Name: Saint leo MBA560 quiz 6 (feb 12, 2014)
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1.
Select the correct statement regarding fixed costs.
(Points : 2)

There is a contradiction between the term “fixed cost per unit” and the behavior pattern implied by the term.
Fixed cost per unit is not fixed.
Total fixed cost remains constant when volume changes.
All of the above are correct statements.

Question 2.
2.
Larry’s Lawn Care incurs significant gasoline costs. This
cost would be classified as a variable cost if the total gasoline cost:
(Points : 2)

varies inversely with the number of hours the lawn equipment is operated.
increases in direct proportion to the number of hours the lawn equipment is operated.
is not affected by the number of hours the lawn equipment is operated.
Both A or B.

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.
Romo Corporation normally produces between 150,000 and
175,000 units each year. Producing more than 175,000 units alters the
company’s cost structure. For example, fixed costs increase because more
space must be rented, and additional supervisors must be hired. The
production range between 150,000 and 175,000 is called the:
(Points : 2)

differential range.
relevant range.
opportunity range.
leverage range.

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.
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 7.
7.
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 8.
8.
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 9.
9.
The excess of a product’s selling price over its variable costs is referred to as:
(Points : 2)

gross profit.
contribution margin.
gross margin.
manufacturing margin.

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
companyâ€™s volume doubles, the companyâ€™s total cost will:
(Points : 2)

stay the same.
double as well.
increase but will not double.
decrease.

Question 11.
11.
Zoro, Inc. produces a product that has a variable cost of
$6.00 per unit. The company’s fixed costs are $30,000. The product sells
for $10.00 a unit and the company desires to earn a $20,000 profit.
What is the volume of sales in units required to achieve the target
profit?
(Points : 2)

5,000
7,500
8,333
12,500

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

products.
processes.
departments.
all of the above.

Question 13.
13.
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 14.
14.
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 15.
15.
A chair manufacturer makes custom chairs using hand tools,
wood, glue, and varnish. Which of the following statements is true?
(Points : 2)

The costs of wood and glue would be treated as direct costs.
Wood, glue, and varnish would all be direct materials.
Wood would be accounted for as a direct cost, and glue and varnish as indirect costs.
The concepts of direct and indirect costs are not applicable here.

Question 16.
16.
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 17.
17.
Which of the following statements is true?
(Points : 2)

Direct costs can easily be traced to a cost object; indirect costs cannot be.
Both direct and indirect costs can easily be traced to a cost object.
Neither direct nor indirect costs are easily traced to a cost object.
Indirect costs can be traced easily to a cost object, but direct costs cannot be.

Question 18.
18.
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 19.
19.
The KnitWitt Corporation manufactures knitted shawls and
scarves. The company expects to incur $1,500,000 in overhead costs
during 2010. The following budget information is for 2010:

	Shawls	Scarves	Total
Number of units expected to be produced	50,000	100,000	150,000
Direct labor hours	250,000	800,000	1,050,000
Machine hours	100,000	80,000	180,000

If the company uses direct labor hours as the cost driver, what will be the allocation rate for 2010?
(Points : 2)

$1.43 per direct labor hour
$10 per direct labor hour
$8.33 per direct labor hour
$1.88 per direct labor hour

Question 20.
20.
Humboldt Corporation manufactures electronic products, including calculators and printers.

Cost items of the company include:

Labor on assembling a printer
Salary of an employee who supervises calculator manufacturing
Materials used in making a printer
Company presidentâ€™s salary
Salary of the manager of the Calculator Division
Depreciation on corporate headquarters building
Ink cartridges installed in printer during manufacture
Depreciation on equipment used in making calculators
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 printer

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