1. Traditional short-term decision making assumes that:

• a. Capacity is fixed.
• b. Selling prices are fixed.
• c. Variable costs (in total) are fixed.
• d. All of the above.

1. In a hospital, the thread used in stitching wounds would be treated as a direct materials cost.

True

False

3. Consider a cost prediction equation in which total manufacturing overhead is estimated as $1,350,000 + S28x, where x = the number of units produced. Batch-related product costs are included in the $28.

• True
• False

4. Sitwell Corporation manufactures an exclusive line of chairs and recliners. Which of the following costs would be considered a product cost for Sitwell? (Select the six that apply.)

• a. Cost of the utilities incurred to run the manufacturing plant.
• b. Cost of office supplies.
• c. Cost of the fabric used on the recliners.
• d. Depreciation on delivery trucks.
• e. The CEO's salary.
• f. Cost of the wood used in the chair.
• g. Depreciation on machinery used to manufacture the chairs.
• h. Cost of the glue used to assemble the chairs.
• i. The salary of the manager who oversees the raw materials stockroom.
• j. Commissions paid to sales staff.

5. A company sells its only product for $25. The unit variable cost is $16.25, and the total fixed costs are $142,000. What is the breakeven point in the number of units sold? (Because it is not possible to sell a fraction of a unit, you should round your answer UP to the nearest whole unit.

6. the breakeven point is the point at which:

• a. Total fixed costs equal the contribution margin.
• b. The total revenue line intersects the Y-axis,
• c. The total cost line intersects the X-axis.
• d. Total fixed costs equal total variable costs.

7. A company produces a product that normally sells for $24 each. The total manufacturing cost is $17, of which $11 consists of variable costs and $6 consists of fixed costs. The company is considering whether it should accept a one-time special order for 2,000 units at a special price of $15 each. Assuming that sufficient excess capacity exists and that no other relevant considerations exist, a traditional analysis would suggest that the company should:

• a. Accept the offer since income will increase by $4,000.
• b. Accept the offer since income will increase by $8,000.
• c. Reject the offer since income will decrease by $4,000.
• d. Reject the offer since income will decrease by $8,000.

8. If the selling price increases, the breakeven point will:

• a. decrease.
• b.Not determinable.
• c.Increase.
• d. Stay the same.