CHAPTER 2 QUIZ
1. Tanner Co. management desires cost information regarding their Rawhide brand. The Rawhide brand is a(n)
a. cost object.
b. cost driver.
c. cost assignment.
d. actual cost.
2. The cost of replacement light bulbs on campus would be a direct cost to a college but would need to be allocated as an indirect cost to
a. departments.
b. buildings.
c. schools.
d. individual student instruction.
3. What is the total fixed cost of the shipping department of EZ-Mail Clothing Co. if it has the following information for 2002?
Salaries                $800,000 75% of employees on guaranteed contracts
Packaging            $400,000 depending on size of item(s) shipped
Postage                $500,000 depending on weight of item(s) shipped
Rent of warehouse space    $250,000 annual lease
a.    $850,000
b.    $900,000
c.    $1,050,000
d.    $1,950,000
4. Morton Graphics successfully bid on a job printing standard notebook covers during the year using last year’s price of $0.27 per cover. This amount was calculated from prior year costs, noting that no changes in any costs had occurred from the past year to the current year. At the end of the year, the company manager was shocked to discover that the company had suffered a loss. “How could this be?” she exclaimed. “We had no increases in cost and our price was the same as last year. Last year we had a healthy income.” What could explain the company’s loss in income this current year?
a. Their costs were all variable costs and the amount produced and sold increased.
b. Their costs were mostly fixed costs and the amount produced this year was less than last year.
c. They used a different cost object this year than the previous year.
d. Their costs last year were actual costs but they used budgeted costs to make their bids.
5. Which type of company converts materials into finished products?
a. Not-for-profit
b. Service   
c. Merchandising
d. Manufacturing
6. The three categories of inventories commonly found in many manufacturing companies are:
a. Direct materials, direct labor, and indirect manufacturing costs.
b. Purchased goods, period costs, and cost of goods sold.
c. Direct materials, work in process, and finished goods.
d. LIFO, FIFO, and weighted average.
7. Inventoriable costs are
a. only purchased goods for resale.
b. a category of costs used only for manufacturing companies.
c. recorded as expenses when incurred and later reclassified as assets.
d. recorded as assets when incurred.
8. Period costs are
a. all costs in the income statement other than cost of goods sold.
b. defined as manufacturing costs incurred this period on the schedule of cost of goods manufactured.
c. always recorded as assets when first incurred.
d. those costs that benefit future periods.
9. The cost of a product can be measured as any of the following except as cost
a. gathered from all areas of the value chain.
b. identified as period cost.
c. designated as manufacturing cost only.
d. explicitly defined by contract.
10. The primary focus of cost management is to
a. help managers make different decisions.
b. calculate product costs.
c. aid managers in budgeting.
d. distinguish between relevant and irrelevant information.


CHAPTER 2 QUIZ SOLUTIONS
1.    a
2.    d
3.    a
4.    b
5.    d
6.    c
7.    d
8.    a
9.    b
10.    a
Quiz Question Calculations
3.    Fixed costs = (800,000)  75% + 250,000 = $850,000
CHAPTER 3 QUIZ
1. Which of the following is not a factor in cost-volume-profit analysis?
a. Units sold
b. Selling price
c. Total variable costs
d. Fixed costs of a product
2. Which of the following is not an assumption of cost-volume-profit analysis?
a. The time value of money is incorporated in the analysis.
b. Costs can be classified into variable and fixed components.
c. The behavior of revenues and expenses is accurately portrayed as linear over the relevant range.
d. The number of output units is the only driver.
3. Contribution margin is calculated as
a. total revenue – total fixed costs.
b. total revenue – total manufacturing costs (CGS).
c. total revenue – total variable costs.
d. operating income + total variable costs.
Questions 4-6 are based on the following data.
    Tee Times, Inc. produces and sells the finest quality golf clubs in all of Clay County. Th
e company expects the following revenues and costs in 2004 for its Elite Quality golf club sets:
    Revenues (400 sets sold @ $600 per set)        $240,000
    Variable costs                      160,000
    Fixed costs                        50,000
4. How many sets of clubs must be sold for Tee Times, Inc. to reach their breakeven point?
a.    400
b.    250
c.    200
d.    150
5. How many sets of clubs must be sold to earn a target operating income of $90,000?
a.    700
b.    500
c.    400
d.    300
6. What amount of sales must Tee Times, Inc. have to earn a target net income of $63,000 if they have a tax rate of 30%?
a.    $489,000
b.    $429,000
margin ratec.    $420,000
d.    $300,000
7. One way for managers to cope with uncertainty in profit planning is to
a. use CVP analysis because it assumes certainty.
b. recommend management hire a futurist whose work is to predict business trends.

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