Answered: What type of cost includes product…

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter12: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 4SEQ: For which cost concept used in applying (he cost-plus, approach to product pricing are fixed...

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Question

What type of cost includes product ingredients and materials?

a. fixed

c. total

b. revenue

d. variable

What type of cost includes the rental of space?

a. fixed

c. total

b. revenue

d. variable

What type of cost is the product of the price and the quantity sold?

a. fixed

c. total

b. revenue

d. variable

What concept is being described when the business will neither earn a profit nor suffer a loss?

a. break-even

c. profit

b. loss

d. summit

What type of analysis shows equal revenue and total cost?

a. break-even

c. profit-loss

b. cost of variable

d. volume of sales

Read the selection for questions 6-10.

Junedyl is planning to run a coffee shop where he plans to sell each cup of coffee at 50.00. The

₱

fixed cost that is amounting to 40,000.00 includes all his expenses for the rent, wages, basic needs and others.

₱

So even if Junedyl will not be able to sell, he is still obliged to pay this amount. If it costs Junedyl an average

of 10.00 for every cup of coffee which is allotted for the bulk of coffee beans, purified water and coffee

₱

filters, then:

6. What equation represents the variable cost (VC) when x is the number of cups of coffee?

a.= 5

b.= 10

c.=

d.=

7. What is the break-even quantity?

a. 50 cups of coffee

c. 500 cups of coffee

b. 100 cups of coffee

d. 1,000 cups of coffee

8. Which of the following ordered pairs determine a break-even point?

a. (500, 1000)

c. (1500, 50000)

b. (1000, 50000)

d. (5000, 1000)

9. How much profit will he earn if he sells 500 cups?

a. 20,000.00

₱

c. incur loss of 20,000.00

₱

b. 40,000.00

₱

d. cannot be determined

10. How many cups of coffee must be sold to earn a profit of 50,000.00?

₱

a. 1,250

c. 2,250

b. 1,500

d. 2,500

Read the selection for questions 11-15.

Mike owns a gadget store. He purchases his stocks from a supplier in Luzon. Each unit of

earphone is listed at 300.00. If he buys a dozen, he gets a 5 % trade discount. He plans to sell each unit of

₱

earphone at a price with 20% mark-up based on cost.

11. How much will Mike pay for a dozen of earphone if he will avail of the trade discount?

a. 3,000.00

₱

c. 3,420.00

₱

b. 3,240.00

₱

d. 3,600.00

₱

12.

How much will be Mike’s net sales if he will be able to sell a dozen of earphones?

a. 3,140.00

₱

c. 4,104.00

₱

b. 3,215.00

₱

d. 4,405.00

₱

13. How much profit will Mike gain for this transaction?

a. 160.00

₱

c. 500.00

₱

b. 365.00

₱

d. 684.00

₱

14.

If a new model will come out in the market and Mike decides to markdown the price of the earphone by

10%, how much will be the amount of markdown?

a. 30.00

₱

c. 34.20

₱

b. 31.50

₱

d. 35.00

₱

15. What is the new markdown price of each unit of earphone?

a. 270.00

₱

c. 307.80

₱

b. 283.50

₱

d. 315.00

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What type of cost includes product ingredients and materials? a. fixed c. total b. revenue d. variable 2.