Acct Ch 11 100% Solution

ACCT CH 11 100% SOLUTION Select the true statement: a. As volume increases fixed cost per unit remains constant. b. As volume increases variable cost per unit increases. c. As volume decreases fixed cost per unit increases. d. As volume increases variable cost per unit decreases. - ANSWER c. As volume decreases fixed cost per unit increases. The graph below depicts Dove Company's monthly warehouse rental cost. (Graph with straight horizontal line parallel to X axis) Based on the graph, the rental cost is a a. fixed cost. b. variable cost. c. mixed cost. d. The answer cannot be determined from the information provided. - ANSWER a. fixed cost. The line on the graph shows that the cost remains constant and does not change At lunchtime, Pete's Chilly Dogs sells hot dogs, chips, and soft drinks from five portable hot dog carts stationed on busy street corners. The depreciation cost on the carts is $1,000 per year for each cart. The company buys supplies (hot dogs, chips, cups, napkins) as needed. The 5 cart operators are each paid $8,000 per year plus 5% of sales revenue. Relative to the number of hot dog carts, the depreciation cost is a. mixed. b. strategic. c. fixed. d. variable. - ANSWER d. variable. The more hot dog carts in use the greater the total depreciation charge. Since the total amount of depreciation cost increases or decreases in proportion to the number of carts in service, it is a variable cost under these circumstances. At lunchtime, Pete's Chilly Dogs sells hot dogs, chips, and soft drinks from five portable hot dog carts stationed on busy street corners. The depreciation cost on the carts is $1,000 per year for each cart. The company buys supplies (hot dogs, chips, cups, napkins) as needed. The 5 cart operators are each paid $8,000 per year plus 5% of sales revenue. Relative to the number of customers at a particular hot dog stand, the depreciation cost is a. mixed. b. strategic. c. fixed. d. variable. - ANSWER c. fixed. Since total depreciation charge does not change in relation to the number of customers that buy food at a particular stand, it is a fixed cost. Based on the behavior shown in the following table, which of the following is a variable cost? Cost Per Unit of Materials : 2= 500 3=500 4=500 5=500 Total Labor Cost: 2=3,000 3=4,500 4=6,000 5= 7,500 Total Utilities Cost: 2= 4,500 3= 4,500 4= 4,500 5=4,500 a. Cost Per Unit of Materials b. Total Labor Cost c. Total Utilities Cost d. Both the cost per unit of materials and the total labor cost are variable costs. - ANSWER d. Both the cost per unit of materials and the total labor cost are variable costs. When volume increases variable cost per unit remains constant. Since the per unit cost of materials remains constant regardless of the number of units produced, it is a variable cost. Also, when volume increases total variable cost increases. Since the total labor cost increases in proportion to increases in the number of units produced it is a variable cost. At a production and sales level of 3,000 units, Bastion Company incurred $60,000 of fixed cost and $36,000 of variable cost. When 4,000 units of product are produced and sold the company's cost per unit is: a. $24. b. $32. c. $27. d. $29. - ANSWER c. $27. Variable cost per unit = $36,000 ÷ 3,000 units = $12. Total cost at 4,000 units is: Variable (4,000 units x $12) = $48,000 Fixed 60,000 Total = $108,000 Cost per unit = $108,000 ÷ 4,000 units = $27 per unit The contribution margin is determined by subtracting a. variable product and fixed period costs from sales. b. fixed product costs from sales. c. variable product and fixed product costs from sales. d. variable product and variable period costs from sales. -