School of Business and Economics

EXAMINATION Version: A

Course : Accounting Code: EBC1013

Coordinator(s): Alexander Brüggen
Date : 22.12.2016 Time: 9:00h-12:00h
Location : MECC Westhal

Communications devices and watches are not allowed – put them in your bag
(under your table) or on the floor, not within arm’s reach! Otherwise this
will be reported as possible fraud to the Board of Examiners.

Any changes to the examination after the official end of the examination will be reported as
possible fraud to the Board of Examiners.

Sanctions by the Board of Examiners on fraud or irregularities include such measures as:
- complete or partial voidance or annulment of the relevant examination;
- exclusion from participation or further participation of one or more examinations or
exams at the SBE for a period of time to be determined by the Board of Examiners, with
a maximum period of one year;
- termination of the student’s registration for the concerning study programme.

This examination consists of: (please check if you received all pages, before you start
answering)
16 Pages (Front page included)
80 Questions

You are allowed to make use of:

non-programmable calculator (only Casio FX82 or Casio FX85)

Norm:
You pass this exam if you achieve at least 53 points (one point per correctly answered question)

Publication of the results: within 15 workdays

Procedure for objections:

Comments: Any comments about the examination itself must be delivered via a link - provided
via the course page in “My Courses” - at the latest five (5) days after the examination date.
Complaints: Within ten (10) working days of the publication of your official examination results
in “My Courses >> Show results”, you will be able to have a look at your assessed work (exam
inspection). In case you disagree with the grading, you can then file a complaint to your course
coordinator. You can find the inspection date via the course page in “My Courses”

Particulars:

You have to hand in the entire examination set. It is not allowed to take
home, copy or photograph the examination or parts of it!
(You can write your answers of MC questions on a piece of scrap paper and take it home).
1. Which of the following average costs per unit may be expected to decrease by the
greatest percentage with an increase in the volume of units produced?
A) Average variable cost per unit
B) Average total cost per unit
C) Average semi-variable cost per unit
D) Average fixed cost per unit

2. Within the relevant range of production, average variable cost per unit tends to
A) vary inversely with the level of production.
B) vary proportionately with the level of production.
C) remain relatively constant.
D) fluctuate drastically.

3. Broucklijn Inc. which produces and sells a single product, recently experienced an
increase in fixed costs relating to depreciation on new equipment. If variable costs and
sales price remain unchanged, what will happen to contribution margin and the break-
even point.
A) Contribution margin will be unchanged and the break-even point will increase.
B) Contribution margin will increase and the break-even point will decrease.
C) Contribution margin will be unchanged and the break-even point will decrease.
D) Contribution margin will decrease and the break-even point will increase.

4. The following information is available regarding the total manufacturing overhead of

XYZ for a recent four-month period:
Month Direct Labour Hours Manufacturing Overhead
August 90,000 $213,000
September 100,000 $227,000
October 70,000 $185,000
November 80,000 $199,000

Using the high-low method, what are the variable manufacturing overhead costs (per
direct labour hour)?
A) $1.40 per direct labour hour.
B) $0.71 per direct labour hour.
C) $2.31 per direct labour hour.
D) $2.27 per direct labour hour.

5. Refer to the information to question 4. Using the high-low method, what are the fixed
manufacturing overhead costs?
A) $140,000
B) $185,000
C) $87,000
D) $98,000
 6. Refer to the information to question 4. XYZ's projected December operations will
require approximately 120,000 direct labour hours. Using the high-low method,
compute total manufacturing overhead estimated for December.
A) $317,143
B) $168,000
C) $272,400
D) $255,000

7. Winky Sweets produces chocolate bars for resale at grocery stores throughout North
America. The company is currently in the process of establishing a master budget on a
quarterly basis for this coming fiscal year, which ends December 31. Prior year
quarterly sales were as follows (1 unit = 1 batch):
Period Units
First quarter 64,000 units
Second quarter 76,800 units
Third quarter 96,000 units
Fourth quarter 83,200 units
Unit sales are expected to increase 25 percent, and each unit is expected to sell for $8.
The management prefers to maintain ending finished goods inventory equal to 10
percent of next quarter's sales. Assume finished goods inventory at the end of the fourth
quarter budget period is estimated to be 9,000 units.
What is the budgeted total sales revenue for the next year?
A) $2,400,000
B) $320,000
C) $3,200,000
D) $832,000

8. Refer to the information to question 7. What is the total finished goods inventory needed
for the next year?
A) 409,000 units
B) 400,000 units
C) 113,000 units
D) 320,000 units

9. Refer to the information to question 7. How many units need to be produced in the
fourth quarter of the next period?
A) 83,200 units
B) 113,000 units
C) 102,600 units
D) 104,000 units

10. A business plans to make 15,000 coats per annum, each taking 1.5 direct labor hours. If
the direct labor rate is $8 per hour and a pay rise of 15% is awarded halfway through the
year, what is the total annual direct labor budget?
A) $207,000
B) $120,000
C) $193,500
D) $180,000
11. Which of the following steps in the preparation of the master budget would logically be
performed last?
A) Prepare a cash budget
B) Prepare a budgeted balance sheet
C) Prepare a sales forecast
D) Prepare production schedules

12. Which of the following is not a function of budgeting?

A) Decision-making
B) Controlling
C) Motivating
D) Planning

13. Which of the following is not a purpose of allocating indirect costs to cost objects:
A) To distinguish actual from budgeted costs
B) To provide information for economic decisions
C) To justify costs
D) To motivate personnel

14. The step down allocation method

A) is the most accurate method to use when support departments provide services to
other departments
B) is the method that ranks operating departments based on their importance
C) is the method that allocates each support department's costs directly to the
operating departments.
D) All of the above are false

15. Alex is invited by an employer in Rotterdam for a job interview. A week later, he
receives another invitation from an employer in Eindhoven. A train ticket from
Maastricht to Rotterdam costs €25, a train ticket from Maastricht to Eindhoven costs
€15. However, if he combines the two trips it will cost him only €30. The €30 is a
common cost that benefits both employers. With the stand-alone method, the allocation
of common cost between the two potential employers would be as follows:
A) Rotterdam employer: €25 Eindhoven employer: €5
B) Rotterdam employer: €20 Eindhoven employer: €10
C) Rotterdam employer: €18.75 Eindhoven employer: €11.25
D) Rotterdam employer: €15 Eindhoven employer: €15

16. Which of the following issues is not a problem of Activity Based Costing (ABC)?
A) ABC often leads to product overcosting
B) If activity costs have a fixed component with regard to the cost driver, ABC
ignores this distinction
C) ABC is more costly and complex than most other costing systems
D) ABC cannot resolve the problem of facility level costs (indirect costs that cannot
be identified with a particular unit, batch, product or service)
17. Examples of output-unit-level costs are
A) Setup costs
B) Product design costs
C) Machine depreciation
D) Procurement costs

18. Which items are all considered as assets on the balance sheet?
A) Cash, Revenue, Inventory, PPE
B) Cash, Inventory, Accounts receivable, PPE
C) Cash, Inventory, Accounts payable, Ordinary shares
D) Cash, Revenue, Accounts receivable, PPE

19. Which statement is true about the accounting equation?

A) Assets and liabilities are considered as the source of financing and their sum needs
to equal Equity.
B) Assets and Equity are considered as the source of financing and their sum needs to
equal liabilities.
C) Equity and liabilities are considered as the source of financing and their sum needs
to equal assets.
D) None of the above statements is true.

20. Under process costing - Weighted Average Method: Our Work In Progress opening
contain 12,000 units (with a stage of completion of 60% for the material costs and 20%
for the conversion costs) and 43,000 units have been started during this period. We also
know that 13,000 units have been completed during the period and that units in our
Work In Progress closing have a stage of completion of 30% for the material costs and
10% for the conversion costs. What is then our amount of work done to date in term of
equivalent units (eu)?
A) 12,600 eu for the material costs and 4,200 eu for the conversion costs
B) 25,600 eu for the material costs and 17,200 eu for the conversion costs
C) 24,600 eu for the material costs and 16,200 eu for the conversion costs
D) 13,000 eu for the material costs and 13,000 eu for the conversion costs

21. Under process costing - FIFO Method: Our Work In Progress opening contain 12,000
units (with a stage of completion of 60% for the material costs and 20% for the
conversion costs) and 43,000 units have been started during this period. We also know
that 13,000 units have been completed during the period and that units in our Work In
Progress closing have a stage of completion of 30% for the material costs and 10% for
the conversion costs. What is then our amount of work done to date in term of
equivalent units (eu)?
A) 4,800 eu for the material costs and 9,600 eu for the conversion costs
B) 5,800 eu for the material costs and 10,600 eu for the conversion costs
C) 13,000 eu for the material costs and 13,000 eu for the conversion costs
D) 18,400 eu for the material costs and 14,800 eu for the conversion costs
22. Under process costing - Weighted Average Method: The value of our Work In Progress
opening is €8,000 (75% for the material costs and 25% for the conversion costs) and
the costs added currently are €30,000 (70% for the material costs and 30% for the
conversion costs). We also know that the work done to date in terms of equivalent units
are 20,000 eu for the material costs and 15,000 eu for the conversion costs. What is the
total cost per equivalent units?
A) €2,53
B) €1,90
C) €2,30
D) €2,08

23. Under process costing - FIFO Method: The value of our Work In Progress opening is
8,000 € (75% for the material costs and 25% for the conversion costs) and the costs
added currently are 30,000 € (70% for the material costs and 30% for the conversion
costs). We also know that the work done to date in terms of equivalent units are 20,000
eu for the material costs and 15,000 eu for the conversion costs. What is the total cost
per equivalent units?
A) €1,50
B) €1,65
C) €2,00
D) €1,83

24. Rent paid 1 month in advance should be accounted for as:

A) An accrued liability.
B) Expense in the month paid.
C) A current liability.
D) A current asset.

25. During the year, Sandwich Shop made sales of €45,000 and purchases of €20,000. The
inventory at the beginning of the year was valued at €9,000 and at €5000 at the end of
the year. The costs of goods sold for the year was:
A) €24,000
B) €49,000
C) €34,000
D) €21,000

26. Which of the following is correct?

A) Closing entries set permanent accounts back to zero.
B) Dividends is a temporary account.
C) Retained earnings is a temporary account.
D) All of the above.

27. Which of the following is false:

A) Accrual accounting also records cash transactions.
B) In cash basis accounting losses occur when cash receipts are less than cash
payments.
C) Cash accounting involves more judgement than accrual accounting.
D) Cash accounting fails to capture the underlying economic phenomenon.
28. Which of the following is not part of the revenue recognition principle?
A) The transferral of risk
B) It is probable that economic benefits are transferred.
C) Costs incurred in respect of the transaction can be measured reliably.
D) Expenses can be reliably matched with the revenue.

29. When preparing a flexible budget, based on a given static budget, which variable is not
held constant?
A) The number of units sold
B) The unit's selling price
C) The amount of fixed costs
D) The unit's variable costs

30. Which variance cannot be calculated without having the information on the static
budget?
A) Efficiency variance
B) Sales-volume variance
C) Price variance
D) Flexible budget variance

31. The efficiency variance is:

A) The difference between the flexible-budget amount and the static-budget amount.
B) The difference between the actual results and the flexible-budget amount.
C) The difference between the actual price and the budgeted price, multiplied by the
actual quantity.
D) The difference between the actual quantity of input used and the budgeted amount
of input that should have been used, multiplied by the budgeted price.

32. AC Corporation uses the following data to evaluate their current performance. The
actual selling price of each unit is €100, as was the budgeted selling price.
Static budget flexible budget actual results
Units sold 20,000 17,000 17,000
Variables costs (€) 1,150,000 977,500 1,200,000
Fixed costs (€) 500,000 500,000 475,000
What is the static-budget variance of the operating income?
A) €325,000 unfavorable
B) €50,000 unfavorable
C) €300,000 unfavorable
D) €25,000 favorable

33. Refer to the information to question 32. What is the flexible budget variance of
operating income?
A) €197,500 unfavorable
B) €722,500 unfavorable
C) €25,000 favorable
D) €127,500 unfavorable
34. One of the raw materials used in the products of car manufacturer AT Corporation is
steel. The actual quantity of steel used in the manufacturing process of this month is
20,000 kilograms. The budgeted price of a kilogram of steel was €27. The actual price
paid for each kilogram amounted to €38. The lowest market price available in the
current month was €34. The price-variance, for which the purchase department can be
held accountable, amounts to:
A) €80,000 unfavorable
B) €220,000 unfavorable
C) €140,000 unfavorable
D) €80,000 favorable

35. Differences of actual and normal costing

A) Are only known once the job has been completed
B) Can be attributed to differences in both direct and indirect cost rates
C) Can be attributed to differences in the actual and budgeted overhead costs only
D) Can be attribute to differences in the actual cost allocation base and budgeted cost
allocation base only

36. Which statement is incorrect? Indirect costs

A) Are only indirect with regard to a specific cost object
B) Are also known as overhead costs
C) Are allocated to a cost object
D) Always include rent and depreciation of machinery

37. Under variable costing

A) The production-volume variance is calculated
B) Manufacturing overhead costs are only expensed when units are sold
C) The income statement is presented in the gross margin format
D) Net income is equal to net income under absorption costing when based on
budgeted production and revenues and expenses

38. Managers have an incentive to build-up inventory

A) Equally under both variable and absorption costing
B) When the FIFO rather than the weighted average method is used
C) Under variable costing, because all fixed costs are expensed in the period when
they are incurred
D) Under absorption costing, because fixed costs are treated as inventory costs
39. Bruggen Inc. produces and sells accounting books to students of the first year
accounting course at Maastricht University. The actual revenue and cost figures for
Bruggen Inc. for the year 2015 are
unit total
direct material €20
direct labour €40
variable manufacturing €8
overhead
variable marketing costs €6
fixed manufacturing overhead €24,000
fixed marketing costs €12,000
revenue €140
Other information:
units produced 1,500
units sold 1,000
Assume that there is no beginning inventory and that actual production equals budgeted
production levels.
Under absorption costing
A) net income is €8,000 lower than under variable costing
B) variable marketing costs are treated as inventory cost
C) the production volume variance is always irrelevant
D) net income is €8,000 higher than under variable costing

40. Refer to the information to question 39. What is the cost of goods sold per unit under
absorption costing?
A) €74
B) €68
C) €96
D) €84

41. Refer to the information to question 39. Now assume that the budgeted production of
accounting books was 1300, but due to overcapacity, the actual production was 1500 as
stated above. The production volume variance is close to
A) €3,700 Favorable
B) €3,200 Unfavorable
C) €3,200 Favorable
D) €3,700 Unfavorable

42. Every lunch delivery should contribute to covering a range of indirect costs of the
delivery business that amounted to €6,880 this month. Something better delivery
services decided to allocate these costs based on the kilometres driven per delivery,
compared to the total kilometres driven during the entire month (3,200 KM). For lunch
delivery A they drove 69 KM and for lunch delivery B they drove 87 KM. Calculate the
indirect costs for lunch delivery B:
A) €187.05
B) €148.35
C) €40.47
D) €32.10
43. Expenses result in:
A) Increase in debit and credit
B) Decrease in debit and credit
C) Increase in debit and a decrease in credit
D) Decrease in debit and increase in credit

44. On 31-11-2016, Something Better purchases new raw materials for €2,400, of which
40% is purchased on account. How should this transaction be journalized?
A) DEBIT: Inventory €2,400
CREDIT: Accounts payable €960
Cash €1,440
B) DEBIT: Accounts payable €1,440
Cash €960
CREDIT: COGS €2,400
C) DEBIT: COGS €2,400
CREDIT: Accounts payable €960
Cash €1,440
D) DEBIT: EQUIPMENT €2,400
CREDIT: Accounts payable €1,440
Cash €960

45. Which of the following statements is true? From an accounting viewpoint:

A) Corporations are considered separate entities
B) Proprietorships are considered separate entities
C) Partnerships are considered separate entities
D) All of the above are true

46. Which of the following statements is true?

A) Accounts receivable cover goods or services that are purchased by the company,
but not yet paid by them
B) Accounts payable cover goods or services that were sold by the company, but not
yet paid by the buyer
C) The balance sheet shows you what the financial position of the company is, while
the income statement shows financial performance
D) All of the above are true

47. Which of the following statements is false?

A) A debit decreases the revenues account, a credit increases it.
B) A debit increases the prepaid taxes account, a credit decreases it.
C) A credit increases the accounts payable account, a debit decreases it.
D) A debit decreases the dividends account, a credit increases it.

48. Which of the following statements is false?

A) Accrued revenues are revenues that have been received before they are actually
earned
B) Prepaid rent is an example of a deferred expense
C) The differences between the accrual and the cash based approach are caused by the
matching and revenue recognition principles.
D) Accumulated depreciation is a contra asset
49. The matching principle of accounting indicates that:
A) expenses should equal cash outflow.
B) every transaction involves both a credit and a debit.
C) revenues are recognized when they are reasonably assured.
D) resources consumed to earn revenues are recognized in the period in which these
revenues are earned.

50. Which of the following statements is not impacted by the changes in sales?
A) Revenue
B) Finished Goods Closing stock
C) WIP Closing Stock
D) COGS

51. Which factors affect the classification of a cost as direct or indirect?

A) the relevant range of the cost in question, available information-gathering
technology and design of operations.
B) materiality of the cost in question, available information-gathering technology and
design of operations.
C) materiality of the cost in question, available information-gathering technology and
the extent of value adding of the cost
D) materiality of the cost in question, time span of the cost in question and design of
operations.

52. Which of the following statements is true or false?

Statement 1: The static-budget variance is equal to the sum of the flexible-budget
variance and the sales-volume variance.
Statement 2: The flexible-budget variance consists of the price variance and the
efficiency variance.
A) Statement 1 is false and statement 2 is true
B) Statement 1 is true and statement 2 is true
C) Statement 1 is false and statement 2 is false
D) Statement 1 is true and statement 2 is false

53. The following information regarding the inventory cost per unit is given for a company
that produces bicycles:
Manufacturing costs: Inventory cost per unit:
Direct materials (variable) € 40
Direct manufacturing labour (variable) € 55
Indirect manufacturing costs (variable) € 15
Direct manufacturing labour (fixed) € 10
Indirect manufacturing costs (variable) € 35
Calculate the total inventory costs per unit using variable costing and absorption
costing.
A) Variable costing: € 145 and absorption costing: € 105
B) Variable costing: € 110 and absorption costing: € 105
C) Variable costing: € 145 and absorption costing: € 155
D) Variable costing: € 110 and absorption costing: € 155
54. The assembly department of a bicycles producing company are as follows:
Physical units for January 2016
Work in progress, opening stock (1 January) 0
Started during January 300
Completed and transferred out 300
Work in progress, closing stock (31 January) 0
Physical units for February 2016
Work in progress, opening stock (1 February) 0
Started during February 350
Completed and transferred out 250
Work in progress, closing stock (29 February) 100
All direct materials are added at the beginning of the assembly process. The manager of
the assembly department estimates that the partially assembled units are, on average,
70% complete as to conversion costs. Calculate the work done for the month February
2016 in equivalent units for both direct materials as conversions costs.
A) Direct materials 250 and conversion cost 320
B) Direct materials 350 and conversion cost 250
C) Direct materials 350 and conversion cost 320
D) Direct materials 250 and conversion cost 250

55. Haesebrouck Manufacturing is approached by a Belgian customer to fulfill a one-time-

only special order for a product similar to one offered to domestic customers.
Haesebrouck Manufacturing has excess capacity. The following per unit data apply for
sales to regular customers:
Variable costs:
Direct materials €40
Direct labor €30
Manufacturing support €35
Packaging costs €5
Fixed costs:
Manufacturing support €45
Marketing costs €15
Total costs €170
Markup (50%) €85
Target selling price €255
What is the contribution margin per unit for sales to regular customers?
A) €85
B) €255
C) €145
D) €110

56. Refer to the information to question 55. What is the lowest price per unit Haesebrouck
Manufacturing should ask for this special order?
A) €145
B) €110
C) €255
D) €170
57. Refer to the information to question 55. What is the change in operating profits if the
one-time-only special order for 1,000 units is accepted for €180 a unit by Haesebrouck
Manufacturing?
A) €75,000 decrease in operating profits
B) €10,000 increase in operating profits
C) €10,000 decrease in operating profits
D) €70,000 increase in operating profits

58. Kaenen International Inc. planned to use €82 of material per unit but actually used €80
of material per unit, and planned to make 1,200 units but actually made 1,000 units.
The flexible-budget variance is:
A) €16,400 unfavorable
B) €2,400 favorable
C) €14,000 unfavorable
D) €2,000 favorable

59. Refer to the information to question 58. The sales-volume variance is:
A) €14,000 unfavorable
B) €16,400 unfavorable
C) €2,400 favorable
D) €2,000 favorable

60. Operating budgets include all of the following EXCEPT:

A) the budgeted balance sheet
B) the administrative costs budget
C) the revenues budget
D) the budgeted income statement

61. A flexible budget:

A) is developed at the end of the period
B) is another name for management by exception
C) is based on the budgeted level of output
D) provides favorable operating results

62. Which of the following costs always differ among future alternatives?
A) fixed costs
B) variable costs
C) relevant costs
D) historical costs

63. The incremental costs of producing one more unit of product include all of the following
EXCEPT:
A) variable overhead costs
B) direct labor
C) direct materials
D) fixed overhead costs
64. Katlijn, owner of Hi-Tech Fiberglass Fabricators, Inc., is interested in using the
reciprocal allocation method. The following data from operations were collected for
analysis:

Budgeted manufacturing overhead costs:

Plant Maintenance PM (Support Dept) €350,000
Data Processing DP (Support Dept) € 75,000
Machining M (Operating Dept) €225,000
Capping C (Operating Dept) €125,000

Services furnished:
By Plant Maintenance (budgeted labor-hours):
to Data Processing 3,500
to Machining 5,000
to Capping 8,200
By Data Processing (budgeted computer time):
to Plant Maintenance 600
to Machining 3,500
to Capping 600

Which of the following linear equations represents the complete reciprocated cost of the
Data Processing Department?
A) DP= €75,000 x (600/4,700) + €350,000 x (3,340/16,700)
B) DP= €350,000 + (600/16,700) DP
C) DP= €75,000 + (3,500/16,700) PM
D) DP= €75,000 + (600/4,700) PM

65. Refer to the information to question 64. What is the complete reciprocated cost of the
Plant Maintenance Department?
A) close to €369,500
B) close to €389,500
C) close to €359,500
D) close to €379,500

66. The direct allocation method:

A) is also referred to as the sequential method
B) is conceptually the most precise method
C) results in allocating only the support costs used by operating departments
D) partially recognizes the services provided among support departments

67. The only difference between variable and absorption costing is the expensing of:
A) indirect manufacturing costs
B) fixed manufacturing costs
C) variable manufacturing costs
D) variable marketing costs
68. Variable costing:
A) is required for external reporting to shareholders in most countries
B) treats variable marketing expenses as an inventoriable cost
C) treats variable manufacturing costs as an inventoriable cost
D) includes fixed manufacturing overhead as an inventoriable cost

69. Cost allocation is:

A) a function of cost tracing
B) the assignment of indirect costs to the chosen cost object
C) the process of tracking both direct and indirect costs associated with a cost object
D) the process of determining the actual cost of the cost object

70. The determination of a cost as either direct or indirect depends upon the:
A) cost tracing system
B) accounting system
C) cost object chosen
D) allocation system

71. _____________ is the collection of cost data in some organized way through an
accounting system.
A) cost allocation
B) cost pool
C) cost assignment
D) cost accumulation

72. In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to

estimate the __________ allocated to a job.
A) direct labor
B) total costs
C) direct materials
D) manufacturing overhead costs

73. Within the relevant range, if there is a change in the level of the cost driver, then
A) total fixed costs will remain the same and total variable costs will change
B) fixed costs per unit will change and variable costs per unit will remain the same
C) fixed costs per unit will remain the same and variable costs per unit will change
D) both A and B

74. When 10,000 units are produced, variable costs are €6 per unit. Therefore, when 20,000
units are produced:
A) variable costs will total €120,000
B) variable unit costs will decrease to €3 per unit
C) variable unit costs will remain €6 per unit
D) both A and C
 75. On November 1, Kaenen & Cigdem Company paid six months' insurance in advance
totaling €9,000. An adjusted trial balance prepared on December 31 would include a
balance in the Prepaid Insurance account of:
A) €6,000
B) €3,000
C) €0
D) €9,000

76. Income taxes owed to the federal government would be classified as a(n):
A) financing activity on the Statement of Cash Flows.
B) current liability on the Balance Sheet.
C) expense on the Income Statement.
D) current asset on the Balance Sheet.

77. A master budget:

A) includes only financial aspects of a plan and excludes nonfinancial aspects.
B) is an aid to coordinate what needs to be done to implement a plan.
C) includes broad expectations and visionary results.
D) both A and B.

78. For January, the cost components of a picture frame include €0.35 for the glass, €0.65
for the wooden frame, and €0.80 for assembly. The equipment (e.g., assembly desk and
tools) cost €400 in total. 1,000 frames are expected to be produced in the coming year.
What cost function best represents these costs?
A) y = 400 +1.80X
B) y = 2.20 + 1,000X
C) y = 1.00 + 400X
D) y = 1.80 + 400X

79. Classifying a cost as either direct or indirect depends upon:

A) whether an expenditure is avoidable or not in the future.
B) whether the cost can be easily identified with the cost object.
C) the behavior of the cost in response to volume changes.
D) whether the cost is expensed in the period in which it is incurred.

80. Which of the following will increase a company's breakeven point?

A) increasing variable cost per unit
B) reducing its total fixed costs
C) increasing the selling price per unit
D) Both A and C.

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