Exhibit 3.5 The Following Questions Are Based on This Problem and Accompanying

question 35

Multiple Choice

Exhibit 3.5
The following questions are based on this problem and accompanying Excel windows.
A company is planning production for the next 4 quarters. They want to minimize the cost of production. The production cost is stable but demand and production capacity vary from quarter to quarter. The maximum amount of inventory which can be held is 12,000 units and management wants to keep at least 3,000 units on hand. Quarterly inventory holding cost is 3% of the cost of production. The company estimates the number of units carried in inventory each month by averaging the beginning and ending inventory for each month. There are currently 5,000 units in inventory. The company wants to produce at no less than one half of its maximum capacity in any quarter.
-Refer to Exhibit 3.5. What formula could be entered in cell F20 in the accompanying Excel spreadsheet to compute the Total Cost for all four quarters?

• A) SUMPRODUCT($C$4:$F$4,C17:F17)
• B) SUM(C17:F17) + SUM(C18:F18)
• C) PRODUCT(SUM(C14:F15,C17:F18)
• D) SUMPRODUCT(C4:F4,C14:F14) + SUMPRODUCT(C6:F6,C15:F15)

Determine manufacturing overhead and its components.

Calculate direct costs and prime costs in manufacturing and service departments.

Recognize the importance of the relevant range in cost behavior analysis.

Understand the incremental costs associated with a change in production levels.

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Definitions:

Information Overload

Exposure to an overwhelming amount of information.

Electronic Communication

The transmission of information using electronic means such as email, text messages, and social media.

Text Message

A form of electronic communication where short messages are sent over cellular networks between mobile devices.

Verbal

Pertaining to words, either spoken or written, as a means of communication or expression.