Question 1

Activity-based costing uses a common allocation base for all activities.

Accepted Answer

A) True 
 B)False

Question 2

Parkinson Company provides the following financial information: $$\begin{array} { | l | r | } 
\hline \text { Income from operations } & \$ 200,000 \
\hline \text { Interest expense } & 45,000 \
\hline \text { Gains/(losses) on sale of equipment } & ( 2,500 ) \
\hline \text { Net income } & 152,500 \
\hline \text { Total assets at Jan 1 } & 2,600,000 \
\hline \text { Total assets at Dec } 31 & 3,200,000 \
\hline
\end{array}$$ Calculate return on investment based on the information given above.

Accepted Answer

A)  6.3% 
B)  5.3% 
C)  6.9% 
D)  7.2% 
A)  6.3% 
B)  5.3% 
C)  6.9% 
D)  7.2%

Question 3

Huntswell Corporation has two major divisions: Agricultural Products and Industrial Products. It provides the following information for the year 2014. $$\begin{array} { | l | c | c | } 
\hline & \text { Agriculture Division } & \text { Industrial Division } \
\hline \text { Sales revenue } & \$ 140,000 & \$ 1,040,000 \
\hline \text { Operating income } & \$ 16,400 & \$ 218,400 \
\hline \text { Average assets } & \$ 300,000 & \$ 5,540,000 \
\hline
\end{array}$$ Calculate the profit margin ratio for the Industrial Division of the company.

Accepted Answer

A)  10.5% 
B)  11.1% 
C)  21.0% 
D)  11.7% 
A)  10.5% 
B)  11.1% 
C)  21.0% 
D)  11.7%

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

The activity-based costing system improves the allocation of:

Accepted Answer

A)  indirect manufacturing costs. 
B)  direct labor. 
C)  direct materials. 
D)  sales commissions. 
A)  indirect manufacturing costs. 
B)  direct labor. 
C)  direct materials. 
D)  sales commissions.

Question 6

Which of the following is the correct formula for calculating return on investment?

Accepted Answer

A)  Net profit ÷ Sales 
B)  Gross profit ÷ Sales 
C)  Operating profit ÷ Average total assets 
D)  Earnings available to stockholders ÷ Number of outstanding stock. 
A)  Net profit ÷ Sales 
B)  Gross profit ÷ Sales 
C)  Operating profit ÷ Average total assets 
D)  Earnings available to stockholders ÷ Number of outstanding stock.

Question 7

The term goal congruence refers to the:

Accepted Answer

A)  matching of financial goal of the company with its nonfinancial goals. 
B)  aligning the goals of business segment managers with the goals of top management. 
C)  achievement of the goals set by the management by utilizing the resources available. 
D)  duplication of costs as a result of decentralization. 
A)  matching of financial goal of the company with its nonfinancial goals. 
B)  aligning the goals of business segment managers with the goals of top management. 
C)  achievement of the goals set by the management by utilizing the resources available. 
D)  duplication of costs as a result of decentralization.

Question 8

Companies evaluate investment centers using the same measures as the profit centers.

Accepted Answer

A) True 
 B)False

Question 9

Brad, one of the managers of a multi-national company, is responsible to generate revenues and control costs in order to increase the operating income of his division. However, he is not concerned with investment-related decisions. Brad is most likely to be the manager of a(n):

Accepted Answer

A)  cost center. 
B)  investment center. 
C)  profit center. 
D)  revenue center. 
A)  cost center. 
B)  investment center. 
C)  profit center. 
D)  revenue center.

Question 10

Cardec, a leading manufacturer of car spare parts, divided its manufacturing process into two departments: 1) Production 2) Packing. Estimated overhead costs for the Production and Packing department amounted to $25,000,000 and $20,000,000, respectively. The company produces two types of parts: Part-1 and Part-2. The total estimated labor hours for the year 2015 were 40,000 and estimated machine hours were 50,000. The Production department was mechanized whereas the Packing department was labor oriented. Calculate departmental overhead allocation rates.
 $$\begin{array} { c c c } 
& \begin{array} { c } 
\text { Production } \
\text { Machine hours }
\end{array} & \begin{array} { c } 
\text { Packing } \
\text { Labor hours }
\end{array} \
\text { Part-1 } & 15,000 & 25,000 \
\text { Part-2 } & \underline{35,000} & \underline{15,000} \
& 50,000 & 40,000
\end{array}$$

Accepted Answer

Calculation of departmental allocation r

Activity-based costing uses a common allocation base for all activities.

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.

The activity-based costing system improves the allocation of:

Which of the following is the correct formula for calculating return on investment?

The term goal congruence refers to the:

Companies evaluate investment centers using the same measures as the profit centers.

Brad, one of the managers of a multi-national company, is responsible to generate revenues and control costs in order to increase the operating income of his division. However, he is not concerned with investment-related decisions. Brad is most likely to be the manager of a(n):

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

Filters

Exam 24: Cost Allocation and Responsibility Accounting

Activity-based costing uses a common allocation base for all activities.

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.

The activity-based costing system improves the allocation of:

Which of the following is the correct formula for calculating return on investment?

The term goal congruence refers to the:

Companies evaluate investment centers using the same measures as the profit centers.

Brad, one of the managers of a multi-national company, is responsible to generate revenues and control costs in order to increase the operating income of his division. However, he is not concerned with investment-related decisions. Brad is most likely to be the manager of a(n):

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

Filters