# Acc206 Principles of Accounting: Week 4 Quiz (Version 3 – July 2012)

Acc206 Principles of Accounting
Week 4 Quiz (Version 3 – July 2012):

1. 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.

2. 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

3. 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

4. Peterson Company has both fixed and variable costs. If the volume doubles, the total fixed costs will double. (Points : 1)
True
False

5. Kenney Company uses activity-based costing to account for its manufacturing process. Kenney Company produces tires, and each tire has \$.50 of direct materials, includes 20 parts and requires 2 hours of machine time. There is no direct labor. Additional information follows:
Activity Allocation Base Cost Allocation Rate
Materials handling Number of parts \$0.16
Machining Machine hours \$14.40
Assembling Number of parts \$.70
Packaging Number of finished units \$5.40
What is the cost of machining per tire? (Points : 1)
\$28.80
\$26.40
\$25.80
\$29.50
None of these is correct

6. 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

7. 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

8. Activity-based costing creates more precise matching of indirect costs with products (Points : 1)
True
False

9. Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of 20 separate parts totalling \$95 in direct materials, and requires 2.5 hours of machine time to produce. There are no direct labor costs.
Activity Allocation Base Cost Allocation Rate
Materials handling Number of parts \$ .08
Machining Machine hours \$7.20
Assembling Number of parts \$.35
Packaging Number of finished units \$2.70
What is the total manufacturing cost per ceiling fan? (Points : 1)
\$125.75
\$121.13
\$115.32
\$124.30
None of these is correct

10. Peterson Company has both fixed and variable costs. If the volume doubles, the total variable costs will double. (Points : 1)
True
False