Question 1

Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume increases to 5,000 units,the company's total costs will be:

Accepted Answer

The total cost equation can be given as:
Total cost = Fixed cost + Variable cost per unit x Number of units

Variable cost per unit = Total variable cost / Number of units
Variable cost per unit = $50,000 / 4,000 = $12.50

When the volume increases to 5,000 units, the total cost will be:
Total cost = $40,000 + ($12.50 x 5,000)
Total cost = $40,000 + $62,500
Total cost = $102,500

Therefore, the best choice is C as it represents the total cost with the increased volume of 5,000 units.

Question 2

Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume increases to 5,000 units,the total cost per unit will be:

Accepted Answer

Using the high-low method, we can calculate the variable cost per unit:

Variable cost per unit = (cost at high volume - cost at low volume) / (units produced at high volume - units produced at low volume)
Variable cost per unit = ($90,000 - $50,000) / (5,000 - 4,000)
Variable cost per unit = $40,000 / 1,000
Variable cost per unit = $40.00

To find the total cost per unit at 5,000 units:

Total cost per unit = fixed cost per unit + variable cost per unit
Total cost per unit = ($40,000 / 4,000) + $40.00
Total cost per unit = $10.00 + $40.00
Total cost per unit = $50.00 / 5,000
Total cost per unit = $10.00
Total cost per unit at 5,000 units = $10.00 + $40.50
Total cost per unit at 5,000 units = $20.50

Therefore, the answer is C) $20.50.

Question 3

In the graph below,which depicts the relationship between units produced and total cost,the dotted line depicts which type of total cost?

Accepted Answer

A

Question 4

Select the correct statement regarding fixed costs.

Accepted Answer

Fixed costs remain constant in total, but the fixed cost per unit decreases as the volume of production or sales increases, because the same amount of fixed costs is spread over more units.

Question 5

Pickard Company pays its sales staff a base salary of $4,500 a month plus a $3.00 commission for each product sold.If a salesperson sells 800 units of product in January,the employee would be paid:

Accepted Answer

The total pay is the sum of the base salary ($4,500) and the commission for 800 units sold (800 units * $3.00/unit = $2,400), which equals $6,900.

Question 6

Two different costs incurred by Ruiz Company exhibit the following behavior pattern per unit:  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text { Unit Sold }$
$\begin{array}{lrr}
&50&100&150&200\
  \text {Cost \#1  } &  \text {\$ 300 Per unit} & \text { \$ 150 Per unit }& \text { \$ 100 Per unit}&\text {  \$ 75 Per  unit} \
 \text {Cost\#2  } & \text { \$  2 Per unit}&\text { \$ 2 perunit}&\text { \$ 2 perunit}&\text { \$ 2 perunit}\
\end{array}$
 Cost #1 and Cost #2 exhibit which of the following cost behavior patterns,respectively?

Accepted Answer

Cost #1 is fixed because it does not change with the number of units sold. Cost #2 is variable because it changes with the number of units sold.

Question 7

Fixed cost per unit:

Accepted Answer

Fixed cost per unit decreases as production volume increases because the fixed cost is spread over a larger number of units produced. As a result, the fixed cost per unit decreases with an increase in production volume.

Question 8

Rock Creek Bottling Company pays its production manager a salary of $6,000 per month.Salespersons are paid strictly on commission,at $1.50 for each case of product sold. For Rock Creek Bottling Company,the production manager's salary is an example of:

Accepted Answer

The production manager's salary is a fixed cost because it remains the same regardless of the level of production or sales.

Question 9

Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume doubles,the company's total cost will:

Accepted Answer

The fixed cost of $40,000 remains the same regardless of the volume. However, the variable cost of $50,000 will increase proportionally with the volume. Doubling the volume means that the company will make and sell 8,000 units. Therefore, the total cost will increase but not double since the fixed cost will remain the same, and the variable cost will increase proportionally. So, the answer is C, "increase but will not double."

Question 10

Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume doubles,the total cost per unit will:

Accepted Answer

When volume doubles, fixed costs remain the same ($40,000) while variable costs double ($50,000 to $100,000). The total cost per unit decreases because the fixed cost is spread over more units.

Question 11

Java Joe operates a chain of coffee shops.The company pays rent of $20,000 per year for each shop.Supplies (napkins,bags,and condiments)are purchased as needed.The manager of each shop is paid a salary of $3,000 per month,and all other employees are paid on an hourly basis.Relative to the number of customers for a shop,the cost of supplies is which kind of cost?

Accepted Answer

Variable costs are dependent on the level of activity, in this case, the number of customers for a shop. As the number of customers increases, the cost of supplies will also increase. Fixed costs, such as rent and the manager's salary, remain the same regardless of the level of activity. Mixed costs are a combination of fixed and variable costs, and relevant costs are costs that are specifically related to a decision or situation.

Question 12

Larry's Lawn Care incurs significant gasoline costs.This cost would be classified as a variable cost if the total gasoline cost:

Accepted Answer

Variable costs change in direct proportion to the level of activity. If the total gasoline cost increases as the number of hours the lawn equipment is operated increases, it is considered a variable cost.

Question 13

Based on the following cost data,what conclusions can you make about the costs of Product A and Product B? $\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\text { Total Cost }$
$\begin{array}{lrrr}
\text { Production: } & \text { Product A } & \text { Product B } \
10 \text { units } & \$ 100 & ? \
100 \text { units } & \$ 1,000& ? \
1,000 \text { units } & \$ 10,000& ?
\end{array}$

$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\text { Unit Cost }$
$\begin{array}{rr}
\text {Production:}&\text { Product A } & \text { Product B } \
\text { 10 units}&? & \$ 10,000 \
\text { 100 units}&? & \$ 1,000 \
\text { 1,000 units}&? & \$ 100
\end{array}$

Accepted Answer

The answer of Based on the following cost data,what conclusions...

Question 14

Hard Nails and Bright Nails are competing nail salons.Both companies have the same number of customers.Both charge the same price for a manicure.The only difference is that Hard Nails pays its manicurists on a salary basis (i.e.,a fixed cost structure)while Bright Nails pays its manicurists on the basis of the number of customers they serve (i.e.,a variable cost structure).Both companies currently make the same amount of net income.If sales of both salons increase by an equal amount,Hard Nails:

Accepted Answer

Hard Nails has a fixed cost structure, so its costs do not increase with more customers, leading to higher profits with increased sales. Bright Nails' costs increase with more customers, so its profit increase is less.

Question 15

Select the correct statement regarding fixed costs.

Accepted Answer

All statements are correct regarding fixed costs. "Fixed cost per unit" does imply a contradiction because while total fixed costs remain constant regardless of volume, the fixed cost per unit changes inversely with the volume of production or sales. As volume increases, the fixed cost per unit decreases, and vice versa, highlighting that the per-unit measure is not fixed. Total fixed costs, however, do remain constant with changes in volume, which is a fundamental characteristic of fixed costs.

Question 16

Quick Change and Fast Change are competing oil change businesses.Both companies have 5,000 customers.The price of an oil change at both companies is $20.Quick Change pays its employees on a salary basis,and its salary expense is $40,000.Fast Change pays its employees $8 per customer served.Suppose Quick Change is able to lure 1,000 customers from Fast Change by lowering its price to $18 per vehicle.Thus,Quick Change will have 6,000 customers and Fast Change will have only 4,000 customers. Select the correct statement from the following.

Accepted Answer

Quick Change's profit will increase because it will serve more customers at a lower cost of $18 compared to the original cost of $20. Its total revenue from oil changes will increase from $100,000 to $108,000 ($18 x 6,000). Its total cost of salaries will remain the same at $40,000, resulting in a profit of $68,000 ($108,000 - $40,000). 
On the other hand, Fast Change's profit will fall because it loses 1,000 customers and will only serve 4,000 customers now. Its total revenue from oil changes will decrease from $100,000 to $80,000 ($20 x 4,000). Its total cost of salaries will increase to $32,000 ($8 x 4,000), resulting in a profit of $48,000 ($80,000 - $32,000), which is lower than Quick Change's profit of $68,000. Therefore, the correct statement is A.

Question 17

In the graph below,which depicts the relationship between units produced and unit cost,the dotted line depicts which type of cost per unit?

Accepted Answer

The dotted line represents the variable cost per unit, as it changes with the level of production. Variable costs increase as production output increases, resulting in an upward-sloping line.

Question 18

In the graph below,which depicts the relationship between units produced and total cost,the dotted line depicts which type of total cost?

Accepted Answer

The dotted line in the graph depicts fixed cost because it remains constant, regardless of the level of units produced. This means that even if the production level increases or decreases, the fixed cost will remain the same. Variable costs, on the other hand, increase or decrease with the level of production, and mixed costs are a combination of both fixed and variable costs.

Question 19

Rock Creek Bottling Company pays its production manager a salary of $6,000 per month.Salespersons are paid strictly on commission,at $1.50 for each case of product sold. For Rock Creek Bottling Company,the cost of the salespersons' commissions is an example of:

Accepted Answer

The cost of salespersons' commissions is directly proportional to the amount of product sold, making it a variable cost.

Question 20

Based on the following cost data,items labeled (a)and (b)in the table below are which of the following amounts,respectively? $\begin{array}{lrr}
  \text { Number of units: } &1,500&3,000\
 \text { Total cost: } &\
 \text {  Variable} &\$7,500&\$15,00\
 \text {  Fixed} &\$6,000&\$6,000\
\
 \text {  Cost per unit:} &\
 \text { Variable } &\$5&(a)\
 \text { Fixed }&\$4&(b)
\end{array}$

Accepted Answer

Variable cost per unit remains constant as production increases, so (a) is $5.00. Fixed cost per unit decreases as production increases, so for 3,000 units, the fixed cost per unit is $6,000 / 3,000 = $2.00, making (b) $2.00.

Quiz 2: Cost Behavior, operating Leverage, and Profitability Analysis

Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume increases to 5,000 units,the company's total costs will be:

Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume increases to 5,000 units,the total cost per unit will be:

In the graph below,which depicts the relationship between units produced and total cost,the dotted line depicts which type of total cost?

Select the correct statement regarding fixed costs.

Pickard Company pays its sales staff a base salary of $4,500 a month plus a $3.00 commission for each product sold.If a salesperson sells 800 units of product in January,the employee would be paid:

Fixed cost per unit:

Rock Creek Bottling Company pays its production manager a salary of $6,000 per month.Salespersons are paid strictly on commission,at $1.50 for each case of product sold. For Rock Creek Bottling Company,the production manager's salary is an example of:

Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume doubles,the company's total cost will:

Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume doubles,the total cost per unit will:

Larry's Lawn Care incurs significant gasoline costs.This cost would be classified as a variable cost if the total gasoline cost:

Select the correct statement regarding fixed costs.

In the graph below,which depicts the relationship between units produced and unit cost,the dotted line depicts which type of cost per unit?

In the graph below,which depicts the relationship between units produced and total cost,the dotted line depicts which type of total cost?

Rock Creek Bottling Company pays its production manager a salary of $6,000 per month.Salespersons are paid strictly on commission,at $1.50 for each case of product sold. For Rock Creek Bottling Company,the cost of the salespersons' commissions is an example of: