Question 1

Controllable revenue is included in a performance report of a:
$\begin{array} { cc} 
&{ \text { Revenue Center } } &  { \text { Cost Center } } \\end{array}$

Accepted Answer

A) $\begin{array} { cc}  && \text { Yes } &&&&&& \text { No } \\end{array}$ 
B) $\begin{array} { cc} && \text { Yes } &&&&&& \text { Yes } \\end{array}$ 
C) $\begin{array} { cc}  && \text { No } &&&&&& \text { No } \\end{array}$ 
D) $\begin{array} { cc}  && \text { No } &&&&&& \text { Yes } \
\end{array}$ 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A) $\begin{array} { cc}  && \text { Yes } &&&&&& \text { No } \\end{array}$ 
B) $\begin{array} { cc} && \text { Yes } &&&&&& \text { Yes } \\end{array}$ 
C) $\begin{array} { cc}  && \text { No } &&&&&& \text { No } \\end{array}$ 
D) $\begin{array} { cc}  && \text { No } &&&&&& \text { Yes } \
\end{array}$ 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 2

Smash Burgers is a fast-food restaurant that sells vegetarian burgers and hot dogs in a 1950s environment. The fixed operating costs of the company are $5,000 per month. The controlling shareholder, interested in product profitability and pricing, wants all costs allocated to either the burgers or the hot dogs. The following information is provided for the operations of the company:
 $$\begin{array} { | l | r | r | } 
\hline & \text { Burgers } & { \text { Hot Dogs } } \
\hline \text { Sales for January } & 4,000 & 2,400 \
\hline \text { Sales for February } & 6,400 & 2,400 \
\hline
\end{array}$$ 
Required:
a. What amount of fixed operating costs is assigned to the burgers and hot dogs when actual sales are used as the allocation base for January? For February?
b. Hot dog sales for January and February remained constant. Did the amount of fixed operating costs allocated to hot dogs also remain constant for January and February? Explain why or why not. Comment on any other observations.

Accepted Answer

a.January sales:
Burgers $5,000 × [4,000

Question 3

Cost allocations based on dual rates assume that a common cost can be separated into a fixed component and a variable component.

Accepted Answer

A) True 
 B)False

Question 4

The Michael Vamosi Corporation operates one central plant that has two divisions, the Lamp Division and the Flashlight Division. The following data apply to the coming budget year:
   
 $$\begin{array}{l}
\text { Budgeted long-nun usage per year: }\
\begin{array} { | l | l | l | l | } 
\hline \text { Lamp Division } & \text { 800hours } \times 12 \text { months } = & 9,600 \text { hours per year } \
\hline \text { Flashlight Division } & 450 \text { hours } \times 12 \text { months } = & 5,400 \text { hours per year } \
\hline
\end{array}
\end{array}$$ 
Assume that practical capacity is used to calculate the allocation rates. Further assume that actual usage of the Lamp Division was 700 hours and the Flashlight Division was 400 hours for the month of June.
Required:
a. If a single-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month?
b. For the month of June, if a single-rate cost allocation method is used, what amount of cost will be allocated to the Lamp Division? To the Flashlight Division? Assume actual usage is used to allocate operating costs.
c. If a dual-rate cost allocation method is used, what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month?
d. For the month of June, if a dual-rate cost allocation method is used, what amount of cost will be allocated to the Lamp Division? To the Flashlight Division?

Accepted Answer

a. @#IMG-DLM& b. \[\begin{array} { l l } 
\text {

Question 5

The fixed costs of Black Company's personnel department are allocated to operating departments on the basis of direct labor-hours. The following data have been provided:
$$\begin{array} {r}
  { \text { Operatirg Department } } \
\begin{array}{ | l | c | c | } 
\hline & \mathrm { X } & \mathrm { Y } \
\hline \text { Direct labor-hours - Long-run average } & 15,000 & 10,000 \
\hline \text { Direct labor-hours - Actual } & 10,000 & 6,000 \
\hline
\end{array}\end{array}$$
The fixed costs of the personnel department are budgeted at $56,000 per year and are incurred in order to support long-run average requirements. How much of this fixed cost should be charged to Operating Department X at the end of the year for performance evaluation purposes?

Accepted Answer

A)  $35,000. 
B)  $33,600. 
C)  $52,500. 
D)  $22,400. 
A)  $35,000. 
B)  $33,600. 
C)  $52,500. 
D)  $22,400.

Question 6

Assets invested in a responsibility center are included in a performance report of a:
$\begin{array} { cc} 
&\text { Profit  Center } & \text {Cost Center } \\end{array}$

Accepted Answer

A) $\begin{array} { cc}  && \text { Yes } &&&&&& \text { No } \\end{array}$ 
B) $\begin{array} { cc} && \text { Yes } &&&&&& \text { Yes } \\end{array}$ 
C) $\begin{array} { cc}  && \text { No } &&&&&& \text { No } \\end{array}$ 
D) $\begin{array} { cc}  && \text { No } &&&&&& \text { Yes } \
\end{array}$ 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A) $\begin{array} { cc}  && \text { Yes } &&&&&& \text { No } \\end{array}$ 
B) $\begin{array} { cc} && \text { Yes } &&&&&& \text { Yes } \\end{array}$ 
C) $\begin{array} { cc}  && \text { No } &&&&&& \text { No } \\end{array}$ 
D) $\begin{array} { cc}  && \text { No } &&&&&& \text { Yes } \
\end{array}$ 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 7

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.
$$\begin{array} { l c } 
\text { Available capacity } & 6,000,000 \text { pages } \
\text { Budgeted usage: } & \
\text { Marketing } & 3,600,000 \text { pages } \
\text { Economics } & 1,800,00 \text { pages } \
\text { Cost equation } & \$ 120,000 + \$ 0.025 \text { per page }
\end{array}$$
-
If the Copy Department uses a dual-rate for allocating its costs, how much cost will be allocated to the Economics Department, assuming the Economics Department actually made 2,100,000 copies during the year?

Accepted Answer

A)  $85,000. 
B)  $92,500. 
C)  $132,500. 
D)  $112,500. 
A)  $85,000. 
B)  $92,500. 
C)  $132,500. 
D)  $112,500.

Question 8

Which one of the following will not occur in an organization that gives managers throughout the organization maximum freedom to make decisions? (CMA adapted)

Accepted Answer

A)  More effective solutions to operational problems. 
B)  Individual managers regard the managers of other segments as they do external parties. 
C)  Two divisions of the organization having competing models that aim for the same market segments. 
D)  Delays in securing approval for the introduction of new products. 
A)  More effective solutions to operational problems. 
B)  Individual managers regard the managers of other segments as they do external parties. 
C)  Two divisions of the organization having competing models that aim for the same market segments. 
D)  Delays in securing approval for the introduction of new products.

Question 9

The Barton Creek Company has three client-contact departments: Market Research, Branding, and Promotion. Each department requires the services of the Legal Department for the contracts that each undertakes. The size of the Legal Department was based on long-run estimates of contracts. Information on the Legal Department's budgeted and actual costs is as follows:
The budget for the Legal Department is $200,000 + $7.50/contract. The budgeted volume of contracts is as follows:
 $$\begin{array} { | l | r |} 
\hline \text { Market Research } & 300 \
\hline \text { Branding } & 500 \
\hline \text { Promotion } & 700 \
\hline
\end{array}$$ 
The actual number of contracts for Market Research was 286, for Branding was 450, and for Promotion was 675.
Required:
(Use three decimal places in your calculations.)
a. If a single charging rate based on budgeted usage is used, how much of the cost of the Legal Department would be allocated to each of the producing departments?
b. If a dual charging rate is used, how much of the cost of the Legal Department would be allocated to each of the producing departments?

Accepted Answer

a.Rate = $200,000 + [$7.50 × (300 + 500

Question 10

Examples of pressures that can lead to financial fraud do not include:

Accepted Answer

A)  unrealistic budgets. 
B)  inappropriate bonus plans. 
C)  overemphasis on long-term results. 
D)  overemphasis on short-term results. 
A)  unrealistic budgets. 
B)  inappropriate bonus plans. 
C)  overemphasis on long-term results. 
D)  overemphasis on short-term results.

Question 11

Santa Fe Industries has two divisions, Marketing and Finance, that share the common costs of the company's communications network. The annual common costs are $2,250,000. You have been provided with the following information for the upcoming year:
 $$\begin{array} { | l | r | c | } 
\hline & \text { Calls } & \text { Time on Network (hours) } \
\hline \text { Marketing } & 50,000 & 120,000 \
\hline \text { Finance } & 40,000 & 330,000 \
\hline
\end{array}$$ 
Required:
(Use three decimal places in your calculations.)
a. What is the allocation rate for the upcoming year assuming Santa Fe uses the single-rate method and allocates common costs based on the number of calls? Calculate the costs allocated to each division.
b. What is the allocation rate for the upcoming year assuming Santa Fe uses the single-rate method and allocates common costs based on the time on the network? Calculate the costs allocated to each division.

Accepted Answer

a.Rate: $2,250,000/(50,000 + 40,000) = $

Question 12

Decentralization refers to the delegation of decision-making authority to:

Accepted Answer

A)  top management. 
B)  superiors. 
C)  board of directors. 
D)  subordinates. 
A)  top management. 
B)  superiors. 
C)  board of directors. 
D)  subordinates.

Question 13

Relative performance evaluations (RPE) are not designed to:

Accepted Answer

A)  compare managers to other comparable managers. 
B)  compare divisions with other comparable divisions. 
C)  remove the effect of environmental factors that are beyond a manager's control. 
D)  restate departmental goals so meaningful comparisons can be made. 
A)  compare managers to other comparable managers. 
B)  compare divisions with other comparable divisions. 
C)  remove the effect of environmental factors that are beyond a manager's control. 
D)  restate departmental goals so meaningful comparisons can be made.

Question 14

Properly designed management control systems will eliminate fraudulent behavior by maximizing goal congruence within the organization.

Accepted Answer

A) True 
 B)False

Question 15

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.
$$\begin{array} { l c } 
\text { Available capacity } & 6,000,000 \text { pages } \
\text { Budgeted usage: } & \
\text { Marketing } & 3,600,000 \text { pages } \
\text { Economics } & 1,800,00 \text { pages } \
\text { Cost equation } & \$ 120,000 + \$ 0.025 \text { per page }
\end{array}$$
-
If the Copy Department uses a dual rate for allocating its costs based on usage, how much cost will be allocated to the Marketing Department?

Accepted Answer

A)  $85,000. 
B)  $90,000. 
C)  $150,000. 
D)  $170,000. 
A)  $85,000. 
B)  $90,000. 
C)  $150,000. 
D)  $170,000.

Question 16

Describe five advantages of decentralization.

Accepted Answer

(1) Better use of local knowledge; (2) f

Question 17

Atlantic 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, Standard, and Budget) 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):
 $$\begin{array} { | l | r | r | } 
\hline \text { Division } & { \text { Time Usage } } & \text { Number of Reservations } \
\hline \text { Luxury } & 500,000 & 50,000 \
\hline \text { Standard } & 2,000,000 & 300,000 \
\hline \text { Budget } & 1,500,000 & 250,000 \
\hline
\end{array}$$ 
During this period, the cost of the computer center amounted to $1,760,000 for personnel and $1,240,000 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).

Accepted Answer

a. Total cost allocated: $1,760,000 + 1,

Question 18

Mesa Telcom 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:
$$\begin{array} { | l | r | r | } 
\hline & \text { Connections } & { \text { Time on Network (hours) } } \
\hline \text { Commercial } & 60,000 & 120,000 \
\hline \text { Retail } & 80,000 & 150,000 \
\hline \text { Consumer } & 100,000 & 330,000 \
\hline
\end{array}$$
-
The cost accountant determined $1,700,000 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 total server network costs allocated to the Consumer Division (rounded to the nearest whole dollar), assuming the company uses dual-rates to allocate common costs?

Accepted Answer

A)  $1,200,000. 
B)  $1,093,333. 
C)  $954,896. 
D)  $750,000. 
A)  $1,200,000. 
B)  $1,093,333. 
C)  $954,896. 
D)  $750,000.

Question 19

One of the key internal controls for any organization is separation of duties.

Accepted Answer

A) True 
 B)False

Question 20

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.
$\begin{array}{lr}
\text { Available capacity } & 8,000,000 \text { pages } \
\text { Budgeted usage: } & \
\text { Software Development } & 1,600,00 \text { pages } \
\text { Training } & 3,000,00 \text { pages } \
\text { Management } & 2,400,000 \text { pages } \
\text { Cost equation } & \$ 280,000+\$ 0.03 \text { per page }
\end{array}$

-
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 2,770,000 copies during the year?

Accepted Answer

A)  $180,050. 
B)  $190,079. 
C)  $193,900. 
D)  $203,100. 
A)  $180,050. 
B)  $190,079. 
C)  $193,900. 
D)  $203,100.

Controllable revenue is included in a performance report of a: Revenue Center Cost Center A) Yes No B) Yes Yes C) No No D) No Yes

Cost allocations based on dual rates assume that a common cost can be separated into a fixed component and a variable component.

Assets invested in a responsibility center are included in a performance report of a: Profit Center Cost Center A) Yes No B) Yes Yes C) No No D) No Yes

Which one of the following will not occur in an organization that gives managers throughout the organization maximum freedom to make decisions? (CMA adapted)

Examples of pressures that can lead to financial fraud do not include:

Decentralization refers to the delegation of decision-making authority to:

Relative performance evaluations (RPE) are not designed to:

Properly designed management control systems will eliminate fraudulent behavior by maximizing goal congruence within the organization.

Describe five advantages of decentralization.

One of the key internal controls for any organization is separation of duties.

Cost Accounting: Information for Decision Making

Cost Concepts and Behavior

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

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Exam 12: Fundamentals of Management Control Systems

Controllable revenue is included in a performance report of a: Revenue Center Cost Center A) Yes No B) Yes Yes C) No No D) No Yes

Cost allocations based on dual rates assume that a common cost can be separated into a fixed component and a variable component.

Assets invested in a responsibility center are included in a performance report of a: Profit Center Cost Center A) Yes No B) Yes Yes C) No No D) No Yes

Which one of the following will not occur in an organization that gives managers throughout the organization maximum freedom to make decisions? (CMA adapted)

Examples of pressures that can lead to financial fraud do not include:

Decentralization refers to the delegation of decision-making authority to:

Relative performance evaluations (RPE) are not designed to:

Properly designed management control systems will eliminate fraudulent behavior by maximizing goal congruence within the organization.

Describe five advantages of decentralization.

One of the key internal controls for any organization is separation of duties.

Cost Accounting: Information for Decision Making

Cost Concepts and Behavior

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters