Question 1

Return on investment is a useful measure to evaluate the performance of a cost center manager.

Accepted Answer

A) True 
 B)False

Question 2

The __________ is a report of the amount of sales less direct expenses for a department.

Accepted Answer

department

Question 3

Investment center managers are usually evaluated using performance measures

Accepted Answer

A) that combine income and assets. 
B) that combine income and capital. 
C) based on assets only. 
D) based on income only. 
E) that combine assets and capital. 
A) that combine income and assets. 
B) that combine income and capital. 
C) based on assets only. 
D) based on income only. 
E) that combine assets and capital.

Question 4

A company rents a small building with 10,000 square feet of space for $100,000 per year.The rent is allocated to the company's three departments on the basis of the value of the space occupied by each.Department One occupies 1,500 square feet of ground-floor space,Department Two occupies 3,500 square feet of ground-floor space,and Department Three occupies 5,000 square feet of second-floor space.If rent for comparable floor space in the neighborhood averages $15.00 per sq.ft.for ground-floor space and $10.00 per sq.ft.for second-floor space,what annual rent expense should be charged to each department?

Accepted Answer

The answer of A company rents a small building with...

Question 5

If a company reports profit margin of 31.6% and investment turnover of 1.30 for one of its investment centers,the return on investment must be:

Accepted Answer

A) 24.3%. 
B) 41.1%. 
C) 32.9%. 
D) 30.3%. 
E) 4.11%. 
A) 24.3%. 
B) 41.1%. 
C) 32.9%. 
D) 30.3%. 
E) 4.11%.

Question 6

Dartford Company reported the following financial data for one of its divisions for the year;average investment center total assets of $3,500,000;investment center income $610,000;a target income of 12% of average invested assets.The residual income for the division is:

Accepted Answer

A) $536,800. 
B) $1,030,000. 
C) $190,000. 
D) $683,200. 
E) $493,200. 
A) $536,800. 
B) $1,030,000. 
C) $190,000. 
D) $683,200. 
E) $493,200.

Question 7

No standard rule identifies the best basis of allocating expenses across departments,so it is impossible to allocate costs in a manner that will be perceived as fair.

Accepted Answer

A) True 
 B)False

Question 8

A department's direct expenses are usually considered uncontrollable costs.

Accepted Answer

A) True 
 B)False

Question 9

A joint cost of producing two products can be allocated between those products on the basis of the relative physical quantities of each product produced.

Accepted Answer

A) True 
 B)False

Question 10

A firm produces and sells two products,Plus and Max.The following information is available relating to setup costs (a part of factory overhead):   Using number of setups as the activity base,the amount of setup cost allocated to each unit of product for Plus and Max,respectively is:

Accepted Answer

A) $21.60;$.54. 
B) $54.00;$27.00. 
C) $60.00;$60.00. 
D) $108.00;$2.70. 
E) $200.00;$16,000. 
A) $21.60;$.54. 
B) $54.00;$27.00. 
C) $60.00;$60.00. 
D) $108.00;$2.70. 
E) $200.00;$16,000.

Question 11

Holo Company reported the following financial numbers for one of its divisions for the year;average total assets of $5,800,000;sales of $5,375,000;cost of goods sold of $3,225,000;and operating expenses of $1,147,000.Compute the division's return on investment:

Accepted Answer

A) 18.6%. 
B) 21.3%. 
C) 17.3%. 
D) 10.4%. 
E) 14.7%. 
A) 18.6%. 
B) 21.3%. 
C) 17.3%. 
D) 10.4%. 
E) 14.7%.

Question 12

Franklin Co.has three departments: purchasing,human resources,and assembly.In a recent month the three departments incurred two shared indirect expenses.The amounts of the indirect expenses and the bases used to allocate them follow.Use this information to allocate each of the two indirect expenses across the three departments using the tables provided below.   Departmental data for the company's recent reporting period follow.

Accepted Answer

The answer of Franklin Co.has three departments: purchasing,human resources,and assembly.In...

Question 13

Investment center is another name for profit center.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not a step in creating operating department income statements?

Accepted Answer

A) Prepare the departmental income statements. 
B) Accumulate revenues and direct expenses by department. 
C) Allocate indirect expenses across departments. 
D) Allocate service department expenses to operating departments. 
E) Eliminate the uncontrollable costs for each department. 
A) Prepare the departmental income statements. 
B) Accumulate revenues and direct expenses by department. 
C) Allocate indirect expenses across departments. 
D) Allocate service department expenses to operating departments. 
E) Eliminate the uncontrollable costs for each department.

Question 15

Pleasant Hills Properties is developing a golf course subdivision that includes 250 home lots;100 lots are golf course lots and will sell for $95,000 each;150 are street frontage lots and will sell for $65,000.The developer acquired the land for $1,800,000 and spent another $1,400,000 on street and utilities improvement.Compute the amount of joint cost to be allocated to the golf course lots using value basis.

Accepted Answer

A) $1,920,000. 
B) $720,000. 
C) $1,620,800. 
D) $1,579,200. 
E) $1,080,000. 
A) $1,920,000. 
B) $720,000. 
C) $1,620,800. 
D) $1,579,200. 
E) $1,080,000.

Question 16

An accounting system that accumulates and reports costs incurred by each service department for management to evaluate the performance of a department is a:

Accepted Answer

A) Departmental accounting system. 
B) Cost accounting system. 
C) Service accounting system. 
D) Revenue accounting system. 
E) Standard accounting system. 
A) Departmental accounting system. 
B) Cost accounting system. 
C) Service accounting system. 
D) Revenue accounting system. 
E) Standard accounting system.

Question 17

Using the information below,compute the cycle efficiency:

Accepted Answer

A) 93.8%. 
B) 81.3%. 
C) 100.0%. 
D) 75.0%. 
E) 88.8%. 
A) 93.8%. 
B) 81.3%. 
C) 100.0%. 
D) 75.0%. 
E) 88.8%.

Question 18

The Menswear Department of Major's Department Store had sales of $188,000,cost of goods sold of $132,500,indirect expenses of $13,250,and direct expenses of $27,500 for the current period.The Menswear Department's contribution to overhead as a percent of sales is:

Accepted Answer

A) 7.8%. 
B) 14.9%. 
C) 29.5%. 
D) 66.7%. 
E) 85.4%. 
A) 7.8%. 
B) 14.9%. 
C) 29.5%. 
D) 66.7%. 
E) 85.4%.

Question 19

In regard to joint cost allocation,the "split-off point" is:

Accepted Answer

A) A physical basis method to allocate costs based on ratio of some physical characteristic. 
B) The difference between the actual and market value of joint costs. 
C) The point at which some products are sold and some remain in inventory. 
D) The point at which separate products can be identified. 
E) Not acceptable when using the value basis for allocating joint costs. 
A) A physical basis method to allocate costs based on ratio of some physical characteristic. 
B) The difference between the actual and market value of joint costs. 
C) The point at which some products are sold and some remain in inventory. 
D) The point at which separate products can be identified. 
E) Not acceptable when using the value basis for allocating joint costs.

Question 20

Advertising expense can be reasonably allocated to departments on the basis of each department's proportion of sales.

Accepted Answer

A) True 
 B)False

Exam 24: Performance Measurement and Responsibility Accounting

Return on investment is a useful measure to evaluate the performance of a cost center manager.

The __________ is a report of the amount of sales less direct expenses for a department.

Investment center managers are usually evaluated using performance measures

If a company reports profit margin of 31.6% and investment turnover of 1.30 for one of its investment centers,the return on investment must be:

Dartford Company reported the following financial data for one of its divisions for the year;average investment center total assets of $3,500,000;investment center income $610,000;a target income of 12% of average invested assets.The residual income for the division is:

No standard rule identifies the best basis of allocating expenses across departments,so it is impossible to allocate costs in a manner that will be perceived as fair.

A department's direct expenses are usually considered uncontrollable costs.

A joint cost of producing two products can be allocated between those products on the basis of the relative physical quantities of each product produced.

A firm produces and sells two products,Plus and Max.The following information is available relating to setup costs (a part of factory overhead): Using number of setups as the activity base,the amount of setup cost allocated to each unit of product for Plus and Max,respectively is:

Holo Company reported the following financial numbers for one of its divisions for the year;average total assets of $5,800,000;sales of $5,375,000;cost of goods sold of $3,225,000;and operating expenses of $1,147,000.Compute the division's return on investment:

Investment center is another name for profit center.

Which of the following is not a step in creating operating department income statements?

An accounting system that accumulates and reports costs incurred by each service department for management to evaluate the performance of a department is a:

Using the information below,compute the cycle efficiency:

The Menswear Department of Major's Department Store had sales of $188,000,cost of goods sold of $132,500,indirect expenses of $13,250,and direct expenses of $27,500 for the current period.The Menswear Department's contribution to overhead as a percent of sales is:

In regard to joint cost allocation,the "split-off point" is:

Advertising expense can be reasonably allocated to departments on the basis of each department's proportion of sales.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Appendix B: Time Value of Money

Appendix C: Activity-Based Costing

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