Exam 24: Cost Allocation and Responsibility Accounting

Stampout Plastics produces different kinds of products,all in one manufacturing facility.They have identified four activities for their costing system: Materials management-allocated by number of purchase orders Chemical processing-allocated on metric tons Molding-allocated on direct labor hours Packaging-allocated by number of units produced The activity rates are as follows: Materials management \ 12.00 Per purchase order Chemical processing \ 7.50 Per metric ton Molding \ 24.00 Per direct labor hour Parkaging \ 0.10 Per unit Engineering design shows that the order will require direct materials that cost $540; direct labor cost will be $90.The order will also require four purchase orders to be placed,use two metric tons of chemical base,and need eight direct labor hours.The size of the order is to produce 3,000 units of product.Calculate the total production of the order.

All of the following are advantages of decentralization EXCEPT ________.

Which of the following is a responsibility that is common to the managers of cost,profit,and investment centers?

A market-based transfer price is based on the ________ when determining the transfer price.

Accelerated Logistics provides the following information: Operating income \ 1,500,000 Net sales \ 14,000,000 Average total assets \ 2,000,000 Management's target rate of return 30\% What is the company's profit margin ratio? (Round your answer to two decimal places.)

Madsen,Inc.intends to increase its profits by 50% in the next fiscal year.Which of the following is most likely to be a lead indicator in Madsen's performance report?

Why is using multiple predetermined overhead allocation rates more accurate than using a single plantwide allocation rate?

Royal Rotisserie Company,a manufacturer of kitchen ovens,had the following activities,allocated costs,and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 73,000 2800 hours Account billing (lines) \ 35,000 17,000 lines Account verification (accounts) \ 19,000 27,000 accounts Correspondence (letters) \ 14,000 1000 letters The above activities are carried out at two of its regional offices. Activities Northeast Office Midwest Office Account inquiry (hours) 180 hours 250 hours Account billing (lines) 14,000 lines 7000 lines Account verification (accounts) 1700 accounts 650 accounts Correspondence (letters) 30 letters 150 letters How much of the account inquiry cost will be assigned to the Midwest Office? (Round any intermediate calculations to two decimal places and your final answer to the nearest dollar.)

Manufacturing overhead costs,which are also known as indirect costs,cannot be cost-effectively traced to products.

The balanced scorecard focuses only on lead indicators,because lag indicators are not important for performance evaluation.

Which of the following perspectives of the balanced scorecard focuses on the increase of company profits through increasing revenue growth and productivity?

Reynolds Construction Materials Company has a sales office that sells concrete culvert pipes to property developers.The sales office is a revenue center and prepares a monthly responsibility report.The following information is provided. Revenue Center Responsibility Repart Product Type Actual Sales Revenue Flexible Budget Variance U/F Flexible Budget Sales Volume Variance U/F Static Budget 40 inch \ 31,700 \ 30,000 \ 40,600 36 inch long 40,000 42,200 33,200 36 inch short 36,000 33,000 30,000 32 inch 19,100 20,900 28,000 What is the flexible budget variance for the 40-inch pipe?

Net income is used in the numerator of the return on investment formula.

Worldwide Logistics provides the following information: Operating income \ 1,600,000 Net sales \ 13,000,000 Average total assets \ 1,800,000 Management's target rate of return 25\% What is the company's residual income?

The following is divisional information for Kingfisher Enterprises: East Division West Division Operating income \ 250,000 \ 200,000 Net sales 2,225,000 1,575,000 Total assets at Jan. 1 1,500,000 840,000 Total assets at Dec .31 1,200,000 1,000,000 The target rate of return is 12% for the East Division and is 10% for the West Division. Compute residual income for each division.

One part of the balanced scorecard helps management answer the question,"How do we look to investors and creditors?" Which of the four perspectives is being described with this statement?

If a company allows division managers to negotiate a cost-based transfer price,it is better to use actual costs rather than standard costs.Otherwise,the selling division has no motivation to control costs.

Which of the following is an advantage of decentralization?

Raven,Inc.has a division that manufactures a component that sells for $195 and has a variable cost of $30.Another division of the company wants to purchase the component.Fixed cost per unit of the component is $20.What is the minimum transfer price if the division is operating below its capacity?

Managers are able to set an accurate selling price without knowing product cost information.