Exam 2: Identification and Estimating Costs and Benefits

Costs that do not vary at the unit level, the batch level, or the product level are administrative costs.

Which of the following statements relating to relevance and controllability is not correct?

Sunk costs influence value because they have already occurred.

Which of the following is a not a correct statement? a. A decision maker's control over costs and benefits decrease as the time horizon increases. B) A decision maker's control over costs increases as the time horizon increases. C) A decision maker's control over benefits increases as the time horizon increases. D) Both B and C are incorrect statements.

Which of the following will least likely be a variable cost for Pizza Hut? a. Dough, sauce, and cheese. B) Boxes for 'to go' pizza orders. C) Cooking ovens. D) Cashiers' hourly wages

Which of the following statements describes how step costs relate to fixed and variable costs? a. A step cost behaves more like a variable cost as the step size decreases. B) A step cost behaves more like a fixed cost as the step size decreases. C) A step cost behaves like a variable cost, but not like a fixed cost. D) A step cost behaves like a fixed cost, but not like a variable cost.

In the short-run, organizations often are not able to substantially alter their abilities to deliver products or services, making levels of capacity resources non-controllable.

Step costs relate only to variable costs.

Which of the following best represents a controllable cost for a manufacturing plant? a. Reducing the number of pages in a product brochure. B) Increasing the price of two of the best selling products. C) Billing customers for delivery fuel surcharges. D) Charging customers for additional production runs of a special ordered product.

Steve Johnson has decided to lease a vehicle as opposed to purchasing it. The lease agreement calls for a monthly payment of $400. Any mile driven above 1,000 per month will cost an additional $.10 per mile. If Steve drives 1,240 miles in the month of January his total cost will be: a. $400 B) $640 C) $524 D) $424

During the month of September the Gaffney Company, which operates one factory location and one administrative location, reported the following costs: Facility costs total:

Step costs change in proportion to the volume of activity.

Organizations frequently refer to indirect costs as: a. Volume costs. B) Variable costs. C) Common costs. D) Special costs. E) Fixed costs.

Which of the following is the best example of a long-term capacity cost for a trucking company? a. Performing tune-ups on older trucks. B) Installing a GPS unit in each truck to monitor efficient routes and fuel efficiency in order to serve more customers on a daily basis. C) Changing the oil annually in each delivery truck. D) Replacing torn seats in several of the trucks in which truckers have complained

Which of the following is the best example of a variable cost? a. Monthly loan payment on a plant generator. B) Labor cost for plant employees. C) Lease payment for the office copy machine. D) General manager's salary.

Which one of the following best represents a controllable benefit for a manufacturing plant? a. Reduce the number of security guards during holiday periods. B) Increasing the selling price of the company's best selling product by $1.00 per unit. C) Reduce the medical benefit coverage for employees. D) Eliminate one copy machine for the human resources department.

Considering only controllable costs and benefits in an analysis: a. Always reduces the number of costs and benefits needing to be measured. B) Never reduces the number of costs and benefits needing to be measured. C) Reduces only the number of costs to be measured if they are controllable. D) Will not reduce the number of costs and benefits to be measured if the status quo is an available option.

Variability deals with: a. The degree to which we can directly relate a cost or benefit to a specific option. B) How activities influence costs and benefits. C) The result of performing activities. D) The difference across decision options. E) None of the above.

When making decisions, a general rule would be: a. Fixed costs are always relevant. B) Variable (unit-level) costs are always irrelevant. C) Future costs and revenues are always relevant. D) Future costs and revenues which differ are always relevant.

Few short-term decisions are recurring.