Exam 1: Managerial Accounting and Cost Concepts

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

Cardillo Inc. , an escrow agent, has provided the following data concerning its office expenses: Management believes that office expense is a mixed cost that depends on the number of escrows completed.Note: Real estate purchases usually involve the services of an escrow agent that holds funds and prepares documents to complete the transaction. Using the high-low method, the estimate of the fixed component of office expense per month is closest to:

Management of Childers Corporation is considering whether to purchase a new model 380 machine costing $278, 000 or a new model 230 machine costing $207, 000 to replace a machine that was purchased 3 years ago for $266, 000.The old machine was used to make product R16K until it broke down last week.Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 230 machine.It has less capacity than the new model 380 machine, but its capacity is sufficient to continue making product R16K. Management also considered, but rejected, the alternative of simply dropping product R16K.If that were done, instead of investing $207, 000 in the new machine, the money could be invested in a project that would return a total of $305, 000. In making the decision to invest in the model 230 machine, the opportunity cost was:

Electrical costs at one of Kantola Corporation's factories are listed below: Management believes that electrical cost is a mixed cost that depends on machine-hours.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:

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

Oaklis Company has provided the following data for maintenance cost: Maintenance cost is a mixed cost with variable and fixed components.The fixed and variable components of maintenance cost are closest to:

Bee Company is a honey wholesaler.An income statement and other data for the second quarter of the year are given below: Bee Company's cost formula for total selling and administrative expenses, with "X" equal to the number of units sold would be:

A partial listing of costs incurred during December at Rooks Corporation appears below: The total of the manufacturing overhead costs listed above for December is:

The following costs were incurred in April: Prime costs during the month totaled:

Manufacturing salaries and wages incurred in the factory are period costs.

Given the cost formula, Y = $7, 000 + $1.80X, total cost for an activity level of 4, 000 units would be:

Tolden Marketing, Inc. , a merchandising company, reported sales of $2, 861, 800 and cost of goods sold of $1, 492, 400 for December.The company's total variable selling expense was $77, 900;its total fixed selling expense was $70, 600;its total variable administrative expense was $98, 400;and its total fixed administrative expense was $193, 400.The cost of goods sold in this company is a variable cost. The contribution margin for December 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?

Callis 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 $141.60 per unit. The best estimate of the total variable cost per unit is:

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

An example of a discretionary fixed cost would be:

Which of the following companies would have the highest proportion of variable costs in its cost structure?

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 fixed component of inspection cost per month is closest to:

Total variable cost is expected to remain unchanged as activity changes within the relevant range.

The following data pertains to activity and costs for two months: Assuming that these activity levels are within the relevant range, the manufacturing overhead for July was: