Question 1

Investment center is another name for profit center.

Accepted Answer

A) True 
 B)False

Question 2

A department that is responsible for maximizing revenues is known as a profit center.

Accepted Answer

A) True 
 B)False

Question 3

An accounting system that provides information that management can use to evaluate the performance of a department's manager is called a:

Accepted Answer

A) Cost accounting system. 
B) Managerial accounting system. 
C) Responsibility accounting system. 
D) Financial accounting system. 
E) Activity-based accounting system. 
A) Cost accounting system. 
B) Managerial accounting system. 
C) Responsibility accounting system. 
D) Financial accounting system. 
E) Activity-based accounting system.

Question 4

A responsibility accounting system:

Accepted Answer

A) Is designed to measure the performance of managers in terms of controllable costs. 
B) Assigns responsibility for costs to the appropriate managerial level that controls those costs. 
C) Should not hold a manager responsible for costs over which the manager has no influence. 
D) Can be applied at any level of an organization. 
E) All of the choices are correct. 
A) Is designed to measure the performance of managers in terms of controllable costs. 
B) Assigns responsibility for costs to the appropriate managerial level that controls those costs. 
C) Should not hold a manager responsible for costs over which the manager has no influence. 
D) Can be applied at any level of an organization. 
E) All of the choices are correct.

Question 5

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

Accepted Answer

department

Question 6

How do companies decide what allocation bases to use to allocate indirect costs to departments?

Accepted Answer

While it is not always possible to avoid

Question 7

In producing oat bran,the joint cost of milling the oats into bran,oatmeal,and animal feed is considered a direct cost to the oat bran,because the oat bran cannot be produced without incurring the joint cost.

Accepted Answer

A) True 
 B)False

Question 8

Part WY4 costs the Eastern Division of Tyble Corporation $26 to make-direct materials are $10,direct labor is $4,variable manufacturing overhead is $9,and fixed manufacturing overhead is $3.Eastern Division sells Part WY4 to other companies for $30.The Western Division of Tyble Corporation can use Part WY4 in one of its products.The Eastern Division has enough idle capacity to produce all of the units of Part WY4 that the Western Division would require.What is the lowest transfer price at which the Eastern Division should be willing to sell Part WY4 to the Central Division?

Accepted Answer

A) $30 
B) $26 
C) $23 
D) $27 
E) $21 
A) $30 
B) $26 
C) $23 
D) $27 
E) $21

Question 9

An example of a service department is the human resources department.

Accepted Answer

A) True 
 B)False

Question 10

Farber,Inc.,has four departments.The Administrative Department costs are allocated to the other three departments based on the number of employees in each and the Maintenance Department costs are allocated to the Assembly and Packaging Departments based on their occupied space.Data for these departments follows:
$$\begin{array} { l r r r r } 
\text { Operating costs } & \frac { \text { Adrrin. } } { \$ 30,000 } & \frac { \text { Maintenance } } { \$ 15,000 } & \frac { \text { Assernbly } } { 570,000 } & \frac { \text { Packaging } } { \$ 45,000 } \
\text { No. of ermployees... } && 2 & 6 & 4 \
\text { Sq. ft. of space..... } &&& 2,000 & 3,000
\end{array}$$ The total amount of the Administrative Department's cost that would eventually be allocated to the Packaging Department is:

Accepted Answer

A) $ 4,800. 
B) $12,000. 
C) $10,000. 
D) $18,000. 
E) $13,000. 
A) $ 4,800. 
B) $12,000. 
C) $10,000. 
D) $18,000. 
E) $13,000.

Question 11

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 12

Vaughn Co.operates three separate departments (A,B,C).The data below is provided for the current year:
   Required:
Prepare an income statement showing the departmental contributions to overhead for the current year.

Accepted Answer

The answer of Vaughn Co.operates three separate departments (A,B,C).The data...

Question 13

Explain the difference between direct and indirect expenses in accounting for departments.

Accepted Answer

Direct expenses are readily traced to a

Question 14

Which of the following statements is correct concerning the elements of cycle time?

Accepted Answer

A) Move time is the time spent moving (1) raw materials from storage to production and (2) goods in process from one factory location to another factory location. 
B) Inspection time is the time spent producing the product. 
C) Process time is considered non-value-added time. 
D) Wait time is considered value-added time. 
E) Cycle efficiency is the ratio of non-value-added time to total cycle time. 
A) Move time is the time spent moving (1) raw materials from storage to production and (2) goods in process from one factory location to another factory location. 
B) Inspection time is the time spent producing the product. 
C) Process time is considered non-value-added time. 
D) Wait time is considered value-added time. 
E) Cycle efficiency is the ratio of non-value-added time to total cycle time.

Question 15

Leontif Corporation has a Parts Division that does work for other Divisions in the company as well as for outside customers.The company's Equipment Division has asked the Parts Division to provide it with 2,000 special parts each year.The special parts would require $17.00 per unit in variable production costs.The Equipment Division has a bid from an outside supplier for the special parts at $28.00 per unit.In order to have time and space to produce the special part,the Parts Division would have to cut back production of another part-the J789 that it presently is producing.The J789 sells for $34.00 per unit,and requires $22.00 per unit in variable production costs.Packaging and shipping costs of the J789 are $4.00 per unit.Packaging and shipping costs for the new special part would be only $0.50 per unit.The Parts Division is now producing and selling 10,000 units of the J789 each year.Production and sales of the J789 would drop by 10% if the new special part is produced for the Equipment Division.
Required:
a.What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 2,000 special parts per year from the Parts Division to the Equipment Division?
b.Is it in the best interests of Leontif Corporation for this transfer to take place?
 Explain.

Accepted Answer

a.From the perspective of the Parts Divi

Question 16

The China Department of the Coulsen Department Store had sales of $282,000,cost of goods sold of $198,750,indirect expenses of $19,875,and direct expenses of $41,250 for the current period.What is the China Department's contribution to overhead as a percent of sales?

Accepted Answer

$282,000 - $198,750

Question 17

An accounting system that provides information that management can use to evaluate the profitability and/or cost effectiveness of a department's activities 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 18

A department can never be considered to be a profit center.

Accepted Answer

A) True 
 B)False

Question 19

Allocating joint costs to products can be based on their relative:

Accepted Answer

A) Sales values. 
B) Direct costs. 
C) Gross margins. 
D) Total costs. 
E) Variable costs. 
A) Sales values. 
B) Direct costs. 
C) Gross margins. 
D) Total costs. 
E) Variable costs.

Question 20

A useful measure used to evaluate the performance of an investment center is investment center residual income.

Accepted Answer

A) True 
 B)False

Exam 24: Performance Measurement and Responsibility Accounting

Investment center is another name for profit center.

A department that is responsible for maximizing revenues is known as a profit center.

An accounting system that provides information that management can use to evaluate the performance of a department's manager is called a:

A responsibility accounting system:

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

How do companies decide what allocation bases to use to allocate indirect costs to departments?

In producing oat bran,the joint cost of milling the oats into bran,oatmeal,and animal feed is considered a direct cost to the oat bran,because the oat bran cannot be produced without incurring the joint cost.

An example of a service department is the human resources department.

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.

Vaughn Co.operates three separate departments (A,B,C).The data below is provided for the current year: Required: Prepare an income statement showing the departmental contributions to overhead for the current year.

Explain the difference between direct and indirect expenses in accounting for departments.

Which of the following statements is correct concerning the elements of cycle time?

The China Department of the Coulsen Department Store had sales of $282,000,cost of goods sold of $198,750,indirect expenses of $19,875,and direct expenses of $41,250 for the current period.What is the China Department's contribution to overhead as a percent of sales?

An accounting system that provides information that management can use to evaluate the profitability and/or cost effectiveness of a department's activities is a:

A department can never be considered to be a profit center.

Allocating joint costs to products can be based on their relative:

A useful measure used to evaluate the performance of an investment center is investment center residual income.

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

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