Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume doubles, the total cost per unit will:

stay the same.

decrease.

double as well.

increase but will not double.

{C}

5.

Award: 0 out of 1.00 point

Quick Change and Fast Change are competing oil change businesses. Both companies have 5,000 customers. The price of an oil change at both companies is $20. Quick Change pays its employees on a salary basis, and its salary expense is $40,000. Fast Change pays its employees $8 per customer served. Suppose Quick Change is able to lure 1,000 customers from Fast Change by lowering its price to $18 per vehicle. Thus, Quick Change will have 6,000 customers and Fast Change will have only 4,000 customers. Select the correct statement from the following.

Quick Change's profit will increase while Fast Change's profit will fall.

Fast Change's profit will fall but it will still earn a higher profit than Quick Change.

Profits will decline for both Quick Change and Fast Change.

Quick Change's profit will remain the same while Fast Change's profit will decrease.

6.

Award: 0 out of 1.00 point

Wu Company incurred $138,600 of fixed cost and $155,400 of variable cost when 3,700 units of product were made and sold.

If the company's volume increases to 4,200 units, the total cost per unit will be:

$33.

$37.

$70.

$75.

{C}

7.

Award: 2 out of 2.00 points

The following income statement is provided for Ramirez Company in 2012:

Sales revenue (2,300 units $19.80 per unit)	$45,540
Cost of goods sold (variable; 2,300 units $7.80 per unit)	(17,940)
Cost of goods sold (fixed)	(3,800)
Gross margin	23,800
Administrative salaries	(5,800)
Depreciation	(3,800)
Supplies (2,300 units $1.80 per unit)	(4,140)
Net income	$10,060

What amount was the company's contribution margin?

$27,600

$23,800

$10,060

$23,460

8.

Award: 0 out of 1.00 point

The following income statement is provided for Vargas, Inc.

Sales revenue (1,900 units $19.40 per unit)	$36,860
Cost of goods sold (Variable; 1,900 units $9.40 per unit)	17,860
cost of goods sold (fixed)	3,400
Gross margin	15,600
Administrative salaries	5,400
Depreciation	4,400
Supplies (1,900 units $1.40 per unit)	2,660
Net income	$3,140

What is this company's magnitude of operating leverage? (round your answer to 2 decimal places.)

4.97

0.27

0.20

5.20

{C}

9.

Award: 0 out of 2.00 points

The magnitude of operating leverage for Forbes Corporation is 2.0 when sales are $120,000 and net income is $16,000. If sales increase by 5%, what is net income expected to be?

$20,000

$15,800

$17,600

$16,800

{C}

10.

Award: 2 out of 2.00 points

What are the expected average quarterly costs of running a consulting practice if fixed costs are expected to be $4,200 a month and variable costs are expected to be $100 per client for each quarter? Expected number of clients for the year are (do not round intermediate calculations):

Jan-March	April-June	July-Sep	Oct-Dec
110	185	185	120

$27,600

$15,000

$27,000

$33,500

{C}

11.

Award: 2 out of 2.00 points

Yankee Tours provide seven-day guided tours along the New England coast. The company pays its guides a total of $220,000 per year. The average cost of supplies, lodging and food per customer is $550. The company expects a total of 1,000 customers during the period January - June, and a total of 3,000 customers from July through December. Yankee wants to earn $250 income per customer. For promotional reasons the company desires to charge the same price throughout the year. Based on this information, what is the correct price per customer? (round to nearest dollar)

$910

$650

$855

$605

{C}

12.

Award: 1 out of 1.00 point

Production in 2012 for California Manufacturing, a producer of high security bank vaults, was at its highest point in the month of June when 41 units were produced at a total cost of $610,000. The lowest point in production was in January when only 16 units were produced at a cost of $341,000. The company is preparing a budget for 2012 and needs to project expected fixed cost for the budget year. Using the high/low method, the projected amount of fixed cost per month is

$168,840

$158,840

$269,000

$249,000

{C}{C}

Cost Behavior Quiz

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