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1. You are put in charge of a new, independent factory. The products you produce are cheap to produce but the profit margin is small. Maintaining low costs and maximum efficiency is key.
You are concerned that certain parts of the production line are producing excess waste and damaging profits.
Which type of cost centre would be most useful in this situation?
A) Service location
B) Equipment
C) Activity
D) Function
2. In a company's sales ledger department, one additional invoice clerk is needed for every eighty customers added to the customer database. The total salary cost of invoice clerks is best described as:
A) a semi-variable cost
B) a step cost
C) a fixed cost
D) a variable cost
3. A company employs 28 production workers for 40 hours per week. The workers are paid $6 per hour during normal time and an overtime premium of 20%. It is anticipated that the employees will work at 95% efficiency.
Budgeted production for next week is 608 units and each unit requires 2 direct labour hours.
What is the direct labour cost budget for the week?
A) $7,872
B) $7,411
C) $6,973
D) $7,680
4. A new range of clothing is very unique and will not appeal everyone. You are aware that if you were to equally distribute all the units there is a chance that they would not all sell.
You decide that the best option would be to select specific stores in which to sell the items, making them rare and desirable. This way they will become highly sought after.
However, whilst this has the potential to be very profitable it also has the lowest probability.
By making this decision you are considered to be_______.
A) Risk adverse
B) Risk seeking
C) Risk neutral
5. Refer to the exhibit.
In this profit/volume graph, which distance indicates the contribution earned at level of activity L?
A) Distance c
B) Distance b
C) Distance d
D) Distance a
Solutions:
| Question # 1 Answer: C | Question # 2 Answer: B | Question # 3 Answer: A | Question # 4 Answer: B | Question # 5 Answer: C |
Fundamentals of Business Economics
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