1. Which of the following is correct concerning reactions to INCREASES in activity?

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MULTIPLE CHOICE

1. Which of the following is correct concerning reactions to INCREASES in activity?
a. Total Variable Cost
b. Variable Cost Per Unit (Points : 2)

2. 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)

3. How much sunk cost is represented in the following list?
Annual operating cost $80,000
Fixed operating costs other than depreciation $14,000
Resale value, if sold now $25,000
Original cost of current machine $68,000 (Points : 2)

4. 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)

5. A manufacturing plant produces two product lines: football equipment and hockey equipment. An indirect cost for the hockey equipment line is the: (Points : 2)

6. 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)

7. The potential benefit that is given up when one alternative is selected over another is called: (Points : 2)

8. An example of a fixed cost that would be considered a direct cost is: (Points : 2)

9. An example of a cost object is: (Points : 2)

10. When the level of activity decreases within the relevant range, the fixed cost per unit will: (Points : 2)

11. Haala Inc. is a merchandising company. Last month the company’s cost of goods sold was $68,000. The company’s beginning merchandise inventory was $11,000 and its ending merchandise inventory was $17,000. What was the total amount of the company’s merchandise purchases for the month? (Points : 2)

12. A sunk cost is: (Points : 2)

13. 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.
Mark purchased a machine two years ago to make experimental boards. The machine will be used to manufacture the new board. The cost of this machine is: (Points : 2)

14. Cost distortion is common in conventional costing systems because: (Points : 2)

15. 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)

16. Indirect manufacturing costs: (Points : 2)

17. A manufacturing plant produces two product lines: football equipment and hockey equipment. Direct costs for the football equipment line are the: (Points : 2)

18. 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 center, what should be the average property tax per unit at a sales volume of 37,300 units? (Assume that this sales volume is within the relevant range.) (Points : 2)

19. 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)

20. The fixed portion of the cost of electricity for a manufacturing plant is:
a. Period cost
b. Product cost (Points : 2)

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