Accounting Test with Answers
Answer Key for Test Your Skills
1. Tutti’s Sandwich Shop has the following information regarding costs at various levels of monthly sales. Help Tutti separate her costs into fixed costs and variable costs so that she can predict and evaluate costs at varying levels of guests served.
January
February
March
Monthly Sales in Guests Served
10,000
16,000
20,000
Cost of Sales (Food Cost )
10,500
16,800
21,000
Salaries, Wages, and Benefits
15,000
15,600
16,000
Telephone
12,750
16,350
18,750
Rent on Building
2,400
2,400
2,400
Depreciation on Equipment
600
600
600
Utilities
1,000
1,300
1,500
Maintenance and Repairs
500
740
900
Administrative Costs
2,600
2,600
2,600
Item
Variable Cost per Guest
Fixed Costs
Cost of Sales (Food Cost )
1.05
0
Salaries, Wages, and Benefits
0.10
14,000
Telephone
0.60
6,750
Rent on Building
0.00
2,400
Depreciation on Equipment
0.00
600
Utilities
0.05
500
Maintenance and Repairs
0.04
100
Administrative Costs
0.00
2,600
Total
$1.84
$26,950
a. Develop a Total Cost Equation for Tutti that she can use at any volume of sales.
Total Costs =
Fixed Costs +
(Variable Cost per Guest x
Number of Guests)
Total Costs =
$26,950
$1.84
X
b. Determine if Tutti is controlling her costs in April as well as she did in January, February, and March. She sold sandwiches to 30,000 guests in April. Calculate her expected costs based on her actual number of guests.
Expected costs based on the total cost equation:
Total Costs =
Fixed Costs +
(Variable Cost per Guest x
Number of Guests)
$82,150.00
$26,950
$1.84
30,000
c. Her actual total costs in April were $81,500. Were her actual costs in April higher or lower than expected based on her total cost equation, and was this a favorable or unfavorable variance?
Were actual costs higher or lower than expected?
Lower
Were actual costs favorable or unfavorable?
Favorable
2. Big Tex is a true Texan. When he opened his hotel on the plains of West Texas, he named it the Screaming Saloon Inn. He now provides
1. Tutti’s Sandwich Shop has the following information regarding costs at various levels of monthly sales. Help Tutti separate her costs into fixed costs and variable costs so that she can predict and evaluate costs at varying levels of guests served.
January
February
March
Monthly Sales in Guests Served
10,000
16,000
20,000
Cost of Sales (Food Cost )
10,500
16,800
21,000
Salaries, Wages, and Benefits
15,000
15,600
16,000
Telephone
12,750
16,350
18,750
Rent on Building
2,400
2,400
2,400
Depreciation on Equipment
600
600
600
Utilities
1,000
1,300
1,500
Maintenance and Repairs
500
740
900
Administrative Costs
2,600
2,600
2,600
Item
Variable Cost per Guest
Fixed Costs
Cost of Sales (Food Cost )
1.05
0
Salaries, Wages, and Benefits
0.10
14,000
Telephone
0.60
6,750
Rent on Building
0.00
2,400
Depreciation on Equipment
0.00
600
Utilities
0.05
500
Maintenance and Repairs
0.04
100
Administrative Costs
0.00
2,600
Total
$1.84
$26,950
a. Develop a Total Cost Equation for Tutti that she can use at any volume of sales.
Total Costs =
Fixed Costs +
(Variable Cost per Guest x
Number of Guests)
Total Costs =
$26,950
$1.84
X
b. Determine if Tutti is controlling her costs in April as well as she did in January, February, and March. She sold sandwiches to 30,000 guests in April. Calculate her expected costs based on her actual number of guests.
Expected costs based on the total cost equation:
Total Costs =
Fixed Costs +
(Variable Cost per Guest x
Number of Guests)
$82,150.00
$26,950
$1.84
30,000
c. Her actual total costs in April were $81,500. Were her actual costs in April higher or lower than expected based on her total cost equation, and was this a favorable or unfavorable variance?
Were actual costs higher or lower than expected?
Lower
Were actual costs favorable or unfavorable?
Favorable
2. Big Tex is a true Texan. When he opened his hotel on the plains of West Texas, he named it the Screaming Saloon Inn. He now provides