Chapter 21 Practice Materials.docx

Chapter 21 Practice Materials.docx

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Chapter21PracticeMaterials

Chapter21

CostBehaviorandCost-Volume-ProfitAnalysis

MULTIPLECHOICE

1.Costbehaviorreferstothemannerinwhich:

a.acostchangesastherelatedactivitychanges

b.acostisallocatedtoproducts

c.acostisusedinsettingsellingprices

d.acostisestimated

ANS:

ADIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

2.Thethreemostcommoncostbehaviorclassificationsare:

a.variablecosts,productcosts,andsunkcosts

b.fixedcosts,variablecosts,andmixedcosts

c.variablecosts,periodcosts,anddifferentialcosts

d.variablecosts,sunkcosts,andopportunitycosts

ANS:

BDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

3.Coststhatremainconstantintotaldollaramountasthelevelofactivitychangesarecalled:

a.fixedcosts

b.mixedcosts

c.opportunitycosts

d.variablecosts

ANS:

ADIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

4.WhichofthegraphsinFigure20-1illustratesthebehaviorofatotalfixedcost?

a.Graph2

b.Graph3

c.Graph4

d.Graph1

ANS:

DDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

5.WhichofthegraphsinFigure20-1illustratesthebehaviorofatotalvariablecost?

a.Graph2

b.Graph3

c.Graph4

d.Graph1

ANS:

BDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

6.WhichofthegraphsinFigure20-1illustratesthenatureofamixedcost?

a.Graph2

b.Graph3

c.Graph4

d.Graph1

ANS:

ADIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

7.Whichofthefollowingcostsisanexampleofacostthatremainsthesameintotalasthenumberofunitsproducedchanges?

a.Directlabor

b.Salaryofafactorysupervisor

c.Unitsofproductiondepreciationonfactoryequipment

d.Directmaterials

ANS:

BDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

8.Whichofthefollowingdescribesthebehaviorofthefixedcostperunit?

a.Decreaseswithincreasingproduction

b.Decreaseswithdecreasingproduction

c.Remainsconstantwithchangesinproduction

d.Increaseswithincreasingproduction

ANS:

ADIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

9.Whichofthefollowingactivitybaseswouldbethemostappropriateforfoodcostsofahospital?

a.Numberofcooksscheduledtowork

b.Numberofx-raystaken

c.Numberofpatientswhostayinthehospital

d.Numberofscheduledsurgeries

ANS:

CDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

10.Whichofthefollowingactivitybaseswouldbethemostappropriateforgasolinecostsofadeliveryservice,suchasUnitedPostalService?

a.Numberoftrucksemployed

b.Numberofmilesdriven

c.Numberoftrucksinservice

d.Numberofpackagesdelivered

ANS:

BDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

11.Mostoperatingdecisionsofmanagementfocusonanarrowrangeofactivitycalledthe:

a.relevantrangeofproduction

b.strategiclevelofproduction

c.optimallevelofproduction

d.tacticaloperatinglevelofproduction

ANS:

ADIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

12.Coststhatvaryintotalindirectproportiontochangesinanactivitylevelarecalled:

a.fixedcosts

b.sunkcosts

c.variablecosts

d.differentialcosts

ANS:

CDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

13.Whichofthefollowingisanexampleofacostthatvariesintotalasthenumberofunitsproducedchanges?

a.Salaryofaproductionsupervisor

b.Directmaterialscost

c.Propertytaxesonfactorybuildings

d.Straight-linedepreciationonfactoryequipment

ANS:

BDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

14.WhichofthefollowingisNOTanexampleofacostthatvariesintotalasthenumberofunitsproducedchanges?

a.ElectricityperKWHtooperatefactoryequipment

b.Directmaterialscost

c.Straight-linedepreciationonfactoryequipment

d.Wagesofassemblyworker

ANS:

CDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

15.WhichofthefollowingisNOTanexampleofacostthatvariesintotalasthenumberofunitsproducedchanges?

a.ElectricityperKWHtooperatefactoryequipment

b.Directmaterialscost

c.Insurancepremiumsonfactorybuilding

d.Wagesofassemblyworker

ANS:

CDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

16.Whichofthefollowingdescribesthebehaviorofthevariablecostperunit?

a.Variesinincreasingproportionwithchangesintheactivitylevel

b.Variesindecreasingproportionwithchangesintheactivitylevel

c.Remainsconstantwithchangesintheactivitylevel

d.Variesindirectproportionwiththeactivitylevel

ANS:

CDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

17.Thegraphofavariablecostwhenplottedagainstitsrelatedactivitybaseappearsasa:

a.circle

b.rectangle

c.straightline

d.curvedline

ANS:

CDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

18.Acostthathascharacteristicsofbothavariablecostandafixedcostiscalleda:

a.variable/fixedcost

b.mixedcost

c.discretionarycost

d.sunkcost

ANS:

BDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

19.Whichofthefollowingcostsisamixedcost?

a.Salaryofafactorysupervisor

b.Electricitycostsof$2perkilowatt-hour

c.Rentalcostsof$5,000permonthplus$.30permachinehourofuse

d.Straight-linedepreciationonfactoryequipment

ANS:

CDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

20.Forpurposesofanalysis,mixedcostsaregenerally:

a.classifiedasfixedcosts

b.classifiedasvariablecosts

c.classifiedasperiodcosts

d.separatedintotheirvariableandfixedcostcomponents

ANS:

DDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

21.IngramCo.manufacturesofficefurniture.Duringthemostproductivemonthoftheyear,3,500desksweremanufacturedatatotalcostof$84,400.Initsslowestmonth,thecompanymade1,100desksatacostof$46,000.Usingthehigh-lowmethodofcostestimation,totalfixedcostsare:

a.$56,000

b.$28,400

c.$17,600

d.cannotbedeterminedfromthedatagiven

ANS:

BDIF:

ModerateOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

22.GiventhefollowingcostandactivityobservationsforWondrousCompany’sutilities,usethehigh-lowmethodtocalculateWondrous’variableutilitiescostspermachinehour.

Cost

MachineHours

March

$3,100

15,000

April

2,700

10,000

May

2,900

12,000

June

3,500

18,000

a.$10.00

b.$.67

c.$.63

d.$.10

ANS:

DDIF:

ModerateOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

23.GiventhefollowingcostandactivityobservationsforJohnsonCompany’sutilities,usethehigh-lowmethodtocalculateJohnson’sfixedcostspermonth.

Cost

MachineHours

January

$52,600

20,000

February

75,100

29,000

March

57,000

22,000

April

64,000

24,500

a.$2,600

b.$50,000

c.$12,500

d.$5,000

ANS:

ADIF:

ModerateOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

24.GiventhefollowingcostandactivityobservationsforSanchezCompany’sutilities,usethehigh-lowmethodtocalculateSanchez’svariableutilitiescostspermachinehour.

Cost

MachineHours

May

$8,300

15,000

June

10,400

20,000

July

7,200

12,000

August

9,500

18,000

a.$10.00

b.$.60

c.$.40

d.$.52

ANS:

CDIF:

ModerateOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

25.LanleyCo.manufacturesofficefurniture.Duringthemostproductivemonthoftheyear,4,500desksweremanufacturedatatotalcostof$86,625.Initsslowestmonth,thecompanymade1,800desksatacostof$49,500.Usingthehigh-lowmethodofcostestimation,totalfixedcostsare:

a.$61,875

b.$33,875

c.$24,750

d.cannotbedeterminedfromthedatagiven

ANS:

CDIF:

ModerateOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

26.Whichofthefollowingstatementsistrueregardingfixedandvariablecosts?

a.Bothcostsareconstantwhenconsideredonaperunitbasis.

b.Bothcostsareconstantwhenconsideredonatotalbasis.

c.Fixedcostsarefixedintotal,andvariablecostsarefixedperunit.

d.Variablecostsarefixedintotal,andfixedcostsvaryintotal.

ANS:

CDIF:

ModerateOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

27.Asproductionincreases,whatwouldyouexpecttohappentofixedcostperunit?

a.Increase

b.Decrease

c.Remainthesame

d.Eitherincreaseordecrease,dependingonthevariablecosts

ANS:

BDIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

28.Knowinghowcostsbehaveisusefultomanagementforallthefollowingreasonsexceptfor

a.predictingcustomerdemand.

b.predictingprofitsassalesandproductionvolumeschange.

c.estimatingcosts.

d.changinganexistingproductproduction.

ANS:

ADIF:

EasyOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

29.ThemanufacturingcostofLancerIndustriesforthreemonthsoftheyearareprovidedbelow:

TotalCost

Production

April

$61,900

1,200Units

May

80,920

1,800

June

100,300

2,400

Usingthehigh-lowmethod,thevariablecostperunit,andthetotalfixedcostsare:

a.$32.30perunitand$77,520respectively.

b.$32perunitand$23,500respectively.

c.$32perunitand$76,800respectively.

d.$32.30perunitand$22,780respectively.

ANS:

BDIF:

ModerateOBJ:

21-01

NAT:

AACSBAnalytic|IMA-PerformanceMeasurement

30.Whichofthefollowingstatementsis