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Exam 1: Managerial Accounting and Cost Concepts

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Question 141

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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. If 25,000 books are sold during the second quarter and this activity is within the relevant range, the company's expected contribution margin would be:

A) $875,000
B) $300,000
C) $175,000
D) $65,000

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Question 142

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In account analysis, an account is classified as either variable or fixed based on an analyst's prior knowledge of how the cost in the account behaves.

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Question 143

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Parlavecchio 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: Required: a. For financial reporting purposes, what is the total amount of product costs incurred to make 4,000 units? b. For financial reporting purposes, what is the total amount of period costs incurred to sell 4,000 units? c. If 5,000 units are sold, what is the variable cost per unit sold? d. If 5,000 units are sold, what is the total amount of variable costs related to the units sold? e. If 5,000 units are produced, what is the average fixed manufacturing cost per unit produced? f. If 5,000 units are produced, what is the total amount of fixed manufacturing cost incurred? g. If 5,000 units are produced, what is the total amount of manufacturing overhead cost incurred? What is this total amount expressed on a per unit basis?

Which of the following statements concerning direct and indirect costs is NOT true?

Salomon Marketing, Inc., a merchandising company, reported sales of $1,555,500 and cost of goods sold of $1,025,100 for December. The company's total variable selling expense was $96,900; its total fixed selling expense was $34,300; its total variable administrative expense was $71,400; and its total fixed administrative expense was $100,100. The cost of goods sold in this company is a variable cost. The gross margin for December is:

At a volume of 5,000 units, Pwerson Company incurred $32,000 in factory overhead costs, including $14,000 in fixed costs. If volume increases to 6,000 units and both 5,000 units and 6,000 units are within the relevant range, then the company would expect to incur total factory overhead costs of: (Round intermediate calculations to 2 decimal places.)

Pedregon Corporation has provided the following information: If 4,000 units are sold, the total variable cost is closest to:

Differential costs can:

The following cost data pertain to the operations of Quinonez Department Stores, Inc., for the month of September. The Northridge Store is just one of many stores owned and operated by the company. The Cosmetics Department is one of many departments at the Northridge Store. The central warehouse serves all of the company's stores. What is the total amount of the costs listed above that are direct costs of the Cosmetics Department?

Bauman Sales Corporation, a merchandising company, reported total sales of $4,069,800 for November. The cost of goods sold (all variable) was $2,351,100, the total variable selling expense was $204,000, the total fixed selling expense was $117,700, the total variable administrative expense was $102,000, and the total fixed administrative expense was $267,000. Required: a. Prepare a contribution format income statement for November. b. Prepare a traditional format income statement for November.

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

Norred Corporation has provided the following information: If 8,000 units are produced, the total amount of indirect manufacturing cost incurred is closest to:

Conversion cost equals product cost less direct materials cost.

Kesterson Corporation has provided the following information: The incremental manufacturing cost that the company will incur if it increases production from 5,000 to 5,001 units is closest to:

The cost of electricity for running production equipment is classified as:

At an activity level of 7,200 machine-hours in a month, Falks Corporation's total variable production engineering cost is $556,416 and its total fixed production engineering cost is $226,008. What would be the total production engineering cost per machine-hour, both fixed and variable, at an activity level of 7,300 machine-hours in a month? Assume that this level of activity is within the relevant range. (Round intermediate calculations to 2 decimal places.)

Dominik Corporation purchased a machine 5 years ago for $527,000 when it launched product M08Y. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 310 machine costing $545,000 or by a new model 240 machine costing $450,000. Management has decided to buy the model 240 machine. It has less capacity than the model 310 machine, but its capacity is sufficient to continue making product M08Y. Management also considered, but rejected, the alternative of dropping product M08Y and not replacing the old machine. If that were done, the $450,000 invested in the new machine could instead have been invested in a project that would have returned a total of $532,000. In making the decision to buy the model 240 machine rather than the model 310 machine, the differential cost was:

Committed fixed costs remain largely unchanged in the short run.

Which of the following statements is true when referring to fixed costs?

At a sales volume of 40,000 units, Lonnie Company's total fixed costs are $40,000 and total variable costs are $60,000. The relevant range is 30,000 to 50,000 units. If Lonnie were to sell 42,000 units, the total expected cost would be: