Question 1

The true statement about cost behavior is that:

Accepted Answer

A)  variable costs change on a per-unit basis and change in total as activity changes. 
B)  fixed costs are constant on a per-unit basis and change in total as activity changes. 
C)  fixed costs are constant on a per-unit basis and are constant in total as activity changes. 
D)  fixed costs change on a per-unit basis and are constant in total as activity changes. 
E)  variable costs are constant on a per-unit basis and are constant in total as activity changes. 
A)  variable costs change on a per-unit basis and change in total as activity changes. 
B)  fixed costs are constant on a per-unit basis and change in total as activity changes. 
C)  fixed costs are constant on a per-unit basis and are constant in total as activity changes. 
D)  fixed costs change on a per-unit basis and are constant in total as activity changes. 
E)  variable costs are constant on a per-unit basis and are constant in total as activity changes.

Question 2

As activity increases, unit variable cost:

Accepted Answer

A)  increases proportionately with activity. 
B)  decreases proportionately with activity. 
C)  remains constant. 
D)  increases by a fixed amount. 
E)  decreases by a fixed amount. 
A)  increases proportionately with activity. 
B)  decreases proportionately with activity. 
C)  remains constant. 
D)  increases by a fixed amount. 
E)  decreases by a fixed amount.

Question 3

When 5,000 units are produced variable costs are $35 per unit and total costs are $200,000. What are the total costs when 8,000 units are produced?

Accepted Answer

A)  $200,000. 
B)  $305,000. 
C)  $240,000. 
D)  None of the other answers are correct. 
E)  Total costs cannot be calculated based on the information presented. 
A)  $200,000. 
B)  $305,000. 
C)  $240,000. 
D)  None of the other answers are correct. 
E)  Total costs cannot be calculated based on the information presented.

Question 4

A suitable cost driver for the amount of direct materials used is the number of direct labor hours worked.

Accepted Answer

A) True 
 B)False

Question 5

Heathrow Corporation sold 12,500 units of its single product during the year, reporting a cost of good sold that totaled $250,000. A review of the company's accounting records disclosed the following information: $\begin{array}{lr}\text { Cost of goods sold as a percentage of sales}\
\quad \text { revenue } & 40 \% \
\text { Finished-goods inventory, 1/1 } & \$ 87,000 \
\text { Work-in-process inventory, 12/31 } & 55,000 \
\text { Cost of goods manufactured } & 241,000 \
\text { Raw materials used } & 40,000 \
\text { Direct labor } & 74,000 \
\text { Manufacturing overhead } & 122,000 \
\text { Selling and administrative expenses } & 310,000
\end{array}$ 
Heathrow is subject to a 30% income tax rate.
Required: 
A. Determine the selling price per unit.
B. Management established a goal at the beginning of the year to reduce the company's investment in finished-goods inventory and work-in-process inventory.
1. Analyze cost of goods sold and determine if management's goal was achieved with respect to finished-goods inventory. Show computations.
2. Analyze the firm's manufacturing costs and determine if management's goal was achieved with respect to work-in-process inventory. Show computations.
C. Is the company profitable? Show calculations.

Accepted Answer

A. Let X = sales revenue
0.4X = $250,000

The true statement about cost behavior is that:

As activity increases, unit variable cost:

When 5,000 units are produced variable costs are $35 per unit and total costs are $200,000. What are the total costs when 8,000 units are produced?

A suitable cost driver for the amount of direct materials used is the number of direct labor hours worked.

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters

Exam 2: Basic Cost Management Concepts

The true statement about cost behavior is that:

As activity increases, unit variable cost:

When 5,000 units are produced variable costs are $35 per unit and total costs are $200,000. What are the total costs when 8,000 units are produced?

A suitable cost driver for the amount of direct materials used is the number of direct labor hours worked.

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters