Exam 7: Cost Allocation and Responsibility Accounting

An activity-based costing system is developed in four steps. a. Compute the allocation rate for each activity b. Identify activities and estimate their total costs c. Identify the cost driver for each activity and then estimate the quantity of each driver's allocation base d. Allocate the indirect costs to the cost object Which of the following is the correct order of performing these steps?

Performance report of a profit center includes both revenues and expenses.

Which of the following internal business perspective key performance indicators (KPIs) is commonly used to assess the innovation process?

Direct material costs and direct labor costs cannot be easily traced to products. Therefore, they are allocated to products.

Which of the following statements most accurately describes residual income?

Johnson Construction Materials Company has a sales office which sells concrete culvert pipe to property developers. The sales office is a revenue center and must prepare a monthly performance report. It has provided the following information. Revenue Center Performance Report Actual Flexible Budget Flexible Sales Volume Static Product type: Sales Revenue Variance U/F Budget Variance U/F Budget 40 inch \ 31,500 \ 30,000 \ 40,000 36 inch long \ 40,150 \ 42,000 \ 33,000 36 inch short \ 36,200 \ 33,000 \ 30,000 32 inch \ 19,000 \ 20,000 \ 28,000 -How much is the flexible budget variance for the 40 inch pipe?

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

Which of the following is the correct formula for calculating return on investment?

Pitt Jones Company had the following activities, allocated costs, and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 60,000 2,000 hours Account billing (lines) \ 30,000 20,000 lines Account verification (accounts) \ 15,000 20,000 accounts Correspondence (letters) \ 10,000 1,000 letters The above activities are carried out at two of their regional offices. Northeast Office Midwest Office Account inquiry (hours) 100 hours 200 hours Account billing (lines) 10,000 lines 7,000 lines Account verification (accounts) 1,000 accounts 600 accounts Correspondence (letters) 50 letters 100 letters - How much of the account verification costs will be assigned to the Northeast Office?

A system of evaluating the performance of each responsibility center and its manager is known as responsibility accounting system.