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|The cost of the cushions that are used to manufacture sofas is best described as a: (Points : 2) |
|manufacturing overhead cost. |
|period cost. |
|variable cost. |
|conversion cost. |
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|2. A recent college graduate has the choice of buying a new auto for $20,000 or to invest the money for four years with a 12% expected rate of |
|return. If the graduate decides to purchase the auto, the BEST estimate of the opportunity cost of that decision is: (Points : 2) |
|$2,400 |
|$11,470 |
|$20,000 |
|There is no opportunity cost for this decision. |
|3. A mattress manufacturer has provided the following cost data. The cost of fabric, foam, springs, and lumber is $68,000. The cost of indirect |
|materials is $21,000. Labor cost of assembly workers is $52,000 and for production supervisors is $14,000. How much indirect cost is included in the|
|above costs? (Points : 2) |
|$21,000 |
|$35,000 |
|$89,000 |
|$103,000 |
|4. Cost behavior refers to: (Points : 2) |
|how costs react to a change in the level of activity |
|whether a cost is incurred in a manufacturing, merchandising, or service company |
|classifying costs as either product or period costs |
|whether a particular expense has been ethically incurred |
|5. The opportunity cost(s): (Points : 2) |
|of a resource with excess capacity is zero |
|should be maximized by organizations |
|are recorded as an expense in the accounting records |
|are most important to financial accountants |
|6. When the level of activity decreases within the relevant range, the fixed cost per unit will: (Points : 2) |
|decrease. |
|increase. |
|remain the same. |
|The effect cannot be predicted. |
|7. At a sales volume of 38,000 units, Tirri Corporation's property taxes (a cost that is fixed with respect to sales volume) total $733,400. |
|To the nearest whole dollar, what should be the total property taxes at a sales volume of 37,200 units? (Assume that this sales volume is within the|
|relevant range.) |
|(Points : 2) |
|$725,680 |
|$733,400 |
|$749,172 |
|$717,960 |
|8. Which of the following is correct concerning reactions to INCREASES in activity? |
|a. Total Variable Cost |
|b. Variable Cost Per Unit |
|(Points : 2) |
|a. Increases, b. Decreases |
|a. Constant, b. Decreases |
|a. Decreases, b. Constant |
|a. Increases, b. Constant |
|9. Mark is an engineer who has designed a telecommunications device. He is convinced that there is a big potential market for the device. |
|Accordingly, he has decided to quit his present job and start a company to manufacture and market the device. |
|The cost of the raw materials that will be used in manufacturing the computer board is: |
|(Points : 2) |
|a sunk cost |
|a fixed cost |
|a period cost |
|a variable cost |
|10. Rotonga Manufacturing Company leases a vehicle that it uses to deliver its finished products to customers. Which of the following terms could be|
|used to correctly describe the monthly lease payments made on the delivery vehicle? |
|a. Direct Cost |
|b. Fixed Cost |
|(Points : 2) |
|a. Yes, b. Yes |
|a. Yes, b. No |
|a. No, b. Yes |
|a. No, b. No |
|11. The following cost data pertains to the operations of Ladwig Department Stores, Inc., for the month of December. |
|Corporate legal office salaries: $68,000 |
|Shoe Department cost of sales, Brentwood Store: $66,000 |
|Corporate headquarters building lease: $86,000 |
|Store manager's salary, Brentwood Store: $10,000 |
|Shoe Department sales commissions, Brentwood Store: $5,000 |
|Store utilities, Brentwood Store: $11,000 |
|Shoe Department manager's salary, Brentwood Store: $3,000 |
|Central warehouse lease cost: $3,000 |
|Janitorial costs, Brentwood Store: $11,000 |
|The Brentwood store is just one of many stores owned and operated by the company. The Shoe department is one of the many departments at the |
|Brentwood store. The central warehouse serves all of the company's stores. |
|What is the total amount of the costs listed above that are NOT direct costs of the Brentwood store? |
|(Points : 2) |
|$74,000 |
|$32,000 |
|$157,000 |
|$86,000 |
|12. All of the cost categories listed below are usually found in a company's accounting records, except for: (Points : 2) |
|Sunk costs |
|inventoriable costs |
|opportunity costs |
|marketing costs |
|13. An understanding of the underlying behavior of costs helps in all of the following EXCEPT: (Points : 2) |
|sales volume can be better estimated |
|costs can be better estimated as volume expands and contracts |
|true costs of processes can be better evaluated |
|process inefficiencies can be better identified and, as a result, improved |
|14. Mendoza, Inc. manufactures and sells aluminum dishes for camping and outdoor enthusiasts through a mail order catalog operation. Large |
|rectangular sheets of aluminum are purchased by Mendoza. These sheets are cut down into smaller squares and are then fed into a machine where they |
|are trimmed down into a circular shape. These aluminum circles are then fed into a stamping machine where they are formed into plates and bowls. |
|After production, the dishes are shipped to warehouses where they are packed and then shipped to customers. |
|Which of the following terms could be used to correctly describe the cost of electricity used to run the stamping machine? |
|(Points : 2) |
|variable cost |
|indirect cost |
|manufacturing overhead cost |
|All of these |
|15. The terms "direct cost" and "indirect cost" are commonly used in cost accounting. Classifying a cost as either direct or indirect depends upon: |
|(Points : 2) |
|the behavior of the cost in response to volume changes |
|whether the cost is expended in the period in which it is incurred |
|whether the cost can be related readily to resources consumed for a cost object |
|whether an expenditure is unavoidable because it cannot be changed regardless of any action taken |
|16. Leas Corporation staffs a helpline to answer questions from customers. The costs of operating the helpline are variable with respect to the |
|number of calls in a month. At a volume of 25,000 calls in a month, the costs of operating the helpline total $452,500. |
|To the nearest whole cent, what should be the average cost of operating the helpline per call at a volume of 25,300 calls in a month? (Assume that |
|this call volume is within the relevant range.) |
|(Points : 2) |
|$18.93 |
|$18.00 |
|$17.89 |
|$18.10 |
|17. Mark is an engineer who has designed a telecommunications device. He is convinced that there is a big potential market for the device. |
|Accordingly, he has decided to quit his present job and start a company to manufacture and market the device. |
|The salary that Mark earns at his present employ is: |
|(Points : 2) |
|a variable cost |
|a fixed cost |
|a product cost |
|an opportunity cost |
|18. At a sales volume of 20,000 units, Choice Corporation's sales commmissions (a cost that is variable with respect to sales volume) total |
|$132,000. |
|To the nearest whole cent, what should be the average sales commission per unit at a sales volume of 18,500 units? (Assume that this sales volume is|
|within the relevant range.) |
|(Points : 2) |
|$6.60 |
|$6.87 |
| |
|$7.17 |
|$7.14 |
|19. A sunk cost is: (Points : 2) |
|a cost that is planned to be incurred in the near future. |
|irrelevant for decision making. |
|a cost connected with drilling for oil |
|affected by changes in the level of activity. |
|20. Which of the following production costs, if expressed on a per unit basis, would be most likely to change significantly as the production level |
|varies? (Points : 2) |
|Direct materials. |
|Direct labor. |
|Fixed manufacturing overhead. |
|Responses A and B are both correct. |
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