominantly variable.
C.  Direct materials are frequently a comparatively small part of the total cost.
D.  Activity based costing is not applicable to service industries.
 
AACSB: Analytical
Difficulty: Medium
Graduate Attribute: Problem Solving
 
52. Which of the following statements regarding the service industry and/or the application of management accounting
(p. 240) techniques to the service industry is incorrect? 
 

A.  Service output is much more difficult to define than manufacturing output.
B.  Many of the activity measures chosen for service firms tend to be different from those chosen by manufacturing firms.
C.  Firms in the service industry should use process costing systems rather than job costing systems.
D.  Many service firms use a hybrid costing system.
 
AACSB: Reflective
Difficulty: Easy
Graduate Attribute: Problem Solving
Learning Objective: 06-06 Identify whether job, process or hybrid costing is most appropriate for the various types of service entities
 
53. The realisation rate for a firm equals: 
(p. 247)  

A.  the firm's chargeout rate/industry average chargeout rate

B.  the industry average chargeout rate/firm's chargeout rate
C.  the firm's billing system fee/actual fee charged
D.  the actual fee charged/the firm's billing system fee
 
Difficulty: Easy
Learning Objective: 06-08 Explain the concepts of billable hours, chargeout rates and realisation and their use in estimating service costs, prices and profits
 
54. Which of the following statements best completes the following sentence? ‘A realisation rate below 100 per cent indicates
(p. 247) that the firm …' 
 

A.  has been unable to earn its required profit margin.

B.  has been inefficient in the provision of its service.
C.  has set chargeout rates too high.
D.  has set chargeout rates too low.
 
AACSB: Reflective
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-08 Explain the concepts of billable hours, chargeout rates and realisation and their use in estimating service costs, prices and profits
 
55. Which of the following correctly describes the way firms would set their chargeout rates per billable hour? 
(p. 247)  

A.  Rates are set to cover costs.

B.  Rates are set to match competitors' rates.
C.  Rates are set in line with the profession's recommendation.
D.  Any or all of the given answers.
 
AACSB: Reflective
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-08 Explain the concepts of billable hours, chargeout rates and realisation and their use in estimating service costs, prices and profits
 
56. Which of the following statements is most correct with respect to chargeout rates? 
(p. 247)  

A.  A chargeout rate is always set to cover the cost of labour and overheads and the required profit margin.
B.  If the firm does not base its chargeout rate on costs, it will not survive.
C.  A chargeout rate is typically set to cover costs of materials, labour and overhead only.
D.  A chargeout rate is typically set to cover costs, but may be varied in the short term to match competitors' actions.
 
AACSB: Reflective
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-08 Explain the concepts of billable hours, chargeout rates and realisation and their use in estimating service costs, prices and profits
 
57. Which of the following descriptions best explains the difference between a billing system and a costing system for a service
(p. 247) firm? 
 

A.  A costing system accumulates the amounts that the service costs the firm to provide.
B.  A billing system estimates the fees to be charged to the client for the service based on chargeout rates per billable hour.
C.  A billing system accumulates the amounts that the client is to be charged for the service rather than the costs of the
service.
D.  A billing system estimates the fees to be charged to the client for the service based on chargeout rates per billable hour
AND a billing system accumulates the amounts that the client is to be charged for the service rather than the costs of the
service.
 
AACSB: Reflective
Difficulty: Easy
Learning Objective: 06-08 Explain the concepts of billable hours, chargeout rates and realisation and their use in estimating service costs, prices and profits
 
58. Which of the following statements describe a difference between the value chain of a service firm and the value chain of a
(p. 234, merchandising firm? 
236)
 

A.  Human resource as a support activity only appears in a service firm value chain.
B.  Research and development activity only appears in a service firm value chain.
C.  Marketing only appears in a merchandising firm value chain.
D.  Customer support only appears in a service firm value chain.
 
AACSB: Reflective
Difficulty: Medium
Learning Objective: 06-03 Describe the value chain of service organisations, explaining the relevance of various upstream, downstream and production functions
Learning Objective: 06-04 Describe the value chain of retailers and wholesalers
 
59. Which of the following is NOT a description of a mass service provider? 
(p. 240)  

A.  It has a high number of standardised services.

B.  It has some customisation of services, with mostly repetitive processes.
C.  Employees have very little contact time with customers, with the main production processes happening in the back
office.
D.  Equipment is a key input, with emphases on minimising discretion by employees
 
AACSB: Reflective
Difficulty: Medium
Learning Objective: 06-06 Identify whether job, process or hybrid costing is most appropriate for the various types of service entities
 
60. Jane Maxwell is a financial planner at Trifle Consulting. Jane's annual salary (including on-costs) is $100 000. It is estimated
(p. 243) she works 37 hours a week and 45 weeks per year (the other weeks relate to annual leave and public holidays). She also
spends 100 hours a year on non-client related work, including administrative duties (30 hours), attending training (60 hours)
and idle time (10 hours). To cover both overhead costs and profit, Trifle Consulting requires a margin of 30 per cent of
labour cost when calculating billable rate. What is Jane's charge out rate per billable hour (rounded to nearest dollar)? 
 

