1.Java Joe’s operates a chain of coffee shops. The company pays rent of $12,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The manager of each shop is paid a salary of $2,000 per month, and all other employees are paid on an hourly basis. Relative to the number of customers for a shop, the cost of rent is which kind of cost? Fixed cost Variable cost Mixed cost Relevant cost Question 2.2.Select the correct statement regarding fixed costs. They do not change, because fixed costs should be ignored in decision making. The fixed cost per unit increases when volume increases. The fixed cost per unit decreases when volume increases. The fixed cost per unit does not change when volume decreases. Question 3.3.Gypsy Joe’s operates a chain of coffee shops. The company pays rent of $10,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The managers of each shop are paid a salary of $2,500 per month and all other employees are paid on an hourly basis. The costs of supplies relative to the number of customers in a particular shop and relative to the number of customers in the entire chain of shops is which kind of cost, respectively? Variable cost / fixed cost Fixed cost / fixed cost Variable cost / fixed cost Variable cost / variable cost Question 4.4.Hico Bottling Company pays its production manager a salary of $5,000 per month. Salespersons are paid strictly on commission, at $2 for each case of product sold.For Hico Bottling Company, the salespersons’ commissions are an example of: a variable cost. a fixed cost. a mixed cost. none of the above.Question 5.5.Zoro, Inc. produces a product that has a variable cost of $6.00 per unit. The company’s fixed costs are $30,000. The product sells for $10.00 a unit and the company desires to earn a $20,000 profit. What is the volume of sales in units required to achieve the target profit? 5,000 7,500 8,333 12,500 Question 6.6.Once sales reach the breakeven point, each additional unit sold will: increase fixed cost by a proportionate amount. reduce the margin of safety. increase profit by an amount equal to the per unit contribution margin. increase the company’s operating leverage. Question 7.7.Ajani Company has variable costs equal to 40% of sales. The company is considering a proposal that will increase sales by $10,000 and total fixed costs by $6,000. By what amount will net income increase? $6,000 $4,000 $2,000 $0 Question 8.8.Felix Company produces a product that has a selling price of $12.00 and a variable cost of $9.00 per unit. The company’s fixed costs are $60,000. What is the breakeven point measured in sales dollars? $240,000 $120,000 $80,000 $100,000 Question 9.9.Hard Nails and Bright Nails are competing nail salons. Both companies have the same number of customers. Both charge the same price for a manicure. The only difference is that Hard Nails pays its manicurists on a salary basis (i.e., a fixed cost structure) while Bright Nails pays its manicurists on the basis of the number of customers they serve (i.e., a variable cost structure). Both companies currently make the same amount of net income. If sales of both salons increase by an equal amount, Hard Nails: will earn a lower profit than Bright Nails. will earn a higher profit than Bright Nails. will earn the same amount of profit as Bright Nails. The answer cannot be determined from the information provided. Question 10.10.Operating leverage exists when: small percentage changes in revenue produce large percentage changes in profit. management buys enough of the company’s shares of stock to take control of the corporation. the organization makes purchases on credit instead of paying cash. the organization avoids all fixed costs in its operations
1.Java Joe’s operates a chain of coffee shops. The company pays rent of $12,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The manager of each shop is paid a salary of $2,000 per month, and all other employees are paid on an hourly basis. Relative to the number of customers for a shop, the cost of rent is which kind of cost? Fixed cost Variable cost Mixed cost Relevant cost
Question 2.2.Select the correct statement regarding fixed costs. They do not change, because fixed costs should be ignored in decision making. The fixed cost per unit increases when volume increases. The fixed cost per unit decreases when volume increases. The fixed cost per unit does not change when volume decreases.
Question 3.3.Gypsy Joe’s operates a chain of coffee shops. The company pays rent of $10,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The managers of each shop are paid a salary of $2,500 per month and all other employees are paid on an hourly basis. The costs of supplies relative to the number of customers in a particular shop and relative to the number of customers in the entire chain of shops is which kind of cost, respectively? Variable cost / fixed cost Fixed cost / fixed cost Variable cost / fixed cost Variable cost / variable cost
Question 4.4.Hico Bottling Company pays its production manager a salary of $5,000 per month. Salespersons are paid strictly on commission, at $2 for each case of product sold.For Hico Bottling Company, the salespersons’ commissions are an example of: a variable cost. a fixed cost. a mixed cost. none of the above.Question 5.5.Zoro, Inc. produces a product that has a variable cost of $6.00 per unit. The company’s fixed costs are $30,000. The product sells for $10.00 a unit and the company desires to earn a $20,000 profit. What is the volume of sales in units required to achieve the target profit? 5,000 7,500 8,333 12,500
Question 6.6.Once sales reach the breakeven point, each additional unit sold will: increase fixed cost by a proportionate amount. reduce the margin of safety. increase profit by an amount equal to the per unit contribution margin. increase the company’s operating leverage.
Question 7.7.Ajani Company has variable costs equal to 40% of sales. The company is considering a proposal that will increase sales by $10,000 and total fixed costs by $6,000. By what amount will net income increase? $6,000 $4,000 $2,000 $0
Question 8.8.Felix Company produces a product that has a selling price of $12.00 and a variable cost of $9.00 per unit. The company’s fixed costs are $60,000. What is the breakeven point measured in sales dollars? $240,000 $120,000 $80,000 $100,000
Question 9.9.Hard Nails and Bright Nails are competing nail salons. Both companies have the same number of customers. Both charge the same price for a manicure. The only difference is that Hard Nails pays its manicurists on a salary basis (i.e., a fixed cost structure) while Bright Nails pays its manicurists on the basis of the number of customers they serve (i.e., a variable cost structure). Both companies currently make the same amount of net income. If sales of both salons increase by an equal amount, Hard Nails: will earn a lower profit than Bright Nails. will earn a higher profit than Bright Nails. will earn the same amount of profit as Bright Nails. The answer cannot be determined from the information provided.
Question 10.10.Operating leverage exists when: small percentage changes in revenue produce large percentage changes in profit. management buys enough of the company’s shares of stock to take control of the corporation. the organization makes purchases on credit instead of paying cash. the organization avoids all fixed costs in its operations
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