Acct 3304 - CH 1 Connect Q & A

Given the cost formula, Y = $16,000 + $3.40X, total cost for activity level of 4,000 units would be:

$29,600 Explanation: Y = $16,000 + ($3.40 per unit × X) = $16,000 + ($3.40 per unit × 4,000 units) = $16,000 + $13,600 = $29,600

Direct labour cost is classified as:

Conversion cost and prime cost

Adventure Holiday sales thousands of Toure packages each month through its various branches. A branch manager salary would be a(n) ___________ of selling a tour package.

Indirect cost

How should the wages of a sheet metal worker in a fabrication plant be classified?

Production cost

Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory of $15,000 at the beginning of the year. An end of the year audit revealed that the company had DVD inventory of $10,000. What amount would be reported as cost of goods sold in the income statement for the current year is ________.

$25,000

Streif Inc., a local retailer, has provided the following data for the month of June: Marchandise inventory, beginning balance $46,000 Merchandise inventory, ending balance $52,000 Sales $260,000 Purchases of merchandise inventory $128,000 Selling expense $13,000 Administrative expense $40,000 The net operating income for June was:

$85,000 Explanation: Net operating income = Sales - Cost of goods sold - Selling and administrative expenses = $260,000 - $122,000 - ($13,000 + $40,000) = $85,000

Which of the following statements about opportunity cost is not correct?

An opportunity cost cannot be changed by any decision made now or in the future.

The traditional income statement uses which of the following cost categories?

Cost of goods sold and selling and administrative expenses.

Which of the following is common to both prime cost and conversion cost?

Direct labor

Which of the following is true of the contribution approach?

It separates costs into fixed and variable categories.

Which of the following is always an irrelevant cost?

Sunk cost

Which of the following is not a business management perspective that goes beyond the numbers to enable intelligent planning, controlling and decision making? a. Enterprise risk management perspective b. Lean production perspective c. Corporate social responsibility perspective d. Leadership perspective

b. Lean production perspective

A _________ is a cause that is encouraging support a number of cost objects but cannot be traced to them individually.

common cost

All of the following are pillars of managerial accounting except. a. controlling b. decision making c. planning d. maximizing profit

d. maximizing profit

Adventure Holiday sales thousands of tour packages each month through its various branches. A branch manager salary would be a(n) _________ of the branch.

direct cost

Emphasizes financial consequences of past activities

financial accounting

Emphasizes objectivity and verifiability

financial accounting

Items such as indirect materials, indirect labour, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in _________.

manufacturing overhead costs

Property taxes associated with a company's administrative facility are considered _________.

nonmanufacturing costs

Differential costs are always ______.

relevant in making business decisions

Planning involves ___________.

setting goals and objectives.

If I farm increases its activity level, _________.

some cost will change, other costs will remain the same

Bolka Corporation, merchandising company, reported the following results for October: Sales - $4,096,400 Cost of goods sold - $2,194,500 Total variable selling expense - $238,700 Total fixed selling expense - $144,700 Total variable administrative expense - $238,700 Total fixed administrative expense - $282,900 The contribution margin for October is:

$1,424,500 Explanation: $4,096,400 - $2,194,500 - $238,700 - $238,700 = $1,424,500

Streif Inc., a local retailer, has provided the following data for the month of June: Merchandise inventory, beginning balance $46,000 Merchandise inventory, ending balance $52,000 Sales $260,000 Purchases of merchandise inventory a $128,000 Selling expense $13,000 Administrative expense $40,000 The cost of goods sold for June was:

$122,000 Explanation: Cost of goods sold = Beginning merchandise inventory + Purchases of merchandise inventory - Ending merchandise inventory $46,000 + $128,000 - $52,000 = $122,000

In a small manufacturing facility, one welder is needed for every 200 hours of machine-hours or fewer in a month. The welder is paid a monthly salary of $2,500. If the total monthly requirement is 1,300 machine-hours, the total salaried employee expense is ________.

$17,500

Davidson company has sales of a $100,000, variable cost of goods sold of $40,000, variable selling expenses of $15,000, variable administrative expenses of $5,000, fixed selling expenses of $7,000, and fixed administrative expenses of $9,000. What is Davidson's contribution margin?

$40,000 Contribution margin = Sales revenues-All variable expenses Contribution margin = $100,000 - ($40,000 + $15,000 + $5,000) = $100,000 - $60,000 = $40,000

Cyber Devices manufacturers PCTV products that enable people to watch television content on their computers. It sells its product to retailers for $50. A tuner component that goes into each of these devices cost $5 to acquire. The total variable cost at an activity level of 1,000 units equals _________.

$5,000

Rotonga manufacturing company leases a vehicle to deliver its finished products to customers. Which of the following terms correctly describes the monthly lease payments made on the delivery vehicle?

Direct cost - No; Fixed cost - Yes

__________ is sometimes called "touch labor."

Direct labor

As the level of activity increases, how will a mixed costs and total and per unit behave?

Increase in total and decrease per unit

A fixed cost is a cost which ________.

remains constant in total with changes in the level of activity

All of the following are examples of product caused accept:

depreciation on the company's retail outlets.

Not required to follow GAAP

managerial accounting

Warner Corporation purchased A machine 7 years ago for $381,000 when it launched product P50. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 300 machine costing $370,300 or buy a new model 200 machine costing $333,200. Management has decided to buy the model 200 machine. It has less capacity than the model 300 machine, but its capacity is sufficient to continue making product P50. Management also considered, but rejected, the alternative of dropping product P50 and not replacing the old machine. If that were done, the $333,200 invested in the new machine could instead have been invested in a project that would have returned a total $460,800. 1. What is the total differential cost regarding the decision to buy the model 200 machine rather than the model 300 machine? 2. What is the total sunk cost regarding the decision to buy the model 200 machine rather than the model 300 machine? 3. What is the total opportunity cost regarding the decision to invest in the model 200 machine?

1. Differential cost $37,100 2. Sunk cost $381,000 3. Opportunity cost $460,800 Explanation: 1. The differential cost is computed as follows: Cost of new model 300 (a) $370,300 Cost of a new model 200 (b) $333,200 Differential cost (a) - (b) $37,100 2. The sunk cost is the cost of the machine purchased 7 years ago for $381,000. 3. The opportunity cost is the $460,800 that could have been earned by pursuing the foregone option.

The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. Listed below are some of the costs that are incurred at the company. For each cost, indicate whether it would most likely be classified as direct labor, direct materials, manufacturing overhead, selling, or an administrative cost. (1 - 8) 1. The cost of a hard drive installed in a computer. 2. The cost of advertising in the Puget Sound Computer User newspaper. 3. The wages of employees who assembled computers from components. 4. Sales commissions paid to the company's sales people. 5. The salary of the assembly shop supervisor. 6. The salary of the company's accountant. 7. Depreciation on equipment used to test assembled computers before release to customers.

1. Direct materials cost 2. Selling cost 3. Direct labor cost 4. Selling cost 5. Manufacturing overhead cost 6. Administrative cost 7. Manufacturing overhead cost

Suppose that you have been given a summer job as an intern at Isaac air cams, a company that manufactures sophisticated spy cameras for remote controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help finance its growth. The bank requires financial statements before approving the loan. Classify each cost listed below as either a product caused for a. Cost for the purpose of preparing financial statements for the bank. 1. Depreciation on salespersons cars. 2. Rent on equipment used 3. Lubricants used for machine maintenance. 4. Salaries of personnel who work in the finished goods warehouse. 5. Soap and paper towels used by factory workers at the end of a shift. 6. Factory supervisors' salaries. 7. Heat, water, and power consumed in the factory. 8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.) 9. Advertising costs. 10. Workers' compensation insurance for factory employees. 11. Depreciation on chairs and tables in the factory lunch room. 12. The wages of the receptionist in the administrative office's. 13. Cost of leasing the corporate Jet used by the company's executives. 14. The cost of renting rooms at a Florida resort for the annual sales conference. 15. The cost of packaging the company's product.

1. Period cost 2. Product cost 3. Product cost 4. Period cost 5. Product cost 6. Product cost 7. Product cost 8. Period cost 9. Period cost 10. Product cost 11. Product cost 12. Period cost 13. Period cost 14. Period cost 15. Product cost

Manufacturing costs include all of the following categories except _________. a. administrative costs b. direct labor c. direct materials d. manufacturing overhead

a. administrative costs

Materials that become an integral part of the finished product and whose cost could be conveniently traced to the finished product are called _________.

direct materials

Emphasizes decisions affecting the future -

managerial accounting

Emphasizes relevance -

managerial accounting

In the equation, Y = a + bX, X represents ________.

the level of activity