A.  $83
B.  $78
C.  $64
D.  $60
 
AACSB: Analytical
Difficulty: Difficult
Graduate Attribute: Problem Solving
 Learning Objective: 06-07 Estimate service costs in a job costing environment
 
61. When calculating billable hours, which of the following should be included?
(p. 243) i the number of hours a employee has available to service customers
ii the number of hours a employee spends on training that is related to improving customer services
iii annual leave and sick leave 
 

A.  i only
B.  i and ii
C.  i and iii
D.  i, ii and iii
 
AACSB: Reflective
Difficulty: Medium
Learning Objective: 06-07 Estimate service costs in a job costing environment
 
62. Jane Maxwell is a financial planner at Trifle Consulting. Her estimated salary cost per billable hour is $100. The estimated
(p. 243) overhead cost per professional labour dollar for Trifle Consulting is 20 per cent and the required profit margin is 40 per cent
of cost. What is Jane's charge out rate per billable hour? 
 

A.  $100
B.  $120
C.  $140
D.  $168
 
AACSB: Analytical
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-07 Estimate service costs in a job costing environment
 
63. The realisation rate is: 
(p. 247)  

A.  the ratio of non-client work related labour cost to client work related labour cost
B.  the non-client work related professional labour cost as a percentage of the professional's annual salary
C.  the professional labour cost as a percentage of the professional's annual salary
D.  the final fee charged to the client as a percentage based on the firm's charge out rate
 
AACSB: Analytical
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-08 Explain the concepts of billable hours, chargeout rates and realisation and their use in estimating service costs, prices and profits
 
64. Which of the following items may be included in a service firm's overhead cost?
(p. 234) i upstream costs such as research and development
ii downstream costs such as marketing
iii professional labour costs 
 

A.  i only
B.  i and ii
C.  i and iii
D.  i, ii and iii
 
AACSB: Reflective
Difficulty: Medium
 Graduate Attribute: Problem Solving
Learning Objective: 06-03 Describe the value chain of service organisations, explaining the relevance of various upstream, downstream and production functions
 
65. Net realisable value of inventory refers to: 
(p. 259)  

A.  estimated selling price of the inventory

B.  estimated selling price of the inventory less estimated costs of completion
C.  estimated selling price of the inventory less estimated costs of completion and the estimated costs necessary to make the
sale
D.  estimated cost of acquiring the inventory
 
Difficulty: Easy
Learning Objective: 06-13 Estimate the costs of the goods (and services) provided by retailers and wholesalers
 
66. For non-profit entities that are also merchandisers, inventory is valued at: 
(p. 259)  

A.  lower of cost and current replacement cost

B.  lower of cost and net realisable cost
C.  lower of cost and estimated selling price of the inventory
D.  net reliable cost
 
Difficulty: Easy
Learning Objective: 06-13 Estimate the costs of the goods (and services) provided by retailers and wholesalers
 
67. A personal trainer working for the local health club is providing health advice to one of the gym's customers. This activity
(p. 238) relates to the health club's: 
 

A.  Front office

B.  Back office
C.  Communication office
D.  Customer service office
 
AACSB: Reflective
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-05 Use the service firm continuum to describe the production environments of various types of service entities, ranging from professional
service firms to service shops and mass service businesses
 
68. Implementing service costing
(p. 254) What are the factors likely to influence a firm in the decision to implement service costing? 
 

The principle consideration will be the use to which the information can be put. Where data is required for pricing, such as in
professional firms, service costs are likely to be implemented. However, if the competitive environment is such that firms
have to follow the market for prices then service costing is not beneficial. Service costs are not generally of significance in
planning and control functions in a service industry. Service costs will assist in assessing the profitability of services and thus
service firms may implement service costing for all or some of their services for this purpose. The accuracy of service costs
will depend on the level of direct costs; if there are high levels of fixed costs or indirect costs, service costs will be less
accurate and therefore of less use to management.

 
AACSB: Communication
Difficulty: Medium
Graduate Attribute: Communication
 Learning Objective: 06-11 Assess when a service entity should implement service costing by considering the costs and benefits of information about service costs
 
69. Underapplied/overapplied overhead
(p. 257) How are underapplied and overapplied overhead dealt with in service industries? 
 

Because costing systems in service firms are not usually integrated with the accounting system, there is no necessity to adjust
for underapplied or overapplied overhead. It is also not necessary because service firms do not carry inventory. Nevertheless,
it is necessary to ensure that any underapplied or overapplied overhead does not result from an inaccurate forecasting system,
particularly where this is used to establish prices.

 
AACSB: Communication
Difficulty: Easy
Graduate Attribute: Communication
Learning Objective: 06-12 Describe the flow of costs in service firms including accounting for overhead and the recording of inventory where appropriate
 
70. Cost of goods in merchandising entities
(p. 259) What costs should be included in the cost of goods in merchandising firms? 
 

