Q: Which formula correctly calculates the total cost for a company producing 8,000 units, if fixed costs are $$10,000,000 and variable cost per unit is 2$$,500?

$$10,000,000 + (2$$,500 \times 8,000)$

Q: Which of the following is a correct formula for calculating average cost?

$$\text{Average cost} = \frac{\text{Total cost}}{\text{Number of units}}$$

Q: Which of the following is the correct formula for calculating cost of goods manufactured?

$$\text{Beginning work in process inventory} + \text{Total manufacturing costs} - \text{Ending work in process inventory}$$

Question 1

Which of the following best describes a merchandising company?

Accepted Answer

A company that resells tangible products bought from manufacturers and suppliers.

Question 2

Which of the following is NOT an element of the value chain?

Accepted Answer

Depreciation

Question 3

A cost that can be traced directly and conveniently to a cost object is called:

Accepted Answer

Direct cost

Question 4

Which of the following is a period cost for a manufacturing company?

Accepted Answer

Advertising expense

Question 5

Which formula correctly calculates the total cost for a company producing 8,000 units, if fixed costs are $$10,000,000 and variable cost per unit is 2$$,500?

Accepted Answer

$$10,000,000 + (2$$,500 	imes 8,000)$

Question 6

Which of the following costs would be considered manufacturing overhead?

Accepted Answer

Glue used in assembling products (not cost-effective to trace)

Question 7

A company’s cost of goods sold for a merchandising company is calculated as:

Accepted Answer

Beginning inventory + Purchases - Ending inventory

Question 8

Which of the following is an example of a relevant cost for decision making?

Accepted Answer

A cost that differs between two alternatives

Question 9

If a company’s total cost is $80,000,000 for producing 12,000 units, what is the average cost per unit?

Accepted Answer

$6,667

Question 10

Which of the following best describes a fixed cost?

Accepted Answer

A cost that stays constant in total over a wide range of activity levels

Question 11

Which of the following is a correct formula for calculating average cost?

Accepted Answer

$$	ext{Average cost} = \frac{	ext{Total cost}}{	ext{Number of units}}$$

Question 12

Which of the following is an example of a controllable cost?

Accepted Answer

Direct materials purchased for production

Question 13

A manufacturer’s product costs include which of the following?

Accepted Answer

Direct materials, direct labor, and manufacturing overhead

Question 14

Which of the following is the correct formula for calculating cost of goods manufactured?

Accepted Answer

$$	ext{Beginning work in process inventory} + 	ext{Total manufacturing costs} - 	ext{Ending work in process inventory}$$

Question 15

Which of the following is an example of a prime cost?

Accepted Answer

Direct materials + Direct labor

Question 16

A company is considering two alternatives. Alternative A has a total cost of $$50,000, and Alternative B has a total cost of 55$$,000. The $5,000 difference is:

Accepted Answer

A relevant cost

Question 17

Which of the following is a characteristic of a service company’s income statement?

Accepted Answer

It reports only operating expenses and revenues

Question 18

Which of the following is an example of a sunk cost?

Accepted Answer

The original purchase price of equipment already owned

Question 19

If a company’s fixed costs are $$15,000,000, variable cost per unit is 3$$,000, and it produces 5,000 units, what is the total cost?

Accepted Answer

$$15,000,000 + (3$$,000 	imes 5,000) = $$30,000,000$$

Question 20

Which of the following best describes marginal cost?

Accepted Answer

The cost of producing one additional unit

Building Blocks of Managerial Accounting: Core Concepts and Applications

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