Questions and Answers
Which of the following statements is/are correct for Applewhite Corporation? I. The cost of the direct materials in Applewhite's products is considered a variable cost. II. The cost of the depreciation of Applewhite's plant machinery is considered a variable cost because Applewhite uses an accelerated depreciation method for both book and income tax purposes. III. The cost of electricity for Applewhite's manufacturing facility is considered a fixed cost, even if the cost of the electricity has both variable and fixed components.
The salary expense associated with direct service staff for Comprehensive Care Nursing Home would most likely be classified as:
As Frisco Corporation analyzes its fixed and variable costs, which of the following statements is/are correct? I. As the cost driver level increases, total fixed cost remains unchanged. II. As the cost driver level increases, unit fixed cost increases. III. As the cost driver level decreases, unit variable cost decreases.
Under the absorption method, Year 1 cost of goods sold for ABC Company is based on the following data: Sales = $5,000,000, Direct materials = $850,000, Direct manufacturing labor = $1,700,000, Variable manufacturing overhead = $400,000, Fixed manufacturing overhead = $750,000, Variable SG&A = $150,000, Fixed SG&A = $250,000. What is the cost of goods sold?
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Study Notes
Cost Structure Analysis in Manufacturing
- Applewhite Corporation examines its cost structure for potential savings.
- Direct materials are classified as variable costs due to their relationship with production volume.
- Depreciation of plant machinery is a fixed cost despite the accelerated depreciation method used.
- Electricity costs can have fixed and variable components; however, it is typically treated as a fixed cost for budgeting.
Staffing Ratio in Nursing Homes
- Comprehensive Care Nursing Home needs to maintain a 3:1 ratio of direct service staff to residents.
- Salary expenses for direct service staff are classified as fixed costs due to regulatory requirements associated with staffing levels.
Fixed and Variable Cost Analysis
- Frisco Corporation evaluates its costs within a relevant range.
- Total fixed costs remain constant as cost driver activity increases within the relevant range.
- Unit fixed costs increase as the cost driver level rises, resulting in higher per-unit expenses.
Cost of Goods Sold under Absorption Method
- For ABC Company, Year 1 absorption cost of goods sold (COGS) calculation includes:
- Sales: $5,000,000
- Direct materials: $850,000
- Direct labor: $1,700,000
- Variable manufacturing overhead: $400,000
- Fixed manufacturing overhead: $750,000
- Total COGS calculated under absorption method amounts to $3,700,000.
Cost of Goods Manufactured Calculation
- Roosevelt Manufacturing Company’s information for the cost of goods manufactured includes:
- Direct materials purchased: $80,000
- Direct materials used: $76,000
- Direct labor: $10,000
- Indirect labor and other plant expenses are not included in the manufacturing cost calculation.
- The cost of goods manufactured totals $120,000, derived mainly from direct materials used and direct labor.
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Description
Test your knowledge on cost structure analysis based on the principles outlined in ACC 311 Chapter 2. This quiz covers variable costs, fixed costs, and the implications of different depreciation methods for manufacturing companies like Applewhite Corporation. Challenge yourself with multiple-choice questions and flashcards.
