Managerial Accounting Chapters 1-3

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

the assumptions about fixed and variable cost behavior are reasonably valid

The following data pertains to activity and costs for two months: June July Activity Level in units 10,000 20,000 Variable Cost 20,000 ? Fixed Cost 15,000 ? Mixed Cost 10,000 ? Total Cost 45,000 70,000 Assuming that these activity levels are within the relevant range, the mixed cost for July was:

$15,000 Variable cost per unit = $20,000 ÷ 10,000 units = $2 per unit Total variable cost in July = $2 per unit × 20,000 units = $40,000 per unit Fixed cost = $15,000 (given) Total cost = Variable cost + Fixed cost + Mixed cost $70,000 = $40,000 + $15,000 + Mixed cost Mixed cost = $70,000 - ($40,000 + $15,000) = $70,000 - $55,000 = $15,000

Carbaugh Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product. Production volume: 3,000 units 4,000 units Direct Materials: $73.90 per unit $73.90 per unit Direct Labor: $49.20 per unit $49.20 per unit Manufacturing Overhead: $70.10 per unit $55.20 per unit The best estimate of the total cost to manufacture 3,300 units is closest to

$619,680 Total Manufacturing overhead at 4,000 units = 4,000 x 55.20 per unit = 220,800 Total Manufacturing overhead at 3,000 units = 3,000 units x 70.10 per unit = 210,300 Variable manufacturing overhead per unit = change in cost/change in activity = (220,800 - 210,300)/(4,000 units - 3,000 units) = 10,500/1,000 units = 10.50 per unit

Haras 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 $141.30 per unit. Sales Volume (units) 6,000 7,000 Cost of goods sold 347,400 405,300 Selling and administrative costs 436,800 458,500 The best estimate of the total variable cost per unit is:

$79.60 Variable cost of sales = Change in cost ÷ Change in activity = ($405,300 - $347,400) ÷ (7,000 units - 6,000 units) = $57,900 ÷ 1,000 units = $57.90 per unit Variable selling and administrative cost = Change in cost ÷ Change in activity = ($458,500 - $436,800) ÷ (7,000 units - 6,000 units) = $21,700 ÷ 1,000 units = $21.70 per unit Total variable cost = Variable cost of sales + Variable selling and administrative cost = $57.90 per unit + $21.70 per unit = $79.60 per unit

The following data pertains to activity and the cost of cleaning and maintenance for two recent months: Month 1 Month 2 Production Volume 2,000 units 2,500 units Cleaning & Maintenance costs 900 1,100 The best estimate of the total month 1 variable cost for cleaning and maintenance is:

$800 Cleaning and maintenance Variable cost per unit = Change in cost ÷ Change in activity = ($1,100 - $900) ÷ (2,500 units - 2,000 units) = $200 ÷ 500 units = $0.40 per unit Total variable cost at 2,000 units = 2,000 units × $0.40 per unit = $800

Which of the following would not be included as part of manufacturing overhead? a. insurance on sales vehicles b. depreciation of production equipment c. lubricants for production equipment d. direct labor overtime premium

A. insurance on Sales Vehicles

The cost of leasing production equipment is classified as:

Prime Cost- NO, Product Cost- YES

The term differential cost refers to:

a difference in cost which results from selecting one alternative instead of another

The salary paid to the production manager in a factory is:

part of conversion cost