Exam 7: Cost Management Issues

An indirect expense:

In a month when a hotel's laundry department processes 20,000 kgs of laundry, the laundry operating costs are $15,000. In a month when it processes 25,000 kgs of laundry, the laundry operating costs are $17,500. Use the high-low method to determine the laundry department's fixed cost per month.

Identify which of the following statements is true. Management accounting:

In a month when a hotel's laundry department processes 10,000 kgs of laundry, the laundry operating costs are $15,000. In a month when it processes 20,000 kgs of laundry, the laundry operating costs are $20,000. Use the high-low method to determine the laundry department's fixed cost per month.

In a week when hotel room cleaning costs were $18,000, 600 rooms had been sold. In a week when hotel room cleaning costs were $22,000, 800 rooms had been sold. Use the high-low method to determine the hotel's fixed cost per week to clean rooms.

Which of the following statements is true:

A scuba diving shop has the following profit and loss statement for its quietest month of the year. Scuba Dives Ltd Profit and Loss Statement for February Revenue \ 70,000 Cost of goods sold Groff profit 42,000 Less expenses Maintenance 28,000 Salaries \& wages 22,000 Rent Net operating loss The shop's accountant has determined that: $\bullet$ The shop pays $7,000 per month under a maintenance agreement to a contractor. The remaining maintenance expense is variable. $\bullet$ 50% of the salaries and wages are fixed. $\bullet$ Rent is all fixed. What would have been the impact on the shop's profit for the year if it had closed in February?

Which of the following is untrue?

A hotel has the following profit and loss statement for its quietest month of the year. Romantic Nights Hotel Ltd Profit and Loss Statement for March Revenue \ 80,000 Cost of sales Gross profit 58,000 Less expenses Maintenance 22,000 Salaries \& wages 28,000 Electricity \ Net operating loss The hotel accountant has determined that: $\bullet$ The hotel pays $60,000 per year under a maintenance agreement to a contractor. The remaining maintenance expense is variable. $\bullet$ 75% of the salaries and wages are fixed. $\bullet$ Variable electricity expense in March was $21,000, the remainder is fixed. What would have been the impact on the hotel's profit for the year if it had closed in March?

A Las Vegas hotel is considering disposing of a row of vending machines as it would like to place an internet cafe in the space occupied by the vending machines. The vending machines have been generating $18,000 in profit for the hotel. When making this decision, the $18,000 annual profit generated by the vending machines can be viewed as:

A semi-variable cost is:

In a month when a hotel's laundry department processes 30,000 kgs of laundry, the laundry operating costs are $17,000. In a month when it processes 20,000 kgs of laundry, the laundry operating costs are $14,000. Use the high-low method to determine the laundry department's fixed cost per month.

Which of the following is not a widely-used cost classification scheme:

A hotel has the following profit and loss statement for its quietest month of the year. Silky Sheets Hotel Ltd Profit and Loss Statement for February Revenue \ 90,000 Cost of sales Gross profit 64,000 Less expenses Maintenance 26,000 Salaries \& wages 30,000 Electricity Net operating loss The hotel accountant has determined that: $\bullet$ The hotel pays $6,000 per month under a maintenance agreement to a contractor. The remaining maintenance expense is variable. $\bullet$ Half the salaries and wages are fixed. $\bullet$ Variable electricity expense in February was $24,000, the remainder is fixed. What would have been the impact on the hotel's profit for the year if it had closed in February?

Which of the following statements is true:

In a month when a hotel's laundry department processes 10,000 kgs of laundry, the laundry operating costs are $9,000. In a month when it processes 15,000 kgs of laundry, the laundry operating costs are $11,500. Use the high-low method to determine the laundry department's fixed cost per month.

A Las Vegas hotel is considering disposing of a drinks vending machine as it would like to place a hotel phone in the space occupied by the vending machine. The vending machine has three years of $2,500 per annum depreciation charges still to be expensed. When making this decision, the $2,500 annual depreciation charges can be viewed as:

A Las Vegas hotel is considering disposing of a drinks vending machine as it would like to place a hotel phone in the space occupied by the vending machine. The vending machine has been generating $6,500 in profit for the hotel. When making this decision, the $6,500 annual profit generated by the vending machine can be viewed as:

An opportunity cost is:

When trying to decide whether a cost is relevant to a decision to outsource office cleaning services, a manager should view a cost as relevant if: