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Exam 1: Managerial Accounting and Cost Concepts

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Question 51

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A partial listing of costs incurred during March at Febbo Corporation appears below: -The total of the manufacturing overhead costs listed above for March is:

A) $68,000
B) $35,000
C) $516,000
D) $293,000

E) A) and C)
F) A) and B)

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Question 52

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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. -The incremental manufacturing cost that the company will incur if it increases production from 9,000 to 9,001 units is closest to:

A) $10.60
B) $22.75
C) $19.60
D) $25.50

E) A) and B)
F) A) and C)

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Question 53

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A contribution format income statement separates costs into fixed and variable categories,first deducting variable expenses from sales to obtain the contribution margin.

Cost behavior is considered curvilinear whenever a straight line is a reasonable approximation for the relation between cost and activity.

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

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:

A cost can be direct or indirect.The classification can change if the cost object changes.

Pedregon Corporation has provided the following information: -If 4,000 units are produced,the total amount of manufacturing overhead cost is closest to:

Conversion cost equals product cost less direct materials cost.

Materials used in a factory that are not an integral part of the final product,such as cleaning supplies,should be classified as:

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 220 machine rather than the model 370 machine,the sunk 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? 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? 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? h.If the selling price is $22.90 per unit,what is the contribution margin per unit sold? 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?

Differential costs can only be variable.

Selling and administrative expenses are period costs under generally accepted accounting principles.

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:

In a manufacturing company,all costs are period costs.

A fixed cost is not constant per unit of product.

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 variable cost per unit sold is closest to:

Varela 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:

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