Exam 24: Cost Allocation and Responsibility Accounting

The responsibilities of a manager of an investment center are to generate profits and to efficiently manage the center's invested capital.

Ace Plastics produces different kinds of products, all in one manufacturing facility. They have identified four activities for their costing system: Materials management-allocated by number of purchase orders Chemical processing-allocated on metric tons Molding-allocated on direct labor hours Packaging-allocated by number of units produced The activity rates are as follows: Engineering design shows that the order will require direct material worth $540, direct labor cost being $90, require 4 purchase orders to be placed, use 2 metric tons of chemical base, need 8 direct labor hours. The size of the order is to produce 3,000 units of product. Calculate total cost of production of the order.

Pitt Jones Company had the following activities, allocated costs, and allocation bases: The above activities are carried out at two of their regional offices. What is the cost per line for the account billing activity?

One part of the balanced scorecard helps management answer the question "How do we look to shareholders?" Which of the four perspectives is being described here?

One of the advantages of decentralization is that it allows top management to concentrate on long-term strategic planning.

Which of the following is the last step in developing an activity-based costing system?

Zhongfang Consumer Products has a small car division that operates as a profit center. Below is a partially completed performance report for the first quarter. How much is the percentage flexible budget variance for sales revenue?

A company that uses a balanced scorecard has established a KPI for product quality. If the actual warranty claims are higher than expected it indicates that the quality standards have been met.

The performance measurement system should provide incentives to segment managers for coordinating activities of the subunits and focusing them toward the overall company objectives. Which of the following performance measurement goals has been described by this statement?

An activity-based costing system is developed in four steps. a. Compute the allocation rate for each activity B. Identify activities and estimate their total costs C. Identify the cost driver for each activity and then estimate the quantity of each driver's allocation base D. Allocate the indirect costs to the cost object Which of the following is the correct order of performing these steps?

Zhongfang Consumer Products has a small car division that operates as a profit center. Below is a partially completed performance report for the first quarter. How much is the percentage flexible budget variance for traceable fixed expenses?

Which of the following is the correct formula for profit margin ratio?

Oscar prizes, a manufacturer of gift articles, uses a single plant wide rate to allocate indirect costs. The company allocates manufacturing overhead using a single plantwide rate with machine hours as the allocation base. Estimated overhead cost for the year is $5,000,000 and estimated machine hours are 25,000. During the year, the actual machine hours used were 30,000. Calculate the predetermined overhead allocation rate.

A company may prefer to use residual income over return on investment for performance evaluation because:

Traditional costing provides more detailed information on costs of activities and the drivers of these costs than activity-based costing.

The manager of a profit center is responsible for generating revenues and managing the center's invested capital.

For a pharmaceutical company, the most suitable base for allocating research and development costs to the finished products would be:

The activity-based costing system improves the allocation of:

The transfer price should be an amount between the market price and the variable cost.

Johnson Construction Materials Company has a sales office which sells concrete culvert pipe to property developers. The sales office is a revenue center and must prepare a monthly performance report. Below is the partially completed performance report. The company uses management by exception to address flexible budget variances. On which variance would the company focus first?