Q. (a) - How should you classify the cost associated with subcontracted snow removal services at your headquarters facility? What if the same costs were incurred at your factory?

1. Headquarters: Product cost. Factory: Period cost.

2. Headquarters: Other overhead. Factory: Indirect labor.

3. Headquarters: Direct labor. Factory: Direct labor.

4. Headquarters: Period cost. Factory: Product cost.

5. Headquarters: Indirect labor. Factory: Other overhead

Q. (b) - When there is only funding available to improve one step in a process:

1. It should always be the first step, because quality should start at the beginning.

2. It should be the step that, after improvement expenses, results in the highest contribution.

3. It should always be the most expensive step.

4. It should always be the last step, because more value-added is scrapped there.

Q. (c ) - When process conformance quality is improved:

1. Variable cost per good unit decreases and number of good units produced for a given amount of inputs increases.

2. Variable cost per good unit increases and number of good units produced for a given amount of inputs decreases.

3. Variable cost per good unit and number of good units produced for a given amount of inputs both decrease.

4. Variable cost per good unit and number of good units produced for a given amount of inputs both increase

Q. (d) - A product is produced in three steps, with the variable cost added at each step and the yield at each step as listed below:

• Step 1 - Variable Cost Added at this Step: $5.00 ; Yield: 93%
• Step 2 - Variable Cost Added at this Step: $8.00 ; Yield: 96%
• Step 3 - Variable Cost Added at this Step: $10.00 ; Yield: 97%

If the selling price is $50, and there are enough materials and labor to start out to produce 1000 units at Step 1, what is the contribution at current quality levels? Assume units are inspected after each step and defective units are scrapped.

Please do not round at any step, EXCEPT for rounding down units produced to a whole number.

1. $25,326.00

2. $21,932.39

3. $23,442.36

4. $27,000.00