Exam 24: Cost Allocation and Responsibility Accounting

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 hour for the account inquiry activity?

Which of the following is the correct formula for asset turnover ratio?

Management by exception directs management's attention to important differences between actual and budgeted amounts.

Managers of investment centers are responsible not only for generating profits, but also for ensuring efficient use of assets of the investment center.

A company in which major planning and controlling decisions are made by top management is considered as a centralized company.

In a decentralized company, all the planning and controlling decisions are made by the top management.

WAX-D Inc. has a division that manufactures a component that sells for $150 and has a variable cost of $45. Another division of the company wants to purchase the component. Fixed cost per unit of component is $25. What is the maximum transfer price if the division is operating below its capacity?

Responsibility reports for revenue centers show all costs incurred by the department and are useful when management needs to know the total cost of operating the department.

When a division is operating at full capacity, the transfer price must be:

Orlando Avionics makes three types of radios for small aircraft: Model A, Model B, and Model C. The manufacturing operations are mechanized and there is no direct labor. Manufacturing overhead costs are significant, and Orlando has adopted an activity-based costing system. Direct materials costs per unit for each model are as follows: Orlando has three activities: assembly, materials management, and testing. The cost driver for assembly is machine hours. The cost driver for materials management is number of parts, and the cost driver for testing is the number of units of product. Total costs and production volumes for the year 2015 were estimated as follows: The Model A radio requires 12 parts to construct, and requires 16 machine hours of processing. What is the manufacturing cost to make one unit of Model A?

Indirect costs allocated to products using activity-based costing are more accurate than traditional allocation systems.

Regardless of the type of responsibility center, responsibility reports should focus on information, not blame.

Parkinson Company provides the following financial information: Calculate return on investment based on the information given above.

A unique factor of responsibility accounting performance reports is the focus on responsibility and controllability.

Activity-based costing focuses on a single predetermined overhead rate for cost analysis.

In a balanced scorecard, which of the following is a key performance indicator of the customer perspective?

Pitt Jones Company had the following activities, allocated costs, and allocation bases: The above activities are carried out at two of their regional offices. How much of the account verification costs will be assigned to the Northeast Office?

ROI (Return on Investment)measures the profitability of an investment center, not efficiency.

Direct material costs and direct labor costs cannot be easily traced to products. Therefore, they are allocated to products.

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. It has provided the following information. How much is the sales volume variance for the 36 inch long pipe?