Exam 11: Reporting for Control

The Baily Division recorded operating data as follows for the past two years: Year 1 Year 2 Sales ? \ 1,200,000 Shareholders' Equity \ 540,000 \ 720,000 Average Operating Assets \ 600,000 ? Margin 15\% ? Return on Investment 22.5\% 18\% $\text { Baily Division's turnover was exactly the same in both Year } 1 \text { and Year } 2 .$ -What were the average operating assets in Year 2?

Ieso Company has two stores: J and K. During November, Ieso Company reported operating income of $30,000 and sales of $450,000. The contribution margin in Store J was $100,000, or 40% of sales. The segment margin in Store K was $30,000, or 15% of sales. Traceable fixed expenses were $60,000 in Store J, and $40,000 in Store K. -What were the total variable expenses in Store K?

Faust Company's quality cost report is to be based on the following data: Quality engineering \ 68,000 Quality circles \ 35,000 Supervision of testing and inspection activities \ 72,000 Net cost of scrap \ 76,000 Test and inspection of in-process goods \ 6,000 Liability arising from defective products \ 3,000 Warranty repairs and replacements \ 56,000 Debugging software errors \ 68,000 Rework labour and overhead \ 19,000 - What will be the total prevention cost appearing on the quality cost report?

Cumberland Beverage Company had the following results for the year just ended: Operating Income \ 5,500 Turnover 4 Return on Investment 25\% What were Cumberland Beverage Company's average operating assets during the year?

The Holmes Division recorded operating data as follows for the past year: Sales \ 200,000 Operating Income \ 25,000 Average Operating Assets \ 100,000 Shareholders' Equity \ 80,000 Residual Income \ 13,000 -For the past year,what was the return on investment?

Allocations of corporate headquarters expenses to divisions used in return on investment calculations should be limited to the cost of those actual services provided by central headquarters,which the divisions otherwise would have to provide for themselves.

The Baily Division recorded operating data as follows for the past two years: Year 1 Year 2 Sales ? \ 1,200,000 Shareholders' Equity \ 540,000 \ 720,000 Average Operating Assets \ 600,000 ? Margin 15\% ? Return on Investment 22.5\% 18\% $\text { Baily Division's turnover was exactly the same in both Year } 1 \text { and Year } 2 .$ -What was the margin in Year 2?

Which of the following would be classified as a prevention cost on a quality cost report?

Godunov Company's quality cost report is to be based on the following data: Downtime caused by quality problem \ 12,000 Rework labour and overhead \ 42,000 Quality circles \ 34,000 Returns arising from quality problems \ 97,000 Supervision of testing and inspection activities \ 20,000 Test and inspection of in-process goods \ 98,000 Systems development \ 38,000 Amortization of test equipment \ 24,000 Warranty repairs and replacements \ 60,000 Required: Prepare a quality cost report in good form with separate sections for prevention costs,appraisal costs,internal failure costs,and external failure costs.

Financial Services Company has two Service Departments and two Operating Departments. Budgeted costs and other data relating to these departments are presented below: Building \& Grounds Personnel Operating A Operating B Departmental costs \ 64,000 \ 200,000 \ 650,000 \ 800,000 Square Metres Occupied 1,000 3,000 12,000 18,000 Number of Employees 10 5 45 55 Professional Hours 76,000 92,000 The costs of Building & Grounds are allocated first on the basis of square metres of space occupied. Personnel costs are allocated on the basis of number of employees. The departmental costs for the Operating Departments are overhead costs. Predetermined overhead rates in the Operating Departments are calculated on the basis of professional hours. - Assume that the company uses the step-down method of allocating Service Department costs to Operating Departments,and Building and Grounds costs are allocated first.How much Personnel Department cost would be allocated to Operating Department A?

Which of the following would be classified as an external failure cost on a quality cost report?

Internal failure costs result when a defective product is used within the company.

Division X makes a part that it sells to customers outside of the company.Data concerning this part appear below: Selling Price to Outside Customers \ 50 Variable cost per Unit \ 30 Total Fixed Costs \ 400,000 Capacity in Units 25,000 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 transfer pricing formula,what is the lower limit on the transfer price?

The salary paid to a store manager is a traceable fixed expense of the store.

Effective decentralization is essential for which of the following management accounting practices in organizations?

Boa Corp.uses the direct method to allocate service department overhead costs to operating departments.Information for the month of June follows: Service Maintenance Departments Utilities Departmental cost incurred \ 20,000 \ 10,000 Service provided to departments: Maintenance 10\% Utilities 20\% Operating - A 40\% 30\% Operating - B 40\% 60\% What would be the amount of maintenance department costs allocated to Operating Department A for June?

Assuming that a segment has both variable expenses and traceable fixed expenses,an increase in sales should increase operating income by an amount equal to the sales multiplied by the segment margin ratio.

Anderson Company has two Service Departments and two Producing Departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows: Employees Personnel Department 30 Engineering Department 90 Producing Department No. 1 590 Producing Department No. 2 Total Employees - Total costs in the Personnel Department are $900,000 per year.Under the step-down method,the costs of the Personnel Department are allocated before the costs of the Engineering Department are allocated.What would be the amount of this cost allocated to the Engineering Department under the step-down method,rounded to the nearest dollar?

The Millard Division's operating data for the past two years are provided below: Year 1 Year 2 Return on Investment 12\% 36\% Shareholders' Equity \ 800,000 \ 500,000 Operating Income ? \ 360,000 Turnover ? 3 Margin ? ? Sales \ 3,200,000 ? Millard Division's margin in Year 2 was 150\% of the margin in Year 1. -What was the operating income for Year 1?

Describe the balanced scorecard concept and explain the reasoning behind it.