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1) Hess Co. manufactures a product that sells for $12 per unit. Total fixed costs are
$96,000 and variable costs are $7 per unit. Hess can buy a newer production machine
that will increase total fixed costs by $22,800 but variable costs will be decreased by
$0.40 per unit. What effect would the purchase of the new machine have on Hess's
break-even point in units?
2) Foreign exchange rates fluctuate due to changing _______________ and
___________ conditions.
3) Times interest earned is computed by dividing _______________ by interest
expense.
4) A company rents a small building with 10,000 square feet of space for $100,000 per
year. The rent is allocated to the company's three departments on the basis of the value
of the space occupied by each. Department One occupies 1,500 square feet of
ground-floor space, Department Two occupies 3,500 square feet of ground-floor space,
and Department Three occupies 5,000 square feet of second-floor space. If rent for
comparable floor space in the neighborhood averages $15.00 per sq. ft. for ground-floor
space and $10.00 per sq. ft. for second-floor space, what annual rent expense should be
charged to each department?
5) Explain how a service firm, such as an advertising agency, might use job order
costing.
6) A common focus of financial statement users in evaluating a company's performance
includes evaluation of its (1) ____________________________, (2)
______________________, and (3) __________________________.
