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1. Without affecting their ability to meet customer demand using a just-in-time system, some companies have found they can reduce inventory levels by as much

1. Without affecting their ability to meet customer demand using a just-in-time system, some companies have found they can reduce inventory levels by as much as

5% to 10%.

35% to 40%.

20% to 25%.

50% to 60%.

2.The salary of the president of the company is an example of

Indirect Labor: Yes & Period Cost: No

Indirect Labor: Yes & Period Cost: Yes

Indirect Labor: No & Period Cost: No

Indirect Labor: No & Period Cost: Yes

3. The cost of storing finished goods inventory is an example of

Period Cost: No & Overhead: Yes

Period Cost: Yes & Overhead: Yes

Period Cost: Yes & Overhead: No

Period Cost: No & Overhead: No

4. Any costs that a company incurs to acquire raw materials and convert them to finished goods ready for sale are referred to as

direct costs.

period costs.

manufacturing costs.

None of these answer choices are correct.

5. Assume you are planning a spring break ski trip to Colorado. You are preparing a budget of your costs. You are staying at a lodge that has a special where the lodge charges you $25 for the first 30 ski lift rides and an additional charge of $5 for each ride in excess of 30. You believe you will ride the ski lift 40 times during the week, so you budget $75. The ski lift cost is an example of a

variable cost.

mixed cost.

step cost.

6. If the activity level decreases, what happens to the total variable cost?

It depends on how much the activity level increases.

It increases.

It decreases.

It remains the same.

fixed cost.

7. Determine the fixed cost given the following information: Lowest level of activity 150 units at a total cost of $600 Highest level of activity 750 units at a total cost of $1800

$300

$600

$200

$360

8. Patricias Puppy Parlor is a pet grooming parlor and boutique. Patricia sells personalized puppy blankets at $20 each. Her contribution margin is $7. If Patricia has an additional $120 in blanket sales, how much additional contribution margin will this produce?

$120

$6

$42

$140

9. Assume sales of $11600, variable costs of $7700, and fixed costs of $2700. Calculate contribution margin and operating income.

Contribution margin = $3900; Operating income = $1200

Contribution margin = $7800; Operating income = $1200

Contribution margin = $6600; Operating income =$1200

Contribution margin = $8900; Operating income = $1200

10. Lindas Cutting Station offers a new concept in haircuts; low cost and very quick. Set in a local mall, Lindas offers 15-minute haircuts for harried shoppers who do not have time for lengthy appointments. To ensure that the clients are in and out quickly, she schedules her 5 employees based on expected client traffic. Each of the employees is paid $1270 per month, with part of their pay coming from client tips. Linda pays rent and overhead costs of $2300 per month on the facility. Because of the quick nature of the service, Linda doesnt have time to clean combs in between clients, so she uses a new comb for each customer, at a cost of $0.75 each. She also provides shampoo and conditioner for each client at a cost of $1.10 per client. The average price for a haircut is $12. Linda pays herself $5800 per month. What is Lindas contribution margin per haircut?

$10.90

$11.25

$9.85

$10.15

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