Response to the following multiple choice questions;
1. The variable portion of advertising costs is a
Conversion YES... Period NO.
Conversion YES .... Period YES.
Conversion NO.... Period NO.
Conversion NO.... Period YES.
2. Total fixed costs
will increase with increases in activity.
will decrease with increases in activity.
are not affected by activity.
should be ignored in making decisions because they can never change.
3. Depreciation of office buildings and office equipment is also known as
variable costs.
conversion costs.
period costs.
product costs.
4. When the activity level is expected to decrease within the relevant range, what effects would be anticipated with respect to each of the following?
Fixed cost per unit Variable cost per unit
Increase No change
Increase Increase
Decrease No change
No change Increase
5. Emco Company uses direct labor cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company included in direct labor cost a portion of indirect labor. The effect of this misclassification will be to
overstate the predetermined overhead rate.
understate the predetermined overhead rate.
have no effect on the predetermined overhead rate.
This cannot be determined from the information given.
6. Under a job-order costing system, the product being manufactured
is homogeneous.
passes from one manufacturing department to the next before being completed.
can be custom manufactured.
has a unit cost that is easy to calculate by dividing total production costs by the units produced.
7. The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method
can be used under any cost-flow assumption.
does not require the use of predetermined overhead rates.
keeps costs in the beginning inventory separate from current period costs.
does not consider the degree of completion of units in the beginning work-in-process inventory when computing equivalent units of production.
8. The contribution margin ratio always increases when the
fixed expenses increase.
fixed expenses decrease.
variable expenses as a percentage of net sales increase.
variable expenses as a percentage of net sales decrease.
9. The unit sales needed to attain the target profit is found by
dividing fixed costs by the contribution margin.
adding variable expenses to fixed expenses and dividing the total by the contribution margin.
adding target profit to the fixed expenses and then dividing the total by the contribution margin.
adding target profit to the fixed expenses and then dividing the total by the unit contribution margin.
10. In an income statement prepared using the variable costing method, fixed manufacturing overhead would
not be used.
be used in the computation of the contribution margin.
be used in the computation of net operating income but not in the computation of the contribution margin.
be treated the same as variable manufacturing overhead.