Exam 1: Managerial Accounting and Cost Concepts

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:

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

Pedregon Corporation has provided the following information: If the selling price is $20.50 per unit, the contribution margin per unit sold is closest to:

A merchandising company typically will have a high proportion of which type of cost in its cost structure?

Dominik Corporation purchased a machine 5 years ago for $527,000 when it launched product M08Y. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 310 machine costing $545,000 or by a new model 240 machine costing $450,000. Management has decided to buy the model 240 machine. It has less capacity than the model 310 machine, but its capacity is sufficient to continue making product M08Y. Management also considered, but rejected, the alternative of dropping product M08Y and not replacing the old machine. If that were done, the $450,000 invested in the new machine could instead have been invested in a project that would have returned a total of $532,000.In making the decision to buy the model 240 machine rather than the model 310 machine, the sunk cost was:

The following data pertains to activity and costs for two months: Assuming that these activity levels are within the relevant range, the other production costs for July were: (Round intermediate calculations to 2 decimal places.)

A cost that differs from one month to another is known as a sunk cost.

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.

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

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

The cost of electricity for running production equipment is classified as:

At a sales volume of 20,000 units, Choice Corporation's sales commissions (a cost that is variable with respect to sales volume) total $132,000.To the nearest whole dollar, what should be the total sales commissions at a sales volume of 18,400 units? (Assume that this sales volume is within the relevant range.) (Round intermediate calculations to 2 decimal places.)

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:

Wessner Corporation has provided the following information: The incremental manufacturing cost that the company will incur if it increases production from 4,000 to 4,001 units is closest to:

Mullennex 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 average fixed manufacturing cost per unit produced is closest to:

Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $447,000 or a new model 220 machine costing $402,000 to replace a machine that was purchased 7 years ago for $435,000. 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 $402,000 in the new machine, the money could be invested in a project that would return a total of $432,000.In making the decision to buy the model 220 machine rather than the model 370 machine, the sunk cost was:

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

Lambeth Corporation has provided the following information: If 3,000 units are produced, the total amount of indirect manufacturing cost incurred is closest to:

Opportunity costs at a manufacturing company are not part of manufacturing overhead.

Schwiesow Corporation has provided the following information: For financial reporting purposes, the total amount of product costs incurred to make 5,000 units is closest to: