Exam 1: Managerial Accounting and Cost Concepts

A number of costs and measures of activity are listed below. Required: For each item above, indicate whether the cost is MAINLY fixed or variable with respect to the possible measure of activity listed next to it.

Skolnick Corporation has provided the following information: Required: a. If 8,000 units are produced, what is the total amount of direct manufacturing cost incurred? b. If 8,000 units are produced, what is the total amount of indirect manufacturing costs incurred?

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 variable cost per unit sold is closest to:

Indirect costs, such as manufacturing overhead, are variable costs.

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

Classify the following costs for an auto manufacturer as either direct materials, direct labor, manufacturing overhead, or period costs. Required: Complete the answer sheet above by placing an "X" under each heading that identifies the cost involved.

Myklebust 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 the selling price is $20.20 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 cost incurred? f. What incremental manufacturing cost will the company incur if it increases production from 6,000 to 6,001 units?

Direct costs:

Erkkila Inc. reports that at an activity level of 2,100 machine-hours in a month, its total variable inspection cost is $69,846 and its total fixed inspection cost is $9,072. What would be the total variable inspection cost at an activity level of 2,400 machine-hours in a month? Assume that this level of activity is within the relevant range. (Round intermediate calculations to 2 decimal places.)

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?

The contribution format income statement is used as an internal planning and decision-making tool. Its emphasis on cost behavior aids cost-volume-profit analysis, management performance appraisals, and budgeting.

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: If the selling price is $25.00 per unit, the contribution margin per unit sold is closest to:

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

Product costs are also known as inventoriable costs.

The following cost data pertain to the operations of Ladwig Department Stores, Inc., 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 NOT direct costs of the Brentwood Store?

Fixed costs expressed on a per unit basis do not change with changes in activity.

If managers are reluctant to lay off direct labor employees when activity declines leads to a decrease in the ratio of variable to fixed costs.

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 fixed manufacturing cost incurred is closest to:

Mary Tappin, an assistant Vice President at Galaxy Toys, was disturbed to find on her desk a memo from her boss, Gary Resnick, to the controller of the company. The memo appears below: GALAXY TOYS INTERNAL MEMO Sept 15 To: Harry Wilson, Controller Fm: Gary Resnick, Executive Vice President As you know, we won't start recording many sales until October when stores start accepting shipments from us for the Christmas season. Meanwhile, we are producing flat-out and are building up our finished goods inventories so that we will be ready to ship next month. Unfortunately, we are in a bind right now since it looks like the net income for the quarter ending on Sept 30 is going to be pretty awful. This may get us in trouble with the bank since they always review the quarterly financial reports and may call in our loan if they don't like what they see. Is there any possibility that we could change the classification of some of our period costs to product costs-such as the rent on the finished goods warehouse? Please let me know as soon as possible. The President is pushing for results. Mary didn't know what to do about the memo. It wasn't intended for her, but its contents were alarming. Required: a. Why has Gary Resnick suggested reclassifying some period costs as product costs? b. Why do you think Mary was alarmed about the memo?

Which of the following approaches to preparing an income statement includes a calculation of the gross margin?