1)The opportunity cost of making a component part in a factory with no excess capacity is the:

	net benefit foregone from the best alternative use of the capacity required.
	total manufacturing cost of the component.
	fixed manufacturing cost of the component.
	variable manufacturing cost of the component.

2) A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. A fixed manufacturing overhead volume variance will necessarily occur in a month in which there is a fixed manufacturing overhead budget variance.

	True
	False

3) Todco planned to produce 3,000 units of its single product, Teragram, during November. The standard specifications for one unit of Teragram include six pounds of material at $0.30 per pound. Actual production in November was 3,100 units of Teragram. The accountant computed a favorable materials purchase price variance of $380 and an unfavorable materials quantity variance of $120. Based on these variances, one could conclude that:

	more materials were used than were purchased.
	more materials were purchased than were used.
	the actual usage of materials was less than the standard allowed.
	the actual cost of materials was less than the standard cost.

4)The cost of a resource that has no alternative use in a make or buy decision problem has an opportunity cost of zero.

	True
	False

5)An unfavorable direct labor efficiency variance could be caused by:

	an unfavorable variable overhead rate variance.
	a favorable materials quantity variance.
	an unfavorable materials quantity variance.
	a favorable variable overhead rate variance.

6) The fixed manufacturing overhead volume variance will be unfavorable if production volume is less than sales volume.

	True
	False

7) If by dropping a product a firm can avoid more in fixed costs than it loses in contribution margin, then the firm is better off economically if the product is dropped.

	True
	False

8) Joint costs are not relevant to the decision to sell a product at the split-off point or to process the product further.

	True
	False

9) When a company has a production constraint, the product with the highest contribution margin per unit of the constrained resource should be given highest priority.

	True
	False

10) An avoidable cost is a cost that can be eliminated (in whole or in part) as a result of choosing one alternative over another.

	True
	False
11) The Malcolm Company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of standard direct labor-hours (DLHs). The standards call for 4 hours of direct labor per unit produced. The following data pertain to the company's manufacturing overhead for the month of July:

Actual fixed manufacturing overhead costs incurred	$28,460
Denominator activity	6,305	DLHs
Number of units produced	3,000	units
Budget variance	$3,240	Unfavorable

The Fixed component of the predetermined overhead rate for June is: (Round your answer to 2 decimal places.)

	$4.00
	$4.77
	$4.51
	$4.11