Question

UULUTUNS (12) In 2019, the director of an online accounting program decided to change her programs business model. Instead of hiring Ph.D.-qualified instructors for each course, the director invested in a course designer. The course designer will receive an annual stipend for designing and maintaining the curriculum for the program. With a strong curriculum place, the director then plans to hire less qualified instructors at a cheaper cost per course. The director also plans to decrease tuition rates by 7%, hoping to offer more course sections each year. Compared to 2018, the program's total cost line will: a. shift downward on the Y-axis and have a steeper slope. b. shift upward on the Y-axis and have a flatter slope. c. shift downward on the Y-axis and have a flatter slope. d. shift upward on the Y-axis and have a steeper slope. remain constant. 7. In response to a $2.00 increase in a product's variable cost per unit, a manufacturer increased its selling price per unit by $2.00. Taken together, which of the following would absolutely without question, result from the changes? (Think, think...) a. Contribution margin per unit will decrease. b. Contribution margin ratio will decrease. c. Total contribution margin will remain the same. d. All of the above. e. B & C above. f. None of the above. 8. Lodi Grapes, Inc. uses direct labor cost as a basis for computing its predetermined overhead rate. In computing this rate, the company misclassified a portion of direct labor cost as indirect labor. The effect of this misclassification will be to: a. overstate the predetermined overhead rate. b. understate the predetermined overhead rate. c. have no effect on the predetermined overhead rate. d. cannot be determined from the information given.

Answer 1

6. (b) Shift upward on Y-axis and have a flatter slope

Explanation:

The slope will sift upward on Y-axis because the company will have to incur a fixed cost in the form of annual stipend to course designer. However, this fixed cost will help the company to hire less qualified instructor in place of Ph.D. Instructors at a lower variable cost that will make the cost slope flatter.

7. (e) B & C above

Explanation:

With an increase of Sales price by $2 followed by increase in variable cost by $2, contribution margin per unit will be unaffected. However, the contribution margin ration is defined as contribution margin per unit as a percentage of sales value. If the selling price will increase and the contribution margin per unit will be same, the contribution margin ratio will tend to decrease.

8. (a) Overstate the predetermined overhead rate

Explanation:

Predetermined Overhead rate is calculated as total indirect costs divided by Direct labor cost. While determining the predetermined overhead rate, the direct labor is classified as indirect labor. This will result in increased numerator and decreased denominator. Therefore, the resulting overhead rate determined will be higher as compared to the actual result that would have been computed if the correct amounts have been used.