management application week 1

1. Managerial accounting stresses accounting concepts and procedures that are relevant to preparing reports for 

investors and banks.

internal users of accounting information.

shareholders and creditors.

the Securities and Exchange Commission (SEC).

2. The goal of managerial accounting is to provide information that managers need for

planning, control, and financial reporting.

control, evaluation, and financial reporting.

planning, control, and decision making.

preparing reports for external users.

3. The financial plans prepared by managerial accountants are referred to as

budgets.

financial statements.

treasurer’s reports.

controller’s opinions.

4. Performance reports often compare current performance with

a competing company’s performance.

shareholders’ expected level of performance.

industry standards.

performance in a prior period or budgeted performance.

5. Below is a performance report that compares budgeted and actual profit of Atlanta Enterprises for the month of June:

		Budget		Actual		Difference
Sales		$182,000		$180,000		($2,000)
Less:
Cost of ingredients		145,000		141,000		4,000
Salaries		24,000		23,000		1,000
Controllable profit		$ 13,000		$ 16,000		$ 3,000

In evaluating the department in terms of its changes in sales and expenses, what will be most important to investigate?

Sales

Cost of ingredients

Salaries

Debtors

6. The fundamental difference between managerial and financial accounting is that

all financial accounting information is audited by Certified Public Accountants whereas managerial accounting information is audited by the IMA.

managerial accounting is concerned principally with budgets, whereas financial accounting is concerned with a wider range of the organization’s activities.

managerial accounting provides information for decision-makers within the organization, whereas financial accounting provides information for individuals and institutions external to the organization.

financial accounting information follows U.S. Generally Accepted Accounting Principles, whereas managerial accounting information generally follows rules set forth by the Institute of Management Accountants.

7. Variable cost per unit

increases when the number of units produced increases.

does not change when the number of units produced increases.

decreases when the number of units produced increases.

decreases when the number of units produced decreases.

8. Which of the following is most likely to be a fixed cost?

Cost of wheels for a lawn mower manufacturer

Rent on a factory building

Cost of labor for cashiers at a retail store

Supplies used by the housekeeping staff that cleans hotel rooms

9. Sunland’s Salsa is in the process of preparing a production cost budget for May. Actual costs in April were:

Sunland’s Salsa Production Costs April 2020
Production		20,000 Jars of Salsa
Ingredient cost (variable)		$12,000
Labor cost (variable)		8,400
Rent (fixed)		5,000
Depreciation (fixed)		6,000
Other (fixed)		1,000
Total		$32,400

(a)

Using this information, prepare a budget for May. Assume that production will increase to 24,000 jars of salsa, reflecting an anticipated sales increase related to a new marketing campaign.

Sunland's Salsa Budgeted Production Costs May 2020
Production		24,000 Jars of Salsa
Ingredient cost		$enter a dollar amount
Labor cost		enter a dollar amount
Rent		enter a dollar amount
Depreciation		enter a dollar amount
Other		enter a dollar amount
Total		$enter a total dollar amount

10. The Riverview Hotel is a deluxe four-star establishment. Late on Friday, it had 20 of its 300 rooms available when the desk clerk received a call from the Pines Hotel. The Pines Hotel made a booking error and did not have room for 4 guests (each of whom had a “confirmed” room). The Pines wants to send its customers to the Riverview but pay the rate the guests would have been charged at the Pines ($190 per room) rather than paying the normal rate of $320 per room at the Riverview. (a) If the Riverview accepts the guests, what will be the incremental revenue?

Incremental Revenue

$enter incremental revenue in dollar

11. Sanchez Sweets is in the process of preparing a production cost budget for May. Actual costs in April for production of 7,000 batches of cookies were:

Ingredients cost		$ 7,200
Rent		1,100
Labor cost		3,300
Depreciation		900
Other fixed costs		700
Total		$13,200

The company is currently producing and selling 80,000 batches of cookies annually with each batch sold for $8.00. The company is considering lowering the price to $7.50 per batch for which management estimates this will increase sales to 90,000 batches. Ingredients and labor are the only variable costs.

What is the incremental cost associated with producing an extra 10,000 batches of cookies?  (Do not round intermediate calculations, round final answer to 0 decimal places, e.g. 2,520.)

Incremental cost

$enter incremental cost in dollars

What is the incremental revenue associated with the price reduction?

Incremental revenue

$enter incremental revenue in dollars

Should Sanchez Sweets lower the price of its cookies?

select an option                                                                       Yes/No, lowering the price will result in incremental select an option                                                                       profit/loss of $enter a dollar amount  .

12. Sterling Auto Detail is currently open Monday through Friday. In the past year, income before taxes was as follows:

Numbers of cars detailed				2,080
Revenue				$468,000
Less operating expenses:
Supplies (polish, wax, etc.)		$5,824
Salaries of detailers		104,000
Water and other variable costs		12,480
Supervisor’s salary		65,000
Rent		36,000
Depreciation		5,000
Other fixed costs		1,050		229,354
Income before taxes				$238,646

Quincy Davis, the owner of Sterling, is considering extending the workweek through Saturday. If he takes this action, he’ll hire a part-time employee for $300 per day to act as the Saturday manager so the supervisor still can have Saturday off. Quincy estimates that his company will detail an additional 10 cars per Saturday, 52 weeks per year.

(a)

Calculate the annual incremental revenue associated with being open on Saturday.

Annual incremental revenue

$enter a annual incremental revenue in dollar

(b)

The parts of this question must be completed in order. This part will be available when you complete the part above.

(c)

The parts of this question must be completed in order. This part will be available when you complete the part above.

13. The production cost information for Sunland’s Salsa is as follows:

Sunland’s Salsa Production Costs April 2020
Production		28,000 Jars of Salsa
Ingredient cost (variable)		$16,800
Labor cost (variable)		11,760
Rent (fixed)		4,000
Depreciation (fixed)		6,200
Other (fixed)		1,100
Total		$39,860

The company is currently producing and selling 392,000 jars of salsa annually. The jars sell for $7.00 each. The company is considering lowering the price to $6.30. Suppose this action will increase sales to 448,000 jars.

(a)

What is the incremental cost associated with producing an extra 56,000 jars of salsa?

Incremental Cost

$enter incremental cost in dollar