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Exam 1: Managerial Accounting and Cost Concepts

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Question 101

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Which of the following is an example of a period cost in a company that makes clothing?

A) Fabric used to produce men's pants.
B) Advertising cost for a new line of clothing.
C) Factory supervisor's salary.
D) Monthly depreciation on production equipment.

E) All of the above
F) B) and C)

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Question 102

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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:

A) $270,000
B) $180,000
C) $144,000
D) $66,000

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

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Question 103

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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 produced, the total amount of manufacturing overhead cost is closest to:

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. The salary that Mark earns at his present employ is:

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 average fixed maintenance cost per unit at an activity level of 9,300 machine-hours in a month? Assume that this level of activity is within the relevant range.

When the level of activity decreases within the relevant range, the fixed cost per unit will:

Schwiesow Corporation has provided the following information: If 6,000 units are produced, the total amount of indirect manufacturing cost incurred is closest to:

Direct labor cost is classified as:

Contribution format income statements are prepared primarily for external reporting purposes

Committed fixed costs represent organizational investments with a one-year planning horizon.

A number of costs are listed below. Required: For each item above, indicate whether the cost is direct or indirect with respect to the cost object listed next to it.

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 50,000 units, the total expected cost per unit would be: (Round intermediate calculations to 2 decimal places.)

Fanelli Corporation, a merchandising company, reported the following results for July: Cost of goods sold is a variable cost in this company. Required: a. Prepare a traditional format income statement for July. b. Prepare a contribution format income statement for July.

The potential benefit that is given up when one alternative is selected over another is called a sunk cost.

At an activity level of 6,800 units, Henkes Corporation's total variable cost is $125,188 and its total fixed cost is $164,152. Required: For the activity level of 7,100 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.

A partial listing of costs incurred at Boylen Corporation during March appears below: Required: a. What is the total amount of product cost listed above? Show your work. b. What is the total amount of period cost listed above? Show your work.

The following costs were incurred in May: Conversion costs during the month totaled:

In a manufacturing company, all costs are period costs.

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?

Leas Corporation staffs a helpline to answer questions from customers. The costs of operating the helpline are variable with respect to the number of calls in a month. At a volume of 25,000 calls in a month, the costs of operating the helpline total $452,500. To the nearest whole cent, what should be the average cost of operating the helpline per call at a volume of 25,300 calls in a month? (Assume that this call volume is within the relevant range.)