11) What would be the cost savings if Argon decides to reduce manufacturing capacity by 2,500 kgs?

A) $9,375

B) $3,750

C) $1,875

D) $7,500

12) Which of the following statements is a valid argument for Argon to reduce its manufacturing capacity?

A) Argon's strategy is to grow its business as L3 have unlimited demand.

B) Argon can call back the expelled employees if the reduced capacity level proves to be insufficient.

C) Argon already has a high employee turnover rate and a few more will make no difference.

D) Argon wants to reduce product costs as they want to be the cost leaders.

13) Direct material cost is an example of ________.

A) conversion costs

B) discretionary costs

C) engineered costs

D) downsized costs

14) Downsized capacity is the amount of productive capacity available over and above the productive capacity employed to meet customer demand in the current period.

15) Discretionary costs arise from periodic (usually annual) decisions regarding the maximum amount to be incurred.

16) Discretionary costs are not easily controllable compared to engineered costs.

17) Engineered costs contain a higher level of uncertainty than discretionary costs.

18) Engineered costs result from a cause-and-effect relationship between the cost driver output and the resources used to produce that output.

19) Advertising cost is an example of a discretionary cost.

20) It is relatively easy to identify unused capacity for discretionary costs.