Acc206 Principles of Accounting: Week 4 Quiz (Version 7 – October 2012)

Acc206 Principles of Accounting
Week 4 Quiz (Version 7 – October 2012):

1. Activity-based costing systems combine many various elements of overhead into a single cost pool. (Points : 1)
True
False

2. Jurassic Manufacturers produces flooring material. Fixed costs are $5,000 per month. Sales price for one unit of product is $50, and the variable cost per unit is $30. If Jurassic wishes to earn an operating income of $2,000, how many units need to be sold? (Points : 1)
270
300
320
350

3. JB Company has fixed costs of $300,000. Total costs, both fixed and variable, are $378,000 when 40,000 units are produced. How much is the variable cost per unit? (Please round to the nearest cent.) (Points : 1)
$9.45
$2.78
$7.50
$1.95
None of these is correct

4. Activity-based costing systems and traditional costing systems will produce the same results for product cost and profitability, although they use different methods of calculation. (Points : 1)
True
False

5. Dalian Company provides the following information:
Price per unit: $20
Variable cost per unit: $8
Fixed costs per month: $15,000

What is the breakeven point in terms of sales revenues? (Points : 1)
$18,500
$25,000
$37,500
$22,750

6. Ace Plastics produces many different kinds of products all in one manufacturing facility. They have identified four activities for their costing system:
Materials management – allocated by number of purchase orders
Chemical processing – allocated on metric tons
Molding – allocated on direct labor hours
Packaging – allocated by number of units produced

The activity rates are as follows:
Materials management $12.00 Per purchase order
Chemical processing $ 7.50 Per metric ton
Molding $24.00 Per direct labor hour
Packaging $ 0.10 Per unit

Ace received an order for 3,000 plastic toys. The engineering design shows that the order will require $540 of direct material cost in total, $90 of direct labor cost, will require 4 purchase orders, will use 2 metric tons of chemical base, will need 8 direct labor hours, and will produce 3.000 units of product. What will the full production cost of the order be? (Points : 1)
$ 630
$ 645
$1,095
$1,185

7. Which of the following statements is CORRECT with respect to variable cost per unit, within the relevant range? (Points : 1)
It will increase as production decreases.
It will decrease as production decreases.
It will remain the same as production levels change.
It will decrease as production increases.

8. Dalian Company provides the following information:
Price per unit: $20
Variable cost per unit: $8
Fixed costs per month: $15,000
What is the breakeven point in terms of units sold? (Points : 1)
1,150
1,200
1,875
1,250

9. Two main benefits of activity-based costing are more accurate product cost information and more detailed information on costs of activities and the drivers of these costs. (Points : 1)
True
False

10. Equival Company wishes to sell truck axles to car manufacturers. The current market price of the axles is $400, and Equival knows it must accept the market price. Currently, it costs the company $330 to produce each axle. The company wishes to make a profit equal to 20% of the price. Which of the following strategies should Equival adopt to achieve its objective? (Points : 1)
Raise the price to $410.
Reduce its production costs by $10 per unit.
Increase the production costs by $20 per unit.
Use advertising to increase the volume of sales.
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