1. A job cost sheet has three cost categories. They are manufacturing expense, administrative expense, and transportation expense.

True

False

2. Triple Limited Partnership refines and sells three chemicals: P, S, and T. P's unit contribution margin is higher than S's which is higher than T's. Which one of the following events is most likely to decrease the company's overall break-even point?

The installation of new computer-controlled equipment that reduces variable costs and increases fixed costs.

A decrease in T's selling price.

An increase in the overall market demand for S.

A change in the relative market demand for the products, with the increase favoring P relative to S and T.

3. One of the items below is a period cost. Which one?

fire insurance on a factory building.

salary of a factory supervisor.

direct materials.

rent on a headquarters building.

4. A company would be incompetent not to have a fire insurance policy covering its manufacturing plant. The cost of that policy is generally considered to be a:

product cost.

period cost.

variable cost.

all of the above.

5. A cost may be classified as a discretionary fixed cost. Which one of the items below is an example of such a cost?

insurance.

taxes on real estate.

management training.

depreciation of buildings and equipment.

6. If someone told you that the degree of operating leverage at Company ABC is higher than that of Company XYZ, what does that mean?

company ABC has higher variable expenses.

company ABC's profits are more sensitive to percentage changes in sales.

company ABC is more profitable.

company ABC is less risky.

company XYZ is located in a swamp but ABC is on a hill