Question 1

What is the main difference between a cost center and a profit center?

Accepted Answer

A cost center incurs costs but does not

Question 2

The concepts of direct expenses and uncontrollable costs are essentially the same; also, indirect expenses and controllable costs are essentially the same.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

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

Question 4

A_____________ generates revenues and incurs costs.

Accepted Answer

The answer of A_____________ generates revenues and incurs costs....

Question 5

An expense that is readily traced to a department because it is incurred for that department's sole benefit is a(n):

Accepted Answer

A)  Administrative expense. 
B)  Common expense. 
C)  Recurring expense. 
D)  Indirect expense. 
E)  Direct expense. 
A)  Administrative expense. 
B)  Common expense. 
C)  Recurring expense. 
D)  Indirect expense. 
E)  Direct expense.

Question 6

Return on investment is a useful measure to evaluate the performance of a cost center manager.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following represents the correct formula for calculating cycle time for a manufacturer?

Accepted Answer

A)  Process time - inspection time + move time + wait time. 
B)  Process time + inspection time - move time - wait time. 
C)  Process time + inspection time + move time + wait time. 
D)  Process time + inspection time + move time - wait time. 
E)  Process time - inspection time - move time - wait time. 
A)  Process time - inspection time + move time + wait time. 
B)  Process time + inspection time - move time - wait time. 
C)  Process time + inspection time + move time + wait time. 
D)  Process time + inspection time + move time - wait time. 
E)  Process time - inspection time - move time - wait time.

Question 8

A system of performance measures, including nonfinancial measures, used to assess company and division manager performance is:

Accepted Answer

A)  Hurdle rate. 
B)  Residual income. 
C)  Balanced scorecard. 
D)  Return on investment. 
E)  Investment turnover. 
A)  Hurdle rate. 
B)  Residual income. 
C)  Balanced scorecard. 
D)  Return on investment. 
E)  Investment turnover.

Question 9

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

Question 10

Wren Pork Company uses the value basis of allocating joint costs in its production of pork products. Relevant information for the current period follows: $$\begin{array} { l r r } 
\text { Product } & \text { Pounds } & \text { Price/Ib. } \
\text { Loin chops } & 3,000 & \$ 5.00 \
\text { Ground } & 10,000 & 2.00 \
\text { Ribs } & 4,000 & 4.75 \
\text { Bacon } & 6,000 & 3.50
\end{array}$$ 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)  $10,750. 
B)  $0. 
C)  $8,600. 
D)  $43,000. 
E)  $5,909. 
A)  $10,750. 
B)  $0. 
C)  $8,600. 
D)  $43,000. 
E)  $5,909.

Question 11

Regal Furniture Company allocates its indirect salaries of $22,500 on the basis of sales. Determine the indirect salaries allocated to Departments 1 and 2 using the following information.
 $$\begin{array} { l | l | l | l | } 
& \text { Dept. 1 } & \text { Dept. 2 } & \text { Combined } \
\hline \text { Revenues from sales......... } & \$ 182,000 & \$ 78,000 & \$ 260,000 \
\hline \text { Direct Salaries ................. } & 42,250 & 22,750 & 65,000
\end{array}$$ Salaries allocated to Dept. 1 ________
Salaries allocated to Dept. 2 ________

Accepted Answer

Dept.1: ($182,000/$260,000) *

Question 12

Departmental contribution to overhead is calculated as the amount of sales of the department less:

Accepted Answer

A)  Joint costs. 
B)  Direct expenses. 
C)  Controllable costs. 
D)  Direct and indirect costs. 
E)  Product and period costs. 
A)  Joint costs. 
B)  Direct expenses. 
C)  Controllable costs. 
D)  Direct and indirect costs. 
E)  Product and period costs.

Question 13

Decentralization refers to companies that have multiple locations.

Accepted Answer

A) True 
 B)False

Question 14

A responsibility accounting performance report usually compares actual costs to budgeted costs amounts by management level.

Accepted Answer

A) True 
 B)False

Question 15

Canfield Technical School allocates administrative costs to its respective departments based on the number of students enrolled, while maintenance and utilities are allocated per square feet of the classrooms. Based on the information below, what is the total amount of maintenance cost to the Carpentry Department (rounded to the nearest dollar) if administrative costs for the school were $50,000, maintenance fees were $12,000, and utilities were $6,000?
$$\begin{array} { l c r l } 
\text { Department } & \text { Students } & & \text { Classrooms } \
\text { Electrical } & 120 & 10,000 & \text { sq. ft. } \
\text { Welding } & 70 & 12,000 & \text { sq. ft. } \
\text { Accounting } & 50 & 8,000 & \text { sq. ft. } \
\text { Carpentry } & 40 & 6,000 & \text { sq. ft. } \
\text { Total } & 280 & 36,000 & \text { sq. ft. } \
\hline
\end{array}$$

Accepted Answer

A)  $0. 
B)  $18,500. 
C)  $30,000 
D)  $22,667. 
E)  $17,000. 
A)  $0. 
B)  $18,500. 
C)  $30,000 
D)  $22,667. 
E)  $17,000.

Question 16

A report that accumulates the actual expenses that a manager is responsible for and their budgeted amounts is a:

Accepted Answer

A)  Departmental accounting report. 
B)  Managerial cost report. 
C)  Controllable expense report. 
D)  Responsibility accounting performance report. 
E)  Segmental accounting report. 
A)  Departmental accounting report. 
B)  Managerial cost report. 
C)  Controllable expense report. 
D)  Responsibility accounting performance report. 
E)  Segmental accounting report.

Question 17

Cost center managers are evaluated on their success in controlling costs compared to budgeted costs.

Accepted Answer

A) True 
 B)False

Question 18

Investment center managers are typically evaluated using performance measures that combine income and assets.

Accepted Answer

A) True 
 B)False

Question 19

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: $\begin{array}{lll}
\text { Ottice Expenses } & \text { Total } & \text { Allocation Basis } \
\text { Salaries } & \$ 30,000 & \text { Number of employees } \
\text { Depreciation } & 20,000 & \text { Cost of goods sold } \
\text { Advertising } & 40,000 & \text { Net sales }
\end{array}$

$\begin{array}{lrrrr}
\text {Item}&\text {Drilling}&\text {Grinding}&\text {Total}\
\text { Number of emplovees } & 1,000 & 1,500 & 2,500 \
\text { Net sales } & \$ 325,000 & \$ 475,000 & \$ 800,000 \
\text { Cost of goods sold } & \$ 75,000 & \$ 125,000 & \$ 200,000
\end{array}$
- The amount of depreciation that should be allocated to Drilling for the current period is:

Accepted Answer

A)  $12,500. 
B)  $ 7,500. 
C)  $40,000. 
D)  $25,000. 
E)  $20,000. 
A)  $12,500. 
B)  $ 7,500. 
C)  $40,000. 
D)  $25,000. 
E)  $20,000.

Question 20

Cycle time is calculated by process time plus inspection time plus move time plus ________.

Accepted Answer

The answer of Cycle time is calculated by process time...

Exam 24: Performance Measurement and Responsibility Accounting

What is the main difference between a cost center and a profit center?

The concepts of direct expenses and uncontrollable costs are essentially the same; also, indirect expenses and controllable costs are essentially the same.

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

A_____________ generates revenues and incurs costs.

An expense that is readily traced to a department because it is incurred for that department's sole benefit is a(n):

Return on investment is a useful measure to evaluate the performance of a cost center manager.

Which of the following represents the correct formula for calculating cycle time for a manufacturer?

A system of performance measures, including nonfinancial measures, used to assess company and division manager performance is:

Departmental contribution to overhead is calculated as the amount of sales of the department less:

Decentralization refers to companies that have multiple locations.

A responsibility accounting performance report usually compares actual costs to budgeted costs amounts by management level.

A report that accumulates the actual expenses that a manager is responsible for and their budgeted amounts is a:

Cost center managers are evaluated on their success in controlling costs compared to budgeted costs.

Investment center managers are typically evaluated using performance measures that combine income and assets.

Cycle time is calculated by process time plus inspection time plus move time plus ________.

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

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