Question 1

London Plastics has monthly fixed costs of $92,500, while its variable costs are $4.10 per unit. If the sales price of a unit is $14.25 and London Plastics sell 14,800 units, the company's total sales revenue will be
A)$150,220.
B)$210,900.
C)$92,500.
D)$179,080.

Accepted Answer

The total sales revenue is calculated by multiplying the sales price per unit by the number of units sold. Therefore, for London Plastics, the total sales revenue is $14.25 per unit * 14,800 units = $210,900.

Question 2

Plowin' Supply plans to make 15,000 tractors at its plant. Fixed costs are $540,000 and variable costs are $200 per tractor. What is the average cost per tractor?
A)$200
B)$2700
C)$236
D)$36

Accepted Answer

Total cost = Fixed cost + (Variable Cost per unit × Number of units)

Total cost = $540,000 + ($200 × 15,000)

Total cost = $540,000 + $3,000,000

Total cost = $3,540,000

Average cost per tractor = Total cost ÷ Number of tractors

Average cost per tractor = $3,540,000 ÷ 15,000

Average cost per tractor = $236

Question 3

Which of the following describes the way in which total fixed costs behave?
A)They will decrease as production increases.
B)They will decrease as production decreases.
C)They will remain the same throughout production levels within the relevant range.
D)They will increase as production decreases.

Accepted Answer

Total fixed costs remain the same throughout production levels within the relevant range. This is because fixed costs are expenses that do not vary with the level of production, such as rent or insurance. Therefore, they will not change even if production levels increase or decrease.

Question 4

How do total variable costs behave?
A)They decrease as production decreases.
B)They remain the same throughout production levels within the relevant range.
C)They decrease as production increases.
D)They increase as production decreases.

Accepted Answer

Total variable costs decrease as production decreases because variable costs vary directly with the level of production.

Question 5

A(n)________ cost is one whose total amount changes in direct proportion to a change in volume.
A)fixed
B)irrelevant
C)variable
D)mixed

Accepted Answer

A variable cost is one that varies directly with changes in volume or activity. As the volume of activity increases, variable costs also increase proportionally. These costs can include direct materials, direct labor, or any other costs that vary based on production levels.

Question 6

A company has fixed costs of $60,000 per month. If sales double from 6,000 to 12,000 units during the month, fixed costs in total will
A)double.
B)remain the same.
C)be cut in half.
D)be none of the above.

Accepted Answer

Fixed costs do not change with the level of sales, so they will remain the same at $60,000 regardless of whether sales are at 6,000 units or 12,000 units.

Question 7

A company has monthly fixed costs of $96,000. The variable costs are $8.00 per unit. If the sales price of a unit is $14.00 and we sell 8000 units, the company's total variable costs will be
A)$96,000.
B)$64,000.
C)$112,000.
D)$48.

Accepted Answer

Total variable cost per unit = $8.00
Number of units sold = 8000

Total variable costs = Total variable cost per unit * Number of units sold
= 8.00 * 8000
= $64,000

Therefore, the answer is B.

Question 8

An example of a fixed cost for a manufacturer would be which of the following?
A)Sales commissions
B)Salary of plant manager
C)Direct materials
D)Delivery costs

Accepted Answer

A fixed cost is a cost that remains constant regardless of production levels, and the salary of a plant manager is an example of a fixed cost. Sales commissions, direct materials, and delivery costs are typically variable costs that change with production levels.

Question 9

Which of the following is an example of a fixed cost for a manufacturer?
A)Income Taxes
B)Machine Repair Expense
C)Fire Insurance on buildings
D)Delivery Fuel Expense

Accepted Answer

Fire insurance on buildings is a fixed cost because it remains constant regardless of the level of production or sales. The other options (income taxes, machine repair expense, and delivery fuel expense) are variable costs which increase or decrease with changes in production or sales levels.

Question 10

A company has monthly fixed costs of $115,500. The variable costs are $5.00 per unit. If the sales price of a unit is $15.00 and we sell 7700 units, the company's average fixed costs per unit will be
A)$10.00 per unit.
B)$5.00 per unit.
C)$20.00 per unit.
D)$15.00 per unit.

Accepted Answer

The answer of A company has monthly fixed costs of...

Question 11

Kramer Manufacturing produces blenders. Its total fixed costs are $30,000. Its variable costs are $55.00 per blender. As production of blenders increases (within the relevant range), fixed costs will
A)stay the same per unit.
B)decrease as production increases.
C)decrease per unit as production increases.
D)increase as production decreases.

Accepted Answer

Fixed costs per unit decrease as production increases because the total fixed costs are spread over more units, reducing the cost per unit.

Question 12

How do variable costs per unit behave?
A)They decrease as production increases.
B)They increase as production decreases.
C)They decrease as production decreases.
D)They remain the same throughout production levels within the relevant range.

Accepted Answer

Variable costs per unit remain constant regardless of the level of production within the relevant range. This means that the cost per unit does not change as production levels increase or decrease, although the total variable costs will change in direct proportion to the production volume.

Question 13

How do fixed costs per unit behave?
A)They remain the same throughout production levels within the relevant range.
B)They decrease as production decreases.
C)They increase as production decreases.
D)They increase as production increases.

Accepted Answer

Fixed costs per unit increase as production decreases because the total fixed costs are spread over a smaller number of units, making the cost per unit higher.

