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Exam 1: Managerial Accounting and Cost Concepts

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Question 1

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Inspection costs at one of Iuliano Corporation's factories are listed below: Management believes that inspection cost is a mixed cost that depends on units produced. Using the high-low method, the estimate of the variable component of inspection cost per unit produced is closest to:

A) $10.57
B) $0.11
C) $17.89
D) $9.33

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

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D

Question 2

Multiple Choice

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At an activity level of 6,900 units in a month, Zelinski Corporation's total variable maintenance and repair cost is $408,756 and its total fixed maintenance and repair cost is $230,253. What would be the total maintenance and repair cost, both fixed and variable, at an activity level of 7,100 units in a month? Assume that this level of activity is within the relevant range.

A) $648,270
B) $639,009
C) $650,857
D) $657,531

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

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Question 3

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Property taxes and insurance premiums paid on a factory building are examples of period costs.

Abbott Company's manufacturing overhead is 20% of its total conversion costs. If direct labor is $38,000 and if direct materials are $23,000, the manufacturing overhead is:

Ence Sales, Inc., a merchandising company, reported sales of 6,400 units in April at a selling price of $684 per unit. Cost of goods sold, which is a variable cost, was $455 per unit. Variable selling expenses were $30 per unit and variable administrative expenses were $40 per unit. The total fixed selling expenses were $156,800 and the total administrative expenses were $260,400. The contribution margin for April was:

A traditional format income statement organizes costs on the basis of behavior.

Calip Corporation, a merchandising company, reported the following results for October: The contribution margin for October is:

At a sales volume of 37,000 units, Maks Corporation's property taxes (a cost that is fixed with respect to sales volume) total $802,900. To the nearest whole cent, what should be the average property tax per unit at a sales volume of 40,300 units? (Assume that this sales volume is within the relevant range.)

Within the relevant range:

The ________________________ is the amount remaining from sales revenue after all variable expenses have been deducted.

In a contribution format income statement, the gross margin minus selling and administrative expenses equals net operating income.

Which of the following costs, if expressed on a per unit basis, would be expected to decrease as the level of production and sales increases?

All of the following costs would be found in a company's accounting records except:

A direct cost is a cost that cannot be easily traced to the particular cost object under consideration.

Emerton 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 32,000 units, the lease cost was $716,800. To the nearest whole cent, what should be the average lease cost per unit at a sales volume of 34,400 units in a month? (Assume that this sales volume is within the relevant range.)

Contribution margin equals revenue minus all fixed costs.

Gambino Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $138.80 per unit. $\begin{array} { | l | r | r | } \hline \text { Sales volume (units) } & 6,000 & 7,000 \\\hline \text { Cost of sales } & \$ 369,000 & \$ 430,500 \\\hline \text { Selling and administrative costs } & \$ 407,400 & \$ 418,600 \\\hline\end{array}$ The best estimate of the total monthly fixed cost is:

The following cost data pertain to the operations of Bouffard Department Stores, Inc., for the month of May. 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?

A fixed cost remains constant if expressed on a unit basis.

The cost of direct materials cost is classified as a: $\begin{array} { | l | l | l | } \hline & \text { Period cost } & \text { Product cost } \\\text { A) } & \text { Yes } & \text { Yes } \\\hline \text { B) } & \text { No } & \text { No } \\\hline \text { C) } & \text { Yes } & \text { No } \\\hline \text { D) } & \text { No } & \text { Yes } \\\hline\end{array}$