Question 1

Sweet Time Candies projects its factory rent to be $8,000 in August when 4,000 pounds of candy are expected to be produced. If rent is a fixed cost, and if production is expected to increase to 6,000 units in September, what is the expected cost of rent in September?

Accepted Answer

Since rent is a fixed cost, it does not change with changes in production quantity. Therefore, the expected cost of rent in September will also be $8,000.

Question 2

Rom Generators is in the process of preparing a production cost budget for August. Actual costs in July for the production of 60 generators were: $\begin{array}{ll}
\text { Materials cost } & \$ 5,200 \
\text { Labor cost } & 2,600 \
\text { Rent } & 1,200 \
\text { Depreciation } & 1,700 \
\text { Other fixed costs } & 4,600\\text { Total } & \$ 15,300 \
\end{array}$ Materials and labor are the only variable costs. The company has estimated that it can increase sales to 70 generators in August if it changes the selling price of generators to $450 instead of the current $480 per unit. What is expected to occur to the cost per unit given the expected changes?

Accepted Answer

The answer of Rom Generators is in the process of...

Question 3

Hanover Binding plans to produce 40,000 books next year at a total cost of $1,640,000 with a selling price per book of $66.00. The fixed costs total $280,000. Management is considering lowering the price to $60.00 per book, and feels that this action will cause sales to climb to 50,000 books. What is the amount of incremental profit if 50,000 books are sold?

Accepted Answer

The answer of Hanover Binding plans to produce 40,000 books...

Question 4

Dent Lab Car Repair projects variable labor costs of $21,500 in July when 8,600 units are produced. If production is expected to drop to 8,000 units in August, what is the expected labor cost in August?

Accepted Answer

Variable costs change in direct proportion to changes in production volume. To find the expected labor cost for August, calculate the cost per unit for July ($21,500 / 8,600 units = $2.50 per unit), then multiply by the expected units for August (8,000 units * $2.50 = $20,000).

Question 5

In a period when anticipated production is 5,000 units, budgeted variable costs are $75,000 and budgeted fixed costs are $24,000. If 5,600 units are actually produced, what is the expected total cost?

Accepted Answer

First, we need to calculate the total budgeted cost per unit:

Total budgeted cost = budgeted variable cost + budgeted fixed cost 
Total budgeted cost = $75,000 + $24,000 
Total budgeted cost = $99,000

Budgeted cost per unit = Total budgeted cost / Anticipated production 
Budgeted cost per unit = $99,000 / 5,000 
Budgeted cost per unit = $19.80

To calculate the expected total cost when 5,600 units are actually produced:

Expected total cost = Budgeted cost per unit x Actual production 
Expected total cost = $19.80 x 5,600 
Expected total cost = $110,880

Therefore, the best choice is C.

Question 6

In a period when anticipated production is 20,000 units, budgeted variable costs are $85,000 and budgeted fixed costs are $45,000. If 15,000 units are actually produced, what is the expected total cost?

Accepted Answer

The formula to calculate total cost is: 
Total cost = (variable cost per unit x actual production) + fixed costs
Variable cost per unit = budgeted variable costs / anticipated production = $85,000 / 20,000 units = $4.25 per unit

Total cost = ($4.25 x 15,000 units) + $45,000 
Total cost = $63,750 + $45,000 
Total cost = $108,750

Therefore, the expected total cost is $108,750.

Question 7

Hurricane Wings has budgeted the following costs for a month in which 24,000 wings will be cooked and sold.
$\begin{array}{lr}
\text { Wings, breading, and sauce } & \$ 4,900 \
\text { Direct labor (Variable) } & 3,500 \
\text { Rent } & 1,10 0\
\text { Depreciation } & 900\
\text { Other fixed costs }&400
\end{array}$
Each wing sells for $0.80 each. What is the budgeted total fixed cost?

Accepted Answer

The budgeted total fixed cost is the sum of rent, depreciation, and other fixed costs: $1,100 + $900 + $400 = $2,400.

Question 8

Rom Generators is in the process of preparing a production cost budget for August. Actual costs in July for the production of 60 generators were: $$\begin{array} { l r } 
\text { Materials cost } & \$ 5,200 \
\text { Labor cost } & 2,600 \
\text { Rent } & 1,200 \
\text { Depreciation } & 1,700 \
\text { Other fixed costs } & { 4,600 }\
\text { Total }& { \$ 15,300 }
\end{array}$$ Materials and labor are the only variable costs. If production and sales are budgeted to increase to 70 generators in August, how much is the expected total cost on the August budget?

Accepted Answer

The answer of Rom Generators is in the process of...

Question 9

Variable cost per unit is budgeted to be $8.00 and fixed cost per unit is budgeted to be $5.00 in a period when 4,000 units are produced. If production is actually 5,100 units, what is the expected total cost of the units produced?

Accepted Answer

To calculate the expected total cost of the units produced, we need to use the formula:

Total Cost = (Variable Cost per unit x Number of units produced) + Fixed Cost

In this case, the variable cost per unit is $8.00, the fixed cost per unit is $5.00, and the number of units produced is 5,100.

