Question

At an activity level of 8,400 units in a month, Braughton Corporation’s total variable maintenance and repair cost is $697,284 and its total fixed maintenance and repair cost is $464,100. What would be the total maintenance and repair cost, both fixed and variable, at an activity level of 8,500 units in a month? Assume that this level of activity is within the relevant range. (Round intermediate calculations to 2 decimal places.)

Multiple Choice

• $1,168,297

• $1,175,210

• $1,161,384

• $1,169,685

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Wages paid to the supervisor of the warehouse where raw materials and parts are temporarily stored before being used in production is considered an example of:

	Direct Labor	Period Cost
A)	Yes	Yes
B)	Yes	No
C)	No	Yes
D)	No	No

Multiple Choice

• Choice D

• Choice C

• Choice A

• Choice B

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A cement manufacturer has supplied the following data:

Tons of cement produced and sold	680,000
Sales revenue	$ 2,788,000
Variable manufacturing expense	$ 1,156,000
Fixed manufacturing expense	$ 760,000
Variable selling and administrative expense	$ 272,000
Fixed selling and administrative expense	$ 294,000
Net operating income	$ 306,000

If the company increases its unit sales volume by 4% without increasing its fixed expenses, then total net operating income should be closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

• $318,240

• $12,240

• $311,973

• $360,400

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As the level of activity increases, how will a mixed cost in total and per unit behave?

	In Total	Per Unit
A)	Increase	Decrease
B)	Increase	Increase
C)	Increase	No effect
D)	Decrease	Increase
E)	Decrease	No effect

Multiple Choice

• Choice E

• Choice C

• Choice A

• Choice B

• Choice D

Answer 1

1) If level of Activity within the range then the fixed cost will be same.

Variable cost per unit = Total variable cost / Activity level = $697,284 / 8400 = 83.01

Total variable cost at 8500 = 8500 * 83.01 = $705,585

Total Cost = Variable + Fixed = $705,585 + $464,100 = $1,169,685

2) Wages paid to the supervisor of the warehouse where raw materials and parts are temporarily stored before being used in production is considered an example of :
Ans : Choice D
Wages paid to supervisor is an indirect labour cost and it is not a period cost.

3) If the company increases its unit sales volume by 4%

Sales Volume = 680,000 + 4% = 707,200

Sales ($2,788,000 / 680,000) * 707,200	$2,899,520
Less :
Variable manufacturing expense ($1,156,000 / 680,000) * 707,200	$1,202,240
Fixed manufacturing expense	$760,000
Variable selling and administrative expense ($272,000 / 680,000) * 707,200	$282,880
Fixed selling and administrative expense	$294,000
Net Operating Income	$360,400

4) As the level of activity increases, how will a mixed cost in total and per unit behave :
Ans : Choice A

Mixed cost is the combination of fixed and variable cost. Fixed costs does not change depending on the level activity however variable cost varies depending on the level of activity. Thus as level of activity increases, total cost will increase due to variable costs but cost per unit will decrease since fixed will remain the same.