Exam 7: Cost Management Issues

A hotel has the following profit and loss statement for its quietest month of the year. Gala Hotel Ltd Profit and Loss Statement for February Revenue \ 100,000 Cost of sales 34,000 Gross profit 66,000 Less expenses Maintenance 24,000 Salaries 32,000 Electricity Net operating loss The hotel accountant has determined that: $\bullet$ The hotel pays $8,000 per month under a maintenance agreement to a contractor. The remaining maintenance expense is variable. $\bullet$ Salaries are all fixed. $\bullet$ Variable electricity expense in February was $20,000, the remainder is fixed. What would have been the impact on the hotel's profit for the year if it had closed in February?

A sunk cost is:

Variable costs:

Widely-used cost classification schemes include:

Which of the following is true?

Material costs that are not traceable to a cost object represent:

In the last financial year, during its busiest month, the Outback Tours company took 12,000 guests on its tours and incurred total costs of $28,000. During its quietest month it had 8,000 guests and its costs were $20,000. How much are Outback Tours monthly fixed costs?

Costs that have a fixed and a variable component are termed:

The Outback Spectacular show has a shop that sells cowboy style jackets. It has spent $33,000 to purchase 3,000 jackets. Due to changing fashions, they have not been able to sell the jackets at the regular selling price of $20.00. The company is evaluating two alternatives. They could drop the selling price of the jackets to $8 each or they could modify the jackets at a cost of $5,000 and sell them for a total of $32,000. What would be the effect on profit of modifying the jackets as opposed to selling them for $8 each?

When making a short-term pricing decision:

In a week when a hotel sells 800 room nights, its cost of cleaning rooms is $23,000. In a week when it sells 500 room nights, its total room cleaning cost is $20,000. Use the high-low method to determine the hotel's fixed cost per week to clean rooms.

Variable costs are costs that:

A hotel has the following profit and loss statement for its quietest month of the year. Gala Hotel Ltd Profit and Loss Statement for February Revenue \ 100,000 Cost of sales Gross profit 66,000 Less expenses Maintenance 24,000 Salaries 32,000 Electricity Net operating loss The hotel accountant has determined that: $\bullet$ The hotel pays $10,000 per month under a maintenance agreement to a contractor. The remaining maintenance expense is variable. $\bullet$ 50% of salaries are fixed. $\bullet$ Variable electricity expense in February was $25,000, 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 represents an overhead if a hotel is trying to determine the cost of hosting a recent conference?

Which of the following is true?

A direct cost is:

A hotel is preparing a cost schedule for a client who is planning to hold a conference in the hotel's main ballroom. Which of the following is not a direct cost in connection with the hotel hosting the conference.

Which of the following is untrue?

Which of the following is not an example of a variable cost?