Exam 24: Cost Allocation and Responsibility Accounting

Traditional costing provides more detailed information on costs of activities and the drivers of these costs than activity-based costing.

A responsibility accounting system evaluates the performance of each responsibility center and its manager.

The practice of comparing a company's achievements against the best practices in the industry is known as goal congruence.

All costs are ultimately controllable at the upper levels of management.

Which of the following is a key performance indicator of the internal business perspective of the balanced scorecard?

Which of the following best describes the manager of a profit center?

Residual income compares the division's actual operating income with the minimum operating income expected by top management for the given size of the division's average total assets.

The limitations of financial performance measures ________.

Galley Company,a manufacturer of small kitchen appliances,had the following activities,allocated costs,and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 73,000 2600 hours Account billing (lines) \ 39,000 16,000 lines Account verification (accounts) \ 12,000 30,000 accounts Correspondence (letters) \ 10,000 1600 letters The above activities are carried out at two of its regional offices. Activities Northeast Office Midwest Office Account inquiry (hours) 160 hours 300 hours Account billing (lines) 14,000 lines 7000 lines Account verification (accounts) 1400 accounts 600 accounts Correspondence (letters) 60 letters 130 letters What is the cost per line for the account billing activity? (Round your answer to the nearest cent.)

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

Gizmo Company,a manufacturer of small appliances,had the following activities,allocated costs,and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 79,000 2000 hours Account billing (lines) \ 40,000 19,000 lines Account verification (accounts) \ 15,000 26,000 accounts Correspondence (letters) \ 10,000 1200 letters The above activities are carried out at two of its regional offices. Activities Northeast Office Midwest Office Account inquiry (hours) 160 hours 250 hours Account billing (lines) 10,000 lines 2000 lines Account verification (accounts) 1800 accounts 650 accounts Correspondence (letters) 90 letters 150 letters What is the cost per hour for the account inquiry activity? (Round your answer to the nearest cent.)

Sousa Corporation provides the following financial information: Minimum acceptable operating income \ 560,000 Average total assets \ 2,000,000 Operating income \ 715,000 Return on investment 36\% Net sales \ 850,000 Calculate the residual income of Sousa Corporation.

Tranquility Company manufactures ceiling fans and uses an activity-based costing system.Each ceiling fan has 20 separate parts.The direct materials cost is $75 and each ceiling fan requires 2.00 hours of machine time to manufacture.There is no direct labor.Additional information is as follows: Activity Allocation Base Predetermined Overhead Allocation Rate Materials handling Number of parts \ 0.06 Machining Machine hours 6.00 Assembling Number of parts 0.35 Packaging Number of finished units 3.40 What is the total manufacturing cost per ceiling fan? (Round any intermediate calculations and your final answer to the nearest cent.)

Safari Equipment Company has several divisions that are investment centers.Data for the Boat Division and the Trailer Division are shown here: Boat Division Trailer Division Operating income \ 75,000 \ 36,000 Total assets at Jan. 1 \ 700,000 \ 215,000 Total assets at Dec .31 \ 750,000 \ 220,000 Which of the following statements would be the most meaningful interpretation of this data?

The responsibility report of Alejandro Garcia,the manager of one of the divisions of an auto parts manufacturing company,includes profits as well as return on investment and residual income.Alejandro is most likely the manager of a(n)________.

Guardian Corporation has two major divisions- Healthcare Products and Pharmaceutical Products.It provides the following information for the year. Healthcare Division Pharmaceutical Division Net sales \ 160,000 \ 1,750,000 Operating income \ 46,000 \ 218,000 Average assets \ 320,000 \ 5,540,000 Target rate of return 12,0\% 12,0\% Calculate the residual income for the Healthcare Division.

Sirius,Inc.has average total assets of $300,000.The annual operating income of the company is $150,000.The target rate of return for the company is 15%.Calculate the residual income.

The primary objective in setting transfer prices is to achieve goal congruence by selecting a price that will maximize the overall company profits.

Responsibility accounting can help managers identify the causes of variances,thereby allowing them to determine what was controllable.

For each of the following responsibility centers,state the typical focus of the responsibility report and briefly discuss the focus. Responsibility Center Focus of the Responsibility Report Brief Discussion of the Focus Cost Revenue Profit