Question 1

Joint products are:
A) Any set of products that can use the same resources
B) Products that create production bottlenecks
C) Products that increase in value if sold as a package
D) Two or more products simultaneously produced from a common set of inputs by a single process

Accepted Answer

This is the textbook definition of a joint product.

Question 2

The following information applies to questions below
Really Fast Delivery Services has the collected the following information about operating expenditures for its delivery truck fleet for the past five years:
 $ \begin{array}{ccc}\text { Year } & \text { Miles } & \text { Operating Costs } \ 2013 & 55,000 & \$ 195,000 \ 2014 & 70,000 & \$ 210,000 \ 2015 & 50,000 & \$ 180,000 \ 2016 & 65,000 & \$ 205,000 \ 2017 & 85,000 & \$ 225,150\end{array} $
-Using the high-low method, what is the cost estimate for variable costs for 2018?
A) $1.29
B) $2.00
C) $1.60
D) $1.50

Accepted Answer

($225,150 - $180,000) / (85,000 - 50,000) = $1.29

Question 3

The following information applies to questions below
Really Fast Delivery Services has the collected the following information about operating expenditures for its delivery truck fleet for the past five years:
 $ \begin{array}{ccc}\text { Year } & \text { Miles } & \text { Operating Costs } \ 2013 & 55,000 & \$ 195,000 \ 2014 & 70,000 & \$ 210,000 \ 2015 & 50,000 & \$ 180,000 \ 2016 & 65,000 & \$ 205,000 \ 2017 & 85,000 & \$ 225,150\end{array} $
-Using the high-low method, what is the cost estimate for fixed costs for 2018?
A) $100,000
B) $ 70,000
C) $115,500
D) $109,650

Accepted Answer

$225,150 - (85,000 x $1.29) = $115,500 (using high observation)
$180,000 - (50,000 x $1.29) = $115,500 (using low observation)

Question 4

The following information applies to questions below
Really Fast Delivery Services has the collected the following information about operating expenditures for its delivery truck fleet for the past five years:
 $ \begin{array}{ccc}\text { Year } & \text { Miles } & \text { Operating Costs } \ 2013 & 55,000 & \$ 195,000 \ 2014 & 70,000 & \$ 210,000 \ 2015 & 50,000 & \$ 180,000 \ 2016 & 65,000 & \$ 205,000 \ 2017 & 85,000 & \$ 225,150\end{array} $
-What is the estimated total cost per hour at a volume of 8,000 hours?
A) $12.50
B) $14.25
C) $18.00
D) $15.25

Accepted Answer

(8,000 x $5.00) + $82,000 = $122,000 / 8,000 = $15.25

Question 5

The following information applies to questions below
Really Fast Delivery Services has the collected the following information about operating expenditures for its delivery truck fleet for the past five years:
 $ \begin{array}{ccc}\text { Year } & \text { Miles } & \text { Operating Costs } \ 2013 & 55,000 & \$ 195,000 \ 2014 & 70,000 & \$ 210,000 \ 2015 & 50,000 & \$ 180,000 \ 2016 & 65,000 & \$ 205,000 \ 2017 & 85,000 & \$ 225,150\end{array} $
-What is the estimated total fixed cost per hour at a volume 8,000 hours?
A) $10.25
B) $28.00
C) $24.00
D) $37.60

Accepted Answer

$82,000 / 8,000 = $10.25

Question 6

The following information applies to questions below
The following data was input into a spreadsheet program to determine the Intercept, Slope and RS1U1P12 S1S1P0(RSQ) for Patient Days and Maintenance Costs for a local hospital:
 $\begin{array}{lcc} 
\text {Month }&\text { Patient Days $ (X) $ }& \text {Maintenance costs $ (Y) $}\
\text {January} & 3,300 &\$ 4,450 \
\text {February} & 4,050 &\$ 4,750 \
\text {March }& 3,000 &\$4,200\
\text {April }& 3,750 &\$4,600  \
\text {May} & 4,150 &\$5,050\
\text {June} & 4,500 &\$5,400  \
\text {July} & 2,600 &\$4,400 \
& & \
\text {Intercept }&\$2,734  \
\text {Slope} &  \$0.541 \
\text {RSQ} & 0.793
\end{array}$
-The estimated fixed maintenance cost for the hospital is:
A) $5,468
B) $2,734
C) $0.793
D) $0.541

Accepted Answer

Fixed cost = Vertical axis intercept

Question 7

The cost of maintaining general facilities such as buildings and grounds would best be classified as what type of activity?
A) A unit-level activity
B) A batch-level activity
C) A product-level activity
D) A facility-level activity

Accepted Answer

Facility-level activities are those that support the entire organization and are not tied to any specific product, batch, or unit, such as maintaining buildings and grounds.

Question 8

The following information relates to questions below
Rock Bottom's Brew is a successful brewery engaged in the development and production of specialty micro brews. It uses manufacturing cost hierarchy to allocate costs to various activities. During the past year, it has incurred:
 $\begin{array}{|l|l|}
\hline  \text { Cost }&  \text { Description} \
\hline\$ 725,000  &   \text {product development costs} \
\hline \$ 475,000  &  \text { materials handling costs} \
\hline \$ 1,250,000 &   \text {production line labor costs} \
\hline \$ 450,000  &  \text { production setup costs }\
\hline\$ 250,000 &  \text { power costs (for cooling beer and running equipment) }\
\hline\$ 875,000  &   \text {manufacturing facility management costs} \
\hline
\end{array}$
-Using the manufacturing cost hierarchy, what is the total cost that would be classified as unit-level activity costs?
A) $ 425,000
B) $1,250,000
C) $1,975,000
D) $1,945,000

Accepted Answer

$475,000 + $1,250,000 + $250,000 = $1,975,000

Question 9

The following information relates to questions below
Rock Bottom's Brew is a successful brewery engaged in the development and production of specialty micro brews. It uses manufacturing cost hierarchy to allocate costs to various activities. During the past year, it has incurred:
 $\begin{array}{|l|l|}
\hline  \text { Cost }&  \text { Description} \
\hline\$ 725,000  &   \text {product development costs} \
\hline \$ 475,000  &  \text { materials handling costs} \
\hline \$ 1,250,000 &   \text {production line labor costs} \
\hline \$ 450,000  &  \text { production setup costs }\
\hline\$ 250,000 &  \text { power costs (for cooling beer and running equipment) }\
\hline\$ 875,000  &   \text {manufacturing facility management costs} \
\hline
\end{array}$
-Using the manufacturing cost hierarchy, what is the total cost that would be classified as batch-level activity costs?
A) $ 450,000
B) $ 350,000
C) $ 600,000
D) $ 625,000

Accepted Answer

Batch-level activity costs are those costs that are incurred every time a batch is handled or processed, regardless of the size of the batch. In this case, the costs that would be classified as batch-level activity costs are the production setup costs of $450,000.

Question 10

The following information relates to questions below
Rock Bottom's Brew is a successful brewery engaged in the development and production of specialty micro brews. It uses manufacturing cost hierarchy to allocate costs to various activities. During the past year, it has incurred:
 $\begin{array}{|l|l|}
\hline  \text { Cost }&  \text { Description} \
\hline\$ 725,000  &   \text {product development costs} \
\hline \$ 475,000  &  \text { materials handling costs} \
\hline \$ 1,250,000 &   \text {production line labor costs} \
\hline \$ 450,000  &  \text { production setup costs }\
\hline\$ 250,000 &  \text { power costs (for cooling beer and running equipment) }\
\hline\$ 875,000  &   \text {manufacturing facility management costs} \
\hline
\end{array}$
-Using the manufacturing cost hierarchy, what is the total cost that would be classified as product-level activity costs?
A) $ 460,000
B) $1,250,000
C) $1,825,000
D) $ 725,000

Accepted Answer

Product-level activity costs are those costs that are incurred for a particular product, regardless of the number of units produced. In this case, the product development costs of $725,000 are directly associated with developing specific products, making them product-level costs.

Question 11

The following information relates to questions below
Rock Bottom's Brew is a successful brewery engaged in the development and production of specialty micro brews. It uses manufacturing cost hierarchy to allocate costs to various activities. During the past year, it has incurred:
 $\begin{array}{|l|l|}
\hline  \text { Cost }&  \text { Description} \
\hline\$ 725,000  &   \text {product development costs} \
\hline \$ 475,000  &  \text { materials handling costs} \
\hline \$ 1,250,000 &   \text {production line labor costs} \
\hline \$ 450,000  &  \text { production setup costs }\
\hline\$ 250,000 &  \text { power costs (for cooling beer and running equipment) }\
\hline\$ 875,000  &   \text {manufacturing facility management costs} \
\hline
\end{array}$
-Using the manufacturing cost hierarchy, what is the total cost that would be classified as facility-level activity costs?
A) $ 500,000
B) $1,750,000
C) $ 875,000
D) $2,000,000

Accepted Answer

Facility-level activity costs are costs that cannot be directly attributed to specific products but are necessary for the production process as a whole. In this case, the manufacturing facility management costs of $875,000 are classified as facility-level activity costs, as they are incurred to maintain the overall manufacturing environment.

Question 12

The following information relates to questions below
Rock Bottom's Brew is a successful brewery engaged in the development and production of specialty micro brews. It uses manufacturing cost hierarchy to allocate costs to various activities. During the past year, it has incurred:
 $\begin{array}{|l|l|}
\hline  \text { Cost }&  \text { Description} \
\hline\$ 725,000  &   \text {product development costs} \
\hline \$ 475,000  &  \text { materials handling costs} \
\hline \$ 1,250,000 &   \text {production line labor costs} \
\hline \$ 450,000  &  \text { production setup costs }\
\hline\$ 250,000 &  \text { power costs (for cooling beer and running equipment) }\
\hline\$ 875,000  &   \text {manufacturing facility management costs} \
\hline
\end{array}$
-What is the total manufacturing cost for inspections?
A) $1,100
B) $1,400
C) $ 900
D) $ 700

Accepted Answer

100 x $14 = $1,400

Question 13

The following information relates to questions below
Rock Bottom's Brew is a successful brewery engaged in the development and production of specialty micro brews. It uses manufacturing cost hierarchy to allocate costs to various activities. During the past year, it has incurred:
 $\begin{array}{|l|l|}
\hline  \text { Cost }&  \text { Description} \
\hline\$ 725,000  &   \text {product development costs} \
\hline \$ 475,000  &  \text { materials handling costs} \
\hline \$ 1,250,000 &   \text {production line labor costs} \
\hline \$ 450,000  &  \text { production setup costs }\
\hline\$ 250,000 &  \text { power costs (for cooling beer and running equipment) }\
\hline\$ 875,000  &   \text {manufacturing facility management costs} \
\hline
\end{array}$
-What is the total manufacturing cost for the period?
A) $80,675
B) $10,625
C) $32,100
D) $17,250

Accepted Answer

100 x [(17 x $0.50) + (3 x $22) + (2.5 x $13) + $50 + $14] + (3 x $50) materials handling
= $17,250

Question 14

The following information relates to questions below
Rock Bottom's Brew is a successful brewery engaged in the development and production of specialty micro brews. It uses manufacturing cost hierarchy to allocate costs to various activities. During the past year, it has incurred:
 $\begin{array}{|l|l|}
\hline  \text { Cost }&  \text { Description} \
\hline\$ 725,000  &   \text {product development costs} \
\hline \$ 475,000  &  \text { materials handling costs} \
\hline \$ 1,250,000 &   \text {production line labor costs} \
\hline \$ 450,000  &  \text { production setup costs }\
\hline\$ 250,000 &  \text { power costs (for cooling beer and running equipment) }\
\hline\$ 875,000  &   \text {manufacturing facility management costs} \
\hline
\end{array}$
-What is the per unit manufacturing cost for the period?
A) $806.75
B) $106.25
C) $321.00
D) $172.50

Accepted Answer

$17,250 / 100 = $172.50

Question 15

Classify the total costs of each of the following as
-Wages of machine operator who is paid based on number of units produced on the machine
A) Variable
B) Fixed
C) Mixed
D) Step

Accepted Answer

The wages of a machine operator who is paid based on the number of units produced are variable costs because they change in direct proportion to the level of production.

Question 16

Classify the total costs of each of the following as
-Keyboards purchased from a subcontract supplier in a computer assembly plant
A) Variable
B) Fixed
C) Mixed
D) Step

Accepted Answer

The cost of keyboards purchased from a subcontract supplier in a computer assembly plant is variable because it changes in direct proportion to the number of computers assembled.

Question 17

Classify the total costs of each of the following as
-Property taxes
A) Variable
B) Fixed
C) Mixed
D) Step

Accepted Answer

Property taxes are considered fixed costs because they remain constant regardless of the level of production or business activity.

Question 18

Classify the total costs of each of the following as
-Salaries of quality inspectors when each inspector can evaluate a maximum of 500 units per day
A) Variable
B) Fixed
C) Mixed
D) Step

Accepted Answer

The cost of salaries for quality inspectors is a step cost because it remains constant for a certain level of units inspected (up to 500 units per day per inspector) and then increases in a step-like manner when an additional inspector is needed.

Question 19

Classify the total costs of each of the following as
-Annual salary for the vice president of manufacturing
A) Variable
B) Fixed
C) Mixed
D) Step

Accepted Answer

The annual salary for the vice president of manufacturing is considered a fixed cost because it does not change with the level of production or sales volume.

Question 20

Classify the total costs of each of the following as
-Electric power in a factory
A) Variable
B) Fixed
C) Mixed
D) Step

Accepted Answer

Electric power in a factory is typically a mixed cost because it includes a fixed component (such as a basic service charge) and a variable component that changes with the level of production or usage.

Quiz 5: Cost Estimation and Manufacturing Cost Classification

Joint products are:

The cost of maintaining general facilities such as buildings and grounds would best be classified as what type of activity?

Classify the total costs of each of the following as -Wages of machine operator who is paid based on number of units produced on the machine

Classify the total costs of each of the following as -Keyboards purchased from a subcontract supplier in a computer assembly plant

Classify the total costs of each of the following as -Property taxes

Classify the total costs of each of the following as -Salaries of quality inspectors when each inspector can evaluate a maximum of 500 units per day

Classify the total costs of each of the following as -Annual salary for the vice president of manufacturing

Classify the total costs of each of the following as -Electric power in a factory