1.Variable costs are best defined as:

Choose one answer.

	a. varying directly in proportion with the number of employees.
	b. varying from period to period.
	c. varying over time.
	d. varying directly in proportion to the level of activity.
	e. varying directly in proportion with the number of units sold.

2.The Super Clean Floor Company makes two products, carpet cleaner and floor deodoriser. Operating information from the previous year is as follows:

	Carpet Cleaner	Floor Deodoriser
Selling price per unit	$7.00	$10.00
Variable costs per unit	$4.00	$8.00
Units produced and sold	5,000	4,000
Machine hours used	5,000	2,000

Fixed costs of $20,000 per year are currently allocated evenly between both products. If the product sales mix were to change, total fixed costs would remain at $20,000 per year. Assuming everything produced for either product can be sold, how many units of each product should be produced and sold if machine hours are limited to 10,000?

Choose one answer.

	a. 8,000 units of carpet cleaner and 4,000 units of floor deodoriser.
	b. 5,000 units of carpet cleaner and 10,000 units of floor deodoriser.
	c. 10,000 units of carpet cleaner and 0 units of floor deodoriser.
	d. 0 units of carpet cleaner and 20,000 units of floor deodoriser.
	e. 8,000 units of carpet cleaner and 8,000 units of floor deodoriser.

3.

Pretty Dolls Pty Ltd usually sell 30,000 dolls per annum. This year they have excess stock of 10,000 dolls; the dolls usually retail at $35 per unit. The dolls' variable cost per unit is $20 and their annual fixed costs are $30,000. Pretty Dollars Pty Ltd has received "a one-time only expression of interest" from an overseas chain to purchase 7,500 dolls at $29 per unit. What would be the best advice you could provide to Pretty Dolls Pty Ltd?

Choose one answer.

	a. Accept the order as it will lead to a $9 per doll contribution to fixed costs.
	b. Do not accept the order as the unit variable costs plus the fixed costs per doll amount to $30 per unit which is higher than the $29 per doll offered by the overseas retail chain.
	c. Do not accept the order as it is not worthwhile pursuing "a one-time only expression of interest".
	d. Do not accept the order as a loss will be incurred.
	e. Do not accept the order as the $29 per doll offered does not contribute to covering the fixed costs of $30,000 per annum.

4.The break-even point is best defined as:

Choose one answer.

	a. where the total cost of goods sold is equal to the total revenue.
	b. where the total costs are equal to the total revenue.
	c. where the total level of activity is equal to the total revenue.
	d. where the total variable costs are equal to the total revenue.
	e. where the total fixed costs are equal to the total revenue.