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Exam 1: Managerial Accounting and Cost Concepts

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Question 141

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Given the cost formula Y = $23,000 + $8X, total cost at an activity level of 7,000 units would be:

A) $33,000
B) $79,000
C) $23,000
D) $56,000

E) B) and D)
F) C) and D)

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Question 142

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Within the relevant range, variable costs can be expected to:

A) vary in total in direct proportion to changes in the activity level.
B) remain constant in total as the activity level changes.
C) increase on a per unit basis as the activity level increases.
D) increase on a per unit basis as the activity level decreases.

E) None of the above
F) A) and B)

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Question 143

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Macy Corporation's relevant range of activity is 8,400 units to 17,000 units. When it produces and sells 12,700 units, its average costs per unit are as follows: If the selling price is $32.50 per unit, the contribution margin per unit sold is closest to:

Although the traditional format income statement is useful for external reporting purposes, it has serious limitations when used for internal purposes because it does not distinguish between fixed and variable costs.

Meginnis Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: If 6,000 units are produced, the total amount of direct manufacturing cost incurred is closest to:

Schwiesow Corporation has provided the following information: If the selling price is $18.70 per unit, the contribution margin per unit sold is closest to:

Karpowicz Corporation's relevant range of activity is 7,000 units to 11,000 units. When it produces and sells 9,000 units, its average costs per unit are as follows: Required:a. If the selling price is $21.40 per unit, what is the contribution margin per unit sold?b. If 8,000 units are produced, what is the total amount of direct manufacturing cost incurred?c. If 8,000 units are produced, what is the total amount of indirect manufacturing cost incurred?d. What incremental manufacturing cost will the company incur if it increases production from 9,000 to 9,001 units?

At an activity level of 9,000 machine-hours in a month, Moffatt Corporation's total variable maintenance cost is $390,240 and its total fixed maintenance cost is $368,280.What would be the total variable maintenance cost at an activity level of 9,300 machine-hours in a month? Assume that this level of activity is within the relevant range. (Round intermediate calculations to 2 decimal places.)

Which costs will change with a decrease in activity within the relevant range?

In a traditional format income statement, the gross margin is sales minus cost of goods sold.

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:

Saxbury Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 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 5,000 units?b. For financial reporting purposes, what is the total amount of period costs incurred to sell 5,000 units?c. If 6,000 units are sold, what is the variable cost per unit sold? (Round "Per unit" answer to 2 decimal places.)d. If 6,000 units are sold, what is the total amount of variable costs related to the units sold?e. If 6,000 units are produced, what is the average fixed manufacturing cost per unit produced? (Round "Per unit" answer to 2 decimal places.)f. If 6,000 units are produced, what is the total amount of fixed manufacturing cost incurred?g. If 6,000 units are produced, what is the total amount of manufacturing overhead cost incurred? What is this total amount expressed on a per unit basis? (Round "Per unit" answer to 2 decimal places.)h. If the selling price is $22.90 per unit, what is the contribution margin per unit sold? (Round "Per unit" answer to 2 decimal places.)i. If 4,000 units are produced, what is the total amount of direct manufacturing cost incurred?j. If 4,000 units are produced, what is the total amount of indirect manufacturing cost incurred?k. What incremental manufacturing cost will the company incur if it increases production from 5,000 to 5,001 units? (Round "Per unit" answer to 2 decimal places.)

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

A fixed cost is constant if expressed on a per unit basis but the total dollar amount changes as the number of units increases or decreases.

An income statement for Sam's Bookstore for the first quarter of the year is presented below: On average, a book sells for $50. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 4% of sales with the remainder being fixed.The net operating income using the contribution approach for the first quarter is:

In a contribution format income statement for a merchandising company, the cost of goods sold reports the product costs attached to the merchandise sold during the period.

Schwiesow Corporation has provided the following information: If 7,000 units are produced, the total amount of manufacturing overhead cost is closest to:

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:

A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $3,090 and is paid at the beginning of the first year. Ninety percent of the premium applies to manufacturing operations and ten percent applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage?

Vignana Corporation manufactures and sells hand-painted clay figurines of popular sports heroes. Shown below are some of the costs incurred by Vignana for last year: What is the total of the conversion costs above?