Mgm 252 Exam Chp 2,3,4

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Managerial Accounting Quizzes & Trivia

Prep for the first exam in Managerial Accounting 252


Questions and Answers
  • 1. 

    Which of the following costs is not part of overhead costs?

    • A.

      Sales commission

    • B.

      Salary for supervisors

    • C.

      Lubrication

    • D.

      Salary for factory forklift operator

    Correct Answer
    A. Sales commission
    Explanation
    Sales commission is not part of overhead costs because it is a variable cost directly related to the sales revenue. Overhead costs, on the other hand, are fixed costs that are not directly tied to the production or sale of goods or services. Salary for supervisors, lubrication, and salary for a factory forklift operator are all examples of overhead costs as they are necessary for the overall operation of the business regardless of the level of sales.

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  • 2. 

    The following information was given about Flag’s costs for March:         Salaries for line workers $ 23,000   Cost of fabric $ 1,700   Power for machines $ 700   Manager’s salary $ 7,800   Supervisor’s salary $ 5,900   Sales commissions $ 4,900 How much is Direct Labor?

    • A.

      $23,000

    • B.

      $36,700

    • C.

      $30,800

    • D.

      $41,600

    Correct Answer
    A. $23,000
    Explanation
    The cost of salaries for line workers is $23,000, which is the amount spent on direct labor.

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  • 3. 

    Which of the following costs is not a period cost?

    • A.

      Shipping costs of finished goods

    • B.

      Sales commissions

    • C.

      Advertising

    • D.

      Indirect materials

    • E.

      Administrative salaries

    Correct Answer
    D. Indirect materials
    Explanation
    Indirect materials are not considered as period costs because they are part of the manufacturing process and are included in the cost of goods sold. Period costs, on the other hand, are expenses that are not directly related to the production of goods and are expensed in the period they are incurred. Shipping costs of finished goods, sales commissions, advertising, and administrative salaries are examples of period costs as they are not directly associated with the manufacturing process.

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  • 4. 

    All of the following are product costs for financial reporting except:

    • A.

      Rent on factory space

    • B.

      Indirect materials

    • C.

      Advertising

    • D.

      Direct labor

    Correct Answer
    C. Advertising
    Explanation
    Product costs are the costs directly associated with the production of goods. These costs include direct materials, direct labor, and overhead costs such as rent on factory space and indirect materials. Advertising, on the other hand, is considered a period cost rather than a product cost. Period costs are expenses that are not directly tied to the production process but are incurred over a specific period of time. They are expensed immediately and are not included in the cost of goods sold. Therefore, advertising is not considered a product cost for financial reporting purposes.

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  • 5. 

    You are provided the following information:         Salaries for assembly workers $ 35,000   Cost of materials $ 2,900   Lubricants for machines $ 1,300   Manager’s salary $ 10,200   Supervisor’s salary $ 7,100   Sales commissions $ 6,100 Determine the amount of period costs

    • A.

      $45,200

    • B.

      $16,300

    • C.

      23,400

    • D.

      $35,00

    Correct Answer
    B. $16,300
    Explanation
    The correct answer is $16,300. The period costs include the manager's salary, supervisor's salary, and sales commissions. Adding these costs together gives a total of $16,300. The other costs listed (salaries for assembly workers, cost of materials, and lubricants for machines) are considered product costs, not period costs.

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  • 6. 

    If the activity level increases, one would expect the fixed cost per unit to:

    • A.

      Increase

    • B.

      Decrease

    • C.

      Remain unchanged

    • D.

      None of these

    Correct Answer
    B. Decrease
    Explanation
    If the activity level increases, the fixed cost per unit is expected to decrease. This is because fixed costs are spread over a larger number of units as the activity level increases. Therefore, the cost per unit decreases.

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  • 7. 

    If the activity level drops by 15%, variable costs should:

    • A.

      Increase per unit cost of product

    • B.

      Drop in total by 15%

    • C.

      Decrease per unit cost of product

    • D.