So,

Total Cost = ($8.00 x 5,100) + ($5.00 x 5,100)

Total Cost = $40,800 + $25,500

Total Cost = $66,300

Therefore, the expected total cost of the units produced is $66,300. The correct answer is C.

Question 10

Barney & Robles plans to produce 50,000 books next year at a total cost of $1,900,000. The fixed costs total $120,000. Selling price per book is $65.00. Management is considering lowering the price to $62.00 per unit, and feels that this action will cause sales to climb to 54,000 books. What is the incremental revenue generated if 54,000 units are sold?

Accepted Answer

To find the incremental revenue, we need to first calculate the revenue at the current price and compare it with the revenue at the new price.

At the current selling price of $65.00 per book, the total revenue for producing 50,000 books is:

Total revenue = Selling price * Number of books sold
Total revenue = $65.00/book * 50,000 books
Total revenue = $3,250,000

Now, if the selling price is lowered to $62.00 per book and the sales increase to 54,000 books, the total revenue will be:

Total revenue = Selling price * Number of books sold
Total revenue = $62.00/book * 54,000 books
Total revenue = $3,348,000

The incremental revenue is the difference between the two revenues:

Incremental revenue = New revenue - Current revenue
Incremental revenue = $3,348,000 - $3,250,000
Incremental revenue = $98,000

Therefore, the best choice is B as it represents the incremental revenue generated if 54,000 units are sold.

Question 11

Rincon Gifts had the following costs in May when 400 ceramic pots were produced: materials, $4,200; labor cost, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500. Which one of the following is the correct cost for Rincon?

Accepted Answer

The answer of Rincon Gifts had the following costs in...

Question 12

Hurricane Wings has budgeted the following costs for a month in which 24,000 wings will be cooked and sold.
$\begin{array}{lr}
\text { Wings, breading, and sauce } & \$ 4,900 \
\text { Direct labor (Variable) } & 3,500 \
\text { Rent } & 1,10 0\
\text { Depreciation } & 900\
\text { Other fixed costs }&400
\end{array}$
Each wing sells for $0.80 each. What is the budgeted total variable cost?

Accepted Answer

The budgeted total variable cost is the sum of the variable costs, which are the direct labor and the cost of wings, breading, and sauce. The direct labor cost is $3,500 and the cost of wings, breading, and sauce is $4,900. Therefore, the budgeted total variable cost is $3,500 + $4,900 = $8,400.

Question 13

Which of the following terms involves calculating the difference in revenue and the difference in cost between decision alternatives?

Accepted Answer

Incremental analysis involves calculating the difference in revenue and the difference in cost between decision alternatives. Budgeting production involves the process of predicting and planning production levels, whereas profit planning involves setting financial goals and outlining strategies to achieve them. Systems development refers to the process of creating or improving upon technological systems within an organization.

Question 14

Rincon Gifts had the following costs in May when 400 ceramic pots were produced: materials, $4,200; hourly labor, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500. If the production level changes to 500 units, how much will the total costs be?

Accepted Answer

To find the total cost for the new production level of 500 units, we need to first calculate the variable cost per unit. The variable cost in this scenario is the cost of materials and hourly labor.

Cost per unit = (Materials + Hourly labor) / Number of units produced 
Cost per unit = ($4,200 + $1,600) / 400 
Cost per unit = $15

Now, we can calculate the total cost for 500 units by adding the fixed costs to the variable cost for 500 units:

Total cost = (Variable cost per unit × Number of units produced) + Fixed costs 
Total cost = ($15 × 500) + $800 + $700 + $500 
Total cost = $7,500 + $2,000 
Total cost = $9,500

Therefore, the answer is C: $9,250.

Question 15

Rom Generators is in the process of preparing a production cost budget for August. Actual costs in July for the production of 60 generators were: $$\begin{array} { l r } 
\text { Materials cost } & \$ 5,200 \
\text { Labor cost } & 2,600 \
\text { Rent } & 1,200 \
\text { Depreciation } & 1,700 \
\text { Other fixed costs } & 4,600 \
\text { Total } & \$ 15,300 \
\hline
\end{array}$$ Materials and labor are the only variable costs. If production and sales are budgeted to increase to 70 generators in August, how much is the expected total variable cost on the August budget?

Accepted Answer

The answer of Rom Generators is in the process of...

Question 16

Which of the following statements regarding incremental analysis is true? Assume that there are no opportunity costs and that the capacity exists to complete any of the alternatives.

Accepted Answer

Incremental analysis involves comparing the costs and revenues of different alternatives to determine which option is the most profitable. Therefore, the preferred alternative will have profits that are greater than the profits of the other alternatives. The other options given are irrelevant to the decision making in incremental analysis.

Question 17

Hurricane Wings has budgeted the following costs for a month in which 24,000 wings will be cooked and sold.
$\begin{array}{lr}
\text { Wings, breading, and sauce } & \$ 4,900 \
\text { Direct labor (Variable) } & 3,500 \
\text { Rent } & 1,100 \
\text { Depreciation } & 900\
\text { Other fixed costs }&400
\end{array}$
Each wing sells for $0.80 each. How much would Hurricane Wing's profit increase if 100 more wings were sold?

