1. Ch 01 Practic Practice e Test Test Questi Question on 01 Which of the following statements doesn’t properly properly describe managerial accounting? It is important that managerial accounting information is veriable and objective. 2. Ch 01 Practic Practice e Test Test Questi Question on 02 Which of the following statements is true? The assembly-line assembly-line supervisors’ supervisors’ wages are considered considered to be indirect indirect labor. labor. 3. Ch 01 Practic Practice e Test Test Questi Question on 04 Which of the following costs is not a period cost? Indirect materials 4. Ch 01 Practic Practice e Test Test Questi Question on 05 ll of the following are product costs for nancial reporting e!cept" advertising. 5. Ch 01 Practic Practice e Test Test Questi Question on 07 If the activity level increases# increases# one would e!pect the !ed cost per unit to" decrease. 6. Ch 01 Practic Practice e Test Test Questi Question on 08 If the activity level drops by $%# variable costs should" drop in total by $%. 7. Ch 01 Practic Practice e Test Test Questi Question on 16 Which of the following would be considered an indirect cost? &ubricants for a machine 8. Ch 01 Practic Practice e Test Test Questi Question on 17 Which of the following would be considered a direct cost? Wood pulp used to produce paper 9. Ch 01 Practic Practice e Test Test Questi Question on 18 'arry is considering whether to produce and sell classic wooden surfboards in his spare time in his garage. Which of the following would be considered a di(erential cost? ). *riginal cost of garage +. Wood for each surfboard ,. Worers salary . Tool rental $. dvertising costs /. 0ales commissions
all costs e!cept )
10. Ch 01 Practice Test Question 19 1olanda 1olanda is planning planning a trip trip to the beach instead of staying staying at home during during the ne!t 0pring brea. Which of the following would be considered an opportunity cost? The money she can can mae by woring during during 0pring brea 11. 11. Exe Ex ercis rcise e 11-2 Cla Class ssi i!i !in" n" #anu nuactu acturi rin n" Cos Costs ts $%& $%&1-2 1-2' The 23 Wors Wors assembles assembles custom computers computers from from components supplied supplied by various manufacturers. manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a 4edmond# Washington# industrial par. &isted below are some of the costs that are incurred at the company. Required:
For each cost, indicate whether it would most likely be classified as direct labor, direct materials, manufacturing overhead, selling, or an administrative cost. (You may select more than one answer. Single click the box with the quest qu estion ion ma mark rk to pr prod oduc ucee a ch chec eck k ma mark rk fo forr a co corr rrec ectt an answe swers rs an and d double click the box with the question mark to empty the box for a wrong answers.)
1. The cost of a hard drive drive installed in a computer. computer.
Direct labor cost Direct materials cost Manufacturing overhead cost Marketing and selling cost Administrative cost
. The cost of advertising in the Puget Sound Computer User newspaper. Computer User newspaper.
Direct labor cost Direct materials cost Manufacturing overhead cost Marketing and selling cost Administrati ve cost !. The wages of employees who assemble computers from components.
Direct labor cost Direct materials cost Manufacturing overhead cost Marketing and selling cost Administrative cost
". #ales commissions paid to the company$s salespeople.
Direct labor cost Direct materials cost Manufacturing overhead cost Marketing and selling cost Administrati ve cost %. The wages of the assembly shop$s supervisor.
Direct labor cost Direct materials cost Manufacturing overhead cost Marketing and selling cost Administrative cost
&. The wages of the company$s accountant.
Direct labor cost Direct materials cost Manufacturing overhead cost Marketing and selling cost Administrative cost
'.
Depreciation on e(uipment used to test assembled computers before release to customers.
Direct labor cost Direct materials cost Manufacturing overhead cost Marketing and selling cost Administrative cost
). *ent on the facility in the industrial park.
Direct labor cost Direct materials cost Manufacturing overhead cost Marketing and selling cost Administrative cost
!. "xercise #$ %igh#&ow 'ethod &#$*
The +heyenne otel in -ig #ky, Montana, has accumulated records of the total electrical costs of the hotel and the number of occupancydays over the last year. An occupancyday represents a room rented out for one day. The hotel/s business is highly seasonal, with peaks occurring during the ski season and in the summer.
Required:
1 . 0sing the highlow method, estimate the fied cost of electricity per month and the variable cost of electricity per occupancyday. (+o not round your intermediate calculations. Round your ,ariable cost answer to ! decimal places and -ixed cost element answer to nearest whole dollar amount)
Variable cost 5 Change in cost/ Change in activity
).$/ 5 ,#$/67 +#+8+ Fixed Cost element = Total cost – Variable cost element
,.9$, 5 $.)8 - :).$/ ; +.6/< . 2hat other factors other than occupancydays are likely to affect the variation in electrical costs from month to month3 (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answers and double click the box with the question mark to empty the box for a wrong answers.)
#easonal factors like winter or summer.
#ystematic factors like guests, switching off fans and lights. 4umber of days present in a month. Fied salary paid to hotel receptionist. 5ncome taes paid on hotel income. 1!. "xercise #! ost lassification &#!/ �/ / *
2ollogong 6roup 7td. of 4ew #outh 2ales, Australia, ac(uired its factory building about 18 years ago. For several years, the company has rented out a small anne attached to the rear of the building. The company has received a rental income of 9!8,888 per year on this space. The renter$s lease will epire soon, and rather than renewing the lease, the company has decided to use the space itself to manufacture a new product.
Direct materials cost for the new product will total 9)8 per unit. To have a place to store finished units of product, the company will rent a small warehouse nearby. The rental cost will be 9%88 per month. 5n addition, the company must rent e(uipment for use in producing the new product: the rental cost will be 9",888 per month. 2orkers will be hired to manufacture the new product, with direct labor cost amounting to 9&8 per unit. The space in the anne will continue to be depreciated on a straightline basis, as in prior years. This depreciation is 9),888 per year.
Advertising costs for the new product will total 9%8,888 per year. A supervisor will be hired to oversee production: her salary will be 91,%88 per month. ;lectricity for operating machines will be 91.8 per unit. +osts of shipping the new product to customers will be 9< per unit.
To provide funds to purchase materials, meet payrolls, and so forth, the company will have to li(uidate some temporary investments. These investments are presently yielding a return of about 9!,888 per year.
Required:
For each of the costs associated with the new product decision, indicate whether it would be variable or fied. 5f it is a product cost, indicate whether
it would be direct materials, direct labor or a manufacturing overhead cost. 5f it is not a product cost, indicate whether it is a period, opportunity or a sunk cost. #elect =4one= if none of the categories apply for a particular item. 4>T;? >pportunity cost is a special category, and to avoid confusion, do not attempt to classify the cost in any other way ecept as an opportunity cost.
). Exercise 1-13 Tra(itional an( Contri)ution *or+at ,nco+e tate+ents $%&1-6' The lpine 'ouse# Inc.# is a large retailer of snow sis. The company assembled the information shown below for the =uarter ended >arch ,)"
Required: 1. @repare a traditional income statement for the (uarter ended March !1.
Cost o "oo(s sol( (Beginning Merchandise. Inventory Merchandise !"rchases# – $nding Merchandise :,6#666 )66#666< @ 6#666 5 90/000
ross +ar"in %ales – Cost o& goods sold )$6#666 @ A6#666 5 60/000
ellin" exenses 5 (Variable selling ex'ense 'er "nit n"mber o& "nits sold# selling )xed ex'enses :$6;+66< +6#6665 30/000
(+inistratie exenses = (Variable administrative ex'ense 'er "nit n"mber o& "nit sold# )xed administrative ex'ense :)6 ; +66< +6#666 5 22/000
u+)er o units sol( Total %ales *even"e / %elling 'rice 'er 'air o& s+is
)$6#66679$65200
. @repare a contribution format income statement for the (uarter ende d March !1.
Cost o "oo(s sol( (Beginning Merchandise. Inventory Merchandise !"rchases# – $nding Merchandise :,6#666 )66#666< @ 6#666 5 90/000
ellin" exenses 5 (Variable selling ex'ense 'er "nit n"mber o& "nits sold
:$6;+66< 5 )6#666
(+inistratie exenses = (Variable administrative ex'ense 'er "nit n"mber o& "nit sold# )xed administrative ex'ense :)6 ; +66< 5 +#666 !. 2hat was the contribution toward fied epenses and profits for each pair of skis sold during the (uarter3
Contrib"tion o& each 'air o& s+is = Contrib"tion margin / ,"mber o& "nits sold 8#6667+66 pair 5 240
)$. Exercise 1-14 i"h-%o #etho( Pre(ictin" Cost $%&1-4/ %&1-5' The &aeshore 'otel’s guest-days of occupancy and custodial supplies e!pense over the last seven months were"
Buest-days is a measure of the overall activity at the hotel. Cor e!ample# a guest who stays at the hotel for three days is counted as three guest-days.
