Exam 7: Cost Allocation and Responsibility Accounting

A company that uses a balanced scorecard has established a KPI for product quality. If the actual warranty claims are higher than expected it indicates that the quality standards have been met.

Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of 20 separate parts. The direct material cost is $95 and each ceiling fan requires 2.5 hours of machine time to manufacture. Additional information is as follows: Activity Allocation Base Cost Allocation Rate \ Materials handling Number of parts 0.08 Machining Machine hours 7.20 Assembling Number of parts 0.35 Packaging Number of finished units 2.70 - What is the cost of machining per ceiling fan?

A lag indicator is a performance measure that forecasts future performance.

Orlando Avionics makes three types of radios for small aircraft: Model A, Model B, and Model C. The manufacturing operations are mechanized and there is no direct labor. Manufacturing overhead costs are significant, and Orlando has adopted an activity-based costing system. Direct materials costs per unit for each model are as follows: Model A \ 28 Model B \ 32 Model C \ 40 Orlando has three activities: assembly, materials management, and testing. The cost driver for assembly is machine hours. The cost driver for materials management is number of parts, and the cost driver for testing is the number of units of product. Total costs and production volumes for the year 2015 were estimated as follows: Total cost Total units Cost Driver Assembly \ 780,000 120,000 Machine hours Materials management \ 120,000 80,000 Parts Testing \ 22,500 5,000 Units The Model A radio requires 12 parts to construct, and requires 16 machine hours of processing. What is the manufacturing cost to make one unit of Model A?

Operating income alone does not indicate how efficiently a segment is using its assets.

The payroll department of a manufacturing company is most likely to be a(n):

The flexible budget uses budgeted costs at the actual level of activity.

The manager of a cost center is responsible for controlling costs and generating revenues of the company.

The predetermined overhead allocation rate is an estimated overhead cost per unit of the allocation base and is calculated at the beginning of the accounting period.

Which of the following is the last step in developing an activity-based costing system?

Which of the following statements is correct regarding the activity-based costing system?

The ROI (Return on Investment) formula focuses on the amount of operating income earned before other revenue/expense items, such as interest expense, by utilizing the average total assets employed for the year.

For a pharmaceutical company, the most suitable base for allocating research and development costs to the finished products would be:

In a balanced scorecard, which of the following is a key performance indicator of the internal business perspective?

The performance measurement system should provide incentives to segment managers for coordinating activities of the subunits and focusing them toward the overall company objectives. Which of the following performance measurement goals has been described by this statement?

Regardless of the type of responsibility center, responsibility reports should focus on information, not blame.

Archid, a manufacturer of spare parts, has two production departments: Assembling and Packaging. The Assembling department is machine oriented, while the Packaging department is labor oriented. Estimated manufacturing overhead costs for the year 2015 were $15,000,000 for Assembling and $10,000,000 for Packaging. Calculate departmental wide allocation rates if total estimated machine hours were 30,000 and labor hours were 20,000 for the year.

When a division is operating at full capacity, the transfer price must be:

Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of 20 separate parts. The direct material cost is $95 and each ceiling fan requires 2.5 hours of machine time to manufacture. Additional information is as follows: Activity Allocation Base Cost Allocation Rate \ Materials handling Number of parts 0.08 Machining Machine hours 7.20 Assembling Number of parts 0.35 Packaging Number of finished units 2.70 -What is the cost of materials handling per ceiling fan?

Increased number of repeat customers and increased rate of on-time deliveries are the indicators of: