Exam 9: Performance Measurement and Responsibility Accounting

Ultimo Co. operates three production departments as profit centers. The following information is available for its most recent year. Which department has the greatest departmental contribution to overhead (in dollars) and what is the amount contributed? Indirect Dept. Sales Cost of Goods Sold Direct Expenses Expenses 1 \ 1,000,000 \ 700,000 \ 100,000 \ 80,000 2 400,000 150,000 40,000 100,000 3 700,000 300,000 150,000 20,000

Which of the following is not a step in creating operating department income statements?

Use the Hamilton Company's investment center information below to calculate (a) return on total investment and (b) investment center residual income. Net Income…………………… $315,900 Average Invested Assets…….. $2,100,000 Target Net Income…………… 6% of division assets

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 advertising cost that should be allocated to Drilling for the current period is:

A challenge in calculating the total costs and expenses of a department is:

A company produces two products, XX and YY, from a single raw material called Zub. Zub is purchased in 55-gallon drums, and the contents of one drum are sufficient to produce 30 gallons of XX and 15 gallons of YY. XX sells for $10.00 per gallon and YY sells for $30.00 per gallon. During the current period, the company used 400 drums of Zub to produce XX and YY. The cost of Zub was $90 per drum. Required: (1) If the cost of Zub is allocated to the XX and YY 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 Zub is allocated to the XX and YY 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?

A responsibility accounting performance report displays:

What is a cost center and how is its performance evaluated?

A report that accumulates the actual expenses that a manager is responsible for and their budgeted amounts is a:

A company has two departments, Y and Z that incur wage expenses. An analysis of the total wage expense of $19,000 indicates that Dept. Y had a direct wage expense of $2,000 and Dept. Z had a direct wage expense of $3,500. The remaining expenses are indirect and analysis indicates they should be allocated evenly between the two departments. Departmental wage expenses for Dept. Y and Dept. Z, respectively, are:

Karl and Grady are managers of two product lines for Brewster Company. One of them is a candidate for promotion based on performance. Using the data below, determine who had the better performance using performance measures such as net income, profit margin, and return on investment. Show your calculations and support your answer. Revenue................ \4 12,000 \4 500,000 Costs..................... 380,000 411,000 Average Assets...... 400,000 600,000

Indirect expenses are incurred for the joint benefit of more than one department; they cannot be readily traced to only one department.

Departmental income statements are prepared for service departments but not operating departments.

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 Maintenance department expense to be allocated to Assembly. Purchasing Maintenance Fabncation Assembly Operating costs \3 2,000 \1 8,000 \9 6,000 \6 2,000 No. of purchase orders 16 4 Sq. ft. of space 3,300 2,700

A selling department is usually evaluated as a profit center.

The following data is available for the Janitorial Services Department of Glitterol Co. Revenues \ 216,000 Cost of Sales 168,000 Expenses: Supplies-Direct 12,000 Salaries-Indirect Allocated 34,000 Rent-Direct 8,000 Rent-Indirect Allocated 4,500 Required: Calculate departmental contribution to overhead for the Janitorial Services Department, including the department's contribution as a percentage of revenues.

What is the purpose of a departmental accounting system?

Kragle Corporation reported the following financial data for one of its divisions for the year; average invested assets of $470,000; sales of $930,000; and income of $105,000. The investment center profit margin is:

In the two-stage cost allocation, ________ costs are allocated to operating departments, and the operating department costs are allocated to ________.

A cost incurred to produce or purchase two or more products at the same time is a(n):