Exam 12: Fundamentals of Management Control Systems

The Sarbanes-Oxley Act of 2002 requires that management of publicly traded companies:

Relative performance evaluations (RPE)are not designed to:

Properly developed and implemented management control systems influence subordinates to act in the organization's best interest.

Which of the following would be considered a principal in the principal-agent relationship?

Markov Engineering 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 Required (use three decimal places in your calculations): The cost accountant determined $1,800,000 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 the total server network costs allocated to each division?

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.If DCC uses a dual-rate for allocating its costs,how m 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 uch cost will be allocated to the Software Development Department,assuming the Software Development Department actually made 1,160,000 copies during the year?

The fixed costs of Black Company's personnel department are allocated to operating departments on the basis of direct labor-hours.The following data have been provided: The fixed costs of the personnel department are budgeted at $56,000 per year and are incurred in order to support long-run average requirements.How much of this fixed cost should be charged to Operating Department X at the end of the year for performance evaluation purposes?

Cost allocations based on dual rates assume that a common cost can be separated into a fixed and variable component.

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 Management Department,assuming the Management Department actually made 2,950,000 copies during the year?

When managers are held responsible for costs but the input-output relationship is not well specified,a(n)________________________ is established.

Layton Company operates a cafeteria for the benefit of its employees.The company subsidizes the cafeteria heavily by allowing employees to purchase meals at greatly reduced prices.Budgeted and actual costs in the cafeteria for the year just ended are as follows: Budgeted Actual Variable costs \ 500,000 \ 436,000 Fixed costs \ 340,000 \ 352,000 Costs of the cafeteria are charged to producing departments on the basis of the number of employees in these departments.Fixed costs are charged on the basis of the peak-period number of employees.Data on employees in the company's producing departments follows: Machining Assembly Total Budgeted number of employees 300 500 800 Actual number of employees 200 400 600 Peak-period number of 400 600 1,000 employees Required: a.Compute the dollar amount of variable and fixed costs that should be charged to each of the producing departments at the end of the year for purposes of evaluating performance.b.Identify the amount,if any,of actual costs that should not be charged to the operating 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 Mesa Telcom uses the single rate method and allocates common costs based on the number of connections.What is the total computer server network cost allocated to the Commercial Division?

Which of the following subunits would most likely be considered a only cost center?

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 Consumer Division,assuming the company uses dual-rates to allocate common costs?

Delegated decision authority is the specification of what decisions a subordinate can make in the organization.

There are five common types of responsibility centers listed below. Required: Briefly describe each of the following terms and provide an example of each term. (a)Cost Center (b)Discretionary Cost Center (c)Revenue Center (d)Profit Center (e)Investment Center

Which one of the following will not occur in an organization that gives managers throughout the organization maximum freedom to make decisions? (CMA adapted)

Which of the following statements is(are)false regarding the effective use of management control systems? (A)In general,single rate cost allocations should not be used in management control systems because clear control over the cost being allocated cannot be determined. (B)The primary reason to use a dual rate allocation system is to focus a manager's performance evaluation on factors under the manager's direct control.

The Human Resources Department for Vargis Corp.provides personnel services for two departments in the Kansas City office.The following budget has been prepared for the month. Budgeted: Production 860 employees Management 140 employees Cost equation \ 46,500+\ 20 per employee Required (use three decimal places in your calculations): If Vargis uses a dual rate for allocating its costs based on employees,how much cost will be allocated to the two departments?

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 based on usage,how much cost will be allocated to the Economics Department?