1. Instead of a production budget, a merchandiser will prepare a Select one: a.

Question

1. Instead of a production budget, a merchandiser will prepare a

Select one:

a. sales forecast

b. master time sheet

c. pseudo-production budget

d. merchandise purchases budget

2. A cost which remains constant per unit at various levels of activity is a

Select one:

a. fixed cost

b. variable cost

c. mixed cost

d. sales discounts

3. A fixed cost is a cost which

Select one:

a. varies in total with changes in the level of activity.

b. remains constant in total with changes in the level of activity

c. varies inversely in total with changes in the level of activity

d. remains constant per unit with changes in the level of activity

4. Which of the following is not a fixed cost?

Select one:

a. lease expense

b. property taxes

c. direct materials

d. straight-line depreciation

5. At the high level of activity in November, 7,000 machine hours were run and power costs were $16,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounted to $8,000. Using the high-low method, the estimated fixed cost element of power costs is

Select one:

a. $11,200

b. $4,800

c. $8,000

d. $16,000

Explanation / Answer

Q1. Answer is d. Merchandise Purchase budget. Q2. Answer is b. Variable cost Q3. Answer is b. remains constant in total with change in level of activity. Q4. Answer is c. direct material Q5. Answer is b. 4800 Explanation Power cost MH HIGh 16000 7000 Low 8000 2000 Change 8000 5000 Variable cost per MH: Change in cost/ Change in MH 8000 /5000 = 1.60 per mH Fixed cost = 16000 -7000 *1.6 = 4800

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