Exam 1: Managerial Accounting and Cost Concepts

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:

The following data pertains to activity and maintenance cost for two recent periods: Maintenance cost is a mixed cost with both fixed and variable components.Using the high-low method,the cost formula for maintenance cost is:

At an activity level of 8,800 units,Pember Corporation's total variable cost is $146,520 and its total fixed cost is $219,296. Required: For the activity level of 8,900 units,compute: (a)the total variable cost; (b)the total fixed cost; (c)the total cost; (d)the average variable cost per unit; (e)the average fixed cost per unit;and (f)the average total cost per unit.Assume that this activity level is within the relevant range.

In a traditional format income statement for a merchandising company,the selling and administrative expenses report all period costs that have been expensed as incurred.

A contribution format income statement for a merchandising company organizes costs into two categories-cost of goods sold and selling and administrative expenses.

Which of the following is classified as a direct labor cost?

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:

Ence Sales,Inc. ,a merchandising company,reported sales of 6,400 units in April at a selling price of $684 per unit.Cost of goods sold,which is a variable cost,was $455 per unit.Variable selling expenses were $30 per unit and variable administrative expenses were $40 per unit.The total fixed selling expenses were $156,800 and the total administrative expenses were $260,400. The contribution margin for April was:

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 dollar,what should be the total sales commissions at a sales volume of 36,100 units? (Assume that this sales volume is within the relevant range. )

Committed fixed costs represent organizational investments with a multi-year planning horizon that can't be significantly reduced even for short periods.

Sobota Corporation has provided the following partial listing of costs incurred during August: Required: a.What is the total amount of product cost listed above? Show your work. b.What is the total amount of period cost listed above? Show your work.

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?

A soft drink bottler incurred the following factory utility cost: $3,936 for 800 cases bottled and $3,988 for 900 cases bottled.Factory utility cost is a mixed cost containing both fixed and variable components.The variable factory utility cost per case bottled is closest to:

At a sales volume of 30,000 units,Carne Company's total fixed costs are $30,000 and total variable costs are $45,000.The relevant range is 20,000 to 40,000 units. If Carne Company were to sell 40,000 units,the total expected cost per unit would be:

At a sales volume of 30,000 units,Carne Company's total fixed costs are $30,000 and total variable costs are $45,000.The relevant range is 20,000 to 40,000 units. If Carne Company were to sell 32,000 units,the total expected cost would be:

Kaelker Corporation reports that at an activity level of 7,000 units,its total variable cost is $590,730 and its total fixed cost is $372,750.What would be the total cost,both fixed and variable,at an activity level of 7,100 units? Assume that this level of activity is within the relevant range.

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:

Baker Corporation has provided the following production and average 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:

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 variable component of office expense per escrow completed is closest to:

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