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Chapter 2 Part 1
Chapter 2 Part 1
2
Tuesday 17/8/2021 Cost Accounting (1) Level 2
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Chapter 2 – Part 1
First: MCQs
10) Which of the following is true if the volume of sales increases (within a relevant
range)?
A) total fixed cost increases
B) total variable cost decreases
C) total variable cost increases
D) total fixed cost decreases
Answer: C
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Tuesday 17/8/2021 Cost Accounting (1) Level 2
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11) Cost behavior refers to .
A) how costs react to a change in the level of activity
B) whether a cost is incurred in a manufacturing, merchandising, or service company
C) classifying costs as either perpetual or period costs
D) whether a particular expense is expensed in the same or the following period
Answer: A
12) Variable costs
A) are always indirect costs
B) increase in total when the actual level of activity increases
C) include most personnel costs and depreciation on machinery
D) are never considered a part of prime cost
Answer: B
14) Within the relevant range, if there is a change in the level of the cost driver, then
A) total fixed costs and total variable costs will change
B) total fixed costs and total variable costs will remain the same
C) total fixed costs will remain the same and total variable costs will change
D) total fixed costs will change and total variable costs will remain the same
Answer: C
15) Outside the relevant range, variable costs, such as direct material costs _.
A) will decrease proportionately with changes in sales volumes
B) will remain the same with changes in production volumes
C) will not change proportionately with changes in production volumes
D) will increase proportionately with changes in sales volumes
Answer: C
Section No.2
Tuesday 17/8/2021 Cost Accounting (1) Level 2
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16) Puritan Apparels is a clothing retailer. Unit costs associated with one of its
products, Product AHF 130, are as follows:
Direct materials $110
Direct manufacturing labor 90
Variable manufacturing overhead 45
Fixed manufacturing overhead 33
Sales commissions (2% of sales) 10
Administrative salaries 28
Total $316
16)What are the variable manufacturing costs per unit associated with ProductAHF
130?
A) $288
B) $200
C) $245
D) $255
Answer:C
Explanation: variable manufacturing costs = $110 + $90 + $45 = $245
17) Puritan Apparels is a clothing retailer. Unit costs associated with one of its
products, Product DCF 130, are as follows:
Direct materials $120
Direct manufacturing labor 40
Variable manufacturing overhead 15
Fixed manufacturing overhead 33
Sales commissions (2% of sales) 5
Administrative salaries 24
Total $237
What are the indirect nonmanufacturing variable costs per unit associated with
Product DCF130?
A) $5
B) $29
C) $160
D) $213
Answer:A
Explanation: Indirect variable costs = Sales commissions = $5
Section No.2
Tuesday 17/8/2021 Cost Accounting (1) Level 2
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18) The East Company manufactures several different products. Unit costs associated
with Product ORD105 are as follows:
Direct materials $54
Direct manufacturing labor 8
Variable manufacturing overhead 11
Fixed manufacturing overhead 25
Sales commissions (2% of sales) 5
Administrative salaries 12
Total $115
What is the percentage of the total fixed costs per unit associated with Product ORD105
with respect to total cost?
A) 37%
B) 32%
C) 15%
D) 26%
Answer: B
Explanation: $25 + 12 = $37/115 = 32%
19) When 25,000 units are produced, fixed costs are $21.00 per unit. Therefore, when
20,000 units are produced, fixed costs will _.
A) increase to $26.25 per unit
B) remain at $21.00 per unit
C) decrease to $16.80 per unit
D) total $420,000
Answer: A
Explanation: Fixed costs are $525,000 ($21.00 × 25,000 units). Dividing $525,000 by
20,000 units = $26.25.
20) When 24,000 units are produced, variable costs are $12.00 per unit. Therefore, when
18,000 units are produced _.
A) variable costs will remain at $12.00 per unit
B) variable costs will total $288,000
C) variable unit costs will increase to $16.00 per unit
D) variable unit costs will decrease to $9.00 per unit
Answer: A
Section No.2
Tuesday 17/8/2021 Cost Accounting (1) Level 2
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Sales $43,000
Variable costs 14,000
Fixed costs 11,000
Operating income $18,000
If sales reduce to half of the amount in the next month, what is the projected operating
income?
A) $2,000
B) $9,000
C) $18,000
D) $3,500
Answer: D
Explanation: Projected operating income = ($43,000 × 0.5) − ($14,000 × 0.5) −
$11,000 = $3,500.
22) Ridez Manufacturing currently produces 4,000 bicycles per month. The following
per unit data apply for sales to regular customers:
The plant has capacity for 6,000 bicycles and is considering expanding production to
5,000 bicycles. What is the per unit cost of producing 5,000 bicycles?
A) $91.80 per unit
B) $111.25 per unit
C) $69.80 per unit
D) $86.20 per unit
Answer: D
Explanation: Cost of producing 5,000 bicycles = [($53 + $10 + $12) × 5,000 units] +($14
× 4,000 units) = 431,000 ÷ 5,000 units = $86.20
Section No.2
Tuesday 17/8/2021 Cost Accounting (1) Level 2
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25) Costs expensed on the income statement in the accounting period incurred are
called .
A) direct costs
B) indirect costs
C) period costs
D) inventoriable costs
Answer: C
Section No.2
Tuesday 17/8/2021 Cost Accounting (1) Level 2
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27) Campus Apparels is a clothing maker. Unit costs associated with one of its
products, Product DCT121, are as follows:
Direct materials $160
Direct manufacturing labor 50
Variable manufacturing overhead 55
Fixed manufacturing overhead 32
Sales commissions (2% of sales) 13
Administrative salaries 17
Total $327
What are the period costs per unit associated with Product DCT121?
A) $33
B) $17
C) $30
D) $100
Answer: C
Explanation: $13 + 17 = $30