Question 1

Which of the following statements regarding fixed costs is incorrect?

Accepted Answer

A) Expressing fixed costs on a per unit basis usually is the best approach for decision making. 
B) Fixed costs expressed on a per unit basis will decrease with increases in activity. 
C) Total fixed costs are constant within the relevant range. 
D) Fixed costs expressed on a per unit basis will increase with decreases in activity. 
A) Expressing fixed costs on a per unit basis usually is the best approach for decision making. 
B) Fixed costs expressed on a per unit basis will decrease with increases in activity. 
C) Total fixed costs are constant within the relevant range. 
D) Fixed costs expressed on a per unit basis will increase with decreases in activity.

Question 2

Nikkel Corporation, a merchandising company, reported the following results for July:  
-The gross margin for July is:

Accepted Answer

A) $358,500 
B) $209,000 
C) $233,700 
D) $164,700 
A) $358,500 
B) $209,000 
C) $233,700 
D) $164,700

Question 3

The following information summarizes the company's cost structure:   Required:
Estimate the following costs at the 40,000 unit level of activity:
a.Total variable cost.
b.Total fixed cost.
c.Variable cost per unit.
d.Fixed cost per unit.

Accepted Answer

Parts a. ,b. ,c. ,&

Question 4

The following costs should be considered direct costs of providing delivery room services to a particular mother and her baby: the costs of drugs administered in the operating room,the attending physician's fees,and a portion of the liability insurance carried by the hospital to cover the delivery room.

Accepted Answer

A) True 
 B)False

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 total fixed selling and administrative expense per year?

Accepted Answer

A) $0 
B) $80,000 
C) $44,000 
D) 174,000 
A) $0 
B) $80,000 
C) $44,000 
D) 174,000

Question 6

At an activity level of 9,200 machine-hours in a month,Nooner Corporation's total variable production engineering cost is $761,300 and its total fixed production engineering cost is $154,008.What would be the total production engineering cost per unit,both fixed and variable,at an activity level of 9,300 machine-hours in a month? Assume that this level of activity is within the relevant range.

Accepted Answer

A) $98.42 
B) $99.49 
C) $99.31 
D) $98.96 
A) $98.42 
B) $99.49 
C) $99.31 
D) $98.96

Question 7

Glatt 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:

Accepted Answer

A) $6,692 
B) $8,064 
C) $7,376 
D) $7,720 
A) $6,692 
B) $8,064 
C) $7,376 
D) $7,720

Question 8

Indirect costs,such as manufacturing overhead,are always fixed costs.

Accepted Answer

A) True 
 B)False

Question 9

Given the cost formula Y = $15,000 + $5X,total cost at an activity level of 8,000 units would be:

Accepted Answer

A) $23,000 
B) $15,000 
C) $55,000 
D) $40,000 
A) $23,000 
B) $15,000 
C) $55,000 
D) $40,000

Question 10

Anderwald 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 monthly fixed manufacturing cost is:

Accepted Answer

A) $360,800 
B) $136,800 
C) $196,800 
D) $176,800 
A) $360,800 
B) $136,800 
C) $196,800 
D) $176,800

Question 11

The following cost data pertain to the operations of Swestka Department Stores, Inc., for the month of July.   
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?

Accepted Answer

A) $40,000 
B) $34,000 
C) $141,000 
D) $78,000 
A) $40,000 
B) $34,000 
C) $141,000 
D) $78,000

Question 12

Conversion costs do NOT include:

Accepted Answer

A) depreciation. 
B) direct materials. 
C) indirect labor. 
D) indirect materials. 
A) depreciation. 
B) direct materials. 
C) indirect labor. 
D) indirect materials.

Question 13

Automation results in a shift away from variable costs toward more fixed costs.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) $348,000 
B) $31,000 
C) $592,000 
D) $77,000 
A) $348,000 
B) $31,000 
C) $592,000 
D) $77,000

Question 15

For a lamp manufacturing company,the cost of the insurance on its vehicles that deliver lamps to customers is best described as a:

Accepted Answer

A) prime cost. 
B) manufacturing overhead cost. 
C) period cost. 
D) differential (incremental)cost of a lamp. 
A) prime cost. 
B) manufacturing overhead cost. 
C) period cost. 
D) differential (incremental)cost of a lamp.

Question 16

Slappy Corporation leases its corporate headquarters building. This lease cost is fixed with respect to the company's sales volume. In a recent month in which the sales volume was 20,000 units, the lease cost was $482,000.
-To the nearest whole cent,what should be the average lease cost per unit at a sales volume of 19,200 units in a month? (Assume that this sales volume is within the relevant range. )

Accepted Answer

A) $28.52 
B) $24.60 
C) $25.10 
D) $24.10 
A) $28.52 
B) $24.60 
C) $25.10 
D) $24.10

Question 17

The advertising costs that Pepsi incurred to air its commercials during the Super Bowl can best be described as a:

Accepted Answer

A) variable cost. 
B) fixed cost. 
C) product cost. 
D) prime cost. 
A) variable cost. 
B) fixed cost. 
C) product cost. 
D) prime cost.

Question 18

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 buy the model 230 machine rather than the model 330 machine,the differential cost was:

Accepted Answer

A) $34,000 
B) $38,000 
C) $4,000 
D) $67,000 
A) $34,000 
B) $38,000 
C) $4,000 
D) $67,000

Question 19

A manufacturing company prepays its insurance coverage for a three-year period.The premium for the three years is $2,700 and is paid at the beginning of the first year.Eighty percent of the premium applies to manufacturing operations and 20% applies to selling and administrative activities.What amounts should be considered product and period costs respectively for the first year of coverage? $\begin{array}{lrr} 
& \text { Product } & \text { Period } \
\text { A) } & \$ 2,700 & \$ 0 \
\text { B) } & \$ 2,160 & \$ 540 \
\text { C) } & \$ 1,440 & \$ 360 \
\text { D) } & \$ 720 & \$ 180
\end{array}$

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 20

Property taxes and insurance premiums paid on a factory building are examples of manufacturing overhead.

Accepted Answer

A) True 
 B)False

Exam 1: Managerial Accounting and Cost Concepts

Which of the following statements regarding fixed costs is incorrect?

Nikkel Corporation, a merchandising company, reported the following results for July: -The gross margin for July is:

The following information summarizes the company's cost structure: Required: Estimate the following costs at the 40,000 unit level of activity: a.Total variable cost. b.Total fixed cost. c.Variable cost per unit. d.Fixed cost per unit.

The following data have been provided by a retailer that sells a single product. -What is the best estimate of the company's total fixed selling and administrative expense per year?

Indirect costs,such as manufacturing overhead,are always fixed costs.

Given the cost formula Y = $15,000 + $5X,total cost at an activity level of 8,000 units would be:

Anderwald 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 monthly fixed manufacturing cost is:

Conversion costs do NOT include:

Automation results in a shift away from variable costs toward more fixed costs.

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

For a lamp manufacturing company,the cost of the insurance on its vehicles that deliver lamps to customers is best described as a:

The advertising costs that Pepsi incurred to air its commercials during the Super Bowl can best be described as a:

Property taxes and insurance premiums paid on a factory building are examples of manufacturing overhead.

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

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