Question : 3.2 Optimization in Levels 1) To carry out an optimization analysis: A) : 1377308

3.2 Optimization in Levels

1) To carry out an optimization analysis:

A) different types of costs are measured in different units.

B) only direct costs incurred in a project are to be estimated.

C) only indirect costs incurred in a project are to be estimated.

D) all costs are required to be converted to a same unit of measurement.

2) If the opportunity cost of time is $20 per hour, and an individual spends 20 hours in commuting every month, his opportunity cost of commute is:

A) $1 per month.

B) $20 per month.

C) $200 per month.

D) $400 per month.

3) If the opportunity cost of time is ________, and an individual spends ________ commuting every month, his opportunity cost of commute is $100 every month.

A) $5 per hour; 10 hours

B) $8 per hour; 20 hours

C) 10 per hour; 10 hours

D) $12 per hour; 5 hours

4) If an individual’s opportunity cost of commute is $300 per month and his monthly commuting time is 60 hours, his opportunity cost of time is:

A) $5 per hour.

B) $10 per hour.

C) $30 per hour.

D) $60 per hour.

5) Among a set of alternatives with the same benefits, an individual is said to optimize if she chooses an alternative that:

A) has the lowest total cost.

B) has the highest total cost.

C) has the highest indirect cost.

D) has the lowest opportunity cost.

6) Among a set of alternatives with the same total costs, an individual is said to optimize if she chooses an alternative that has the:

A) highest total benefit.

B) highest risk.

C) lowest opportunity costs.

D) highest net costs.

7) An individual pays $100 every month as rent for an apartment, and his monthly opportunity cost of commuting from the apartment to his place of work is $40. Which of the following statements is then true?

A) The direct cost of renting the apartment is $140.

B) The indirect cost of renting the apartment is $140.

C) The direct cost of renting the apartment is $40, whereas the indirect cost of renting the apartment is $100.

D) The direct cost of renting the apartment is $100, whereas the indirect cost of renting the apartment is $40.

Ryan wants to rent an apartment. The following table shows the monthly rent of five apartments and the monthly commuting time to work from each apartment. Ryan’s opportunity cost of time is $15 per hour.

Apartment

Commuting Time (hours/month)

Rent ($/month)

1,500

1,750

2,000

2,210

2,250

8) Refer to the table above. What is the total cost incurred per month if Ryan rents apartment 3?

A) $2,000

B) $2,050

C) $2,150

D) $2,270

9) Refer to the table above. What is the total cost incurred per month if Ryan rents apartment 5?

A) $2,150

B) $2,270

C) $2,400

D) $2,265

10) Refer to the table above. What is the opportunity cost of commute per month to work if Ryan rents apartment 2?

A) $20

B) $150

C) $200

D) $300

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July 1, 2023

21. The percentage-of-sales procedure arises from the idea that uncollectible amounts will vary with the volume of credit business. The firm estimates the appropriate percentage by studying its own experience or by inquiring into the experience of similar firms. Default rates generally fall within the range of .01% to .02% of credit sales.

22. The percentage-of-completion method measures the proportion of total work carried out during the accounting period either from engineers' estimates of the degree of completion or from the ratio of costs incurred to date to the total costs expected for the entire contract.

23. A common-size income statement expresses each expense and net income as a percentage of
A. assets.
B. revenues.
C. liabilities.
D. expenses.
E. shareholders’ equity.

24. If the firm has received a promise of payment but cannot measure this promise with reasonable reliability,
A. U.S. GAAP would permit revenue to be recognized, but IFRS would not permit revenue to be recognized.
B. U.S. GAAP would not permit revenue to be recognized, but IFRS would permit revenue to be recognized.
C. neither U.S. GAAP nor IFRS would permit revenue to be recognized.
D. U.S. GAAP and IFRS would permit revenue to be recognized.
E. none of the above

25. Which section includes income derived from a firm’s primary business activities as well as from activities peripherally related to operations? (The firm expects these sources of earnings to continue.)
A. income from continuing operations
B. income, gains, and losses from discontinued operations
C. extraordinary gains and losses
D. retained earnings
E. paid-in-capital

26. Operating risks
A. include variability in sales from changing economic conditions (cyclicality risk).
B. include variability in sales from short product life cycles (because of technological change or changes in consumer taste).
C. include variability of earnings that arises when the firm has a high proportion of fixed costs that do not change as sales change.
D. Answers a, b, and c are correct.
E. None of these answer choices is correct.

27. Ulrich Co. sells an asset to a buyer for a total sales price of $6,000 with a payment schedule of $2,000 in year 1, $2,000 in year 2, and $2,000 in year 3. The cost of the asset is $5,000. Under the cost-recovery-first method, what amount of net profit is recognized in year 3?
A. $2,000
B. $1,000
C. $666.67
D. $333.33
E. $0

28. Which of the following is true regarding income recognition?
A. The seller must have substantially performed its obligations to the customer (for example, by transferring ownership of goods to the customer).
B. The seller must have obtained an asset from the customer that it can reliably measure. If the asset is not cash, the seller must be reasonably certain of converting it into cash.
C. The firm recognizes expenses when it consumes assets.
D. If an event or transaction leads to the recognition of revenue, the firm matches the consumption of any assets (the expense), in time, with the revenue recognized.
E. all of the above

29. Cowden Properties

Cowden Properties sold a condominium to Ms. Roberts for $90,000. Cowden originally acquired the condo at a cost of $40,000 and made improvements to the unit totaling $20,000. The contract for sale required Ms. Roberts to pay the $90,000 as follows: