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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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