1. Assume that a manufacturing company incurred the following costs:

Direct labor	$	90,000
Advertising	$	40,000
Factory supervision	$	35,000
Sales commissions	$	15,000
Depreciation, office equipment	$	4,000
Indirect materials	$	5,000
Depreciation, factory building	$	20,000
Administrative office salaries	$	1,000
Utilities, factory	$	2,500
Direct materials	$	105,000
Insurance, factory	$	6,000
Property taxes, factory	$	7,000

If the information above pertains to 1,000 units of production, what is its average manufacturing cost per unit?

Multiple Choice

• $268.00

• $274.50

• $285.50

• $270.50

2. A merchandiser plans to sell 15,000 units next month at a selling price of $110 per unit. It also gathered the following cost estimates for next month:

Cost	Cost Formula
Cost of goods sold	$60 per unit sold
Advertising expense	$150,000 per month
Depreciation expense	$70,000 per month
Shipping expense	$100,000 per month + $10 per unit sold
Administrative salaries	$50,000 per month
Sales commissions	5% of sales
Insurance expense	$15,000 per month

What is the estimated net operating income for next month?

Multiple Choice

• $517,500

• $750,000

• $162,500

• $132,500

3. Assume that a supermarket is considering replacing all of its frozen food freezers. The new freezers use less energy to operate than the existing freezers. Two costs that have been discussed by various employees with respect to this decision include (1) the utility cost (or energy cost) that would continue to be incurred if the company decides to keep its existing freezers, and (2) the price that would be paid for the new freezers. Which of the following choices properly classifies each of these costs as being relevant or irrelevant in the decision to "keep or replace" the freezers?

	Cost: Utility Cost			Cost:
	Associated with Keeping the Existing			Price That Would be Paid
	Freezers			for the New Freezers
	Relevant	Irrelevant		Relevant	Irrelevant
A)	No	Yes		No	Yes
B)	Yes	No		No	Yes
C)	Yes	No		Yes	No
D)	No	Yes		Yes	No

Multiple Choice

• Choice A

• Choice B

• Choice C

• Choice D