Cost Exam #1

**SIX ARE WRONG

The high-low method may give unsatisfactory results if
Answer

a. the data points all fall on a line. b. volume of activity is heavy. c. volume of activity is light. d. the points are unrepresentative.

Which of the following job positions is a staff position?
Answer

a. production vice president b. assembly foreman c. controller d. production supervisor

Figure 3-3

The Sandoval Company has four process engineers that are each able to process 1,500 design changes. Last year 5,250 design changes were produced by the four engineers. Each engineer is paid $60,000 per year.

Refer to Figure 3-3. Calculate the unused capacity.
Answer

a. 2,000 change orders b. 750 change orders c. 4,000 change orders d. 1,375 change orders

The following cost functions were developed for manufacturing overhead costs:
Manufacturing Overhead Cost Cost Function
Electricity $200 + $20 per direct labor hour
Maintenance $400 + $30 per direct labor hour
Supervisors' salaries $20,000 per month
Indirect materials $16 per direct labor hour

If January production is expected to be 2,000 units requiring 3,000 direct labor hours, estimated manufacturing overhead costs would be
Answer
a. $198,000. b. $20,733. c. $152,600. d. $218,600.
Figure 3-1

Sonor Systems undertakes its own machine maintenance. The depreciation on the equipment is $20,000 per year and operating cost is $2 per machine hour. Last year 275,000 machine hours were used to produce 100,000 units.

Refer to Figure 3-1. Compute the total variable machine maintenance cost last year.
Answer

a. $240,000 b. $220,000 c. $550,000 d. $275,000

Which of the following statements is TRUE?
Answer

a. Traditional smokestack industries have increased in importance in recent years.