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 11.

If the selling price per unit were to drop by $2, from $100 to $98, the sales volume were to increase by 500 units to 4,500 units per month, and advertising expense were to increase by $1,000, then:

a)            the break-even point would increase.

b)            the break-even point would decrease.

c)            the contribution margin ratio would increase.

d)            operating income would decrease.


 

12.

An example of a product cost is:

a)            advertising expense for the product.

b)            a portion of the presidents travel expenses.

c)            interest expense on a loan to finance inventory.

d)            production line maintenance costs.


 

13.

Which of the following costs would be classified as a period cost?

a)            Production line maintenance costs.

b)            Advertising expense for the product.

c)            Plant electricity.

d)            Indirect labor.


 

14.

Direct costs pertain to costs that:

a)            are traceable to a cost object.

b)            are not traceable to a cost object.

c)            are commonly incurred.

d)            are variable costs.


 

 15.

Cost of Goods Manufactured can be computed as:

a)            ending balance of work in process + raw materials used + direct labor costs incurred + manufacturing overhead costs applied ─ beginning balance of work in process.

b)            beginning balance of work in process + raw materials purchased + direct labor costs incurred + manufacturing overhead costs applied ─ ending balance of work in process.

c)            ending balance of work in process + raw materials purchased + direct labor costs incurred + manufacturing overhead costs applied ─ beginning balance of work in process.

d)            beginning balance of work in process + raw materials used + direct labor costs incurred + manufacturing overhead costs applied ─ ending balance of work in process.


 

16.

The three components of product costs are:

a)            direct material, supervisor salaries, selling expenses.

b)            direct labor, manufacturing overhead, indirect material.

c)            direct material, direct labor, manufacturing overhead.

d)            manufacturing overhead, indirect material, indirect labor.


 

 17.

An activity-based costing system involves identifying the activity that causes the incurrence of a cost; this activity is known as a:

a)            cost driver

b)            cost applier

c)            direct cost

d)            cost object


 

24.

How is performance evaluated for a cost center?

a)            Actual costs incurred compared to budgeted costs.

b)            Actual segment margin compared to budgeted segment margin.

c)            Comparison of actual and budgeted return on investment (ROI) based on segment margin and assets controlled by the segment.

d)            None of the above.


 

25.

How is performance evaluated for a profit center?

a)            Actual costs incurred compared to budgeted costs.

b)            Actual segment margin compared to budgeted segment margin.

c)            Comparison of actual and budgeted return on investment (ROI) based on segment margin and assets controlled by the segment.

d)            None of the above.


 

26.

How is performance evaluated for an investment center?

a)            Actual costs incurred compared to budgeted costs.

b)            Actual segment margin compared to budgeted segment margin.

c)            Comparison of actual and budgeted return on investment (ROI) based on segment margin and assets controlled by the segment.

d)            None of the above.


 

27.

When an income statement shows data for segments of the organization, and data for each segment are added together to get totals for the whole organization:

a)            all expenses should be allocated to the segments.

b)            common fixed expenses should be allocated to the segments.

c)            only direct revenues and direct expenses should be assigned to segments.

d)            direct fixed expenses should be subtracted as one amount in the total column.


 

28.

Braizen, Inc. produces a product with a $30 per-unit variable cost and an $80 per-unit sales price. Fixed manufacturing overhead costs are $100,000. The firm has a one-time opportunity to sell an additional 1,000 units at $60 each that would not affect its current sales. Assuming the company has sufficient capacity to produce the additional units, how would the acceptance of the special order affect net income?

a)            Income would decrease by $30,000.

b)            Income would increase by $30,000.

c)            Income would increase by $140,000.

d)            Income would increase by $40,000.

 

 

29.

Opportunity costs are:

a)            included in inventory.

b)            foregone benefits.

c)            sunk costs.

d)            included in cost of goods sold.


 

30.

Greenland Sports, Inc. has been asked to submit a bid to the National Hockey League on supplying 1,000 pairs of professional quality skates. The cost per pair of skates has been determined as follows:

Direct materials                                                $80

Direct labor                                         $60

Variable overhead                           $30

Fixed overhead (allocated)          $20

Other non-manufacturing costs associated with each pair of skates are:

Variable selling cost (commission)            $25

Fixed selling and administrative cost       10

Assume the commission on the sale of skates to the National Hockey League would be reduced to $15 per pair and that available production capacity exists to produce the 1,000 pairs of skates. The lowest price the firm can bid is some price greater than:

a)            $185.

b)            $190.

c)            $215.

d)            $225.

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