Saint MBA565 week 6 quiz (april 08, 2014)

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Question
1. 1.
Gypsy Joe’s operates a chain of coffee shops.
The company pays rent of $10,000 per year for each shop. Supplies (napkins,
bags and condiments) are purchased as needed. The managers of each shop are
paid a salary of $2,500 per month and all other employees are paid on an hourly
basis. The costs of supplies relative to the number of customers in a
particular shop and relative to the number of customers in the entire chain of
shops is which kind of cost, respectively? (Points : 2)

Variable cost / fixed cost

Fixed cost / fixed cost

Variable cost / fixed cost

Variable cost /
variable cost

Question
2. 2.
Hico Bottling Company pays its production
manager a salary of $5,000 per month. Salespersons are paid strictly on
commission, at $2 for each case of product sold.

For Hico Bottling Company, the
salespersons’ commissions are an example of: (Points : 2)

a variable cost.

a fixed cost.

a mixed cost.

none of the above.

Question
3. 3.
Tri-State Food Service operates six fast food
restaurants in the New England area. The company pays rent of $10,000 per year
for each shop. The managers of each shop are paid a salary of $3,200 per month
and all other employees are paid on an hourly basis. Relative to the number of
hours worked, total compensation cost for a particular shop is which kind of
cost? (Points : 2)

Variable cost

Fixed cost

Mixed cost

None of the above

Question
4. 4.
Whether a cost behaves as a fixed cost or as
a variable cost depends upon the: (Points : 2)

activity base used.

company.

industry.

presence of mixed costs.

Question
5. 5.
The magnitude of operating leverage for
Perkins Corporation is 3.4 when sales are $100,000. If sales increase to $110,000,
profits would be expected to increase by what percent? (Points : 2)

34%

2.9%

3.4%

37%

Question
6. 6.
Ajani Company has variable costs equal to 40%
of sales. The company is considering a proposal that will increase sales by
$10,000 and total fixed costs by $6,000. By what amount will net income
increase? (Points : 2)

$6,000

$4,000

$2,000

$0

Question
7. 7.
At its $25 selling price, Paciolli Company
has sales of $10,000, variable manufacturing costs of $4,000, fixed
manufacturing costs of $1,000, variable selling and administrative costs of
$2,000 and fixed selling and administrative costs of $1,000. What is the
company’s contribution margin per unit? (Points : 2)

$15

$10

$0.60

$0.40

Question
8. 8.
Wall Company incurred $30,000 of fixed cost
and $40,000 of variable cost when 1,000 units of product were made and sold. If
the company’s volume increases to 1,500 units, the company’s total costs will
be: (Points : 2)

$80,000

$105,000

$87,500

$90,000

Question
9. 9.
Which of the following equations can be used
to compute a firm’s magnitude of operating leverage? (Points : 2)

Net income/sales

Fixed costs/contribution margin

Net income/gross margin

Contribution
margin/net income

Question
10. 10.
Wall Company incurred $30,000 of fixed cost
and $40,000 of variable cost when 1,000 units of product were made and sold. If
the company’s volume doubles, the company’s total cost will: (Points : 2)

stay the same.

double as well.

increase but will
not double.

decrease.

Question
11. 11.
Once sales reach the breakeven point, each
additional unit sold will: (Points : 2)

increase fixed cost by a proportionate amount.

reduce the margin of safety.

increase profit by
an amount equal to the per unit contribution margin.

increase the company’s operating leverage.

Question
12. 12.
Cost objects may be: (Points : 2)

products.

processes.

departments.

all of the above.

Question
13. 13.
Which of the following statements is true
regarding the salary of the manager of a fast food hamburger restaurant? (Points
: 2)

The salary is a fixed cost that is directly traceable to the cost of
making hamburgers.

The salary is a
fixed cost that is directly traceable to the cost of operating a specific
restaurant.

The salary is a variable cost that cannot be traced to the cost of
operating a specific restaurant.

None of the above.

Question 14. 14.
Overhead costs include: (Points : 2)

direct and indirect
costs.

direct costs only.

indirect costs only.

neither direct nor indirect costs.

Question
15. 15.
Humboldt Corporation manufactures
electronic products, including calculators and printers.

Cost
items of the company include:

1 Labor on assembling a printer

2 Salary of an employee who supervises
calculator manufacturing

3 Materials used in making a printer

4 Company president’s salary

5 Salary of the manager of the Calculator
Division

6 Depreciation on corporate headquarters
building

7 Ink cartridges installed in printer
during manufacture

8 Depreciation on equipment used in making
calculators

9 Supplies used in corporate offices

Which of the costs listed above is a direct
cost assuming the cost object is an individual printer? (Points : 2)

Numbers 1 and 3

Numbers 1, 3, and 7

Number 3 only

None of the costs is direct to an individual print

Question
16. 16.
Select the true statement from the
following. (Points : 2)

Only direct costs are assigned to cost objects.

The same cost may
be assigned to more than one cost object.

General, selling, and administrative
costs are not assigned to cost objects.

A given cost cannot be driven by more than one cost driver.

Question
17. 17.
Milton Company has three departments
occupying the following amount of floor space:

Department 1 15,000 sq. ft.

Department 2 10,000 sq. ft.

Department 3 25,000 sq. ft.

How much store rent should be allocated to
Department 2 if total rent is equal to $100,000? (Points : 2)

$25,000

$50,000

$20,000

None of the above

Question
18. 18.
Overhead costs: (Points : 2)

can be traced to cost objects in a cost-effective manner.

cannot be traced to
cost objects cost effectively but can be allocated to cost objects.

primarily are variable costs.

are not incurred by most companies.

Question
19. 19.
Which of the following costs is most likely
to be directly traceable to a specific department in a retail clothing store?
(Points : 2)

The cost of heating and air conditioning the department

The cost of supplies

The cost of
commissions paid to the sales staff

All of the above

Question
20. 20.
Hamlin Company expects to incur overhead
costs of $100,000 per year and direct production costs (materials and labor) of
$125 per unit. The estimated production activity for the upcoming year is
10,000 units. If the company desires to earn a gross profit of $50 per unit,
what would be the sales price per unit? (Points : 2)

$185

$175

$160

$205

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