Required: 1. 0sing the highlow method, estimate a cost formula for custodial supplies epense. (Round the ,ariable cost per guest#day to ! decimal points.)
Variable cost 5 Change in cost/ Change in activity /#66678#666 5 0.75 Fixed Cost element = Total cost – Variable cost element
),#$66 @ :6.9$ ; )+#666< 5 4/500
. 0sing the cost formula, you derived above, what amount of custodial supplies epense would you epect to be incurred at an occupancy level of 11,888 guestdays3 (+o not round your intermediate calculations.)
))#666 guest-days ; 6.9$ 5 8/250
! . @repare a scatter graph using the data given above. @lace custodial supplies epense on the vertical ais and guestdays on the horiBontal ais.C
)/. Pro)le+ 1-16 Cost ehaior i"h-%o #etho( Contri)ution *or+at ,nco+e tate+ent $%&1-4/ %&1-5/ %&1-6'
>orrisey D Erown# &td.# of 0ydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among ustralian consumers. The company’s income statements for the three most recent months follow"
Required: 1. 5dentify each of the company$s epenses including cost of goods soldC as either variable, fied, or mied.
. 0sing the highlow method, separate each mied epense into variable and fied elements. #tate the cost formula for each mied epense.
!. *edo the company$s income statement at the %,888unit level of activity using the contribution format.
)9. 2roblem )-)A 3ontribution Cormat versus Traditional Income 0tatement F&*)-/G >arwic’s 2ianos# Inc.# purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost# on the average# H+#$6 each from the manufacturer. >arwic’s 2ianos# Inc.# sells the pianos to its customers at an average price of H,#)+$ each. The selling and administrative costs that the company incurs in a typical month are presented below"
During August, Marwick$s @ianos, 5nc., sold and delivered "8 pianos.
Required: 1. @repare an income statement for Marwick$s @ianos, 5nc., for August. 0se the traditional format, with costs organiBed by function.
6 piano ; ,#)+$ 5 )+$#666 6 piano ; +#$6 5 A8#666 )+$#666 @ A8#666 5 +9#666 A$6 : 8% :6.68< ; )+$#666< 5 )6#A$6 3lerical )#666 : +6; 6< 5 )#866
. @repare an income statement for Marwick$s @ianos, 5nc., for August, this time using the contribution format, with costs organiBed by behavior. #how costs and revenues on both a total and a per unit basis down through contribution margin.
)8. 2roblem )-+) 3ost 3lassication F&*)-)# &*)-,# &*)-G &isted below are costs found in various organiations. Cor each cost item# indicate whether it would be variable or !ed with respect to the number of units produced and soldJ and then whether it would be a selling cost# an administrative cost# or a manufacturing cost. If it is a manufacturing cost# indicate whether it would typically be treated as a direct cost or an indirect cost with respect to units of product. Three sample answers are provided for illustration. , a cost classi:cation is not alication to a cost ite+/ leae the cell )lan;.<
)A. K!ercise )-$ 'igh-&ow >ethod F&*)-$G The 3heyenne 'otel in Eig 0y# >ontana# has accumulated records of the total electrical costs of the hotel and the number of occupancy-days over the last year. n occupancy-day represents a room rented out for one day. The hotelLs business is highly seasonal# with peas occurring during the si season and in the summer.
Required: 1. 0sing the highlow method, estimate the fied cost of electricity per month and the variable cost of electricity per occupancyday. (+o not round your intermediate calculations. Round your ,ariable cost answer to ! decimal places and -ixed cost element answer to nearest whole dollar amount)
. 2hat other factors other than occupancydays are likely to affect the variation in electrical costs from month to month3 (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answers and double click the box with the question mark to empty the box for a wrong answers.)
+6. K!ercise )-), Traditional and 3ontribution Cormat Income 0tatements F&*)-/G
The Alpine ouse, 5nc., is a large retailer of snow skis. The company assembled the information shown below for the (uarter ended March !1?
Required: 1. @repare a traditional income statement for the (uarter ended March !1.
. @repare a contribution format income statement for the (uarter ende d March !1. (Round your answer to nearest whole dollar.)
!. 2hat was the contribution toward fied epenses and profits for each pair of skis sold during the (uarter3 (Round your answer to the nearest whole dollar.)
9$79$2oints)66%
