ACCT-102- Managerial Accounting- CHAPTER 1

Timchak Corporation reports that at an activity level of 9,900 units, its total variable cost is $919,116 and its total fixed cost is $259,974. What would be the total cost, both fixed and variable, at an activity level of 10,100 units? Assume that this level of activity is within the relevant range. (Round intermediate calculations to 2 decimal places.)

$1,197,658 Explanation Variable cost per unit = $919,116 ÷ 9,900 units = $92.84 per unit Total cost = Total fixed cost + Total variable cost = $259,974 + ($92.84 per unit × 10,100 units) = $259,974 + $937,684 = $1,197,658

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

False

Manufacturing costs include all of the following categories except ________.

administrative costs

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

nonmanufacturing costs

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

the level of activity

During the month of May, direct labor cost totaled $5,860 and direct labor cost was 20% of prime cost. If total manufacturing costs during May were $77,300, the manufacturing overhead was:

$48,000 Explanation Direct labor cost = $5,860 Direct labor cost = 0.20 × Prime cost Total manufacturing cost = $77,300 Direct labor cost = 0.20 × Prime cost Prime cost = Direct labor cost ÷ 0.20 Prime cost = $5,860 ÷ 0.20 = $29,300 Total manufacturing cost = Prime cost + Manufacturing overhead cost $77,300 = $29,300 + Manufacturing overhead cost Manufacturing overhead cost = $48,000

Cyber Devices manufactures 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 costs $5 to acquire. The total variable cost at an activity level of 1,000 units equals ________.

$5,000

A partial listing of costs incurred at Archut Corporation during September appears below: Direct materials$113,000 Utilities, factory$5,000 Administrative salaries$81,000 Indirect labor$25,000 Sales commissions$48,000 Depreciation of production equipment$20,000 Depreciation of administrative equipment$30,000 Direct labor$129,000 Advertising$135,000 The total of the manufacturing overhead costs listed above for September is:

$50,000 Manufacturing overhead includes: Utilities, factory; Indirect labor; and Depreciation of production equipment. $5,000 + $25,000 + $20,000 = $50,000

Match the term and the definition.

1.Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) _________ of selling a tour package. indirect cost 2.A ___________ is a cost that is incurred to support a number of cost objects but cannot be traced to them individually. common cost 3.Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) _________ of the branch. direct cost

Which of the following is an example of a period cost in a company that makes clothing?

Advertising cost for a new line of clothing.

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

Cost of goods sold and selling and administrative expenses.

________ is sometimes called "touch labor."

Direct labor

Which of the following is true of the contribution approach?

It separates costs into fixed and variable categories.

The following costs were incurred in May: Direct materials$39,900 Direct labor$30,300 Manufacturing overhead$23,000 Selling expenses$19,500 Administrative expenses$31,900 Prime costs during the month totaled:

Prime cost = Direct materials + Direct labor = $39,900 + $30,300 = $70,200

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

Product cost

Which of the following is always an irrelevant cost?

Sunk cost

Materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product are called ________.

direct materials

The ________ requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized.

matching principle

A fixed cost is a cost which ________.

remains constant in total with changes in the level of activity

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

manufacturing overhead costs

Tirri Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $6.85 Direct labor $3.80 Variable manufacturing overhead $1.35 Fixed manufacturing overhead $23,100 Sales commissions $1.30 Variable administrative expense $0.65 Fixed selling and administrative expense $7,500 If the selling price is $26.80 per unit, the contribution margin per unit sold is closest to:

$12.85 Explanation Selling price per unit $26.80 Direct materials $6.85 Direct labor 3.80 Variable manufacturing overhead 1.35 Sales commissions 1.30 Variable administrative expense 0.65 Variable cost per unit sold 13.95 Contribution margin per unit $12.85

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

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. The amount that would be reported as cost of goods sold in the income statement for the current year is ________.

$25,000

Davidson Company has sales of $100,000, variable cost of goods sold of $55,000, variable selling expenses of $15,000, variable administrative expenses of $6,000, fixed selling expenses of $7,000, and fixed administrative expenses of $9,000. What is Davidson's contribution margin?

$40,000

Haack Inc. is a merchandising company. Last month the company's cost of goods sold was $84,000. The company's beginning merchandise inventory was $20,000 and its ending merchandise inventory was $18,000. What was the total amount of the company's merchandise purchases for the month?

$82,000 Explanation Cost of goods sold = Beginning merchandise inventory + Purchases - Ending merchandise inventory $84,000 = $20,000 + Purchases - $18,000 Purchases = $84,000 - $20,000 + $18,000 = $82,000

Which observation is true of period costs?

They are expensed in the period in which they are incurred.

Conversion cost is the sum of direct labor cost and manufacturing overhead cost.

True

Differential costs are always ________.

relevant in making business decisions

If a firm increases its activity level, ________.

some costs will change, other costs will remain the same

Management of Mcgibboney Corporation has asked your help as an intern in preparing some key reports for November. Direct materials cost was $42,000, direct labor cost was $25,000, and manufacturing overhead was $62,000. Selling expense was $21,000 and administrative expense was $38,000. The conversion cost for November was:

$87,000

Given the cost formula, Y = $16,000 + $3.40X, total cost for an 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

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

Direct labor

The following data pertains to activity and costs for two months: June July Activity level in units 10,000 11,000 Direct materials $17,000 $? Fixed factory rent 21,000 ? Other production costs 20,000 ? Total cost $58,000 $61,300 Assuming that these activity levels are within the relevant range, the other production costs for July were: (Round intermediate calculations to 2 decimal places.)

$21,600 Explanation Direct materials per unit = $17,000 ÷ 10,000 units = $1.70 per unit Total direct materials cost in July = $1.70 per unit × 11,000 units = $18,700 Fixed factory rent = $21,000 (given) Total cost = Direct materials + Fixed factory rent + Other production costs $61,300 = $18,700 + $21,000 + Other production costs Other production costs = $61,300 − ($18,700 + $21,000) = $61,300 − $39,700 = $21,600

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

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

Haack Inc. is a merchandising company. Last month the company's cost of goods sold was $61,700. The company's beginning merchandise inventory was $17,700 and its ending merchandise inventory was $23,100. What was the total amount of the company's merchandise purchases for the month?

Cost of goods sold = Beginning merchandise inventory + Purchases - Ending merchandise inventory $61,700 = $17,700 + Purchases - $23,100 Purchases = $61,700 - $17,700 + $23,100 = $67,100