Exam 12: Fundamentals of Management Control Systems

The use of dual rates in a cost allocation system assumes that common costs can be:

A manager makes a decision that is beneficial for a specific investment center and for the entire organization. From the organization's perspective, this decision results in:

Which of the following statements is false?

Seaside Resorts operates a centralized call center for the reservation needs of its time-share units. Costs associated with use of the center are charged to the time-share group (Luxury and Standard) where a reservation is made on the basis of time spent on a call. Due to recent increased competition in the time-share business, the company has decided that it is necessary to more accurately allocate its costs to price its services competitively and profitably. During the current period, the use of the call center for each group was as follows (in thousands of seconds for time usage and in number of reservations): Division Time Usage Number of Reservations Luxury 500,000 50,000 Standard 2,000,000 300,000 During this period, the cost of the computer center amounted to $1,220,000 for personnel and $960,000 for equipment and other costs. Required: Determine the allocation to each of the divisions using: (Round all decimals to three places.) a. a single rate based on time used. b. multiple rates based on time used (for personnel costs) and number of reservations (for equipment and other cost).

The Sunset Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year. Assume that practical capacity is used to calculate the allocation rates. Actual usage for the year by the Flashlight Division was 1,400 hours and by the Night Light Division was 600 hours. Required: 1. If a single-rate cost-allocation method is used, what amount of cost will be allocated to the Flashlight Division? Assume actual usage is used to allocate operating costs. 2. If a dual-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Night Light Division? 3. If a dual-rate cost-allocation method is used, what amount of cost will be allocated to the Night Light Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.

A successful responsibility accounting reporting system is dependent upon (CMA adapted):

The Copy Department in the College of Business at State University provides photocopying services for both the Marketing and Economics Departments. The following budget has been prepared for the year Available capacity 6,000,000 pages Budgeted usage: Marketing 3,600,000 pages Economics 1,800,000 pages Cost equation \ 120,000+\ 0.025 per page - If the Copy Department uses a dual-rate for allocating its costs, how much cost will be allocated to the Marketing Department, assuming the Marketing Department actually made 3,000,000 copies during the year?

The purpose of the Data Processing Department of Haslam Corporation is to assist the various departments of the corporation with their information needs free of charge. The Data Processing Department would best be evaluated as a(n):

An operating unit that is responsible for only costs is commonly referred to as a(n):

Properly designed management control systems have both fixed compensation and contingent compensation.

Internal controls include all of the following except:

The fixed costs of operating the maintenance facility of Indian River Hospital are $4,500,000 annually. Variable costs are incurred at the rate of $30 per maintenance hour. The facility averages 40,000 maintenance hours a year. Budgeted and actual hours for 2020 are as follows: Budgeted hours Actual hours Building and prounds 10,000 12,000 Operating and emergency 8,000 8,000 Patient care 21,000 22,000 Adrninistration Total Assume that budgeted maintenance hours are used to calculate the allocation rates. Required: a. If a single-rate cost allocation method is used, what amount of maintenance cost will be budgeted for each department? b. If a single-rate cost allocation method is used, what amount of maintenance cost will be allocated to each department based on actual usage? c. If a dual-rate cost allocation method is used, what amount of maintenance cost will be budgeted for each department? d. If a dual-rate cost allocation method is used, what amount of maintenance cost will be allocated to each department based on actual usage?

Poole Corporation's Maintenance Department provides services to the company's two operating divisions - the Paints Division and the Stains Division. The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments. The fixed costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments during the peak period. Data appear below: For performance evaluation purposes, how much Maintenance Department cost should be charged to the Stains Division at the end of the year?

Darren Corporation's Maintenance Department provides services to the company's two operating divisions - the Paints Division and the Stains Division. The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments. The fixed costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments during the peak period. Data appear below: For performance evaluation purposes, how much Maintenance Department cost should be charged to the Paints Division at the end of the year?

The Document Creation Center (DCC) for Arlington Corp. provides photocopying and document services for three departments in the Minneapolis office. The following budget has been prepared for the year. Available capacity 8,000,000 pages Budgeted usage: Software Development 1,600,00 pages Training 3,000,00 pages Management 2,400,000 pages Cost equation \ 280,000+\ 0.03 per page - If DCC uses a dual-rate for allocating its costs, how much cost will be allocated to the Training Department, assuming the Training Department actually made 3,250,000 copies during the year?

Markov Engineering has three divisions, commercial, retail, and consumer, that share the common costs of the company's computer server network. The annual common costs are $2,400,000. You have been provided with the following information for the upcoming year: Cannections Time on Netwark (haurs) Commercial 60,000 120,000 Retail 80,000 150,000 Consumer 100,000 330,000 Required: The cost accountant determined $1,800,000 of the server network's costs were fixed and should be allocated based on the number of connections. The remaining costs should be allocated based on the time on the network. What is the total server network costs allocated to each division? (Use three decimal places in your calculations.)

The Document Creation Center (DCC) for Arlington Corp. provides photocopying and document services for three departments in the Minneapolis office. The following budget has been prepared for the year. Available capacity 8,000,000 pages Budgeted usage: Software Development 1,600,00 pages Training 3,000,00 pages Management 2,400,000 pages Cost equation \ 280,000+\ 0.03 per page - If DCC uses a dual-rate for allocating its costs, how much cost will be allocated to the Management Department, assuming the Management Department actually made 2,950,000 copies during the year?

Which of the following is the purpose of relative performance evaluation (RPE)?

Describe the three main elements of a management control system.

Fixed compensation is generally not linked to measured performance; i.e., it is independent of measured performance.