Exam 1: Managerial Accounting and Cost Concepts

Comparative income statements for Tudor Retailing Company for the last two months are presented below: If the Tudor Retailing Company uses the high-low method of analysis, the total selling and administrative expense if Tudor Retailing Company sells 6,500 units during a month would be estimated to be:

When the level of activity decreases, variable costs will:

Baker Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product. The best estimate of the total cost to manufacture 6,300 units is closest to:

Farnor, Inc., would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the last four months of operations. Using the high-low method of analysis, the estimated variable cost per machine hour for electricity is closest to:

Commissions paid to salespersons are a variable selling expense.

Krimton Corporation's manufacturing costs last year consisted of $150,000 of direct materials, $200,000 of direct labor, $40,000 of variable manufacturing overhead, and $25,000 of fixed manufacturing overhead. Prime cost was:

At an activity level of 8,300 machine-hours in a month, Baudry Corporation's total variable maintenance cost is $220,448 and its total fixed maintenance cost is $556,764. What would be the total variable maintenance cost at an activity level of 8,600 machine-hours in a month? Assume that this level of activity is within the relevant range.

Data concerning Nelson Company's activity for the first six months of the year appear below: Using the high-low method of analysis, the estimated monthly fixed component of the electrical cost is:

Searls Corporation, a merchandising company, reported the following results for July: Cost of goods sold is a variable cost in this company. The contribution margin for July is:

The potential benefit that is given up when one alternative is selected over another is called an opportunity cost.

Corcetti Company manufactures and sells prewashed denim jeans. Large rolls of denim cloth are purchased and are first washed in a giant washing machine. After the cloth is dried, it is cut up into jean pattern shapes and then sewn together. The completed jeans are sold to various retail chains. Which of the following terms could be used to correctly describe the cost of the thread used to sew the jeans together?

In describing the cost equation, Y = a + bX, "a" is:

At a sales volume of 35,000 units, Cly Corporation's sales commissions (a cost that is variable with respect to sales volume) total $525,000. To the nearest whole cent, what should be the average sales commission per unit at a sales volume of 33,600 units? (Assume that this sales volume is within the relevant range.)

The following cost data pertain to the operations of Rademaker Department Stores, Inc., for the month of March. The Northridge Store is just one of many stores owned and operated by the company. The Cosmetics Department is one of many departments at the Northridge 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 Northridge Store?

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

Kodama Corporation staffs a helpline to answer questions from customers. The costs of operating the helpline are variable with respect to the number of calls in a month. At a volume of 30,000 calls in a month, the costs of operating the helpline total $369,000. To the nearest whole cent, what should be the average cost of operating the helpline per call at a volume of 31,300 calls in a month? (Assume that this call volume is within the relevant range.)

Baker Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product. The best estimate of the total variable manufacturing cost per unit is:

Supply costs at Chobot Corporation's chain of gyms are listed below: Management believes that supply cost is a mixed cost that depends on client-visits. Use the high-low method to estimate the variable and fixed components of this cost. Compute the variable component first, rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the nearest whole dollar. Those estimates are closest to:

For planning, control, and decision-making purposes:

Dechico Corporation purchased a machine 3 years ago for $456,000 when it launched product G92L. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 330 machine costing $474,000 or by a new model 260 machine costing $418,000. Management has decided to buy the model 260 machine. It has less capacity than the model 330 machine, but its capacity is sufficient to continue making product G92L. Management also considered, but rejected, the alternative of dropping product G92L and not replacing the old machine. If that were done, the $418,000 invested in the new machine could instead have been invested in a project that would have returned a total of $496,000. In making the decision to buy the model 260 machine rather than the model 330 machine, the sunk cost was: