Question 1

The difference between a profit center and an investment center is

Accepted Answer

A) an investment center incurs costs, but does not directly generate revenues. 
B) an investment center incurs no costs but does generate revenues. 
C) an investment center is responsible for effectively using center assets. 
D) an investment center provides services to profit centers. 
E) There is no difference; investment center and profit center are synonymous. 
A) an investment center incurs costs, but does not directly generate revenues. 
B) an investment center incurs no costs but does generate revenues. 
C) an investment center is responsible for effectively using center assets. 
D) an investment center provides services to profit centers. 
E) There is no difference; investment center and profit center are synonymous.

Question 2

The number of hours that a department uses equipment and machinery is a reasonable basis for allocating depreciation.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following represents the correct formula for calculating cycle time for a manufacturer?

Accepted Answer

A) Process time + inspection time - move time - wait time. 
B) Process time - inspection time + move time + wait time. 
C) Process time + inspection time + move time + wait time. 
D) Process time - inspection time - move time - wait time. 
E) Process time + inspection time + move time - wait time. 
A) Process time + inspection time - move time - wait time. 
B) Process time - inspection time + move time + wait time. 
C) Process time + inspection time + move time + wait time. 
D) Process time - inspection time - move time - wait time. 
E) Process time + inspection time + move time - wait time.

Question 4

Departmental contribution to overhead is the amount of revenues for that department less its direct expenses.

Accepted Answer

A) True 
 B)False

Question 5

Describe the information found on a responsibility accounting performance report.

Accepted Answer

Joint costs are costs incurred to produc

Question 6

Jamesway Corporation has two separate divisions that operate as profit centers.The following information is available for the most recent year:
$$\begin{array} { l r r r } 
& \text { White Division } & & \text { Grey Division } \
\text { sales (net) } & \$ 200,000 & & \$ 400,000 \
\text { salary expense } & 28,000 & & 48,000 \
\text { Cost of goods sold ...... } & 100,000 & & 159,000
\end{array}$$ The White Division occupies 20,000 square feet in the plant.The Grey Division occupies 30,000 square feet.Rent is an indirect expense and is allocated based on square footage.Rent expense for the year was $50,000.Compute gross profit for the White and Grey Divisions,respectively.

Accepted Answer

A) $72,000; $193,000. 
B) $172,000; $352,000. 
C) $100,000; $241,000. 
D) $52,000; $163,000. 
E) $72,000; $163,000. 
A) $72,000; $193,000. 
B) $172,000; $352,000. 
C) $100,000; $241,000. 
D) $52,000; $163,000. 
E) $72,000; $163,000.

Question 7

Costs that the manager does not have the power to determine or at least strongly influence are:

Accepted Answer

A) Variable costs. 
B) Uncontrollable costs. 
C) Indirect costs. 
D) Direct costs. 
E) Joint costs. 
A) Variable costs. 
B) Uncontrollable costs. 
C) Indirect costs. 
D) Direct costs. 
E) Joint costs.

Question 8

A sawmill bought a shipment of logs for $40,000.When cut,the logs produced a million board feet of lumber in the following grades.Compute the cost to be allocated to Type 1 and Type 2 lumber,respectively,if the value basis is used. Type 1 - 400,000 bd.ft.priced to sell at $0.12 per bd.ft.
Type 2 - 400,000 bd.ft.priced to sell at $0.06 per bd.ft.
Type 3 - 200,000 bd.ft.priced to sell at $0.04 per bd.ft.

Accepted Answer

A) $16,000; $16,000. 
B) $13,333; $4,444. 
C) $40,000; $24,000. 
D) $24,000; $12,000. 
E) $24,000; $8,000. 
A) $16,000; $16,000. 
B) $13,333; $4,444. 
C) $40,000; $24,000. 
D) $24,000; $12,000. 
E) $24,000; $8,000.

Question 9

A cost center does not directly generate revenues.

Accepted Answer

A) True 
 B)False

Question 10

The salaries of employees who spend all their time working in one department are:

Accepted Answer

A) Variable expenses. 
B) Indirect expenses. 
C) Direct expenses. 
D) Responsibility expenses. 
E) Unavoidable expenses. 
A) Variable expenses. 
B) Indirect expenses. 
C) Direct expenses. 
D) Responsibility expenses. 
E) Unavoidable expenses.

Question 11

A company produces two products,X and Y,from a single raw material called ZZ.ZZ is purchased in 55-gallon drums,and the contents of one drum are sufficient to produce 30 gallons of X and 15 gallons of Y.X sells for $10.00 per gallon and Y sells for $30.00 per gallon.During the current period,the company used 400 drums of ZZ to produce X and Y.The cost of ZZ was $90 per drum.
Required:
(1)If the cost of ZZ is allocated to the X and Y products on the basis of the number of gallons produced,how much of the total cost of the 400 drums should be charged to each product?
(2)If the cost of ZZ is allocated to the X and Y products in proportion to their market values,how much of the total cost of the 400 drums should be charged to each product?
(3)Which basis of allocating the cost is most likely to be used by the company?
The relative number of gallons of each product produced or the relative market values of each product at the point of separation.

Accepted Answer

Preliminary calculations: Total joint co

Question 12

Division X makes a part with the following characteristics:   Division Y of the same company would like to purchase 10,000 units each period from Division X.Division Y now purchases the part from an outside supplier at a price of $17 each.Suppose Division X has ample excess capacity to handle all of Division Y's needs without any increase in fixed costs and without cutting into sales to outside customers.If Division X refuses to accept the $17 price internally and Division Y continues to buy from the outside supplier,the company as a whole will be:

Accepted Answer

A) worse off by $70,000 each period. 
B) better off by $10,000 each period. 
C) worse off by $60,000 each period. 
D) worse off by $20,000 each period. 
E) better off by $60,000 each period. 
A) worse off by $70,000 each period. 
B) better off by $10,000 each period. 
C) worse off by $60,000 each period. 
D) worse off by $20,000 each period. 
E) better off by $60,000 each period.

Question 13

Precision Brackets,Co.uses a traditional allocation of overhead based on direct labor hours system.The manager has accumulated the following information on engineering changes for two of the company's major products:
   Compute the cost per unit using:
 The traditional two-stage allocation of the costs of engineering changes based on direct labor hours.

Accepted Answer

($400 * 5)+ ($400 * 25)= $12,000 total c

Question 14

The investment center return on total assets is ________________ divided by ________.

Accepted Answer

answers m

Question 15

Using the information below,compute the cycle efficiency: $$\begin{array} { | l | r | } 
\hline \text { Process time } & 6.0 \text { hours } \
\hline \text { Inspection time } & .5 \text { hours } \
\hline \text { Move time } & .6 \text { hours } \
\hline \text { Wait time } & .9 \text { hours } \
\hline \text { Warehouse storage time } & 72.0 \text { hours } \
\hline
\end{array}$$

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 16

Division X makes a part that it sells to customers outside of the company.Data concerning this part appear below:   Division Y of the same company would like to use the part manufactured by Division X in one of its products.Division Y currently purchases a similar part made by an outside company for $49 per unit and would substitute the part made by Division X.Division Y requires 5,000 units of the part each period.Division X has ample excess capacity to handle all of Division Y's needs without any increase in fixed costs and without cutting into outside sales.According to the formula in the text,what is the lowest acceptable transfer price from the standpoint of the selling division?

Accepted Answer

A) $50 
B) $49 
C) $46 
D) $30 
E) $20 
A) $50 
B) $49 
C) $46 
D) $30 
E) $20

Question 17

A company rents a building with a total of 100,000 square feet,which are evenly divided between two floors.The space on the first floor is considered twice as valuable as that on the second floor.The total monthly rent for the building is $30,000.How much of the monthly rental expense should be allocated to a department that occupies 10,000 square feet on the first floor?

Accepted Answer

A) $6,000. 
B) $5,000. 
C) $3,000. 
D) $4,000. 
E) $2,000. 
A) $6,000. 
B) $5,000. 
C) $3,000. 
D) $4,000. 
E) $2,000.

Question 18

When the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred,then the lowest acceptable transfer price as far as the selling division is concerned is:

Accepted Answer

A) variable cost of producing a unit of product. 
B) the full absorption cost of producing a unit of product. 
C) the market price charged to outside customers, less costs saved by transferring internally. 
D) the amount that the purchasing division would have to pay an outside seller to acquire a similar product for its use. 
E) all the costs of producing a unit of product. 
A) variable cost of producing a unit of product. 
B) the full absorption cost of producing a unit of product. 
C) the market price charged to outside customers, less costs saved by transferring internally. 
D) the amount that the purchasing division would have to pay an outside seller to acquire a similar product for its use. 
E) all the costs of producing a unit of product.

Question 19

Wilson Trade School allocates administrative costs to its respective departments based on the number of students enrolled,while maintenance and utilities are allocated per square feet of the classrooms.Based on the information below,what is the total amount allocated to the Automotive Department (rounded to the nearest dollar)if administrative costs for the school were $50,000,maintenance fees were $12,000,and utilities were $6,000?
Department Students Classrooms
Electrical............ 120 10,000 sq.ft.
                     Automotive……. 70 12,000 sq.ft.
Secretarial……… 50 8,000 sq.ft.
Plumbing………. 40 6,000 sq.ft .

Accepted Answer

A) $ 0. 
B) $17,000. 
C) $18,500. 
D) $22,667. 
E) $30,000. 
A) $ 0. 
B) $17,000. 
C) $18,500. 
D) $22,667. 
E) $30,000.

Question 20

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...

The difference between a profit center and an investment center is

The number of hours that a department uses equipment and machinery is a reasonable basis for allocating depreciation.

Which of the following represents the correct formula for calculating cycle time for a manufacturer?

Departmental contribution to overhead is the amount of revenues for that department less its direct expenses.

Describe the information found on a responsibility accounting performance report.

Costs that the manager does not have the power to determine or at least strongly influence are:

A cost center does not directly generate revenues.

The salaries of employees who spend all their time working in one department are:

The investment center return on total assets is ________ divided by .

Using the information below,compute the cycle efficiency: Process time 6.0 hours Inspection time .5 hours Move time .6 hours Wait time .9 hours Warehouse storage time 72.0 hours

When the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred,then the lowest acceptable transfer price as far as the selling division is concerned is:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

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 Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

Filters

Exam 24: Performance Measurement and Responsibility Accounting

The difference between a profit center and an investment center is

The number of hours that a department uses equipment and machinery is a reasonable basis for allocating depreciation.

Which of the following represents the correct formula for calculating cycle time for a manufacturer?

Departmental contribution to overhead is the amount of revenues for that department less its direct expenses.

Describe the information found on a responsibility accounting performance report.

Costs that the manager does not have the power to determine or at least strongly influence are:

A cost center does not directly generate revenues.

The salaries of employees who spend all their time working in one department are:

The investment center return on total assets is ________________ divided by ________.

Using the information below,compute the cycle efficiency: Process time 6.0 hours Inspection time .5 hours Move time .6 hours Wait time .9 hours Warehouse storage time 72.0 hours

When the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred,then the lowest acceptable transfer price as far as the selling division is concerned is:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

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 Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

Filters

The investment center return on total assets is ________ divided by .