Question 1

The term "relevant range" means the range of activity over which:

Accepted Answer

A) relevant costs are incurred. 
B) costs may fluctuate. 
C) production may vary. 
D) the assumptions about fixed and variable cost behavior are reasonably valid. 
A) relevant costs are incurred. 
B) costs may fluctuate. 
C) production may vary. 
D) the assumptions about fixed and variable cost behavior are reasonably valid.

Question 2

At a sales volume of 35,000 units, Thoma Corporation's sales commissions (a cost that is variable with respect to sales volume) total $448,000.
-To the nearest whole dollar,what should be the total sales commissions at a sales volume of 33,200 units? (Assume that this sales volume is within the relevant range. )

Accepted Answer

A) $424,960 
B) $448,000 
C) $436,480 
D) $472,289 
A) $424,960 
B) $448,000 
C) $436,480 
D) $472,289

Question 3

Management of Modugno Corporation is considering whether to purchase a new model 370 machine costing $441,000 or a new model 240 machine costing $387,000 to replace a machine that was purchased 7 years ago for $429,000. The old machine was used to make product M25A until it broke down last week. Unfortunately, the old machine cannot be repaired.
Management has decided to buy the new model 240 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product M25A.
Management also considered, but rejected, the alternative of simply dropping product M25A. If that were done, instead of investing $387,000 in the new machine, the money could be invested in a project that would return a total of $430,000. 
-In making the decision to buy the model 240 machine rather than the model 370 machine,the sunk cost was:

Accepted Answer

A) $430,000 
B) $429,000 
C) $387,000 
D) $441,000 
A) $430,000 
B) $429,000 
C) $387,000 
D) $441,000

Question 4

Salvadore Inc., a local retailer, has provided the following data for the month of September:
 
-The cost of goods sold for September was:

Accepted Answer

A) $132,000 
B) $134,000 
C) $133,000 
D) $200,000 
A) $132,000 
B) $134,000 
C) $133,000 
D) $200,000

Question 5

The following data have been provided by a retailer that sells a single product.  
-What is the best estimate of the company's contribution margin for this year?

Accepted Answer

A) $252,000 
B) $300,000 
C) $158,000 
D) $120,000 
A) $252,000 
B) $300,000 
C) $158,000 
D) $120,000

Question 6

Babuca 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:

Accepted Answer

A) $1,425,690 
B) $1,355,760 
C) $1,495,620 
D) $1,449,000 
A) $1,425,690 
B) $1,355,760 
C) $1,495,620 
D) $1,449,000

Question 7

Getchman Marketing, Inc., a merchandising company, reported sales of $592,500 and cost of goods sold of $305,000 for April. The company's total variable selling expense was $37,500; its total fixed selling expense was $16,000; its total variable administrative expense was $35,000; and its total fixed administrative expense was $38,900. The cost of goods sold in this company is a variable cost.
-The contribution margin for April is:

Accepted Answer

A) $465,100 
B) $287,500 
C) $160,100 
D) $215,000 
A) $465,100 
B) $287,500 
C) $160,100 
D) $215,000

Question 8

A decrease in production will ordinarily result in an increase in fixed production costs per unit.

Accepted Answer

A) True 
 B)False

Question 9

Management of Mcentire Corporation has asked your help as an intern in preparing some key reports for April. Direct materials cost was $64,000, direct labor cost was $47,000, and manufacturing overhead was $75,000. Selling expense was $15,000 and administrative expense was $44,000
-The prime cost for April was:

Accepted Answer

A) $59,000 
B) $122,000 
C) $100,000 
D) $111,000 
A) $59,000 
B) $122,000 
C) $100,000 
D) $111,000

Question 10

Variable cost:

Accepted Answer

A) increases on a per unit basis as the number of units produced increases. 
B) remains constant on a per unit basis as the number of units produced increases. 
C) remains the same in total as production increases. 
D) decreases on a per unit basis as the number of units produced increases. 
A) increases on a per unit basis as the number of units produced increases. 
B) remains constant on a per unit basis as the number of units produced increases. 
C) remains the same in total as production increases. 
D) decreases on a per unit basis as the number of units produced increases.

Question 11

Temblador Corporation purchased a machine 7 years ago for $319,000 when it launched product E26T. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 330 machine costing $323,000 or by a new model 230 machine costing $285,000. Management has decided to buy the model 230 machine. It has less capacity than the model 330 machine, but its capacity is sufficient to continue making product E26T. Management also considered, but rejected, the alternative of dropping product E26T and not replacing the old machine. If that were done, the $285,000 invested in the new machine could instead have been invested in a project that would have returned a total of $386,000.
-In making the decision to invest in the model 230 machine,the opportunity cost was:

Accepted Answer

A) $386,000 
B) $319,000 
C) $285,000 
D) $323,000 
A) $386,000 
B) $319,000 
C) $285,000 
D) $323,000

Question 12

A variable cost is a cost whose cost per unit varies as the activity level rises and falls.

Accepted Answer

A) True 
 B)False

Question 13

The wages of factory maintenance personnel would usually be considered to be: $\begin{array}{ccc}
&\text { Indirect labor } & \begin{array}{c}
\text { Manufacturing } \
\text { overhead }
\end{array} \
\text { A) } & \text { No } & \text { Yes } \
\text { B) } & \text { Yes } & \text { No } \
\text { C) } & \text { Yes } & \text { Yes } \
\text { D) } & \text { No } & \text { No }
\end{array}$

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 14

An example of a committed fixed cost is:

Accepted Answer

A) a training program for salespersons. 
B) executive travel expenses. 
C) property taxes on the factory building. 
D) new product research and development. 
A) a training program for salespersons. 
B) executive travel expenses. 
C) property taxes on the factory building. 
D) new product research and development.

Question 15

Erkkila Inc. reports that at an activity level of 7,900 machine-hours in a month, its total variable inspection cost is $210,061 and its total fixed inspection cost is $191,970.
-What would be the total variable inspection cost at an activity level of 8,100 machine-hours in a month? Assume that this level of activity is within the relevant range.

Accepted Answer

A) $210,061 
B) $196,830 
C) $215,379 
D) $402,031 
A) $210,061 
B) $196,830 
C) $215,379 
D) $402,031

Question 16

Chaffee 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 33,000 calls in a month, the costs of operating the helpline total $742,500.
-To the nearest whole dollar,what should be the total cost of operating the helpline costs at a volume of 34,800 calls in a month? (Assume that this call volume is within the relevant range. )

Accepted Answer

A) $742,500 
B) $783,000 
C) $704,095 
D) $762,750 
A) $742,500 
B) $783,000 
C) $704,095 
D) $762,750

Question 17

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

Accepted Answer

A) $10,000 
B) $35,000 
C) $15,000 
D) $40,000 
A) $10,000 
B) $35,000 
C) $15,000 
D) $40,000

Question 18

Management of Modugno Corporation is considering whether to purchase a new model 370 machine costing $441,000 or a new model 240 machine costing $387,000 to replace a machine that was purchased 7 years ago for $429,000. The old machine was used to make product M25A until it broke down last week. Unfortunately, the old machine cannot be repaired.
Management has decided to buy the new model 240 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product M25A.
Management also considered, but rejected, the alternative of simply dropping product M25A. If that were done, instead of investing $387,000 in the new machine, the money could be invested in a project that would return a total of $430,000. 
-In making the decision to buy the model 240 machine rather than the model 370 machine,the differential cost was:

Accepted Answer

A) $12,000 
B) $1,000 
C) $54,000 
D) $42,000 
A) $12,000 
B) $1,000 
C) $54,000 
D) $42,000

Question 19

At a sales volume of 27,000 units, Danielle Corporation's property taxes (a cost that is fixed with respect to sales volume) total $207,900.
-To the nearest whole cent,what should be the average property tax per unit at a sales volume of 27,600 units? (Assume that this sales volume is within the relevant range. )

Accepted Answer

A) $6.73 
B) $7.70 
C) $7.62 
D) $7.53 
A) $6.73 
B) $7.70 
C) $7.62 
D) $7.53

Question 20

Which of the following costs is an example of a period rather than a product cost?

Accepted Answer

A) Depreciation on production equipment. 
B) Wages of salespersons. 
C) Wages of production machine operators. 
D) Insurance on production equipment. 
A) Depreciation on production equipment. 
B) Wages of salespersons. 
C) Wages of production machine operators. 
D) Insurance on production equipment.

Exam 1: Managerial Accounting and Cost Concepts

The term "relevant range" means the range of activity over which:

Salvadore Inc., a local retailer, has provided the following data for the month of September: -The cost of goods sold for September was:

The following data have been provided by a retailer that sells a single product. -What is the best estimate of the company's contribution margin for this year?

Babuca 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:

A decrease in production will ordinarily result in an increase in fixed production costs per unit.

Variable cost:

A variable cost is a cost whose cost per unit varies as the activity level rises and falls.

The wages of factory maintenance personnel would usually be considered to be: Indirect labor Manufacturing overhead A) No Yes B) Yes No C) Yes Yes D) No No

An example of a committed fixed cost is:

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

Which of the following costs is an example of a period rather than a product cost?

Job-Order Costing

Process Costing

Cost-Volume-Profit Relationships

Variable Costing and Segment Reporting: Tools for Management

Activity-Based Costing: a Tool to Aid Decision Making

Profit Planning

Flexible Budgets and Performance Analysis

Standard Costs and Variances

Performance Measurement in Decentralized Organizations

Differential Analysis: The Key to Decision Making

Capital Budgeting Decisions

Statement of Cash Flows

Financial Statement Analysis

Least-Squares Regression Computations

Appendix B: Cost of Quality

The Predetermined Overhead Rate and Capacity

Further Classification of Labor Costs

Fifo Method

Service Department Allocations

Abc Action Analysis

Using a Modified Form of Activity-Based Costing to Determine Product Costs for External Reports

Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System

Journal Entries to Record Variances

Transfer Pricing

Service Department Charges

The Concept of Present Value

Income Taxes in Capital Budgeting Decisions

The Direct Method of Determining the Net Cash Provided by Operating Activities

Pricing Products and Services

Profitability Analysis

Filters