Question 1

Which of the following is the correct formula for the profit margin ratio?

Accepted Answer

A)  Net profit / Sales 
B)  Net sales / Average total assets 
C)  Net profit × Capital invested 
D)  Operating income / Net sales 
A)  Net profit / Sales 
B)  Net sales / Average total assets 
C)  Net profit × Capital invested 
D)  Operating income / Net sales D

Question 2

Which of the following statements is TRUE of costing systems?

Accepted Answer

A)  Many traditional costing systems can distort product costs and profitability. 
B)  Traditional costing systems tend to be more costly than activity-based costing systems. 
C)  Activity-based costing systems tend to combine various costs into a single cost pool. 
D)  Activity-based costing systems tend to use fewer cost pools than does a traditional costing system. 
A)  Many traditional costing systems can distort product costs and profitability. 
B)  Traditional costing systems tend to be more costly than activity-based costing systems. 
C)  Activity-based costing systems tend to combine various costs into a single cost pool. 
D)  Activity-based costing systems tend to use fewer cost pools than does a traditional costing system. A

Question 3

Define cost-based transfer price.When should cost-based transfer pricing be used? Explain your answer.

Accepted Answer

Cost-based transfer price is a transfer price based on the cost of producing the goods.This price could be the variable cost,the full cost including the variable cost and the fixed cost,or the cost plus a markup.It is used when the division is operating below capacity.Because sales cannot be made to customers outside the company,managers can negotiate a transfer price that is satisfactory to both divisions.There is capacity available to produce goods for other divisions.

Question 4

In decentralized companies,performance evaluation systems provide upper management with the feedback it needs to maintain control over the entire organization.

Accepted Answer

A) True 
 B)False

Question 5

Decentralized companies often lead to diminished customer relations and slower customer response time.

Accepted Answer

A) True 
 B)False

Question 6

List the primary goals of performance evaluation systems.

Accepted Answer

The goals of the performance e

Question 7

Which of the following managers is likely to have the most diverse responsibilities?

Accepted Answer

A)  the manager of a cost center 
B)  the manager of a profit center 
C)  the manager of an investment center 
D)  the manager of a revenue center 
A)  the manager of a cost center 
B)  the manager of a profit center 
C)  the manager of an investment center 
D)  the manager of a revenue center

Question 8

Provisions Company,a manufacturer of office supplies,provides the following financial information: $$\begin{array} { | l | r | r | } 
\hline & \text { Pen Division } & \text { Pencil Division } \
\hline \text { Operating income } & \$ 80,000 & \$ 30,000 \
\hline \text { Net sales } & \$ 400,000 & \$ 150,000 \
\hline \text { Total assets at Jan. 1 } & \$ 600,000 & \$ 350,000 \
\hline \text { Total assets at Dec. 31 } & \$ 610,000 & \$ 300,000 \
\hline
\end{array}$$ Calculate the return on investment for the Pen Division.(Round your answer to two decimal places.)

Accepted Answer

A)  13.22% 
B)  9.23% 
C)  13.33% 
D)  13.11% 
A)  13.22% 
B)  9.23% 
C)  13.33% 
D)  13.11%

Question 9

A company uses a balanced scorecard and has established a key performance indicator for product quality.If the actual warranty claims are higher than expected,there is an indication that the quality standards have been met.

Accepted Answer

A) True 
 B)False

Question 10

Borsetta,Inc.manufactures two kinds of bags-totes and satchels.The company allocates manufacturing overhead using a single plantwide rate with direct labor cost as the allocation base.Estimated overhead costs for the year are $25,500.Additional estimated information is given below. $$\begin{array} { | l | l | l | } 
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 30 & \$ 43 \
\hline \text { Direct labor cost per unit } & \$ 54 & \$ 64 \
\hline \text { Number of units } & \$ 20 & \$ 70 \
\hline
\end{array}$$ Calculate the amount of overhead to be allocated to Satchels,if the actual units produced and direct labor costs equal the estimated amounts.(Round any percentages to two decimal places and your final answer to the nearest dollar.)

Accepted Answer

A)  $472 
B)  $13,835 
C)  $11,667 
D)  $23,680 
A)  $472 
B)  $13,835 
C)  $11,667 
D)  $23,680

Question 11

The financial perspective of the balanced scorecard is concerned with ________.

Accepted Answer

A)  how customers perceive the business and its products and services 
B)  the company's ability to improve and create value 
C)  which business processes the company must excel in to meet expectations 
D)  whether investors and creditors view the company favorably 
A)  how customers perceive the business and its products and services 
B)  the company's ability to improve and create value 
C)  which business processes the company must excel in to meet expectations 
D)  whether investors and creditors view the company favorably

Question 12

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.

Accepted Answer

A) True 
 B)False

Question 13

List and briefly discuss the two limitations of financial performance measures.

Accepted Answer

Measurement issues-Both the return on in

Question 14

Which responsibility center managers are responsible for both generating revenue and either controlling costs or efficiently managing invested capital?

Accepted Answer

A)  cost and profit centers 
B)  revenue and profit centers 
C)  profit and investment centers 
D)  revenue and investment centers 
A)  cost and profit centers 
B)  revenue and profit centers 
C)  profit and investment centers 
D)  revenue and investment centers

Question 15

In a ________,the manager is responsible for generating revenues and controlling costs.

Accepted Answer

A)  cost center 
B)  profit center 
C)  revenue center 
D)  transfer pricing center 
A)  cost center 
B)  profit center 
C)  revenue center 
D)  transfer pricing center

Question 16

Discuss the difference between a centralized company and a decentralized company.

Accepted Answer

In a small company,the owner or top mana

Question 17

In the first step in developing an activity-based costing system for a manufacturing company,the management team must determine the activities that incur the majority of the product and period costs.

Accepted Answer

A) True 
 B)False

Question 18

When a manufacturer changes from using a single plantwide predetermined overhead rate to multiple predetermined overhead allocation rates,the product unit cost may be more accurate.

Accepted Answer

A) True 
 B)False

Question 19

Communicating top management's expectations to segment managers improves goal congruence.

Accepted Answer

A) True 
 B)False

Question 20

A furniture manufacturer has decided that its use of a single plantwide predetermined overhead allocation rate is no longer accurate.In making the transition to using multiple predetermined overhead allocation rates,which of the following statements is incorrect?

Accepted Answer

A)  With multiple overhead rates, there are multiple cost pools. 
B)  Management must analyze the expected overhead costs and separate them into a cost pool for each department. 
C)  With multiple overhead rates, there is one cost pool and multiple allocation bases. 
D)  The use of multiple predetermined overhead allocation rates is more complex, but it may be more accurate. 
A)  With multiple overhead rates, there are multiple cost pools. 
B)  Management must analyze the expected overhead costs and separate them into a cost pool for each department. 
C)  With multiple overhead rates, there is one cost pool and multiple allocation bases. 
D)  The use of multiple predetermined overhead allocation rates is more complex, but it may be more accurate.

Exam 24: Cost Allocation and Responsibility Accounting

Which of the following is the correct formula for the profit margin ratio?

Which of the following statements is TRUE of costing systems?

Define cost-based transfer price.When should cost-based transfer pricing be used? Explain your answer.

In decentralized companies,performance evaluation systems provide upper management with the feedback it needs to maintain control over the entire organization.

Decentralized companies often lead to diminished customer relations and slower customer response time.

List the primary goals of performance evaluation systems.

Which of the following managers is likely to have the most diverse responsibilities?

A company uses a balanced scorecard and has established a key performance indicator for product quality.If the actual warranty claims are higher than expected,there is an indication that the quality standards have been met.

The financial perspective of the balanced scorecard is concerned with ________.

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.

List and briefly discuss the two limitations of financial performance measures.

Which responsibility center managers are responsible for both generating revenue and either controlling costs or efficiently managing invested capital?

In a ________,the manager is responsible for generating revenues and controlling costs.

Discuss the difference between a centralized company and a decentralized company.

In the first step in developing an activity-based costing system for a manufacturing company,the management team must determine the activities that incur the majority of the product and period costs.

When a manufacturer changes from using a single plantwide predetermined overhead rate to multiple predetermined overhead allocation rates,the product unit cost may be more accurate.

Communicating top management's expectations to segment managers improves goal congruence.

A furniture manufacturer has decided that its use of a single plantwide predetermined overhead allocation rate is no longer accurate.In making the transition to using multiple predetermined overhead allocation rates,which of the following statements is incorrect?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

Filters