29. A major problem with cost-plus contracts is that they A) create an incentive to allocate as much cost as possible to the goods produced under the contract. B) include costs that do not follow GAAP. C) cause the supplier to take significant financial risks. D) require the supplier to use variable costing. 30. The Crab Shack experienced the following costs in 2017 (Assume the same unit costs in all years): Direct materials Direct labor $2.25 per unit $1.50 per unit Manufacturing overhead costs Variable Fixed $1.10 per unit $60,000 Selling & administrative costs Variable selling Fixed selling Fixed administrative $0.80 per unit $9,000 $13,000 There were 1,800 units in beginning inventory. During the year, the company manufactured 24,000 units and sold 25,000 units. If net income using variable costing was $76,250, how much is net income using full costing? A) $74,350 B) $5,880 C) $79,250 D) $73,750 31. Step costs A) are classified as step variable or step fixed depending on the range of activity for which the cost remains fixed B) change in total at every level of activity. C) are considered to be step fixed costs within a relatively small range. D) per unit are the same for each range of volume. 32. When the level of activity decreases, total variable costs A) decrease, but at a slower rate than the level of activity. B) decrease in direct proportion to the decrease in activity. C) increase. remain the same. D) Version 1 Page 7