1) What is the reason for allocating fixed overhead costs to products?
2) Custom Quilters makes decorative comforters, quilted garments, and other products
in a small sewing factory. In 2012, the company expects to make 2,000 comforters.
Indicate whether the given cost is direct or indirect with respect to the comforters, and
also whether it is fixed or variable with respect to the number of comforters. Indicate
your answers by placing X’s in the appropriate columns.
3) What are the costs and benefits associated with budgeting?
4) Harker Company manufactures DVD players and other similar electronic products.
Indicate whether the cost is a product cost or period (selling, general, and
administrative) cost AND whether its cost behavior is fixed, variable, or mixed by
placing X’s in the appropriate boxes. As an example, commissions paid to sales staff
would be classified as a period cost and variable.
Insurance on factory building
5) How is an expenditure that improves the quality of a piece of equipment recorded?
6) How is the average number of days to collect receivables calculated? What does it
tell an analyst about a company’s receivables?
7) What does the payback period measure for a capital investment?