Test bank for Chapter two

Test bank for Chapter two

CHOICE:

LEARNING OBJECTIVE 1

66.

67.

68. machinery? machinery. machinery.

69. 70. cost?

Managers should focus their efforts on managing: a. activities required to make products or deliver services b. products and services c. revenues d. None of these answers is correct Which value chain function would include the cost of computer-aided design

equipment and cost to develop the prototype of a product?

a. The distribution function would include these costs. b. The design of product, services, and processes function would include

these costs.

c. The production function would include these costs. d. The marketing function would include these costs. Which value chain function would include depreciation of plant and a. The distribution function would include depreciation of plant and b. The customer service function would include depreciation of plant and c. The production function would include depreciation of plant and

machinery.

d. The marketing function would include depreciation of plant and

machinery.

Which value chain function would include advertising costs? a. The distribution function would include advertising costs. b. The customer service function would include advertising costs. c. The production function would include advertising costs.

d. The marketing function would include advertising costs.

Which value chain function would include depreciation on transportation a. The distribution function would include depreciation on transportation cost. b. The customer service function would include depreciation on transportation cost. c. The production function would include depreciation on transportation cost.

d. The marketing function would include depreciation on transportation

cost.

71. Which of the following is not a cost driver of customer services costs? a. Hours spent servicing products are not a cost driver of customer services costs. b. Travel costs are not a cost driver of customer services costs. c. Number of service calls is not a cost driver of customer services costs.

d. All of these answers are correct.

72. Which of the following would be a good cost driver for salaries of product and supervisory salaries? a. Number of hours worked is a good cost driver for salaries of product and

supervisory salaries.

b. Number of people supervised is a good cost driver for salaries of product

and supervisory salaries.

c. Number of department transactions is a good cost driver for salaries of

product and supervisory salaries.

d. Number of customers served is a good cost driver for salaries of product

and supervisory salaries.

73. Number of engineering hours is a likely cost driver for which value chain

function?

a. The research and development function has number of engineering hours

as a likely cost driver.

b. The design function has number of engineering hours as a likely cost

driver.

c. The marketing function has number of engineering hours as a likely cost

driver.

d. The production function has number of engineering hours as a likely cost

driver.

74. Output measures of both resources and activities are: a. cost drivers

75. a. Cost behavior b. Cost driver c. Volume-related cost drivers d. None of these answers is correct.

LEARNING OBJECTIVE 2 76. As the cost-driver activity level increases within the relevant range: a. total fixed costs remain unchanged b. fixed costs per unit increases c. total variable costs decrease d. variable costs per unit increases 77. As the cost-driver activity level increases within the relevant range: a. total fixed costs increase b. fixed costs per unit decrease c. total variable costs decrease d. variable costs per unit decrease 78. As the cost driver activity level decreases within the relevant range: a. total fixed costs increase b. fixed costs per unit decreases c. total variable costs decrease d. variable costs per unit decreases 79. As the level of activity decreases within the relevant range: a. total fixed costs increase b. fixed costs per unit decreases c. total variable costs increase d. variable costs per unit remain unchanged 80. An accountant may have difficulty classifying costs as fixed or variable

because:

a. costs may behave in a nonlinear way

b. stages of production

c. fixed activities d. variable activities

_______________ is how the activities of an organization affect its costs.

81. 82. 83. 84. 85. 86.

b. costs may be affected by more than one cost driver

c. the decision situation may cause the costs to be fixed in the short term d. All of these answers are correct. When analyzing cost, think of: a. b. c. d.

variable costs as a total

variable costs on a per-unit basis fixed costs on a per-unit basis

variable costs as a total and fixed costs on a per-unit basis

An increase in fixed costs usually indicates: a. b. c. d.

cost driver activity is decreasing cost driver activity is increasing relevant range is increasing relevant range is decreasing

An increase in total variable cost usually indicates: a. b. c. d.

the cost-driver activity level is decreasing the cost-driver activity level is increasing variable costs per unit is decreasing variable costs per unit is increasing

Fixed costs:

a. are fixed on a per-unit basis, but vary in total b. vary on a per-unit basis, but are fixed in total c. are fixed on a per-unit basis, and fixed in total d. vary on a per-unit basis, and vary in total Variable costs: a. b. c. d.

vary per unit are fixed in total

decrease in total as the cost-driver activity level increases are fixed per unit and vary in total

Relevant range applies to: a. b. c. d.

the variable costs fixed costs

both fixed and variable costs cost driver activity levels

LEARNING OBJECTIVE 3 87. The level of sales at which revenues equal expenses and net income is zero is

called the:

a. margin of safety b. contribution margin c. break-even point

d. marginal income point

88. The margin of safety: a. equals planned unit sales less break-even unit sales b. shows how actual sales differ from planned sales c. is the sales price minus all the fixed expenses

d. is the same as contribution margin

89. Days of Our Lives Hospital has total variable costs of 90% of total revenues

and fixed costs of $50 million per year. There are 50,000 patient-days estimated for next year. What is the break-even point expressed in total revenue?

a. $500 million is the break-even point. b. $50 million is the break-even point. c. $12.5 million is the break-even point. d. None of these answers is correct.

$50 million / (1 - 0.90) = $500 million

90. Rampart Hospital has total variable costs of 90% of total revenues and fixed costs of $50 million per year. There are 50,000 patient-days estimated for next year. What is the average daily revenue per patient necessary to breakeven? a. $1,000 is the average daily revenue per patient necessary to breakeven. b. $4,000 is the average daily revenue per patient necessary to breakeven. c. $250 is the average daily revenue per patient necessary to breakeven. d. $10,000 is the average daily revenue per patient necessary to breakeven.

$50,000,000 / (1 - .90) = $500,000,000; $500,000,000 / 50,000 = $10,000

91. Suppose a Holiday Inn hotel has annual fixed costs applicable to its rooms of

$1.2 million for its 300-room hotel, average daily room rents of $50, and average variable costs of $10 for each room rented. It operates 365 days per

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