Exam 2 from Spring 2007

# Exam 2 from Spring 2007 - 1. If the level of activity...

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1. If the level of activity increases within the relevant range: A) variable cost per unit and total fixed costs also increase. B) fixed cost per unit and total variable cost also increases. C) total cost will increase and fixed cost per unit will decrease. D) variable cost per unit and total cost also increases. 2. Stott Company requires one dockhand for every 500 packages loaded daily. The wages for these dockhands would be classified as: A) variable. B) mixed. C) step-variable. D) curvilinear. 3. The relative proportion of variable, fixed, and mixed costs in a firm is known as the firm's: A) contribution margin. B) cost structure. C) product mix. D) relevant range. 4. The cost of goods sold in a manufacturing firm typically would be classified as a: A) fixed cost. B) variable cost. C) step-variable cost. D) mixed cost. 5. For planning, control, and decision-making purposes: A) fixed costs should be converted to a per unit basis. B) discretionary fixed costs should be eliminated. C) variable costs should be ignored. D) mixed costs should be separated into their variable and fixed components. 6. Contribution margin means A) what remains from total sales after deducting fixed expenses. B) what remains after deducting cost of goods sold to cover fixed and variable expenses. C) the sum of cost of goods sold and variable expenses. D) what remains from total sales after deducting all variable expenses. Page 1

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7. Brooks Company uses the cost formula Y = \$7,200 + \$0.60X for the maintenance cost in department T, where X is machine hours. The July budget is based on 20,000 hours of planned machine time. Maintenance cost expected to be incurred during the month is: A) \$ 7,200. B) \$12,000. C) \$12,600. D) \$19,200. Use the following to answer question 8: Stewart Company is attempting to classify costs according to their cost behavior. Data concerning activity and costs are listed below: January February Sales in units 1,200 1,400 Maintenance \$ 600 \$ 700 Supplies 750 790 Insurance 800 800 Utilities 888 1,036 Lubrication 560 576 Advertising 900 1,050 Total \$4,498 \$4,952 8. The costs that Stewart Company would classify as variable would be: A) maintenance and supplies. B) maintenance, supplies, utilities, lubrication and advertising. C) supplies and advertising. D) maintenance, utilities and advertising. Page 2
Use the following to answer question 9: Compton Company is a wholesale distributor of educational CD-ROMs. The company's records indicate the following: This Year Last Year Units Sold 250,000 200,000 Sales Revenue \$1,250,000 \$1,000,000 Less: Cost of Goods Sold 875,000 700,000 Gross Margin 375,000 300,000 Less: Operating Expenses 222,000 210,000 Net Operating Income \$ 153,000 \$ 90,000 9. What is the company's contribution margin for this year? A)

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## This test prep was uploaded on 04/22/2008 for the course ECON 2843 taught by Professor Hudgins during the Spring '08 term at The University of Oklahoma.

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Exam 2 from Spring 2007 - 1. If the level of activity...

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