Question 1

Investment center is another name for profit center.

Accepted Answer

A) True 
 B)False

Question 2

________ are costs incurred to produce or purchase two or more products at the same time.

Accepted Answer

The answer of ________ are costs incurred to produce or...

Question 3

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period:   The amount of the total office expenses that should be allocated to Drilling for the current period is:

Accepted Answer

A)  $ 35,750. 
B)  $ 45,000. 
C)  $ 54,250. 
D)  $ 90,000. 
E)  $600,000. 
A)  $ 35,750. 
B)  $ 45,000. 
C)  $ 54,250. 
D)  $ 90,000. 
E)  $600,000.

Question 4

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 5

Boiano Corp. operates a retail store and has two service departments and two operating departments, Hardware and Automotive. During the current year, the departments had the following direct expenses and occupied the following amount of floor space.
 $$\begin{array} { | l | c | c | } 
\hline \text { Department } & \text { Direct Expenses } & \text { Square Feet } \
\hline \text { Advertising } & \$ 50,000 & 750 \
\hline \text { Administrative } & 100,000 & 1,500 \
\hline \text { Hardware } & 150,000 & 3,000 \
\hline \text { Automotive } & 200,000 & 9,750 \
\hline
\end{array}$$ The advertising department developed and aired 150 spots. Of these spots, 60 spots were for Hardware and 90 spots were for Automotive. The store sold $1,500,000 of merchandise during the year; $675,000 in Hardware and $825,000 in Automotive. Indirect expenses include rent, utilities, and insurance expense. Total indirect expenses of $220,000 are allocated to all departments. Prepare a departmental expense allocation spreadsheet for Boiano. The spreadsheet should assign (1) direct expenses to each of the four departments, (2) allocate the indirect expenses to each department on the basis of floor space occupied, (3) the advertising department's expenses to the two operating departments on the basis of ad spots placed promoting each department's products, (4) the administrative department's expenses based on the amount of sales. Complete the departmental expense allocation spreadsheet below. Provide supporting computations for the expense allocations below the spreadsheet.

Accepted Answer

@#IMG-DLM& Indirect expense allocation:
750/15,000

Question 6

In a firm that manufactures clothing, the department that is responsible for actually assembling the garments could best be described as a(n):

Accepted Answer

A)  Service department. 
B)  Operating or production department. 
C)  Cost center. 
D)  Department in which all of the costs incurred are direct expenses. 
E)  Department in which all of the costs incurred are indirect expenses. 
A)  Service department. 
B)  Operating or production department. 
C)  Cost center. 
D)  Department in which all of the costs incurred are direct expenses. 
E)  Department in which all of the costs incurred are indirect expenses.

Question 7

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

Accepted Answer

No standard rule identifies the best bas

Question 8

What is the main difference between a cost center and a profit center?

Accepted Answer

A cost center incurs costs but does not

Question 9

Division P of Launch Corporation has the capacity for making 75,000 wheel sets per year and regularly sells 60,000 each year on the outside market. The regular sales price is $100 per wheel set, and the variable production cost per unit is $65. Division Q of Launch Corporation currently buys 30,000 wheel sets (of the kind made by Division P) yearly from an outside supplier at a price of $90 per wheel set. If Division Q were to buy the 30,000 wheel sets it needs annually from Division P at $87 per wheel set, the change in annual net operating income for the company as a whole, compared to what it is currently, would be:

Accepted Answer

A)  $600,000 
B)  $225,000 
C)  $750,000 
D)  $135,000 
E)  $700,000 
A)  $600,000 
B)  $225,000 
C)  $750,000 
D)  $135,000 
E)  $700,000

Question 10

Which of the following is not true regarding a responsibility accounting system?

Accepted Answer

A)  It is designed to measure the performance of managers in terms of controllable costs. 
B)  It assigns responsibility for costs to the appropriate managerial level that controls those costs. 
C)  It should not hold a manager responsible for costs over which the manager has no influence. 
D)  It can be applied at any level of an organization. 
E)  It is only relevant in manufacturing companies. 
A)  It is designed to measure the performance of managers in terms of controllable costs. 
B)  It assigns responsibility for costs to the appropriate managerial level that controls those costs. 
C)  It should not hold a manager responsible for costs over which the manager has no influence. 
D)  It can be applied at any level of an organization. 
E)  It is only relevant in manufacturing companies.

Question 11

Nesbit Co. has two operating (production) departments supported by a number of service departments. The following information was collected for a recent period:
   Indirect costs are allocated as follows: salaries on the basis of sales, office expenses on the basis of the number of employees, and all other costs on the basis of square footage. Additional information about the production departments follows:
Square Number of
Footage Employees
Machining 14,535 78
Assembly 4,845 52
Sales for the Machining Department are $724,404 and sales for the Assembly Department are $356,796. Determine the departmental contribution to overhead and the departmental net income for each production department.

Accepted Answer

The answer of Nesbit Co. has two operating (production) departments...

Question 12

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 13

The following is a partially completed lower section of a departmental expense allocation spreadsheet for Brickland. It reports the total amounts of direct and indirect expenses for the four departments. Purchasing department expenses are allocated to the operating departments on the basis of purchase orders. Maintenance department expenses are allocated based on square footage. Compute the amount of Purchasing department expense to be allocated to Fabrication. $\begin{array}{llcc}
&  \text {   Purchasing } & \text {  Maintenance} & \text { Fabncation  } &\text { Assembly }\
 \text {Operating costs  } &\$32,000&\$18,000&\$96,000&\$62,000\
 \text { No. of purchase orders } &&&16&4\
 \text { Sq. ft. of space } &&&3,300&2,700\
\end{array}$

Accepted Answer

A)  $6,400. 
B)  $9,900. 
C)  $8,100. 
D)  $17,600. 
E)  $25,600. 
A)  $6,400. 
B)  $9,900. 
C)  $8,100. 
D)  $17,600. 
E)  $25,600.

Question 14

In a responsibility accounting system:

Accepted Answer

A)  Managers are responsible for their departments' controllable costs. 
B)  Each accounting report contains all items allocated to a responsibility center. 
C)  Organized and clear lines of authority and responsibility are only incidental. 
D)  All managers at a given level have equal authority and responsibility. 
E)  Outputs of the departments are not part of the evaluation process. 
A)  Managers are responsible for their departments' controllable costs. 
B)  Each accounting report contains all items allocated to a responsibility center. 
C)  Organized and clear lines of authority and responsibility are only incidental. 
D)  All managers at a given level have equal authority and responsibility. 
E)  Outputs of the departments are not part of the evaluation process.

Question 15

A ________ accumulates and reports costs and expenses that a manager is responsible for, including budgeted amounts.

Accepted Answer

responsibi

Question 16

Investment center managers are typically evaluated using performance measures that combine income and assets.

Accepted Answer

A) True 
 B)False

Question 17

Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below:   Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $38 per unit and would substitute the part made by Division A. Division B requires 5,000 units of the part each period. Division A has ample capacity to produce the units for Division B without any increase in fixed costs and without cutting into sales to outside customers. If Division A sells to Division B rather than to outside customers, the variable cost be unit would be $1 lower. What should be the lowest acceptable transfer price from the perspective of Division A?

Accepted Answer

A)  $40 
B)  $38 
C)  $30 
D)  $29 
E)  $10 
A)  $40 
B)  $38 
C)  $30 
D)  $29 
E)  $10

Question 18

A retail store has three departments, S, T, and U, and does general advertising that benefits all departments. Advertising expense totaled $50,000 for the year, and departmental sales were as follows. Allocate advertising expense to Department T based on departmental sales. $$\begin{array} { l } 
\text { Departinent S } &\$110,000 \
\text { Departrnent T } &\$213,750\
\text { Departrnent U } &\$151,250\
\text { Total }&\$475,000
\end{array}$$

Accepted Answer

A)  $11,000. 
B)  $14,000. 
C)  $16,667. 
D)  $22,500. 
E)  $50,000. 
A)  $11,000. 
B)  $14,000. 
C)  $16,667. 
D)  $22,500. 
E)  $50,000.

Question 19

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 20

The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be:

Accepted Answer

A)  Floor space of each department. 
B)  Relative number of items each department had on sale. 
C)  Number of customers to enter each department. 
D)  An equal amount of cost for each department. 
E)  Proportion of sales of each department. 
A)  Floor space of each department. 
B)  Relative number of items each department had on sale. 
C)  Number of customers to enter each department. 
D)  An equal amount of cost for each department. 
E)  Proportion of sales of each department.

Investment center is another name for profit center.

________ are costs incurred to produce or purchase two or more products at the same time.

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:

In a firm that manufactures clothing, the department that is responsible for actually assembling the garments could best be described as a(n):

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

What is the main difference between a cost center and a profit center?

Which of the following is not true regarding a responsibility accounting system?

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:

In a responsibility accounting system:

A ________ accumulates and reports costs and expenses that a manager is responsible for, including budgeted amounts.

Investment center managers are typically evaluated using performance measures that combine income and assets.

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

The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be:

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity Based Costing and Analysis

Cost Behavior Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Analyzing for Business Transactions

Partnership Accounting

Filters

Exam 9: Performance Measurement and Responsibility Accounting

Investment center is another name for profit center.

________ are costs incurred to produce or purchase two or more products at the same time.

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:

In a firm that manufactures clothing, the department that is responsible for actually assembling the garments could best be described as a(n):

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

What is the main difference between a cost center and a profit center?

Which of the following is not true regarding a responsibility accounting system?

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:

In a responsibility accounting system:

A ________ accumulates and reports costs and expenses that a manager is responsible for, including budgeted amounts.

Investment center managers are typically evaluated using performance measures that combine income and assets.

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

The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be:

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity Based Costing and Analysis

Cost Behavior Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Analyzing for Business Transactions

Partnership Accounting

Filters