Question 1

Investment center managers are usually evaluated using performance measures

Accepted Answer

A)  that combine assets and capital. 
B)  based on income only. 
C)  that combine income and capital. 
D)  based on assets only. 
E)  that combine income and assets. 
A)  that combine assets and capital. 
B)  based on income only. 
C)  that combine income and capital. 
D)  based on assets only. 
E)  that combine income and assets.

Question 2

Which of the following is not true regarding a responsibility accounting system?

Accepted Answer

A)  It can be applied at any level of an organization. 
B)  It should not hold a manager responsible for costs over which the manager has no influence. 
C)  It is designed to measure the performance of managers in terms of controllable costs. 
D)  It is only relevant in manufacturing companies. 
E)  It assigns responsibility for costs to the appropriate managerial level that controls those costs. 
A)  It can be applied at any level of an organization. 
B)  It should not hold a manager responsible for costs over which the manager has no influence. 
C)  It is designed to measure the performance of managers in terms of controllable costs. 
D)  It is only relevant in manufacturing companies. 
E)  It assigns responsibility for costs to the appropriate managerial level that controls those costs.

Question 3

The investment center return on investment is ________ divided by ________.

Accepted Answer

investments center n

Question 4

Costs that the manager has the power to determine or at least significantly affect are called:

Accepted Answer

A)  Direct costs. 
B)  Joint costs. 
C)  Controllable costs. 
D)  Uncontrollable costs. 
E)  Indirect costs. 
A)  Direct costs. 
B)  Joint costs. 
C)  Controllable costs. 
D)  Uncontrollable costs. 
E)  Indirect costs.

Question 5

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

Accepted Answer

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

Question 6

Two investment centers at Marshman Corporation have the following current-year income and asset data: Investment Center B
 $\begin{array} { | l | r | r | } 
\hline & \begin{array} { r } 
\text { Investment } \
\text { Center A }
\end{array} & \begin{array} { r } 
\text { Investment } \
\text { Center B }
\end{array} \
\hline \text { Investment center income } & \$ 415,000 & \$ 525,000 \
\hline \text { Investment center average inv ested assets } & \$ 2,400,000 & \$ 1,950,000 \
\hline
\end{array}$
-
The return on investment (ROI) for Investment Center A is:

Accepted Answer

A)  24.1% 
B)  19.1% 
C)  39.2% 
D)  17.3% 
E)  578.3% 
A)  24.1% 
B)  19.1% 
C)  39.2% 
D)  17.3% 
E)  578.3%

Question 7

A cost center does not directly generate revenues.

Accepted Answer

A) True 
 B)False

Question 8

Pleasant Hills Properties is developing a golf course subdivision that includes 250 home lots; 100 lots are golf course lots and will sell for $95,000 each; 150 are street frontage lots and will sell for $65,000. The developer acquired the land for $1,800,000 and spent another $1,400,000 on street and utilities improvement.
- Compute the amount of joint cost to be allocated to the street frontage lots using value basis. (Round your intermediate percentages to 2 decimal places.)

Accepted Answer

A)  $1,920,000. 
B)  $720,000. 
C)  $1,080,000. 
D)  $1,579,200. 
E)  $1,620,800. 
A)  $1,920,000. 
B)  $720,000. 
C)  $1,080,000. 
D)  $1,579,200. 
E)  $1,620,800.

Question 9

Marian Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year: $\begin{array}{lrr}
&\text { Black Division}&\text { Navy Division}\
\text { Sales (net) } & \$ 200,000 & \$ 400,000 \
\text { Salary expense } & 28,000 & 48,000 \
\text { Cost of goods sold } & 100,000 & 159,000
\end{array}$ The Black Division occupies 20,000 square feet in the plant. The Navy Division occupies 30,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $50,000. 
-Compute gross profit for the Black and Navy Divisions, respectively.

Accepted Answer

A)  $52,000; $163,000. 
B)  $72,000; $163,000. 
C)  $100,000; $241,000. 
D)  $172,000; $352,000. 
E)  $72,000; $193,000. 
A)  $52,000; $163,000. 
B)  $72,000; $163,000. 
C)  $100,000; $241,000. 
D)  $172,000; $352,000. 
E)  $72,000; $193,000.

Question 10

Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 150 employees and occupies 44,000 square feet; Painting has 100 employees and occupies 36,000 square feet. Indirect factory expenses for the current period are as follows:
 Administration $ 80,000
Maintenance $ 100,000
- 
Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The amount of maintenance expenses that should be allocated to the Painting Department for the current period is:

Accepted Answer

A)  $110,000. 
B)  $ 48,000. 
C)  $103,000. 
D)  $45,000. 
E)  $ 55,000. 
A)  $110,000. 
B)  $ 48,000. 
C)  $103,000. 
D)  $45,000. 
E)  $ 55,000.

Question 11

Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 150 employees and occupies 44,000 square feet; Painting has 100 employees and occupies 36,000 square feet. Indirect factory expenses for the current period are as follows:
 Administration $ 80,000
Maintenance $ 100,000
- 
Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The amount of administration expenses that should be allocated to the Painting Department for the current period is:

Accepted Answer

A)  $ 48,000. 
B)  $ 32,000. 
C)  $ 55,000. 
D)  $103,000. 
E)  $110,000. 
A)  $ 48,000. 
B)  $ 32,000. 
C)  $ 55,000. 
D)  $103,000. 
E)  $110,000.

Question 12

The following is a partially completed lower section of a departmental expense allocation spreadsheet for Brickland. It reports the total amounts of direct and indirect expenses for the four departments. Purchasing department expenses are allocated to the operating departments on the basis of purchase orders. Maintenance department expenses are allocated based on square footage. Compute the amount of Purchasing department expense to be allocated to Fabrication. $\begin{array}{lcccc}
&\text { Purchasing }& \text { Maintenance }&\text { Fabrication }& \text { Assembly }\ 
\text { Operating costs } & \$ 32,000 & \$ 18,000 & \$ 96,000 & \$ 62,000 \
\text { No. of purchase orders } && & 16 & 4 \
\text { Sq. ft. of space } & & &3,300 & 2,700
\end{array}$

Accepted Answer

A)  $25,600. 
B)  $17,600. 
C)  $6,400. 
D)  $8,100. 
E)  $9,900. 
A)  $25,600. 
B)  $17,600. 
C)  $6,400. 
D)  $8,100. 
E)  $9,900.

Question 13

The first three steps in preparing a departmental income statement are: (1) accumulate of the department, (2) allocate ________ to the department, and (3) allocate ________ to the operating departments.

Accepted Answer

direct expenses; ind

Question 14

A profit center generates revenue, incurs costs, and has the authority to make significant investing decisions.

Accepted Answer

A) True 
 B)False

Question 15

Since service departments do not generate revenues, it is unnecessary to accumulate and allocate their costs.

Accepted Answer

A) True 
 B)False

Question 16

In the process of preparing department income statements, a company uses there are three steps before the statements can be completed. Describe those steps.

Accepted Answer

Step 1-revenues and expenses a

Question 17

The following is a partially completed lower section of a departmental expense allocation spreadsheet for Brickland. It reports the total amounts of direct and indirect expenses for the four departments. Purchasing department expenses are allocated to the operating departments on the basis of purchase orders. Maintenance department expenses are allocated based on square footage. $\begin{array}{lcccc}
&\text { Purchasing }& \text { Maintenance }&\text { Fabrication }& \text { Assembly }\ 
\text { Operating costs } & \$ 32,000 & \$ 18,000 & \$ 96,000 & \$ 62,000 \
\text { No. of purchase orders } && & 16 & 4 \
\text { Sq. ft. of space } & & &3,300 & 2,700
\end{array}$ 
 Required:
Compute the amount of Purchasing department expense to be allocated to Assembly.

Accepted Answer

A)  $8,100. 
B)  $6,400. 
C)  $25,600. 
D)  $9,900. 
E)  $14,400. 
A)  $8,100. 
B)  $6,400. 
C)  $25,600. 
D)  $9,900. 
E)  $14,400.

Question 18

Departmental salary expenses are direct expenses of that department.

Accepted Answer

A) True 
 B)False

Question 19

The amount by which a department's sales exceed its direct expenses is:

Accepted Answer

A)  Contribution margin. 
B)  Departmental profit. 
C)  Departmental contribution to overhead. 
D)  Net sales. 
E)  Gross profit. 
A)  Contribution margin. 
B)  Departmental profit. 
C)  Departmental contribution to overhead. 
D)  Net sales. 
E)  Gross profit.

Question 20

Return on investment can be split into which of the following two measures?

Accepted Answer

A)  Profit margin and net income. 
B)  Profit margin and investment turnover. 
C)  Residual income and operating income. 
D)  Investment center average assets and investment turnover. 
E)  Investment center income and profit margin. 
A)  Profit margin and net income. 
B)  Profit margin and investment turnover. 
C)  Residual income and operating income. 
D)  Investment center average assets and investment turnover. 
E)  Investment center income and profit margin.

Investment center managers are usually evaluated using performance measures

Which of the following is not true regarding a responsibility accounting system?

The investment center return on investment is divided by .

Costs that the manager has the power to determine or at least significantly affect are called:

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

A cost center does not directly generate revenues.

The first three steps in preparing a departmental income statement are: (1) accumulate of the department, (2) allocate to the department, and (3) allocate to the operating departments.

A profit center generates revenue, incurs costs, and has the authority to make significant investing decisions.

Since service departments do not generate revenues, it is unnecessary to accumulate and allocate their costs.

In the process of preparing department income statements, a company uses there are three steps before the statements can be completed. Describe those steps.

Departmental salary expenses are direct expenses of that department.

The amount by which a department's sales exceed its direct expenses is:

Return on investment can be split into which of the following two measures?

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

Filters

Exam 24: Performance Measurement and Responsibility Accounting

Investment center managers are usually evaluated using performance measures

Which of the following is not true regarding a responsibility accounting system?

The investment center return on investment is ________ divided by ________.

Costs that the manager has the power to determine or at least significantly affect are called:

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

A cost center does not directly generate revenues.

The first three steps in preparing a departmental income statement are: (1) accumulate of the department, (2) allocate ________ to the department, and (3) allocate ________ to the operating departments.

A profit center generates revenue, incurs costs, and has the authority to make significant investing decisions.

Since service departments do not generate revenues, it is unnecessary to accumulate and allocate their costs.

In the process of preparing department income statements, a company uses there are three steps before the statements can be completed. Describe those steps.

Departmental salary expenses are direct expenses of that department.

The amount by which a department's sales exceed its direct expenses is:

Return on investment can be split into which of the following two measures?

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

Filters

The investment center return on investment is divided by .

The first three steps in preparing a departmental income statement are: (1) accumulate of the department, (2) allocate to the department, and (3) allocate to the operating departments.