ACCT_285__BC__Whittle_rachna_ExamII_spr06_ch5_8posting -...

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Accounting 285 – Exam II – Spring 2006 Chapters 6-8 1. Cool Company uses ABC costing. Which of the following is most likely to be the cost driver for the cost of ordering parts? a. weight of parts ordered b. number of orders placed c. direct labor cost d. depreciation expense 2. Robinson Company planned to make 500,000 cans of pasta sauce and spend $250,000 on tomatoes during November. However, demand was weak due to increased competition, and only 450,000 cans of pasta sauce were produced. The actual cost incurred was $230,000. Tomato prices were as expected during the period. Which of the following statements would be a fair statement regarding Robinson’s performance on tomato usage? a. Robinson was under flexible budget by $20,000 and did a good job controlling costs. b. Robinson was over budget by $5,000 and did a poor job of controlling costs. c. Robinson’s flexible budget for tomatoes for performance evaluation should have been $250,000. d. Both a and c are correct 3. A company normally sells its product for $15 per unit. Normally, the variable cost of production is $9 per unit and the variable selling cost is $2 per unit. Annual fixed costs for production are $5,000,000 and for selling and administrative are $1,000,000. An exporter has approached the company about buying 1,000,000 units at a price of $12 per unit. The company’s capacity is 5,000,000 units, and they are currently only selling 3,000,000. The variable selling cost of $2 per unit will be avoided on the export order. Assume existing sales will be unaffected by the special order. The company uses variable costing. What will be the impact on profits from accepting the special order? a. Profits will increase by $3,000,000 b. Profits will increase by $1,000,000 c. Profits will decrease by $1,000,000 d. Profits will decrease by $3,000,000
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12. A company is trying to decide whether to keep or drop the sporting goods department in their department store. If the segment is dropped, the manager will be fired. The manager's salary, in relation to the decision to keep or drop the sporting goods department, is a. sunk and therefore not relevant b. the same for all alternatives and therefore not relevant c. avoidable and therefore relevant d.
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This note was uploaded on 04/21/2011 for the course BUS 102 taught by Professor Timbianco during the Spring '08 term at Ivy Tech Community College.

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ACCT_285__BC__Whittle_rachna_ExamII_spr06_ch5_8posting -...

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