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Exam 1: Managerial Accounting and Cost Concepts

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Question 91

True/False

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In a traditional format income statement for a merchandising company, cost of goods sold is a variable cost that is included in the "Variable expenses" portion of the income statement.

A) True
B) False

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Question 92

Multiple Choice

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At a sales volume of 20,000 units, Choice Corporation's sales commissions (a cost that is variable with respect to sales volume) total $132,000. To the nearest whole dollar, what should be the total sales commissions at a sales volume of 18,400 units? (Assume that this sales volume is within the relevant range.) (Round intermediate calculations to 2 decimal places.)

A) $126,720
B) $132,000
C) $121,440
D) $143,478

E) B) and D)
F) A) and B)

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Question 93

Multiple Choice

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Dake Corporation's relevant range of activity is 2,000 units to 6,000 units. When it produces and sells 4,000 units, its average costs per unit are as follows: For financial reporting purposes, the total amount of product costs incurred to make 4,000 units is closest to:

Contribution margin and gross margin mean the same thing.

Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $360,000 or a new model 220 machine costing $340,000 to replace a machine that was purchased 7 years ago for $348,000. The old machine was used to make product I43L until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 220 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product I43L. Management also considered, but rejected, the alternative of simply dropping product I43L. If that were done, instead of investing $340,000 in the new machine, the money could be invested in a project that would return a total of $411,000. In making the decision to invest in the model 220 machine, the opportunity cost was:

One full-time clerical worker is needed for every 750 accounts receivable. The total wages of the accounts receivable clerks is an example of a:

Wages paid to the supervisor of the warehouse where raw materials and parts are temporarily stored before being used in production is considered an example of:

Differential costs can only be variable.

During the month of May, direct labor cost totaled $10,000 and direct labor cost was 40% of prime cost. If total manufacturing costs during May were $86,000, the manufacturing overhead was:

Kesterson Corporation has provided the following information: If the selling price is $21.90 per unit, the contribution margin per unit sold is closest to:

Glisan Corporation's relevant range of activity is 4,000 units to 8,000 units. When it produces and sells 6,000 units, its average costs per unit are as follows: Required: a. For financial reporting purposes, what is the total amount of product costs incurred to make 6,000 units? b. For financial reporting purposes, what is the total amount of period costs incurred to sell 6,000 units? c. If 5,000 units are sold, what is the total amount of variable costs related to the units sold? d. If the selling price is $19.10 per unit, what is the contribution margin per unit sold? e. What incremental manufacturing cost will the company incur if it increases production from 6,000 to 6,001 units?

Glew Corporation has provided the following information: If 3,000 units are produced, the total amount of indirect manufacturing cost incurred is closest to:

The University Store, Inc. is the major bookseller for four nearby colleges. An income statement for the first quarter of the year is presented below: On average, a book sells for $40.00. Variable selling expenses are $3.00 per book; the remaining selling expenses are fixed. The variable administrative expenses are 5% of sales; the remainder of the administrative expenses are fixed. The contribution margin for the University Store for the first quarter is:

An example of a committed fixed cost would be:

Which of the following is unlikely to be classified as a fixed cost with respect to the number of units produced and sold?

Hinrichs Corporation reports that at an activity level of 2,400 units, its total variable cost is $174,504 and its total fixed cost is $55,080. Required: For the activity level of 2,700 units, compute: (a) the total variable cost; (b) the total fixed cost; (c) the total cost; (d) the average variable cost per unit; (e) the average fixed cost per unit; and (f) the average total cost per unit. Assume that this activity level is within the relevant range.

When operations are interrupted or cut back, committed fixed costs are cut in the short term because the costs of restoring them later are likely to be far less than the short-run savings that are realized

Rhome Corporation's relevant range of activity is 2,000 units to 6,000 units. When it produces and sells 4,000 units, its average costs per unit are as follows: If 5,000 units are sold, the total variable cost is closest to:

Fassino Corporation reported the following data for the month of November: The conversion cost for November was:

The sum of all manufacturing costs except for direct materials and direct labor is called manufacturing overhead.