Gypsy Joe’s operates a chain of coffee shops
| Gypsy Joe’s operates a chain of coffee shops. The company pays rent of $10,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The managers of each shop are paid a salary of $2,500 per month and all other employees are paid on an hourly basis. The costs of supplies relative to the number of customers in a particular shop and relative to the number of customers in the entire chain of shops is which kind of cost, respectively? (Points : 2) |
Variable cost / fixed cost
Fixed cost / fixed cost
Variable cost / fixed cost
Variable cost / variable cost |
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| 2.Tri-State Food Service operates six fast food restaurants in the New England area. The company pays rent of $10,000 per year for each shop. The managers of each shop are paid a salary of $3,200 per month and all other employees are paid on an hourly basis. Relative to the number of hours worked, total compensation cost for a particular shop is which kind of cost? (Points : 2) |
Variable cost
Fixed cost
Mixed cost
None of the above |
| 3.Larry’s Lawn Care incurs significant gasoline costs. This cost would be classified as a variable cost if the total gasoline cost: (Points : 2) |
varies inversely with the number of hours the lawn equipment is operated.
increases in direct proportion to the number of hours the lawn equipment is operated.
is not affected by the number of hours the lawn equipment is operated.
Both A or B. |
4.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 salespersons’ commissions are an example of: (Points : 2) |
a variable cost.
a fixed cost.
a mixed cost.
none of the above. |
| 5.Felix Company produces a product that has a selling price of $12.00 and a variable cost of $9.00 per unit. The company’s fixed costs are $60,000. What is the breakeven point measured in sales dollars? (Points : 2) |
$240,000
$120,000
$80,000
$100,000 |
| 6.Barker Company’s break-even point is 10,000 units. Its product sells for $25 and has a $10 variable cost per unit. What is the company’s total fixed cost amount? (Points : 2) |
$250,000
$100,000
$150,000
Fixed costs cannot be computed with the information provided |
| 7.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. |
8.For the last two years, Barton Company had net income as follows:
|
2009 |
2010 |
| Net income |
$80,000 |
$100,000 |
What was the percentage change in income from 2009 to 2010? (Points : 2) |
20% increase
20% decrease
25% decrease
25% increase |
| 9.Ajani Company has variable costs equal to 40% of sales. The company is considering a proposal that will increase sales by $10,000 and total fixed costs by $6,000. By what amount will net income increase? (Points : 2) |
$6,000
$4,000
$2,000
$0 |
| 10.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 cost per unit will: (Points : 2) |
stay the same.
double as well.
increase but will not double.
decrease. |
| 11.Which of the following equations can be used to compute a firm’s magnitude of operating leverage? (Points : 2) |
Net income/sales
Fixed costs/contribution margin
Net income/gross margin
Contribution margin/net income |
| 12.Humboldt Corporation manufactures electronic products, including calculators and printers.
Cost items of the company include:
- Labor on assembling a printer
- Salary of an employee who supervises calculator manufacturing
- Materials used in making a printer
- Company president’s salary
- Salary of the manager of the Calculator Division
- Depreciation on corporate headquarters building
- Ink cartridges installed in printer during manufacture
- Depreciation on equipment used in making calculators
- Supplies used in corporate offices
Which of the costs listed above is a direct cost assuming the cost object is an individual printer? (Points : 2) |
Numbers 1 and 3
Numbers 1, 3, and 7
Number 3 only
None of the costs is direct to an individual printer |
| 13.Hamlin Company expects to incur overhead costs of $100,000 per year and direct production costs (materials and labor) of $125 per unit. The estimated production activity for the upcoming year is 10,000 units. If the company desires to earn a gross profit of $50 per unit, what would be the sales price per unit? (Points : 2) |
$185
$175
$160
$205 |
| 14.Overhead costs: (Points : 2) |
can be traced to cost objects in a cost-effective manner.
cannot be traced to cost objects cost effectively but can be allocated to cost objects.
primarily are variable costs.
are not incurred by most companies. |
| 15.Cost accumulation is used to: (Points : 2) |
identify fixed and variable costs.
identify and estimate opportunity costs.
determine the cost of a particular cost object.
set the selling price for a service. |
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. |
| 17.Which of the following statements is true? (Points : 2) |
Direct costs can easily be traced to a cost object; indirect costs cannot be.
Both direct and indirect costs can easily be traced to a cost object.
Neither direct nor indirect costs are easily traced to a cost object.
Indirect costs can be traced easily to a cost object, but direct costs cannot be. |
| 18.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. |
| 19.Some costs that possibly could be traced directly to cost objects are nonetheless classified as indirect costs because: (Points : 2) |
such practice results in a more accurate accumulated cost for the object.
such costs cannot be traced to objects in a cost-effective manner.
generally accepted accounting principles require some costs to be treated as indirect.
all of the above. |
| 20.Humboldt Corporation manufactures electronic products, including calculators and printers.
Cost items of the company include:
- Labor on assembling a printer
- Salary of an employee who supervises calculator manufacturing
- Materials used in making a printer
- Company president’s salary
- Salary of the manager of the Calculator Division
- Depreciation on corporate headquarters building
- Ink cartridges installed in printer during manufacture
- Depreciation on equipment used in making calculators
- Supplies used in corporate offices
Which of the costs listed above is a direct cost assuming the cost object is the company as a whole? (Points : 2) |
All of the costs listed
All of the costs except number 4
All of the costs except numbers 4 and 6
None of the above |
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