Exam 24: Cost Allocation and Responsibility Accounting

In addition to considering both the division's operating income and its average total assets,residual income incorporates top management's target rate of return.

Holmes,Inc.has a division that manufactures a component that sells for $165 and has a variable cost of $45.Another division of the company wants to purchase the component.Fixed cost per unit of the component is $24.What is the transfer price if the division is operating at full capacity?

When a division is operating at capacity,the transfer price should be ________.

Flexible budgets use budgeted (or standard)costs at the actual level of activity.

The production line of a manufacturing company is most likely to be considered as a(n)________.

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

Which of the following is an advantage of decentralization?

Profit center responsibility reports include ________.

Alexander Consumer Products has a small car division that operates as a profit center.Below is a partially completed responsibility report for the first quarter. Compute the percentage variance for the flexible budget variance for traceable fixed expenses.(Round your answer to two decimal places. )

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

Brad Turret,one of the managers of a multi-national company,is responsible for generating revenues and controlling costs in order to increase the operating income of his division.However,he is not concerned about investment-related decisions.Brad is most likely to be the manager of a(n)________.

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.

The balanced scorecard system requires management to consider ________.

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.

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?

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

A market-based transfer price considers the ________ when determining the transfer price.

Murphy 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 partially completed responsibility report is provided. The company uses management by exception to address flexible budget variances.On which product type would the company first focus?

If managers are measured on short-term financial performance only,they may not introduce new products.

Which of the following is the correct formula for calculating residual income?