Question 1

Profit margin for an investment center measures:

Accepted Answer

A) Investment center income earned per dollar of sales. 
B) How efficiently an investment center generates sales from its invested assets. 
C) Investment center income compared to target investment center income. 
D) Departmental contribution to overhead. 
E) Investment center income generated from its invested assets. 
A) Investment center income earned per dollar of sales. 
B) How efficiently an investment center generates sales from its invested assets. 
C) Investment center income compared to target investment center income. 
D) Departmental contribution to overhead. 
E) Investment center income generated from its invested assets. A

Question 2

A company rents a building with a total of 50,000 square feet,which are evenly divided between two floors.The company allocates the rent for space on the first floor at twice the rate of space on the second floor.The total monthly rent for the building is $30,000.How much of the monthly rental expense should be allocated to a department that occupies 10,000 square feet on the second floor?

Accepted Answer

A) $8,000. 
B) $5,000. 
C) $3,000. 
D) $4,000. 
E) $2,000. 
A) $8,000. 
B) $5,000. 
C) $3,000. 
D) $4,000. 
E) $2,000. D

Question 3

A cost incurred to produce or purchase two or more products at the same time is a(n):

Accepted Answer

A) Product cost. 
B) Incremental cost. 
C) Differential cost. 
D) Joint cost. 
E) Fixed cost. 
A) Product cost. 
B) Incremental cost. 
C) Differential cost. 
D) Joint cost. 
E) Fixed cost. D

Question 4

Which of the following is not one of the perspectives used to analyze performance using the balanced scorecard?

Accepted Answer

A) Customer 
B) Financial/owners 
C) Internal process 
D) Number of employees 
E) Innovation and learning 
A) Customer 
B) Financial/owners 
C) Internal process 
D) Number of employees 
E) Innovation and learning

Question 5

The type of department that generates revenues and incurs costs,and its manager is responsible for the investments made in operating assets is called a(n):

Accepted Answer

A) Profit center 
B) Cost center 
C) Service department 
D) Investment center 
E) Responsibility center 
A) Profit center 
B) Cost center 
C) Service department 
D) Investment center 
E) Responsibility center

Question 6

A firm produces and sells two products,Plus and Max.The following information is available relating to setup costs (a part of factory overhead):  
-Using direct labor hours as the allocation base,the setup cost portion of overhead that is allocated to each unit of product for Plus and Max,respectively is:

Accepted Answer

A) $.80; $.80. 
B) $3.20; $3.20. 
C) $4.00; $4.00. 
D) $160.00; $12,800.00. 
E) $200.00; $16,000.00. 
A) $.80; $.80. 
B) $3.20; $3.20. 
C) $4.00; $4.00. 
D) $160.00; $12,800.00. 
E) $200.00; $16,000.00.

Question 7

Direct expenses require allocation across departments because they cannot be readily traced to one department.

Accepted Answer

A) True 
 B)False

Question 8

Wren Pork Company uses the value basis of allocating joint costs in its production of pork products.Relevant information for the current period follows:  The total joint cost for the current period was $43,000.How much of this cost should Wren Pork allocate to Loin chops?

Accepted Answer

A) $0. 
B) $5,909. 
C) $8,600. 
D) $10,750. 
E) $43,000. 
A) $0. 
B) $5,909. 
C) $8,600. 
D) $10,750. 
E) $43,000.

Question 9

Investment center managers are evaluated on their use of investment center assets to generate income.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) Fixed expenses. 
B) Indirect expenses. 
C) Direct expenses. 
D) Uncontrollable expenses. 
E) Variable expenses. 
A) Fixed expenses. 
B) Indirect expenses. 
C) Direct expenses. 
D) Uncontrollable expenses. 
E) Variable expenses.

Question 11

Part 7B costs the Midwest Division of Frackle Corporation $30 to make,of which $21 is variable.Midwest Division sells Part 7B to other companies for $47.The Northern Division of Frackle Corporation can use Part 7B in one of its products.The Midwest Division has enough idle capacity to produce all of the units of Part 7B that the Northern Division would require.What is the lowest transfer price at which the Midwest Division should be willing to sell Part 7B to the Northern Division?