Question 14

London Plastics has monthly fixed costs of $84,000, while its variable costs are $4.70 per unit. If the sales price of a unit is $15.50 and London Plastics sell $14,000 units, the company's total variable costs will be
A)$151,200.
B)$65,800.
C)$217,000.
D)$84,000.

Accepted Answer

The total variable costs can be calculated by multiplying the variable cost per unit by the number of units sold. So, $4.70 * 14,000 units = $65,800.

Question 15

A company has monthly fixed costs of $96,000. The variable costs are $8.00 per unit. If the sales price of a unit is $14.00 and we sell $8000 units, the total sales revenue will be
A)$48.
B)$96,000.
C)$112,000.
D)$95,950.

Accepted Answer

The total variable cost can be calculated as: 
Variable cost per unit x Number of units = $8.00 x 8000 = $64,000

The total cost (fixed + variable) can be calculated as:
Total cost = Fixed cost + Variable cost
Total cost = $96,000 + $64,000 = $160,000

The total sales revenue can be calculated as:
Sales price per unit x Number of units = $14.00 x 8000 = $112,000

Since the sales revenue ($112,000) is greater than the total cost ($160,000), the company will earn a profit. Therefore, the best choice is C.

Question 16

Average variable costs
A)remain the same as production decreases.
B)remain the same as production increases.
C)remain the same no matter if production increases or decreases.
D)go down as production decreases.

Accepted Answer

The answer of Average variable costs
A)remain the same as production...

Question 17

What is the cost of making one more unit called?
A)Unit cost
B)Marginal cost
C)Variable cost
D)None of the above

Accepted Answer

Making one more unit incurs additional costs such as labor and raw materials. Marginal cost is the cost of producing one more unit and is an important factor in determining profit margins and production levels.

Question 18

A company produces toy airplanes at a variable cost of $24 per toy. If 7090 toys are produced at a total variable cost of $170,160, the total variable cost at 4540 toys will be
A)$170,160.
B)$24.
C)$108,960.
D)$279,120.

Accepted Answer

We can use the formula:

Total variable cost = variable cost per unit x number of units

To find the variable cost per unit, we divide the total variable cost by the number of units:

$170,160 ÷ 7090 = $24

Now we can use the same formula to find the total variable cost at 4540 toys:

Total variable cost = variable cost per unit x number of units
Total variable cost = $24 x 4540
Total variable cost = $108,960

Therefore, the answer is C, $108,960.

Question 19

London Plastics has monthly fixed costs of $87,000, while its variable costs are $4.60 per unit. If the sales price of a unit is $14.00 and London Plastics sell 15,000 units, the company's average fixed costs per unit will be
A)$5.80 per unit.
B)$10.40 per unit.
C)$4.60 per unit.
D)$9.40 per unit.

Accepted Answer

Average fixed costs per unit are calculated by dividing the total fixed costs by the number of units sold. So, $87,000 / 15,000 units = $5.80 per unit.

Question 20

Variable costs
A)are fixed per unit and vary in total as production levels change.
B)are fixed in total as production levels change.
C)decrease per unit as production volume increases.
D)vary per unit of output as production levels change.

Accepted Answer

Variable costs are fixed per unit and vary in total as production levels change. This means that the cost per unit remains the same regardless of the number of units produced, but the total variable cost will increase or decrease in direct proportion to production volume.

Quiz 2: Building Blocks of Managerial Accounting

London Plastics has monthly fixed costs of $92,500, while its variable costs are $4.10 per unit. If the sales price of a unit is $14.25 and London Plastics sell 14,800 units, the company's total sales revenue will be

Plowin' Supply plans to make 15,000 tractors at its plant. Fixed costs are $540,000 and variable costs are $200 per tractor. What is the average cost per tractor?

Which of the following describes the way in which total fixed costs behave?

How do total variable costs behave?

A(n) ________ cost is one whose total amount changes in direct proportion to a change in volume.

A company has fixed costs of $60,000 per month. If sales double from 6,000 to 12,000 units during the month, fixed costs in total will

A company has monthly fixed costs of $96,000. The variable costs are $8.00 per unit. If the sales price of a unit is $14.00 and we sell 8000 units, the company's total variable costs will be

An example of a fixed cost for a manufacturer would be which of the following?

Which of the following is an example of a fixed cost for a manufacturer?

A company has monthly fixed costs of $115,500. The variable costs are $5.00 per unit. If the sales price of a unit is $15.00 and we sell 7700 units, the company's average fixed costs per unit will be

Kramer Manufacturing produces blenders. Its total fixed costs are $30,000. Its variable costs are $55.00 per blender. As production of blenders increases (within the relevant range) , fixed costs will

How do variable costs per unit behave?

How do fixed costs per unit behave?

London Plastics has monthly fixed costs of $84,000, while its variable costs are $4.70 per unit. If the sales price of a unit is $15.50 and London Plastics sell $14,000 units, the company's total variable costs will be

A company has monthly fixed costs of $96,000. The variable costs are $8.00 per unit. If the sales price of a unit is $14.00 and we sell $8000 units, the total sales revenue will be

Average variable costs

What is the cost of making one more unit called?

A company produces toy airplanes at a variable cost of $24 per toy. If 7090 toys are produced at a total variable cost of $170,160, the total variable cost at 4540 toys will be

London Plastics has monthly fixed costs of $87,000, while its variable costs are $4.60 per unit. If the sales price of a unit is $14.00 and London Plastics sell 15,000 units, the company's average fixed costs per unit will be

Variable costs