Exam 2: Identifying and Estimating Costs and Benefits

If a production facility increases its production by 1,500 units, its:

A cost that is proportional to the volume of activity is a:

The cost hierarchy divides costs into unit-, batch-, product-, and facility-level costs.

A decision maker's control over costs and benefits:

Classifying all costs as fixed or variable with respect to sales volume is practical and frequently used, but the assumption often results in imprecise measurements.

During May, Mayer Company's total fixed costs were $5,000 and variable costs were $7,000 when 500 units were produced.How much is total cost for June if 600 units are produced?

During the month of March the Richards Company, which operates one factory location and one administrative location, reported the following costs: Postage on bills sent to customers \ 100 Rent on its factory building \ 3,800 Depreciation used on administrative office computers \ 600 Bonuses paid to the Vice-President of Sales \ 1,500 Indirect costs total:

Variable costs per unit are as follows: Raw materials $2.15 Direct labor $1.45 Fixed costs are $5,000 per month If the company produces 4,000 units in the month of March their total costs will be:

Which of the following is the best example of product-level costs?

Few short-term decisions are recurring.

The principle of variability means that, when estimating costs and benefits, the first step is to estimate the change in activity.

During the month of September the Gaffney Company, which operates one factory location and one administrative location, reported the following costs: Repair costs for the factory's air conditioning system \ 3,500 Property taxes on its administrative office building \ 900 Rent on factory building \ 1,400 Bonuses paid to a factory manager \ 500 Facility costs total:

The Criders Company has 12,000 units of obsolete inventory.The units originally cost $6,000.The company can either sell them for scrap at $.20 per unit or they can invest $2,000 to be able to sell them at a price of $.60 per unit.With regard to this decision, relevant costs or benefits include:

Which one of the following is the best example of a step cost for Ace Manufacturing?

Which of the following is the best example of a variable cost?

Which of the following is the best example of a long-term capacity cost for a trucking company?

Sunk costs influence value because they have already occurred.

Because they seek to maximize profit, commercial organizations measure the value of a decision option as the change in profit relative to change in revenue.

Which of the following statements describes how step costs relate to fixed and variable costs?

A fixed cost does not change as the volume of activity changes.