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Exam 1: Managerial Accounting and Cost Concepts

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Question 101

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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 differential cost was:

A) $20,000
B) $8,000
C) $12,000
D) $63,000

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

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Question 102

Multiple Choice

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Lagle Corporation has provided the following information: If 6,000 units are sold, the variable cost per unit sold is closest to:

A) $17.70
B) $13.70
C) $11.15
D) $13.80

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

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Question 103

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Batterson Corporation leases its corporate headquarters building. This lease cost is fixed with respect to the company's sales volume. In a recent month in which the sales volume was 28,000 units, the lease cost was $697,200.To the nearest whole cent, what should be the average lease cost per unit at a sales volume of 26,400 units in a month? (Assume that this sales volume is within the relevant range.)

Product costs that have become expenses can be found in:

Brault Corporation has provided the following information: If 10,000 units are sold, the variable cost per unit sold is closest to:

Arman 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. If 6,000 units are produced, what is the total amount of fixed manufacturing cost incurred?b. 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?c. If 4,000 units are produced, what is the total amount of direct manufacturing cost incurred?d. If 4,000 units are produced, what is the total amount of indirect manufacturing cost incurred?

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.

Schwiesow 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:

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

Conversion cost is the sum of direct labor cost and manufacturing overhead cost.

Boersma Sales, Incorporated a merchandising company, reported sales of 7,100 units in September at a selling price of $682 per unit. Cost of goods sold, which is a variable cost, was $317 per unit. Variable selling expenses were $44 per unit and variable administrative expenses were $22 per unit. The total fixed selling expenses were $157,200 and the total administrative expenses were $338,000.The gross margin for September was:

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:

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.

Tirri Corporation has provided the following information: If the selling price is $27.60 per unit, the contribution margin per unit sold is closest to:

Variable costs per unit are not affected by changes in activity.

Paolucci Corporation's relevant range of activity is 4,500 units to 10,500 units. When it produces and sells 7,500 units, its average costs per unit are as follows: If 6,500 units are sold, the variable cost per unit sold is closest to:

The following cost data pertain to the operations of Ladwig Department Stores, Incorporated, for the month of December. The Brentwood Store is just one of many stores owned and operated by the company. The Shoe Department is one of many departments at the Brentwood 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 Shoe Department?

Macy 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: If the selling price is $23.50 per unit, the contribution margin per unit sold is closest to:

In April, Holderness Incorporated, a merchandising company, had sales of $221,000, selling expenses of $14,000, and administrative expenses of $25,000. The cost of merchandise purchased during the month was $155,000. The beginning balance in the merchandise inventory account was $34,000 and the ending balance was $48,000.Required:Prepare a traditional format income statement for April.

The following data have been collected for four different cost items. Which of the following classifications of these cost items by cost behavior is correct?