saint mba560 quiz 6

Question # 00004293 Posted By: neil2103 Updated on: 12/01/2013 09:24 AM Due on: 12/31/2013
Subject Accounting Topic Accounting Tutorials:
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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.

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)


Variable costs (2,500 x $11)


Fixed costs


Net income

$ 5,500

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


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)


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)


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)

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:





Units produced





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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