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saint mba560 quiz 6

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Question 1.1.Select the
correct statement regarding fixed costs. (Points : 2)

They do not change,
because fixed costs should be ignored in decision making.
The fixed cost per
unit increases when volume increases.
The fixed cost per
unit decreases when volume increases.
The fixed cost per
unit does not change when volume decreases.

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 production manager’s salary is an example
of: (Points : 2)

a variable cost.
a fixed cost.
a mixed cost.
none of the above.

Question 3.3.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 4.4.Java Joe’s
operates a chain of coffee shops. The company pays rent of $12,000 per year
for each shop. Supplies (napkins, bags and condiments) are purchased as
needed. The manager of each shop is paid a salary of $2,000 per month, and
all other employees are paid on an hourly basis. Relative to the number of
customers for a shop, the cost of rent is which kind of cost? (Points : 2)

Fixed cost
Variable cost
Mixed cost
Relevant cost

Question 5.5.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 6.6.Select the
incorrect statement regarding the contribution margin income statement.
(Points : 2)

The contribution
margin approach for the income statement is acceptable for external
reporting.
Contribution margin
represents the amount available to cover fixed expenses and thereafter to
provide profit.
The contribution
margin approach to preparing an income statement requires that all costs be
classified as fixed or variable.
Assuming no change
in fixed costs, a $1 increase in contribution margin will result in a $1
increase in profit.

Question 7.7.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 8.8.The following
income statement is provided for Flint, Inc.

Sales revenue (2,500 @ $20 a
unit)

$50,000

Variable costs (2,500 x $11)

27,500

Fixed costs

17,000

Net income

$ 5,500

What is this company’s magnitude of operating leverage? (Points : 2)

9.1
5.00
4.1
1.8

Question 9.9.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 10.10.Operating
leverage exists when: (Points : 2)

small percentage
changes in revenue produce large percentage changes in profit.
management buys
enough of the company’s shares of stock to take control of the corporation.
the organization
makes purchases on credit instead of paying cash.
the organization
avoids all fixed costs in its operations.

Question 11.11.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 12.12.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 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.Cost allocation
involves: (Points : 2)

identifying a cost
driver for each cost to be allocated.
calculating an
allocation rate for each cost to be allocated.
multiplying the
allocation rate by the weight of the cost driver.
all of the above.

Question 15.15.Allocation of
costs to various cost objects: (Points : 2)

may affect
managers’ performance evaluation.
may affect resource
allocations within a company.
may affect the
apparent profitability of the various products a company makes.
all of the above.

Question
16.16.Parker
& Co. expects overhead costs of $400,000 per year and direct production
costs of $12 per unit. The estimated production activity for the 2010
accounting period is as follows:

1stQuarter

2ndQuarter

3rdQuarter

4thQuarter

Units produced

11,500

9,000

8,250

11,250

The predetermined overhead rate based on units produced is (rounded to the
nearest penny) is: (Points : 2)

$0.75 per unit.
$9.00 per unit.
$34.80 per unit.
$10.00 per unit.

Question 17.17.Select the
incorrectstatement from
the following. (Points : 2)

The cost object
determines whether a cost is classified as direct or indirect.
The same cost
cannot be classified as both direct and indirect.
Relevant costs can
include direct and indirect costs.
Direct costs can
display a fixed or variable behavior pat.

Question 18.18.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 19.19.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 the Calculator Division? (Points : 2)

Numbers 2, 5, and 6
Numbers 2, 5, and 8
Number 2 only
None of the costs
is direct to the Calculator Division

Question 20.20.A chair
manufacturer makes custom chairs using hand tools, wood, glue, and varnish.
Which of the following statements is true? (Points : 2)

The cost of wood is
a direct and variable cost.
The cost of wood is
a fixed and indirect cost.
The cost of wood is
indirect and variable.
The cost of wood is
a fixed and direct cost.

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