# Accounting Problems. to the Operations of Mancia Department Stores

Topics: Variable cost, Costs, Fixed cost Pages: 10 (1662 words) Published: February 16, 2013

|  | The following cost data pertain to the operations of Mancia Department Stores, Inc., for the month of February.

The Brentwood Store is just one of many stores owned and operated by the company. The Shoe Department is one of many departments at the Brentwood Store. The central warehouse serves all of the company's stores.|

(1)
| 1.| What is the total amount of the costs listed above that are NOT direct costs of the Brentwood Store? | \$152,000| | \$92,000|
| \$79,000|
| \$38,000|

Costs that are not direct costs of the Brentwood Store = Corporate legal office salaries + Corporate headquarters building lease + Central warehouse lease cost = \$62,000 + \$79,000 + \$11,000
= \$152,000|

|  | A partial listing of costs incurred during December at Gagnier Corporation appears below:

|

(1)
| 2.| The total of the period costs listed above for December is: | \$89,000| | \$310,000|
| \$325,000|
| \$399,000|

Period costs = Administrative wages and salaries + Sales staff salaries + Corporate headquarters building rent + Marketing = \$105,000 + \$68,000 + \$34,000 + \$103,000
= \$310,000|

(1)
| 3.| The following costs were incurred in September:

Prime costs during the month totaled: | \$79,000|
| \$120,000|
| \$62,000|
| \$40,000|

Prime cost = Direct materials + Direct labor
= \$39,000 + \$23,000 = \$62,000|

(1)
| 4.| The following costs were incurred in September:

Conversion costs during the month totaled: | \$50,000|
| \$59,000|
| \$137,000|
| \$67,000|

Conversion cost = Direct labor + Manufacturing overhead
= \$29,000 + \$21,000
= \$50,000|

(1)
| 5.| Which of the following statements regarding fixed costs is incorrect? | Expressing fixed costs on a per unit basis usually is the best approach for decision making.| | Fixed costs expressed on a per unit basis will decrease with increases in activity.| | Total fixed costs are constant within the relevant range.| | Fixed costs expressed on a per unit basis will increase with decreases in activity.|

|

(1)
| 6.| Variable cost: | increases on a per unit basis as the number of units produced increases.| | remains constant on a per unit basis as the number of units produced increases.| | remains the same in total as production increases.|

| decreases on a per unit basis as the number of units produced increases.|
|

(0)
| 7.| Conversion costs do NOT include: | depreciation.| →| direct materials.|
| indirect labor.|
| indirect materials.|
|

(1)
| 8.| Which of the following would be considered a product cost for external financial reporting purposes? | Cost of a warehouse used to store finished goods.| | Cost of guided public tours through the company's facilities.| | Cost of travel necessary to sell the manufactured product.| | Cost of sand spread on the factory floor to absorb oil from manufacturing machines.|

|

(1)
| 9.| Edeen Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product.

The best estimate of the total variable manufacturing cost per unit is: | \$62.20| | \$96.50|
| \$109.30|
| \$12.80|

Direct materials cost per unit = Change in cost ÷ Change in activity = (\$373,200 - \$311,000) ÷ (6,000 units - 5,000 units)
= \$62,200 ÷ 1,000 per unit
= \$62.20 per unit

Direct labor cost per unit = Change in cost ÷ Change in activity = (\$205,800 - \$171,500) ÷ (6,000 units - 5,000 units)
= \$34,300 ÷ 1,000 units
= \$34.30 per unit

Variable manufacturing overhead per unit = Change in cost ÷ Change in activity = (\$427,800 - \$415,000) ÷ (6,000 units - 5,000 units)
= \$12,800 ÷ 1,000 units
= \$12.80 per unit

Total variable manufacturing cost per unit = Direct materials per unit + Direct labor per unit + Variable manufacturing overhead per...