241) At an activity level of 9,000 machine-hours in a month, Moffatt Corporation’s total variable
maintenance cost is $390,240 and its total fixed maintenance cost is $368,280.
What would be the total variable maintenance cost at an activity level of 9,300 machine-hours in a
month? Assume that this level of activity is within the relevant range.
A) $758,520
B) $403,248
C) $390,240
D) $380,556
242) At an activity level of 9,000 machine-hours in a month, Moffatt Corporation’s total variable
maintenance cost is $390,240 and its total fixed maintenance cost is $368,280.
What would be the average fixed maintenance cost per unit at an activity level of 9,300
machine-hours in a month? Assume that this level of activity is within the relevant range.
A) $40.92
B) $84.28
C) $39.60
D) $54.93
243) At a sales volume of 40,000 units, Lonnie Company’s total fixed costs are $40,000 and total
variable costs are $60,000. The relevant range is 30,000 to 50,000 units.
If Lonnie were to sell 42,000 units, the total expected cost would be:
A) $105,000
B) $100,000
C) $103,000
D) $102,000
244) At a sales volume of 40,000 units, Lonnie Company’s total fixed costs are $40,000 and total
variable costs are $60,000. The relevant range is 30,000 to 50,000 units.
If Lonnie were to sell 50,000 units, the total expected cost per unit would be:
A) $2.20
B) $2.30
C) $2.50
D) $2.00
245) Erkkila Inc. reports that at an activity level of 2,100 machine-hours in a month, its total
variable inspection cost is $69,846 and its total fixed inspection cost is $9,072.
What would be the average fixed inspection cost per unit at an activity level of 2,400
machine-hours in a month? Assume that this level of activity is within the relevant range.
A) $37.58
B) $4.32
C) $15.23
D) $3.78
246) Erkkila Inc. reports that at an activity level of 2,100 machine-hours in a month, its total
variable inspection cost is $69,846 and its total fixed inspection cost is $9,072.
What would be the total variable inspection cost at an activity level of 2,400 machine-hours in a
month? Assume that this level of activity is within the relevant range.
A) $78,918
B) $69,846
C) $79,824
D) $10,368
247) Kogler Corporation’s relevant range of activity is 7,000 units to 11,000 units. When it
produces and sells 9,000 units, its average costs per unit are as follows:
Average
Cost per Unit
Direct materials
$
4.85
Direct labor
$
4.20
Variable manufacturing overhead
$
1.55
Fixed manufacturing overhead
$
9.00
Fixed selling expense
$
3.15
Fixed administrative expense
$
1.80
Sales commissions
$
0.50
Variable administrative expense
$
0.45
If the selling price is $25.00 per unit, the contribution margin per unit sold is closest to:
A) $13.45
B) ($0.50)
C) $5.40
D) $15.95
Selling price per unit
Direct materials
4.85
Direct labor
4.20
Variable manufacturing overhead
1.55
Sales commissions
0.50
Variable administrative expense
0.45
Variable cost per unit sold
Contribution margin per unit
248) Kogler Corporation’s relevant range of activity is 7,000 units to 11,000 units. When it
produces and sells 9,000 units, its average costs per unit are as follows:
Average
Cost per Unit
Direct materials
$
4.85
Direct labor
$
4.20
Variable manufacturing overhead
$
1.55
Fixed manufacturing overhead
$
9.00
Fixed selling expense
$
3.15
Fixed administrative expense
$
1.80
Sales commissions
$
0.50
Variable administrative expense
$
0.45
The incremental manufacturing cost that the company will incur if it increases production from
9,000 to 9,001 units is closest to:
A) $10.60
B) $22.75
C) $19.60
D) $25.50
Direct materials
Direct labor
Variable manufacturing overhead
Incremental manufacturing cost
10.60
249) The University Store, Inc. is the major bookseller for four nearby colleges. An income
statement for the first quarter of the year is presented below:
University Store, Inc.
Income Statement
For the Quarter Ended March 31
Sales
$
800,000
Cost of goods sold
560,000
Gross margin
240,000
Selling and administrative expenses
Selling
$
100,000
Administrative
110,000
210,000
Net operating income
$
30,000
On average, a book sells for $40.00. Variable selling expenses are $3.00 per book; the remaining
selling expenses are fixed. The variable administrative expenses are 5% of sales; the remainder of
the administrative expenses are fixed.
The contribution margin for the University Store for the first quarter is:
A) $660,000
B) $700,000
C) $180,000
D) $140,000
Sales
$
800,000
Variable expenses:
Cost of goods sold
$
560,000
Variable selling ($3 per book × 20,000 books)
Variable administrative (5% of $800,000))
660,000
Contribution margin
$
140,000
169
250) The University Store, Inc. is the major bookseller for four nearby colleges. An income
statement for the first quarter of the year is presented below:
University Store, Inc.
Income Statement
For the Quarter Ended March 31
Sales
$
800,000
Cost of goods sold
560,000
Gross margin
240,000
Selling and administrative expenses
Selling
$
100,000
Administrative
110,000
210,000
Net operating income
$
30,000
On average, a book sells for $40.00. Variable selling expenses are $3.00 per book; the remaining
selling expenses are fixed. The variable administrative expenses are 5% of sales; the remainder of
the administrative expenses are fixed.
The net operating income computed using the contribution approach for the first quarter is:
A) $30,000
B) $180,000
C) $140,000
D) $0
251) The University Store, Inc. is the major bookseller for four nearby colleges. An income
statement for the first quarter of the year is presented below:
University Store, Inc.
Income Statement
For the Quarter Ended March 31
Sales
$
800,000
Cost of goods sold
560,000
Gross margin
240,000
Selling and administrative expenses
Selling
$
100,000
Administrative
110,000
210,000
Net operating income
$
30,000
On average, a book sells for $40.00. Variable selling expenses are $3.00 per book; the remaining
selling expenses are fixed. The variable administrative expenses are 5% of sales; the remainder of
the administrative expenses are fixed.
The cost formula for selling and administrative expenses with “X” equal to the number of books
sold is:
A) Y = $105,000 + $3X
B) Y = $105,000 + $5X
C) Y = $110,000 + $5X
D) Y = $110,000 + $33X
172
252) The University Store, Inc. is the major bookseller for four nearby colleges. An income
statement for the first quarter of the year is presented below:
University Store, Inc.
Income Statement
For the Quarter Ended March 31
Sales
$
800,000
Cost of goods sold
560,000
Gross margin
240,000
Selling and administrative expenses
Selling
$
100,000
Administrative
110,000
210,000
Net operating income
$
30,000
On average, a book sells for $40.00. Variable selling expenses are $3.00 per book; the remaining
selling expenses are fixed. The variable administrative expenses are 5% of sales; the remainder of
the administrative expenses are fixed.
If 25,000 books are sold during the second quarter and this activity is within the relevant range, the
company’s expected contribution margin would be:
A) $875,000
B) $300,000
C) $175,000
D) $65,000
174
253) An income statement for Sam’s Bookstore for the first quarter of the year is presented below:
Sam’s Bookstore
Income Statement
For Quarter Ended March 31
Sales
$
900,000
Cost of goods sold
630,000
Gross margin
270,000
Selling and administrative expenses
Selling
$
100,000
Administration
104,000
204,000
Net operating income
$
66,000
On average, a book sells for $50. Variable selling expenses are $5 per book with the remaining
selling expenses being fixed. The variable administrative expenses are 4% of sales with the
remainder being fixed.
The contribution margin for Sam’s Bookstore for the first quarter is:
A) $180,000
B) $774,000
C) $144,000
D) $756,000
Sales
$
900,000
Variable expenses:
Cost of goods sold
$
630,000
Variable selling ($5 per book × 18,000 books)
Variable administrative (4% of $900,000)
756,000
Contribution margin
$
144,000
254) An income statement for Sam’s Bookstore for the first quarter of the year is presented below:
175
Sam’s Bookstore
Income Statement
For Quarter Ended March 31
Sales
$
900,000
Cost of goods sold
630,000
Gross margin
270,000
Selling and administrative expenses
Selling
$
100,000
Administration
104,000
204,000
Net operating income
$
66,000
On average, a book sells for $50. Variable selling expenses are $5 per book with the remaining
selling expenses being fixed. The variable administrative expenses are 4% of sales with the
remainder being fixed.
The net operating income using the contribution approach for the first quarter is:
A) $270,000
B) $180,000
C) $144,000
D) $66,000
177
255) An income statement for Sam’s Bookstore for the first quarter of the year is presented below:
Sam’s Bookstore
Income Statement
For Quarter Ended March 31
Sales
$
900,000
Cost of goods sold
630,000
Gross margin
270,000
Selling and administrative expenses
Selling
$
100,000
Administration
104,000
204,000
Net operating income
$
66,000
On average, a book sells for $50. Variable selling expenses are $5 per book with the remaining
selling expenses being fixed. The variable administrative expenses are 4% of sales with the
remainder being fixed.
The cost formula for selling and administrative expenses with “X” equal to the number of books
sold is:
A) Y = $102,000 + $5X
B) Y = $102,000 + $7X
C) Y = $78,000 + $7X
D) Y = $78,000 + $9X
179
256) An income statement for Sam’s Bookstore for the first quarter of the year is presented below:
Sam’s Bookstore
Income Statement
For Quarter Ended March 31
Sales
$
900,000
Cost of goods sold
630,000
Gross margin
270,000
Selling and administrative expenses
Selling
$
100,000
Administration
104,000
204,000
Net operating income
$
66,000
On average, a book sells for $50. Variable selling expenses are $5 per book with the remaining
selling expenses being fixed. The variable administrative expenses are 4% of sales with the
remainder being fixed.
If 20,000 books are sold during the second quarter and this activity is within the relevant range, the
company’s expected contribution margin would be:
A) $300,000
B) $160,000
C) $860,000
D) $58,000
257) Dominik Corporation purchased a machine 5 years ago for $527,000 when it launched
product M08Y. Unfortunately, this machine has broken down and cannot be repaired. The
machine could be replaced by a new model 310 machine costing $545,000 or by a new model 240
machine costing $450,000. Management has decided to buy the model 240 machine. It has less
capacity than the model 310 machine, but its capacity is sufficient to continue making product
M08Y. Management also considered, but rejected, the alternative of dropping product M08Y and
not replacing the old machine. If that were done, the $450,000 invested in the new machine could
instead have been invested in a project that would have returned a total of $532,000.
In making the decision to buy the model 240 machine rather than the model 310 machine, the
differential cost was:
A) $95,000
B) $5,000
C) $77,000
D) $18,000