Exam 24: Cost Allocation and Responsibility Accounting

Which of the following is an expanded form of calculating return on investment?

RI (Residual Income)compares the division's actual operating income with the minimum operating income expected given the size of the division's average total assets.

Long-term investments are made by the manager of an investment division for the purpose of:

The balanced scorecard is a performance evaluation system that requires management to consider financial performance measures of performance, but not nonfinancial measures.

Archid, a manufacturer of spare parts, has two production departments: Assembling and Packaging. The Assembling department is machine oriented, while the Packaging department is labor oriented. Estimated manufacturing overhead costs for the year 2015 were $15,000,000 for Assembling and $10,000,000 for Packaging. Calculate departmental wide allocation rates if total estimated machine hours were 30,000 and labor hours were 20,000 for the year.

Recreation Equipment Company has several divisions that are investment centers. Data for the Boat Division and the Trailer Division are shown here: With regard to the efficient use of assets, the Boat Division has a higher ROI (Return on Investment)because it has the highest operating income.

Communicating the expectations of top management to segment managers improves goal congruence.

The main difference between activity-based costing and traditional costing systems is that activity-based costing uses a separate allocation base for each activity.

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 account for the account verification activity?