Accepted Answer

A) $30 
B) $21 
C) $47 
D) $17 
E) $20 
A) $30 
B) $21 
C) $47 
D) $17 
E) $20

Question 12

Calculating return on investment for an investment center is defined by the following formula:

Accepted Answer

A) Contribution margin/Ending assets. 
B) Gross profit/Ending assets. 
C) Net income/Ending assets. 
D) Income/Average invested assets. 
E) Contribution margin/Average invested assets. 
A) Contribution margin/Ending assets. 
B) Gross profit/Ending assets. 
C) Net income/Ending assets. 
D) Income/Average invested assets. 
E) Contribution margin/Average invested assets.

Question 13

The ________ measures the average time it takes to convert cash outflows into cash inflows from customers.

Accepted Answer

cash conve

Question 14

Fallow Corporation has two separate profit centers.The following information is available for the most recent year:  The West Division occupies 5,000 square feet in the plant.The East Division occupies 3,000 square feet.Rent,which was $40,000 for the year,is an indirect expense and is allocated based on square footage.Compute operating income for the West Division.

Accepted Answer

A) $120,000. 
B) $95,000. 
C) $94,000. 
D) $69,000. 
E) $54,000. 
A) $120,000. 
B) $95,000. 
C) $94,000. 
D) $69,000. 
E) $54,000.

Question 15

Dartford Company reported the following financial data for one of its divisions for the year; average investment center total assets of $3,500,000; investment center income $610,000; a target income of 12% of average invested assets.The residual income for the division is:

Accepted Answer

A) $536,800. 
B) $1,030,000. 
C) $190,000. 
D) $683,200. 
E) $493,200. 
A) $536,800. 
B) $1,030,000. 
C) $190,000. 
D) $683,200. 
E) $493,200.

Question 16

An example of a service department is the human resources department.

Accepted Answer

A) True 
 B)False

Question 17

A company produces two joint products (called 301 and 302)in a single operation that uses one raw material called Fruge.Four hundred gallons of Fruge were purchased at a cost of $800 and were used to produce 150 gallons of Product 301,selling for $5 per gallon,and 75 gallons of Product 302,selling for $15 per gallon.How much of the $800 cost should be allocated to each product,assuming that the company allocates cost based on sales revenue?

Accepted Answer

The answer of A company produces two joint products (called...

Question 18

The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be:

Accepted Answer

A) Floor space of each department. 
B) Relative number of items each department had on sale. 
C) Number of customers to enter each department. 
D) An equal amount of cost for each department. 
E) Proportion of sales of each department. 
A) Floor space of each department. 
B) Relative number of items each department had on sale. 
C) Number of customers to enter each department. 
D) An equal amount of cost for each department. 
E) Proportion of sales of each department.

Question 19

The cash conversion cycle is calculated by days' sales in accounts receivable plus ________ less days' payable outstanding.

Accepted Answer

days' sale

Question 20

Indirect expenses are allocated to departments based upon the benefits received by each department.

Accepted Answer

A) True 
 B)False

Exam 22: Performance Measurement and Responsibility Accounting

Profit margin for an investment center measures:

A cost incurred to produce or purchase two or more products at the same time is a(n):

Which of the following is not one of the perspectives used to analyze performance using the balanced scorecard?

The type of department that generates revenues and incurs costs,and its manager is responsible for the investments made in operating assets is called a(n):

Direct expenses require allocation across departments because they cannot be readily traced to one department.

Wren Pork Company uses the value basis of allocating joint costs in its production of pork products.Relevant information for the current period follows: The total joint cost for the current period was $43,000.How much of this cost should Wren Pork allocate to Loin chops?

Investment center managers are evaluated on their use of investment center assets to generate income.

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

Calculating return on investment for an investment center is defined by the following formula:

The ________ measures the average time it takes to convert cash outflows into cash inflows from customers.

Dartford Company reported the following financial data for one of its divisions for the year; average investment center total assets of $3,500,000; investment center income $610,000; a target income of 12% of average invested assets.The residual income for the division is:

An example of a service department is the human resources department.

The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be:

The cash conversion cycle is calculated by days' sales in accounts receivable plus ________ less days' payable outstanding.

Indirect expenses are allocated to departments based upon the benefits received by each department.

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Time Value of Money

Investments

Lean Principles and Accounting

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