Exam 12: Fundamentals of Management Control Systems

The order entry department of Dano Associated Industries is considering improvements in the order entry process,which includes preparing quotations based on customers' requests (via the sales representative)and processing orders received from customers.A typical sequence of events might begin with a sales representative meeting with a customer to discuss the type of system desired.The sales representative then fills out a paper form and faxes it or phones it in to an order entry associate,who might make several subsequent phone calls to the sales representative,the potential customer,or the manufacturing department to prepare the quote properly.These phone calls deal with such questions as exchangeability of parts,part numbers,current prices for parts,or allowable sales discounts.Order entry staff then keys in the configuration of the desired system,including part numbers,and informs the sales representative of the quoted price.Each quote is assigned a quotation number.To smooth production,manufacturing often produces systems with standard configurations in anticipation of obtaining orders from recent quotes for systems.The systems usually involve adding on special features to the standard configuration.Production in advance of orders sometimes results in duplication in manufacturing,however,because customers often fail to put the assigned quotation numbers on their orders.When order entry receives an order,the information on the order is reentered into the computer to produce an order acknowledgement.This order acknowledgement is sent to the manufacturing department,which produces the system ordered by customer.When the order acknowledgement is sent to the invoicing department,the information is reviewed again to generate an invoice to send to the customer.Enrique Ramos,the order entry manager,has received many complaints from the order entry department's internal customers regarding quality and timeliness problems,and is considering ways to improve the efficiency and quality of the order entry process.Required: (a)Develop some indicators that Ramos could use to assess the performance of the order entry process.(b)List four possible errors that might be found in the quote and/or the order acknowledgement (i.e. ,the outputs of the order entry process).(c)What do you think are the likely causes of delays and quality problems?

Decentralization is the delegation of the authority to make decisions in the organization's name to subordinates.

The Document Creation Center (DCC)for Atlas Corp.provides document services for three departments in the St.Louis office.The following budget has been prepared for the month. Budgeted us age: Software Development 160,000 pages Training 300,000 pages Management 340,000 pages Cost equation \ 31,000+\ 0.03 per page Required (use three decimal places in your calculations): If DCC uses a dual rate for allocating its costs based on usage,how much cost will be allocated to the three user departments?

Mesa Telcom has three divisions,commercial,retail,and consumer,that share the common costs of the company's computer server network.The annual common costs are $2,400,000.You have been provided with the following information for the upcoming year: Connections Time on Network (hous) Commercial 60,000 120,000 Retail 80,000 150,000 Consumer 100,000 330,000 The cost accountant determined $1,700,000 of the server network's costs were fixed and should be allocated based on the number of connections.The remaining costs should be allocated based on the time on the network.What is total server network costs allocated to the Retail Division,assuming the company uses dual-rates to allocate common costs?

Which of the following subunits is most likely to be considered an investment center?

Which of the following is not one of the objectives of cost allocation?

The Barton Creek Company has three client-contact departments: Market Research,Branding,and Promotion.Each department requires the services of the Legal Department for the contracts that each undertakes.The size of the Legal Department was based on long-run estimates of contracts.Information on the Legal Department's budgeted and actual costs is as follows: The budget for the Legal Department is $300,000 + $10/contract.The budgeted volume of contracts is as follows: Market Research 300 Branding 500 Promotion 700 The actual number of contracts for Market Research was 315,for Branding was 450,and for Promotion was 720.Required (use three decimal places in your calculations): a.If a single charging rate based on budgeted usage is used,how much of the cost of the Legal Department would be allocated to each of the producing departments? b.If a dual charging rate is used,how much of the cost of the Legal Department would be allocated to each of the producing departments

Properly designed management control systems have both fixed compensation and contingent compensation.

Waterford Company maintains a cafeteria for its employees.For June,variable food costs were budgeted at $45 per employee based on a budgeted level of 200 employees in other departments.During the month,an average of 190 employees worked in other departments and actual food costs totaled $9,250.How much food cost should be charged to the other departments at the end of the month for performance evaluation purposes?

What is the purpose of the management control system?

When managers are held responsible for costs and the input-output relationship is well specified,a(n)________________________ is established.

The Copy Department in the College of Business at State University provides photocopying service for both the Marketing and Economics Department.The following budget has been prepared for the year. Available capacity 6,000,000 pages Budgeted us age: Marketing 3,600,000 pages Economics 1,800,000 pages Cost equation \ 120,000+\ 0.025 per page If the Copy Department uses a dual-rate for allocating its costs,how much cost will be allocated to the Economics Department,assuming the Economics Department actually made 1,500,000 copies during the year?

In responsibility accounting,a center's performance is measured by those costs which are controllable.Controllable costs are best described as including: (CMA adapted)

An operating unit of an organization is called a profit center if it is responsible:

____________ is the delegation of decision-making authority to lower management levels within the organization.

The concepts of cost allocation that are used in manufacturing can also apply in:

Internal controls include all of the following except:

The Document Creation Center (DCC)for Arlington Corp.provides photocopying and document services for three departments in the Minneapolis office.The following budget has been prepared for the year. Available capacity 8,000,000 pages Budgeted us age: Software Development 1,600,000 pages Training 3,000,000 pages Management 2,400,000 pages Cost equation \ 280,000+\ 0.03 per page If DCC uses a dual-rate for allocating its costs,how much cost will be allocated to the Training Department,assuming the Training Department actually made 3,250,000 copies during the year?

Internal controls are not legally required for publicly traded companies.

Roadways Enterprises has two divisions,Production and Support,that share the common costs of the company's communications network.The annual common costs are $4,500,000.You have been provided with the following information for the upcoming year: Calls Time on Network (hous) Production 200,000 240,000 Support 160,000 660,000 Required (use three decimal places in your calculations): a.What is the allocation rate for the upcoming year assuming Roadways uses the single-rate method and allocates common costs based on the number of calls? Calculate the costs allocated to each division.b.What is the allocation rate for the upcoming year assuming Roadways uses the single-rate method and allocates common costs based on the time on the network? Calculate the costs allocated to each division.c.The cost accountant determined $2,700,000 of the communication network's costs were fixed and should be allocated based on the number of calls.The remaining costs should be allocated based on the time on the network.What is the total communication network costs allocated to each division?