Exam 9: Performance Measurement and Responsibility Accounting

A cost center does not directly generate revenues.

A responsibility accounting report that compares actual costs and expenses for a department with the budgeted amounts is called a(n):

A department's direct expenses can be entirely avoided if the department manager carefully controls and monitors operations.

Profit margin measures how efficiently an investment center generates sales from its invested assets.

A responsibility accounting performance report documents:

Allocating joint costs to products can be based on their relative:

Joint costs are a group of several costs incurred in producing or purchasing a single product.

Define joint costs and explain how joint costs can be allocated.

What is a profit center?

Grey Division's departmental income is: A.$163,000 B.$211,000 C.$241,000 D.$52,000 E.$173,000

Expense allocations cannot always avoid some arbitrariness.

What is a cost center?

Alexander Bruce and Jonathon Wayne are managers of two product lines for Gotham Incorporated.One of them is a candidate for promotion based on performance.Using the following data: a.Calculate the residual income (assume a target income of 10% return on assets)and the investment center return on assets. b.Indicate which manager should be recommended for promotion and why. Revenue \ 205,000 \ 270,000 Costs 189,000 232,000 Average assets 300,000 290,000

A ______________________________ is the value used to record transfers of items between divisions of the same company.

Return on total assets for a cost center is a useful measure to evaluate the cost center manager.

Ice House Industries, Inc. has three operating departments: Cooking, Churning, and Freezing. Indirect factory costs for the current period were Administrative $560,000 and Maintenance $98,000. Administrative costs are allocated to operating departments based on the number of workers and maintenance costs are allocated to operating departments based on square footage occupied. Cooking Department Churning Department Freezing Department Number of employees 2,940 employees 4,900 employees 1,960 employees Square feet occupied 33,250 Sq. Ft. 38,000 Sq. Ft 23,750 Sq. Ft. -Based on the above data, determine the maintenance cost allocated to each operating department of Ice House Industries, Inc. A Cooking: $\$ 219,333$$\quad$ Churing: $\$ 219,333$ $\quad$ Freezing: $\$ 219,333$ B. Cooking: $\$ 230,300$ $\quad$ Churning: $\$ 263,200$$\quad$ Freezing: $\$ 164,500$ C. Cooking: $\$ 33,250$$\quad$ Churning: $\$ 38,000$$\quad$ Freezing: $\$ 23,750$ D. Cooking: $\$ 32,666$ $\quad$ Churning: $\$ 32,666$ $\quad$ Freezing: $\$ 32,666$ E Cooking: $\$ 34,300$ $\quad$ Churing: $\$ 39,200$ $\quad$ Freezing: $\$ 24,500$

Bevo Beef Company uses the relative market value method of allocating joint costs in their production of beef products.Relevant information for the current period follows: Production in Market Sirloin 3,000 \ 5.00 Hamburger 10,000 2.00 Rib eye 4,000 4.75 Roast 6,000 3.50 The total joint cost for the current period was $43,000.How much of this cost should Bevo Beef allocate to sirloin?

Gross profit for the White and Grey Divisions is: $\underline { \text { White} }$ $\quad$ $\quad$ $\quad$ $\quad$ $\underline { \text { Grey }}$ A) $\quad \$ 72,000 \quad \$ 193,000$ B) $\quad \$ 172,000 \quad \$ 352,000$ C) $\quad \$ 100,000 \quad \$ 241,000$ D) $\quad \$ 52,000 \quad \$ 163,000$ E) $\quad \$ 72,000 \quad \$ 163,000$

Uncontrollable costs would continue even if a department were eliminated.

What is the purpose of a departmental accounting system?