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Exam 1: Managerial Accounting and Cost Concepts

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Question 81

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Management of Childers Corporation is considering whether to purchase a new model 380 machine costing $278,000 or a new model 230 machine costing $207,000 to replace a machine that was purchased 3 years ago for $266,000. The old machine was used to make product R16K until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 230 machine. It has less capacity than the new model 380 machine, but its capacity is sufficient to continue making product R16K. Management also considered, but rejected, the alternative of simply dropping product R16K. If that were done, instead of investing $207,000 in the new machine, the money could be invested in a project that would return a total of $305,000. In making the decision to buy the model 230 machine rather than the model 380 machine, the sunk cost was:

A) $305,000
B) $266,000
C) $278,000
D) $207,000

E) C) and D)
F) B) and D)

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Question 82

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Indirect labor is a(n) :

A) Prime cost.
B) Conversion cost.
C) Period cost.
D) Opportunity cost.

E) B) and C)
F) A) and D)

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Question 83

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The following cost data pertain to the operations of Rademaker Department Stores, Inc., for the month of March. 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 direct costs of the Cosmetics Department?

Depreciation on manufacturing equipment is a product cost.

Abare Corporation reported the following data for the month of December: The conversion cost for December was:

Callis 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 $141.60 per unit. The best estimate of the total contribution margin when 5,300 units are sold is:

The cost of factory machinery purchased last year is:

Electrical costs at one of Reifel Corporation's factories are listed below: Management believes that electrical cost is a mixed cost that depends on machine-hours. Using the high-low method, the estimate of the variable component of electrical cost per machine-hour is closest to:

Management of Childers Corporation is considering whether to purchase a new model 380 machine costing $278,000 or a new model 230 machine costing $207,000 to replace a machine that was purchased 3 years ago for $266,000. The old machine was used to make product R16K until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 230 machine. It has less capacity than the new model 380 machine, but its capacity is sufficient to continue making product R16K. Management also considered, but rejected, the alternative of simply dropping product R16K. If that were done, instead of investing $207,000 in the new machine, the money could be invested in a project that would return a total of $305,000. In making the decision to buy the model 230 machine rather than the model 380 machine, the differential cost was:

At a sales volume of 37,000 units, Maks Corporation's property taxes (a cost that is fixed with respect to sales volume) total $802,900. To the nearest whole dollar, what should be the total property taxes at a sales volume of 39,700 units? (Assume that this sales volume is within the relevant range.)

Abare Corporation reported the following data for the month of December: The prime cost for December was:

The salary paid to the maintenance supervisor in a manufacturing plant is an example of:

If the level of activity increases within the relevant range:

The following data pertains to activity and maintenance cost for two recent periods: Maintenance cost is a mixed cost with both fixed and variable components. Using the high-low method, the cost formula for maintenance cost is:

At an activity level of 4,000 machine-hours in a month, Curt Corporation's total variable production engineering cost is $154,200 and its total fixed production engineering cost is $129,000. What would be the total production engineering cost per unit, both fixed and variable, at an activity level of 4,300 machine-hours in a month? Assume that this level of activity is within the relevant range.

Conversion cost equals product cost less direct labor cost.

Comparative income statements for Tudor Retailing Company for the last two months are presented below: Which of the following classifications best describes the behavior of clerical expense?

Cosgrove, Inc., is a wholesaler that distributes a single product. The company's revenues and expenses for the last three months are given below: Required: a. Determine which expenses are mixed and, by use of the high-low method, separate each mixed expense into variable and fixed elements. (Use unit sales as the activity measure.) State the cost formula for each mixed expense. b. Compute the company's contribution margin for May.

A partial listing of costs incurred during December at Rooks Corporation appears below: The total of the product costs listed above for December is:

The engineering approach to the analysis of mixed costs involves a detailed analysis of what cost behavior should be, based on an industrial engineer's evaluation of the production methods to be used, the materials specifications, labor requirements, equipment usage, production efficiency, power consumption, and so on.