      Remain constant in total

    Correct Answer
    B. Drop in total by 15%
    Explanation
    If the activity level drops by 15%, variable costs should drop in total by 15%. This means that the overall variable costs will decrease by 15% compared to the previous level. This could be due to a decrease in the quantity of inputs or resources required for production, resulting in a lower total cost. It is important to note that this does not necessarily mean that the variable cost per unit of product will decrease, as the decrease in total cost could be proportionate to the decrease in activity level.

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  • 8. 

    A company’s cost formula for maintenance is Y = $6,600 + $4.5X, where X is machine-hours. During a period in which 3,300 machine-hours are worked, the expected maintenance cost would be:

    Correct Answer
    $21,450
    Explanation
    The cost formula for maintenance is given as Y = $6,600 + $4.5X, where X represents machine-hours. In this case, the number of machine-hours worked is given as 3,300. To find the expected maintenance cost, we substitute X = 3,300 into the formula. Therefore, the expected maintenance cost would be $6,600 + $4.5(3,300) = $6,600 + $14,850 = $21,450.

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  • 9. 

    In March, Espresso Express had electrical costs of $367.20 when the total volume was 4,530 cups of coffee served. In April, electrical costs were $378.40 for 4,810 cups of coffee. Using the high-low method, what is the estimated fixed cost of electricity per month? (Round your intermediate calculations to 2 decimal places.)

    Correct Answer
    $186.00
    Explanation
    The high-low method is a technique used to estimate fixed and variable costs based on the highest and lowest levels of activity. In this case, we have the highest level of activity in April (4,810 cups) and the lowest level in March (4,530 cups).

    To calculate the variable cost per unit, we subtract the lowest cost from the highest cost and divide it by the difference in activity levels:

    Variable cost per unit = (378.40 - 367.20) / (4,810 - 4,530) = 11.20 / 280 = 0.04

    Next, we can calculate the estimated fixed cost by subtracting the variable cost per unit multiplied by the highest level of activity from the highest cost:

    Fixed cost = 378.40 - (0.04 * 4,810) = 378.40 - 192.40 = 186.00

    Therefore, the estimated fixed cost of electricity per month is $186.00.

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  • 10. 

    Last year, Barker Company’s sales were $251,000, its fixed costs were $55,500, and its variable costs were $2 per unit. During the year, 81,100 units were sold. The contribution margin was:

    Correct Answer
    $88,800
    Explanation
    The contribution margin is calculated by subtracting the variable costs from the sales revenue. In this case, the variable costs per unit are given as $2 and the number of units sold is 81,100. Therefore, the total variable costs would be $2 multiplied by 81,100, which equals $162,200. Subtracting this amount from the sales revenue of $251,000 gives us the contribution margin of $88,800.

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  • 11. 

    Cramer’s, Inc., is a wholesale distributor of a unique business software application. The company’s traditional income statement for the month follows: Cramer’s, Inc. Traditional Format Income Statement For the Month Ended July 31   Sales   $56,000       Cost of goods sold   33,000             Gross margin   23,000       Selling and administrative expenses:            Selling $12,200          Administrative   7,900 20,100           Net operating income   $  2,900           A total of $3,600 of the selling expenses and $1,300 of the administrative expenses are variable; the remainder are fixed. What is the company’s contribution margin?

    Correct Answer
    $18,100
    Explanation
    The contribution margin is calculated by subtracting the variable expenses from the sales revenue. In this case, the variable expenses consist of $3,600 of selling expenses and $1,300 of administrative expenses, totaling $4,900. Therefore, the contribution margin is $56,000 (sales) - $4,900 (variable expenses) = $51,100. However, the given answer of $18,100 is incorrect and does not match the calculated contribution margin.

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  • 12. 

    Petrarca Company incurred $20,000 to ship 2,000 pounds and $27,500 to ship 3,000 pounds. If the company ships 2,500 pounds, what is its total expected shipping expense?

    Correct Answer
    $23,750
    Explanation
    The given information states that Petrarca Company incurred $20,000 to ship 2,000 pounds and $27,500 to ship 3,000 pounds. This suggests that the shipping expense is directly proportional to the weight being shipped. To find the total expected shipping expense for 2,500 pounds, we can use the concept of proportionality. We can set up a proportion: $20,000 is to 2,000 pounds as X (total expected shipping expense) is to 2,500 pounds. Solving this proportion, we find that X is equal to $23,750. Therefore, the total expected shipping expense for 2,500 pounds is $23,750.

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  • 13. 

    The following information has been provided by the Fasan Florist, Inc. for the first quarter of the year:   Cost of goods sold $   640,000 Fixed administrative expenses 220,000 Fixed selling expenses 100,000 Sales 1,400,000 Variable administrative expenses 60,000 Variable selling expense 140,000   What was the company’s contribution margin for the first quarter?

    Correct Answer
    $560,000
  • 14. 

    The tables are made of wood that costs $100 per table.

    • A.

      Direct Materials

    • B.

      Direct Cost

    • C.

      Sunk Cost

    • D.

      Variable Cost

    • E.

      Direct Labor

    Correct Answer(s)
    A. Direct Materials
    D. Variable Cost
    Explanation
    The given answer, "Direct Materials, Variable Cost," is correct because the cost of the wood used to make the tables is a direct material cost. Direct materials are the raw materials that are directly used in the production process. Additionally, the cost of the wood can be considered a variable cost because it varies with the number of tables produced. As more tables are made, the cost of wood will increase proportionally.

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  • 15. 

    The tables are assembled by workers, at a wage cost of $40 per table.

    • A.

      Variable Cost

    • B.

      Direct Materials

    • C.

      Direct Labor

    • D.

      Selling and Administrative Cost

    • E.

      Direct Labor

    Correct Answer(s)
    A. Variable Cost
    E. Direct Labor
    Explanation
    The given answer is correct because direct labor is a component of variable cost. In this case, the workers assembling the tables are being paid a wage cost of $40 per table, which directly contributes to the variable cost of producing each table. Direct labor costs vary with the level of production, as more tables require more workers and therefore higher labor costs. Therefore, direct labor is a variable cost in this scenario.

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  • 16. 

    Workers assembling the tables are supervised by a factory supervisor who is paid $38,000 per year.

    • A.

      Opportunity Cost

    • B.

      Sunk Cost

    • C.

      Manufacturing Overhead

    • D.

      Direct Labor

    • E.

      Fixed Cost

    Correct Answer(s)
    C. Manufacturing Overhead
    E. Fixed Cost
    Explanation
    The correct answer is Manufacturing Overhead and Fixed Cost. The cost of the factory supervisor's salary is considered part of manufacturing overhead because it is an indirect cost that cannot be easily traced to a specific product. It is also classified as a fixed cost because it does not vary with the level of production.

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  • 17. 

    Electrical costs are $2 per machine-hour. Four machine-hours are required to produce a table

    • A.

      Variable Cost

    • B.

      Fixed Cost

    • C.

      Selling Administrative Cost

    • D.

      Sunk Cost

    • E.

      Manufacturing Overhead Cost

    Correct Answer(s)
    A. Variable Cost
    E. Manufacturing Overhead Cost
    Explanation
    The given information states that electrical costs are $2 per machine-hour and four machine-hours are required to produce a table. This indicates that the electrical costs vary with the number of machine-hours used, making it a variable cost. Additionally, since the electrical costs are directly associated with the manufacturing process, they can be classified as part of the manufacturing overhead cost. Therefore, the correct answer is Variable Cost and Manufacturing Overhead Cost.

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  • 18. 

    The depreciation on the machines used to make the tables totals $10,000 per year. The machines have no resale value and do not wear out through use.

    • A.

      Variable Cost

    • B.

      Fixed Cost

    • C.

      Selling and Administrative Cost

    • D.

      Direct Materials

    • E.

      Manufacturing Overhead Cost

    • F.

      Sunk Cost

    Correct Answer(s)
    B. Fixed Cost
    E. Manufacturing Overhead Cost
    F. Sunk Cost
    Explanation
    The depreciation on the machines used to make the tables is a fixed cost because it is a cost that does not change regardless of the level of production. The machines have no resale value, so they are considered a sunk cost, which is a cost that has already been incurred and cannot be recovered. Additionally, the depreciation is part of the manufacturing overhead cost, which includes all the indirect costs of production that cannot be directly attributed to a specific product.

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