9. The Regal Baking Company is considering the expansion of its business into door-to-door delivery service. This would require an additional $12,500 in labor


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Name9. The Regal Baking Company is considering the expansion of its business into door-to-door delivery service. This would require an additional $12,500 in labor
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9. The Regal Baking Company is considering the expansion of its business into door-to-door delivery service. This would require an additional $12,500 in labor costs per month. Company-owned vehicles now used to make morning deliveries to restaurants could be used in the afternoons to make the home deliveries. However, it is estimated that an additional $5,000 would be required per month for gas, oil, and maintenance. It is further estimated that the home delivery use of the trucks would be allocated 45% of the existing $6,500 fixed vehicle costs. What is the differential delivery cost per month for expanding into the home delivery market? 
A. $12,500
B. $17,500
C. $19,750
D. $20,425
E. some other answer _______________.

 

10.  Which of the following statements regarding special orders is (are) true?

(A) The primary decision for special orders is determining whether the differential revenue is greater than the differential costs associated with the order.
(B) The differential analysis approach to pricing for special orders could lead to underpricing in the long-run because fixed costs are not included in the analysis.  
A.  only A.
B.  only B.
C.  neither A nor B is false.
D.  both A and B are true.

 

11. Only variable costs can be differential costs. 
True    False

 

12. Differential revenues and costs are higher in the long-run (as production increases and time progresses) than in the short-run. 
True    False

 

13. Which of the following is the difference between variable costs and fixed costs: (CMA adapted, 6/94) 
A. variable costs per unit fluctuate and fixed costs per unit remain constant
B. variable costs per unit are fixed over the relevant range and fixed costs per unit are variable
C. total variable costs are variable over the relevant range and fixed in the long term, while fixed costs never change
D. variable costs per unit change in varying increments, while fixed costs per unit change in equal units
E. total variable costs can be varied by management, while fixed costs are uncontrollable

 

14. The term "relevant range" as used in cost accounting means the range over which: 
A. relevant costs are incurred.
B. costs may fluctuate.
C. cost relationships are valid.
D. cost data is available.

 

15. The controller of Joy Co has requested a quick estimate of the manufacturing supplies needed for the Morton Plant for the month of July when production is expected to be 470,000 units to meet the ending inventory requirements and sales of 475,000 units. Joy Co's budget analyst has the following actual data for the last three months.

  

Using the high-low method to develop a cost estimating equation, the estimate of needed manufacturing supplies for July would be (CMA adapted) 
A. $681,500.
B. $688,750.
C. $749,180.
D. $752,060.
E. $759,310.

 

16. In determining cost behavior in business, the cost function is often expressed as Y= a + bX. Which one of the following cost estimation methods should not be used in estimating fixed and variable costs for the equation? (CMA adapted, 12/92) 
A. Graphic method
B. Simple regression
C. High and low point method
D. Multiple regression
E. Management analysis of data

 

17. When a manufacturing company has a highly automated manufacturing plant producing many different products, what is probably the most appropriate basis of applying overhead costs to work-in-process? 
A. Direct labor hours.
B. Direct labor dollars.
C. Machine hours.
D. Cost of materials used.

 

18. In an income statement prepared as an internal report using the direct (variable) costing method, fixed selling and administrative expenses would: (CPA adapted, 5/91) 
A. Be used in the computation of the contribution margin
B. Be used in the computation of operating income but not in the computation of the contribution margin
C. Be treated the same as the variable selling and administrative expenses
D. Not be used

 

19. The primary purpose of cost information is to determine the individual product cost on a per unit basis in order to value inventory. 
True    False

 

20. Job costing can be used to account for batch production when each batch is treated as a job for costing purposes. 
True    False

 

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