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Exam 1: Managerial Accounting and Cost Concepts

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Question 41

True/False

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Within the relevant range, a change in activity results in a change in variable cost per unit and total fixed cost.

A) True
B) False

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Question 42

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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 period costs incurred to sell 4,000 units is closest to:

A) $7,700
B) $11,600
C) $3,600
D) $8,000

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

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Question 43

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At a sales volume of 36,500 units, Choice Corporation's sales commissions (a cost that is variable with respect to sales volume) total $576,700.To the nearest whole cent, what should be the average sales commission per unit at a sales volume of 41,800 units? (Assume that this sales volume is within the relevant range.)

In the standard cost formula Y = a + bX, what does the "Y" represent?

Mark is an engineer who has designed a telecommunications device. He is convinced that there is a big potential market for the device. Accordingly, he has decided to quit his present job and start a company to manufacture and market the device.Mark purchased a machine two years ago to make experimental boards. The machine will be used to manufacture the new board. The cost of this machine is:

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:

Which of the following production costs, if expressed on a per unit basis, would be most likely to change significantly as the production level varies?

Committed fixed costs remain largely unchanged in the short run.

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 buy the model 220 machine rather than the model 370 machine, the sunk cost was:

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?

In a manufacturing company, all costs are period costs.

Bolka Corporation, a merchandising company, reported the following results for October: The gross margin for October is:

Contribution format income statements are prepared primarily for external reporting purposes.

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 invest in the model 240 machine, the opportunity cost was:

An income statement for Sam's Bookstore for the first quarter of the year is presented below: On average, a book sells for $65. Variable selling expenses are $4 per book with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales with the remainder being fixed. The cost formula for selling and administrative expenses with "X" equal to the number of books sold is:

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 direct costs above?

Factory overhead is typically a(n) :

Lagle Corporation has provided the following information: If 5,000 units are sold, the variable cost per unit sold is closest to:

Schonhardt Corporation's relevant range of activity is 2,900 units to 7,500 units. When it produces and sells 5,200 units, its average costs per unit are as follows: If 6,500 units are produced, the total amount of fixed manufacturing cost incurred is closest to:

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