Exam 1: Managerial Accounting and Cost Concepts

Weingartner Corporation, a merchandising company, reported sales of 4,800 units for July at a selling price of $269 per unit. The cost of goods sold (all variable) was $114 per unit and the variable selling expense was $6 per unit. The total fixed selling expense was $38,100. The variable administrative expense was $14 per unit and the total fixed administrative expense was $59,900. Required: a. Prepare a contribution format income statement for July. b. Prepare a traditional format income statement for July.

Although the traditional format income statement is useful for external reporting purposes, it has serious limitations when used for internal purposes because it does not distinguish between fixed and variable costs.

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:

Learned Corporation has provided the following information: 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 the selling price is $22.40 per unit, what is the contribution margin per unit sold? d. If 7,000 units are produced, what is the total amount of direct manufacturing cost incurred? e. If 7,000 units are produced, what is the total amount of indirect manufacturing costs incurred?

Which of the following is correct concerning reactions to INCREASES in activity?

Timchak Corporation reports that at an activity level of 9,900 units, its total variable cost is $919,116 and its total fixed cost is $259,974. What would be the total cost, both fixed and variable, at an activity level of 10,100 units? Assume that this level of activity is within the relevant range. (Round intermediate calculations to 2 decimal places.)

In a traditional format income statement, the gross margin is sales minus cost of goods sold.

As activity decreases within the relevant range, fixed costs remain constant on a per unit basis.

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

Bowering Corporation has provided the following information: For financial reporting purposes, the total amount of period costs incurred to sell 9,000 units is closest to:

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:

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

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

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 net operating income computed using the contribution approach for the first quarter is:

Dizzy Amusement Park is open from 8:00 am till midnight every day of the year. Dizzy charges its patrons a daily entrance fee of $30 per person which gives them unlimited access to all of the park's 35 rides. Dizzy donates $2 of every entrance fee to a local homeless shelter. This charitable contribution would best be described as a:

In May direct labor was 60% of conversion cost. If the manufacturing overhead for the month was $54,000 and the direct materials cost was $30,000, the direct labor cost was:

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

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?

Tirri Corporation has provided the following information: If the selling price is $26.20 per unit, the contribution margin per unit sold is closest to:

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