The cost of goods in merchandising firms includes:

· invoice price
· cost of purchasing
· cost of delivery to the point of sale
· cost of storing goods ready for sale
· any processing costs such as breaking bulk deliveries or preparing goods for sale to customers
· any other applicable upstream or downstream costs.

 
AACSB: Communication
Difficulty: Easy
Graduate Attribute: Communication
Learning Objective: 06-13 Estimate the costs of the goods (and services) provided by retailers and wholesalers
 
71. The costs and benefits associated with service costing are influenced by the complexity of the costing system, the accuracy
(p. 254) of the service cost information and the relevance of service cost information to managing resources and creating value. 
 
TRUE
 
AACSB: Reflective
Difficulty: Easy
Learning Objective: 06-11 Assess when a service entity should implement service costing by considering the costs and benefits of information about service costs
 
72. According to the accounting standards, the cost of inventories should include all costs incurred in getting the inventory to the
(p. 259) point where it can be sold as intended. 
 
TRUE
 
Difficulty: Easy
Learning Objective: 06-13 Estimate the costs of the goods (and services) provided by retailers and wholesalers
 
73. Support processes in the service firm value chain include human resources and customer support. 
(p. 234)  
FALSE
 
Difficulty: Easy
 Learning Objective: 06-03 Describe the value chain of service organisations, explaining the relevance of various upstream, downstream and production functions
 
74. The mass services do not have high contact time or high customisation. 
(p. 238)  
TRUE
 
Difficulty: Easy
Learning Objective: 06-05 Use the service firm continuum to describe the production environments of various types of service entities, ranging from professional
service firms to service shops and mass service businesses
 
75. In a merchandising business, purchases can be calculated by taking the cost of goods sold minus the cost of beginning
(p. 259) inventory plus the cost of ending inventory. 
 
TRUE
 
AACSB: Reflective
Difficulty: Easy
Learning Objective: 06-13 Estimate the costs of the goods (and services) provided by retailers and wholesalers
 
76. Service businesses wanting to monitor efficiency and plan resource requirements will generally maintain information about
(p. 254) service costs. 
 
TRUE
 
AACSB: Reflective
Difficulty: Easy
Learning Objective: 06-11 Assess when a service entity should implement service costing by considering the costs and benefits of information about service costs
 
77. Professional service firms will often use a billing system that is based on chargeout rates per billable hour. 
(p. 247)  
TRUE
 
Difficulty: Easy
Learning Objective: 06-08 Explain the concepts of billable hours, chargeout rates and realisation and their use in estimating service costs, prices and profits
 
78. A financial planning business will generally consume three types of resources: overhead costs, direct material costs and
(p. 232) professional labour costs. 
 
FALSE
 
AACSB: Reflective
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 06-01 Describe the features of service organisations and explain how they differ from manufacturers
 
79. The production environment of a service shop includes extensive contact with the customer and the number of services
(p. 238) produced is relatively low. 
 
FALSE
 
Difficulty: Easy
Learning Objective: 06-05 Use the service firm continuum to describe the production environments of various types of service entities, ranging from professional
service firms to service shops and mass service businesses
 
80. Fixed costs can be classified further as either committed or discretionary. 
(p. 234)  
TRUE
 
Difficulty: Easy
Learning Objective: 06-03 Describe the value chain of service organisations, explaining the relevance of various upstream, downstream and production functions
 
 Chapter 06 Testbank Summary
 
Category #  of  Que
stions
AACSB: Analytical 9
AACSB: Communication 3
AACSB: Reflective 37
Difficulty: Difficult 1
Difficulty: Easy 54
Difficulty: Medium 25
Graduate Attribute: Communication 3
Graduate Attribute: Problem Solving 32
Learning Objective: 06-01 Describe the features of service organisations and explain how they differ from manufacturers 9
Learning Objective: 06-02 Apply cost classifications, such as fixed and variable costs, direct and indirect costs and controllable and uncon 1
trollable costs, to analyse costs in service organisations
Learning Objective: 06-03 Describe the value chain of service organisations, explaining the relevance of various upstream, downstream a 11
nd production functions
Learning Objective: 06-04 Describe the value chain of retailers and wholesalers 6
Learning Objective: 06-05 Use the service firm continuum to describe the production environments of various types of service entities, ra 8
nging from professional service firms to service shops and mass service businesses
Learning Objective: 06-06 Identify whether job, process or hybrid costing is most appropriate for the various types of service entities 9
Learning Objective: 06-07 Estimate service costs in a job costing environment 11
Learning Objective: 06-08 Explain the concepts of billable hours, chargeout rates and realisation and their use in estimating service costs,  8
prices and profits
Learning Objective: 06-11 Assess when a service entity should implement service costing by considering the costs and benefits of informa 6
tion about service costs
Learning Objective: 06-12 Describe the flow of costs in service firms including accounting for overhead and the recording of inventory w 3
here appropriate
Learning Objective: 06-13 Estimate the costs of the goods (and services) provided by retailers and wholesalers 8