1. Leas Corporation staffs a helpline to answer questions from customers. The costs of operating the helpline are variable with respect to the number of calls in a month. At a volume of 25,000 calls in a month, the costs of operating the helpline total $452,500.
    To the nearest whole dollar, what should be the total cost of operating the helpline costs at a volume of 23,900 calls in a month? (Assume that this call volume is within the relevant range.)

    (Points : 2)

    2. Within the relevant range, as the number of units produced increases: (Points : 2)
    the variable cost per unit remains the same.
    fixed costs in total remain the same.
    variable costs increase in total.
    all of these.

    3. An understanding of the underlying behavior of costs helps in all of the following EXCEPT: (Points : 2)
    sales volume can be better estimated
    costs can be better estimated as volume expands and contracts
    true costs of processes can be better evaluated
    process inefficiencies can be better identified and, as a result, improved

    4. The following cost data pertain to the operations of Ladwig Department Stores, Inc., for the month of December.
    Corporate legal office salaries: $68,000
    Shoe Department cost of sales: Brentwood Store $66,000
    Corporate headquarters building lease: $86,000
    Store manager’s salary, Brentwood Store: $10,000
    Shoe Department sales commissions, Brentwood Store: $5,000
    Store utilities, Brentwood Store: $11,000
    Shoe Department manager’s salary, Brentwood Store: $3,000
    Central warehouse lease cost: $3,000
    Janitorial costs, Brentwood Store: $11,000

    The Brentwood store is just one of many stores owned and operated by the company. The shoe department is one of the many departments at the Brentwood store. The central warehouse serves all of the company’s stores.

    What is the total amount of the costs listed above that are direct costs of the shoe department?

    (Points : 2)

    5. Mendoza, Inc. manufactures and sells aluminum dishes for camping and outdoor enthusiasts through a mail order catalog operation. Large rectangular sheets of aluminum are purchased by Mendoza. These sheets are cut down into smaller squares and are then fed into a machine where they are trimmed down into a circular shape. These aluminum circles are then fed into a stamping machine where they are formed into plates and bowls. After production, the dishes are shipped to warehouses where they are packed and then shipped to customers.
    Which of the following terms could be used to correctly describe the cost of electricity used to run the stamping machine?

    (Points : 2)
    variable cost
    indirect cost
    manufacturing overhead cost
    All of these

    6. A manufacturing plant for Vanguard produces two product lines: Optimist sailboats and 420 sailboats. An indirect cost for the Optimist line is the: (Points : 2)
    cloth used to make Optimist sails
    labor to pour 420 hull molds
    shift supervisor for the Optimist line
    plant supervisor

    7. A sunk cost is: (Points : 2)
    a cost that is planned to be incurred in the near future.
    irrelevant for decision making.
    a cost connected with drilling for oil
    affected by changes in the level of activity.

    8. Depreciation of plant facilities is classified as a(n): (Points : 2)
    direct material cost
    direct labor cost
    indirect manufacturing cost
    general and administrative cost

    9. Chezpere Company manufactures and sells washing machines. In order to make assembly of the machines faster and easier, some of the metal parts in the machines are coated with grease. How should the cost of this grease be classified?
    a. Direct Material Cost
    b. Fixed Cost

    (Points : 2)
    a. Yes, b. Yes
    a. Yes, b. No
    a. No, b. Yes
    a. No, b. No

    10. A manufacturing plant produces two product lines: football equipment and hockey equipment. An indirect cost for the hockey equipment line is the: (Points : 2)
    material used to make the hockey sticks
    labor to bind the shaft to the blade of the hockey stick
    shift supervisor for the hockey line
    plant supervisor

    11. Which of the following production costs, if expressed on a per unit basis, would be most likely to change significantly as the production level varies? (Points : 2)
    Direct materials.
    Direct labor.
    Fixed manufacturing overhead.
    Responses A and B are both correct.

    12. The cost of the cushions that are used to manufacture sofas is best described as a: (Points : 2)
    manufacturing overhead cost.
    period cost.
    variable cost.
    conversion cost.

    13. Cost behavior refers to: (Points : 2)
    how costs react to a change in the level of activity
    whether a cost is incurred in a manufacturing, merchandising, or service company
    classifying costs as either product or period costs
    whether a particular expense has been ethically incurred

    14. Cost distortion is common in conventional costing systems because: (Points : 2)
    of the recent change in cost structure
    the number of products being manufactured is increasing
    fixed costs are allocated using a volume measure
    fixed costs create higher risks for a company

    15. 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)

    16. 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)

    17. 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.
    The salary that Mark earns at his present employ is:

    (Points : 2)
    a variable cost
    a fixed cost
    a product cost
    an opportunity cost

18. An example of a cost object is: (Points : 2)
a bicycle
an individual fast food franchise
the produce department of a grocery store
All of the above are correct.

19. Indirect manufacturing costs: (Points : 2)
can be traced to the product that created the costs
may have a cause-and-effect relationship with capacity rather than with individual units of production
generally include the cost of material and the cost of labor
are included in period costs

20. 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)