Exam 22: Decentralization and Performance Evaluation

A _____________________________ provides information for managers to use to evaluate the profitability or cost effectiveness of each department's activities.

If the $450 cost of the 300 gallons of Material M were to be allocated to the joint products in proportion to the number of gallons of each product produced, Product A's share would be:

Jamesway Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year: White Grey Division Division Sales (net) \ 200,000 \ 400,000 Salary expense 28,000 48,000 Cost of goods sold 100,000 159,000 The White Division occupies 20,000 square feet in the plant. The Grey Division occupies 30,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $50,000. -Gross profit for the White and Grey Divisions is: $\quad\text { White } \quad \text { Grev }$ (A) $\$ 72,000 \quad \$ 193,000$ (B) $\$ 172,000 \quad \$ 352,000$ (C) $\$ 100,000 \quad \$ 241,000$ (D) $\$ 52,000 \quad \$ 163,000$ (E) $\$ 72,000 \quad \$ 163,000$

Within a an organizational structure, the person most likely to be evaluated in terms of controllable costs would be:

Evaluation of the performance of a department involves only financial measures.

Allocating joint costs to products can be based on their relative:

Assume Rock Bottom Golf is divided into four departments which operate as profit centers and that the data below is from the most recent fiscal year. Golf Clubs Golf Bags Golf Balls Golf Apparel Sales \ 200,000 \ 400,000 \ 800,000 \ 1,600,000 Cost of Goods 90,000 220,000 400,000 960,000 Sold Direct Expenses Salaries 18,000 54,000 90,000 226,000 Insurance 2,000 3,000 6,000 120,000 Utilities 1,000 2,000 3,000 10,000 -Given the information above, list Rock Bottom Golf's departments in order of highest departmental contribution to overhead to lowest departmental contribution to overhead.

The amount by which a department's revenues exceed its direct costs and expenses is the:

Costs that the manager has the power to determine or at least strongly influence are called:

Joint costs can be allocated either using a physical basis or a value basis.

Departmental contribution to overhead is calculated as revenues of the department less:

A responsibility accounting system:

Departmental information is important and always disclosed to the public as part of the company's annual report and footnotes.

Laurel and Hardy are managers of two product lines for Keaton Company. One of them is a candidate for promotion based on performance. Using the data below, determine who had the better performance. Detail your calculations and support your answer.

A single cost incurred in producing or purchasing two or more essentially different products is a(n):

A department's direct expenses can be entirely avoided if the department manager carefully controls and monitors operations.

Evaluation of the performance of managers of profit centers assumes that the managers can control or influence both costs and revenue generation.

A profit center:

The ________________________________ is sales less direct expenses for a department.

List the steps required to prepare a departmental income statement.