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1) pearson electric company uses the high-low method to analyze mixed costs. the
following information relates to the production data for the first six months of the year.
what is the estimated total cost at an operating level of 1,180 hours, using the high-low
method?
a.$10,060
b.$10,145
c.$10,015
d.$10,805
2) the following are types of rework except:
a.rework on normal defective units common to all jobs
b.rework on abnormal defective units not falling within the normal range
c.rework on normal defective units for a particular job
d.all of the above are types of rework, with no exception
3) firm x has a production process that has a total joint cost of $15,000. at the split-off
point, there are 2,000 pounds of product 1 and 3,000 pounds of product 2 . what is the
cost per pound of product 1 using the physical measure method?
a.$2.50
b.$3.00
c.$3.50
d.$4.00
4) which of the following statements regarding a joint production process is not true?
a.the essential decision facing management is whether to sell products at the split-off
point or to sell these products after further processing
b.the allocation of joint (common) production costs to individual products helps
management determine which products should be processed beyond the split-off point
c.costs incurred up to the split-off point are referred to as joint production costs
d.the decision as to whether individual products should be sold "as is" or processed
further is made on the basis of comparing incremental revenues and incremental costs
e.for financial reporting purposes output (inventory) is valued at the sum of separable
processing cost plus an allocated share of joint production costs
5) home remodeling inc. recently obtained a short-term bank loan from city national
bank. the bank required that certain credit information and pro forma financial
statements be maintained through the life of the loan. in order to prepare the pro forma
statements, home remodeling must forecast total overhead cost. the actual machine
hours and overhead cost are presented below for the past six months.
using the high-low method, total monthly fixed overhead cost is calculated to be:
a.$626
b.$696
c.$612
d.$690
e.$722
6) an activity that is performed to support the production of a new custom-order product
is a(n):
a.product-level activity
b.facility-level activity
c.unit-level activity
d.customer-support activity
e.batch-level activity
7) home remodeling inc. recently obtained a short-term bank loan from city national
bank. the bank required that certain credit information and pro forma financial
statements be maintained through the life of the loan. in order to prepare the pro forma
statements, home remodeling must forecast total overhead cost. the actual machine
hours and overhead cost are presented below for the past six months.
using the high-low method, unit variable overhead cost is calculated to be:
a.$2.49
b.$3.40
c.$2.06
d.$2.60
e.$2.00
8) the breakeven point is:
a.the sales volume at which revenues equal total cost plus an operating profit of zero
b.the sales volume at which revenues equal variable cost and profit is zero
c.the sales volume at which revenues equal fixed cost and profit is zero
d.the point at which revenues meet the budget target
e.the sales volume at which the total contribution margin exceeds total variable costs
9) a relatively low margin of safety ratio (mos%) for a product is usually an indication
that the product:
a.is losing money
b.has a high contribution margin
c.is riskier than a product with a higher margin of safety ratio
d.is less risky than a product with a higher margin of safety ratio
e.requires heavy fixed cost to produce or sell
10) sunk costs:
a.are substitutes for opportunity costs
b.in and of themselves are not relevant to decision making
c.are, by definition, relevant to decision making
d.are fixed costs
e.are relevant to long-run but generally not to short-run decisions
