# cost accounting practice exam

2. The Garry Corporation's most recent contribution format income statement is shown below:

Total Per Unit

Sales units 15,000

Sales dollars $225,000 $15.00

Variable expenses135,000 9.00

Contribution margin 90,000 $6.00

Fixed expenses 35,000

Net Operating income $55,000

Required:

Prepare a new contribution format income statement under each of the following conditions (consider each case independently):

a. The sales volume increases by 10% and the price decreases by $0.50 per unit.

b. The selling price decreases $1.00 per unit, fixed expenses increase by $15,000, and the sales volume decreases by 5%.

c. The selling price increases by 25%, variable expense increases by $0.75 per unit, and the sales volume decreases by 15%.

d. The selling price increases by $1.50 per unit, variable cost increases by $1.00 per unit, fixed expenses

decrease by $15,000, and sales volume decreases by 12%.

3. In July, Meers Corporation sold 3,700 units of its only product. Its total sales were $107,300, its total

variable expenses were $66,600, and its total fixed expenses were $34,800.

Required:

a. Construct the company's contribution format income statement for July in good form.

b. Redo the company's contribution format income statement assuming that the company sells 3,400 units.

4. The management of Dethlefsen Corporation would like to have a better understanding of the behavior

of its inspection costs. The company has provided the following data:

Direct Labor Inspection

Hours Cost

JAN 5,089 $33,122

FEB 5,042 $32,929

MAR 5,026 $32,870

APR 5,073 $33,065

MAY 5,029 $32,906

JUN 5,040 $32,913

JUL 5,070 $33,050

AUG 5,027 $32,875

SEP 4,995 $32,746

Management believes that inspection cost is a mixed cost that depends on direct labor-hours.

Required:

a. Using the high low method determine the variable cost per unit, the total fixed cost, and express in a formula.

b. Using the regression analysis determine the variable cost per unit, the total fixed cost, and express in a formula.

Explain what the regression analysis printout for this problem, tells you about the independent and dependent variable,

and the fixed cost or intercept. How good of a predictor is the model and how did you determine this.

#### Solution Summary

The two problems posted are solved using excel so the student can review the formulas in addition to following the process.