Exam 9: Performance Measurement and Responsibility Accounting

Expenses that are not easily associated with a specific department, and which are incurred for the benefit of more than one department, are:

Vaughn Co.operates three separate departments (A, B, C).The data below are provided for the current year: Total sales \ 120,000 (\ 40,000 from each department) Cost of goods sold 80,000 (50\% from A;25\% from B;25\% from C) Direct expense 26,000 \ \ 6,000 from A;\ 12,000 from B;\ 8,000 from C) Indirect expenses 9,000 Required: Prepare an income statement showing the departmental contributions to overhead for the current year.

A single cost incurred in producing or purchasing two or more essentially different products is a(n):

The ________________________________ is sales less direct expenses for a department.

Cycle time is a financial measure commonly used to evaluate a company's production processes.

The amount by which a department's revenues exceed its direct costs and expenses is the:

Describe the information found on a responsibility accounting performance report.

Which of the following would not be considered a cost center?

The portion of the $450 cost that should be allocated to Product A using the value basis of allocation is: A.$0 B.$180 C.$225 D.$300 E.$425

Which department has the greatest departmental contribution to overhead and what is the amount contributed? A.Dept.3; $ 400,000 B.Dept.1; $1,000,000 C.Dept.2; $ 100,000 D.Dept.3; $ 250,000 E.Dept.2; $ 150,000

A __________________________ helps control costs and expenses and evaluates managers' performance by assigning costs and expenses to the managers responsible for controlling them.

Renton Co.has two operating (production)departments supported by a number of service departments.The following information was collected for a recent period: Machining Assembly Indirect Salaries \ 122,400 \ 85,700 \ 36,700 Insurance 20,200 11,000 5,500 Utilities 23,900 13,900 2,000 Depreciation 20,700 11,500 13,800 Maintenance 7,000 4,700 29,400 Office expenses -0- -0- 71,100 Cost of goods sold 327,600 121,200 Indirect costs are allocated as follows: salaries on the basis of sales, office expenses on the basis of the number of employees, and all other costs on the basis of square footage.Additional information about the production departments follows: Square Number of Machininig 14,535 78 Assembly 4,845 52 Sales for the Machining Department are $724,404 and sales for the Assembly Department are $356,796.Determine the departmental contribution to overhead and the departmental net income for each production department.

A service department is usually evaluated as a profit center.

Burien, Inc.operates a retail store with two departments, A and B.Its departmental income statement for the current year follows: BURIEN, INC. Departmental Income Statement For Year Ended December 31 Sales \ 180,000 \ 200,000 \ 380,000 Direct expenses Contributions to overhead Indirect expenses: Depreciation--building 10,000 11,760 21,760 Maintenance 1,600 1,700 3,300 Utilities 6,200 6,320 12,520 Office expenses Total indirect expenses Net income Burien allocates building depreciation, maintenance, and utilities on the basis of square footage.Office expenses are allocated on the basis of sales. Management is considering an expansion to a three-department operation.The proposed Department C would generate $120,000 in additional sales and have a 17.5% contribution to overhead.The company owns its building.Opening Department C would redistribute the square footage to each department as follows: A, 19,040; B, 21,760 sq.ft.; C, 13,600.Increases in indirect expenses would include: maintenance, $500; utilities, $3,800; and office expenses, $1,200. Complete the following departmental income statements, showing projected results of operations for the three sales departments.(Round amounts to the nearest whole dollar.) Sales \ 180,000 \ 200,000 - Direct expenses - Contributions to overhead \ 50,100 \ 57,130 - Indirect expenses - Depreciation-building - Maintenance - Utilities - Office expenses - Total indirect expenses Net income

Allocations of joint product costs can be based on the relative market values of the products:

A dairy allocates the cost of unprocessed milk to the production of milk, cream, butter and cheese.For the current period, unprocessed milk was purchased for $240,000, and the following quantities of product and sales revenues were produced. Price per Milk 100,000 \ 0.90 Cheese 50,000 2.20 Butter 20,000 1.00 Cream 10,000 3.00 How much of the $240,000 cost should be allocated to milk?

A sawmill bought a shipment of logs for $40,000.When cut, the logs produced 1 million board feet of lumber in the following grades: Type 1 - 400,000 bd.ft.priced to sell at $0.12 per bd.ft. Type 2 - 400,000 bd.ft.priced to sell at $0.06 per bd.ft. Type 3 - 200,000 bd.ft.priced to sell at $0.04 per bd.ft. How much cost should be allocated to Type 1 and Type 2, respectively? A. \ 16,000 \ 16,000 B . \ 13,333 \ 4,444 C. \ 40,000 \ 24,000 D. \ 24,000 \ 12,000 E. \ 24,000 \ 8,000

Samm's Department Store operates three departments (A, B, and C).If total costs of $4,500 are to be allocated on the basis of square feet of space, (Dept.A = 1,500 sq.ft.; Dept.B = 900 sq.ft.; Dept.C = 600 sq.ft.)then Dept.A's share (in percent)of the $4,500 cost would be ________%; Dept.B would be ______%, and Dept.C would be __________%.The amount of cost allocated to Dept.C would be $__________.

Assume Rock Bottom Golf is divided into four departments that operate as profit centers and that the data below is from the most recent fiscal year. Golf Clubs Golf Bags Golf Balls Golf Apparel Sales \ 200,000 \ 400,000 \ 800,000 \ 1,600,000 Cost of goods 90,000 220,000 400,000 960,000 Sold Direct expenses Salaries 18,000 54,000 90,000 226,000 Insurance 2,000 3,000 6,000 120,000 Utilities 1,000 2,000 3,000 10,000 -Given the information above, list Rock Bottom Golf's departments in order of highest departmental contribution to overhead to lowest departmental contribution to overhead. A.Golf Balls, Golf Apparel, Golf Bags, Golf Clubs. B.Golf Apparel, Golf Balls, Golf Bags, Golf Clubs. C.Golf Clubs, Golf Bags, Golf Balls, Golf Apparel. D.Golf Clubs, Golf Bags, Golf Apparel, Golf Balls. E.Golf Balls, Golf Apparel, Golf Clubs, Golf Bags.

A company manufactures two products, X and Y, from a single raw material called ZZ.ZZ is purchased in 55-gallon drums, and the contents of one drum are sufficient to produce 30 gallons of X and 15 gallons of Y.X sells for $10 per gallon and Y sells for $30 per gallon.During the current period, the company used 400 drums of ZZ to manufacture X and Y.The cost of ZZ was $90 per drum. Required: a.If the cost of ZZ is allocated to the X and Y products on the basis of the number of gallons produced, how much of the total cost of the 400 drums should be charged to each product? b.If the cost of ZZ is allocated to the X and Y products in proportion to their market values, how much of the total cost of the 400 drums should be charged to each product? c.Which basis of allocating the cost is most likely to be used by the company? Check one and briefly explain. _______ The relative number of gallons of each product produced. _______ The relative market values of each product at the point of separation.