Accepted Answer

The variable cost per wing is $0.1458 ($4,900 + $3,500 / 24,000). If 100 more wings are sold, the variable cost will increase by $14.58 ($0.1458 x 100). The selling price of 100 more wings is $80 ($0.80 x 100). Therefore, the profit will increase by $65.42 ($80 - $14.58).

Question 18

Hurricane Wings has budgeted the following costs for a month in which 24,000 wings will be cooked and sold.
$\begin{array}{lr}
\text { Wings, breading, and sauce } & \$ 4,900 \
\text { Direct labor (Variable) } & 3,500 \
\text { Rent } & 1,10 0\
\text { Depreciation } & 900\
\text { Other fixed costs }&400
\end{array}$
Each wing sells for $0.80 each. How much is the budgeted variable cost per unit?

Accepted Answer

The budgeted variable costs include wings, breading, sauce, and direct labor, totaling $4,900 + $3,500 = $8,400. Dividing by 24,000 wings gives a variable cost per unit of $0.35.

Question 19

Rincon Gifts had the following costs in May when 400 ceramic pots were produced: materials, $4,200; labor cost, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500. If production changes to 500 units, which of the following costs will stay the same?

Accepted Answer

Fixed costs per unit stay the same regardless of how many units are produced.

Question 20

Hanover Binding plans to produce 40,000 books next year at a total cost of $1,640,000 with a selling price per book of $66.00. The fixed costs total $280,000. Management is considering lowering the price to $60.00 per book, and feels that this action will cause sales to climb to 50,000 books. What will be the incremental costs incurred if 50,000 books are sold?

Accepted Answer

First, let's calculate the cost per unit for Hanover Binding's production of 40,000 books:

Total cost = fixed cost + variable cost
$1,640,000 = $280,000 + variable cost
Variable cost per unit = ($1,640,000 - $280,000) / 40,000 = $32.50

Therefore, the total cost for producing and selling 40,000 books is:
Total cost = fixed cost + (variable cost per unit x number of units)
Total cost = $280,000 + ($32.50 x 40,000) = $1,560,000

Now, let's calculate the incremental cost for producing and selling an additional 10,000 books (from 40,000 to 50,000) at a selling price of $60.00:

Incremental cost = (variable cost per unit x number of additional units)
Incremental cost = ($32.50 x 10,000) = $325,000

Therefore, the total cost for producing and selling 50,000 books at a selling price of $60.00 is:
Total cost = fixed cost + (variable cost per unit x number of units)
Total cost = $280,000 + ($32.50 x 50,000) = $2,030,000

The incremental cost incurred for producing and selling 10,000 additional books is the difference between the total cost for 50,000 books and the total cost for 40,000 books:
Incremental cost = $2,030,000 - $1,560,000 = $470,000

However, the question asks for the incremental cost incurred if 50,000 books are sold (not produced). Since the production cost is already included in the total cost calculation, we just need to subtract the total revenue from selling 50,000 books at a selling price of $60.00:
Total revenue = selling price per book x number of units
Total revenue = $60.00 x 50,000 = $3,000,000

Incremental cost incurred = total cost - total revenue
Incremental cost incurred = $2,030,000 - $3,000,000 = -$970,000

This result means that Hanover Binding would actually lose money by decreasing the selling price to $60.00 and selling 50,000 books. Therefore, the best choice is B, which represents the incremental cost for selling the additional 10,000 books only.

Quiz 1: Managerial Accounting in the Information Age

Sweet Time Candies projects its factory rent to be $8,000 in August when 4,000 pounds of candy are expected to be produced. If rent is a fixed cost, and if production is expected to increase to 6,000 units in September, what is the expected cost of rent in September?

Dent Lab Car Repair projects variable labor costs of $21,500 in July when 8,600 units are produced. If production is expected to drop to 8,000 units in August, what is the expected labor cost in August?

In a period when anticipated production is 5,000 units, budgeted variable costs are $75,000 and budgeted fixed costs are $24,000. If 5,600 units are actually produced, what is the expected total cost?

In a period when anticipated production is 20,000 units, budgeted variable costs are $85,000 and budgeted fixed costs are $45,000. If 15,000 units are actually produced, what is the expected total cost?

Variable cost per unit is budgeted to be $8.00 and fixed cost per unit is budgeted to be $5.00 in a period when 4,000 units are produced. If production is actually 5,100 units, what is the expected total cost of the units produced?

Rincon Gifts had the following costs in May when 400 ceramic pots were produced: materials, $4,200; labor cost, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500. Which one of the following is the correct cost for Rincon?

Which of the following terms involves calculating the difference in revenue and the difference in cost between decision alternatives?

Rincon Gifts had the following costs in May when 400 ceramic pots were produced: materials, $4,200; hourly labor, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500. If the production level changes to 500 units, how much will the total costs be?

Which of the following statements regarding incremental analysis is true? Assume that there are no opportunity costs and that the capacity exists to complete any of the alternatives.

Rincon Gifts had the following costs in May when 400 ceramic pots were produced: materials, $4,200; labor cost, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500. If production changes to 500 units, which of the following costs will stay the same?