Exam 24: Cost Allocation and Responsibility Accounting

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

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

When operating at capacity,a market-based transfer price should be used.

Atomic Microwave Company,a manufacturer of microwave ovens,had the following activities,allocated costs,and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 67,000 2200 hours Account billing (lines) \ 35,000 18,000 lines Account verification (accounts) \ 16,000 25,000 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) 140 hours 200 hours Account billing (lines) 12,000 lines 2000 lines Account verification (accounts) 1100 accounts 650 accounts Correspondence (letters) 70 letters 110 letters How much of the account verification costs will be assigned to the Northeast Office? (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.)

The main difference between activity-based costing and traditional costing systems is that activity-based costing uses a separate allocation base for each activity.

Hernandez Company has the following activities in its manufacturing process: Activity Annual Overhead Cost Expected Annual Use Overhead Rate Materials handling \ 60,000 600 purchase orders Machine set-ups \ 15,000 60 batches Product testing \ 28,000 375 tests Calculate the overhead rate for each activity.

In a decentralized company,segment managers may not fully understand the big picture when making decisions.

Whirlwind Fan Company manufactures ceiling fans and uses an activity-based costing system.Each ceiling fan has 20 separate parts.The direct material cost is $85,and each ceiling fan requires 2.50 hours of machine time to manufacture.Additional information is as follows: Activity Allocation Base Predetermined Overhead Allocation Rate Materials handling Number of parts \ 0.08 Machining Machine hours 6.00 Assembling Number of parts 0.25 Packaging Number of finished units 4.00 What is the cost of materials handling per ceiling fan? (Round any intermediate calculations and your final answer to two decimal places.)

Sales revenue growth,gross margin growth,and return on investment are the key performance indicators for the ________.

Which of the following is a key performance indicator of the customer perspective in a balanced scorecard?

Which of the following affects the company's ability to make on-time deliveries?

A high rate of employee turnover indicates that ________.

Centralized operations are better for small companies due to the smaller scope of their operations.

Erwin Plumbing Materials Company has a sales office that sells water pipes to construction companies.The sales office is a revenue center and prepares a monthly responsibility report.The partially completed responsibility report is provided. Revenue Center Respansibility Repart Product Type Actual Sales Revenue Flexible Budget Variance U/F Flexible Budget Sales Volume Variance U/F Static Budget 40 inch \ 31,500 \ 30,500 \ 40,800 36 inch long 40,200 42,000 33,100 36 inch short 36,200 33,200 30,000 32 inch 19,100 19,700 28,450 The company uses management by exception to address flexible budget variances.On which product type would the company first focus?

A company's "climate for action" is a corporate culture ________.

Skipper Company manufactures toy boats and uses an activity-based costing system.The following information is provided for the month of May: Activity Estimated Indirect Activity Costs Allocation Base Estimated Quantity of Allocation Base Materials handling \ 3400 Number of parts 5000 parts Assembling \ 5200 Number of parts 5000 parts Packaging \ 5700 Number of boats 1300 boats Each boat consists of four parts,and the direct materials cost per boat is $7.28.There is no direct labor.What is the total manufacturing cost per boat? (Round any intermediate calculations and your final answer to the nearest cent.)

Companies in which owners or top executives make all of the planning,directing and controlling decisions are ________ companies.

You are concerned that your current single plantwide allocation rate is giving inaccurate results and would like to switch to an activity-based costing method.Why is activity-based costing considered more accurate than traditional costing methods?

Room Chill 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 3.00 hours of machine time to manufacture.Additional information is as follows: Activity Allocation Base Predetermined Overhead Allocation Rate Materials handling Number of parts \ 0.08 Machining Machine hours 7.60 Assembling Number of parts 0.25 Packaging Number of finished units 2.10 What is the cost of assembling per ceiling fan? (Round any intermediate calculations and your final answer to the nearest cent.)

For a centralized company,the major planning and controlling decisions are made by top management.