Question 1

Revenue center and profit center managers are both responsible for meeting:

Accepted Answer

A)  Budgeted income. 
B)  Budgeted costs. 
C)  Budgeted revenues. 
D)  Minimum return on investment as established by the company as a whole. 
A)  Budgeted income. 
B)  Budgeted costs. 
C)  Budgeted revenues. 
D)  Minimum return on investment as established by the company as a whole.

Question 2

Managers in a cost center are held responsible for both the costs and volumes of inputs used to produce a product or provide a service.

Accepted Answer

A) True 
 B)False

Question 3

The Sunset Corporation operates one central plant that has two divisions,the Flashlight Division and the Night Light Division.The following data apply to the coming budget year. Assume that practical capacity is used to calculate the allocation rates.Actual usage for the year by the Flashlight Division was 1,400 hours and by the Night Light Division was 600 hours.Required:
1.If a single-rate cost-allocation method is used,what amount of cost will be allocated to the Flashlight Division? Assume actual usage is used to allocate operating costs.2.If a dual-rate cost-allocation method is used,what amount of operating costs will be budgeted for the Night Light Division?
3.If a dual-rate cost-allocation method is used,what amount of cost will be allocated to the Night Light Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.

Accepted Answer

1. $3,000,000/2,000 × 1,400 =

Question 4

Sumner Corporation has four divisions,commercial,retail,research,and consumer,that share the common costs of the company's computer server network.The annual common costs are $3,500,000.You have been provided with the following information for the upcoming year:$\begin{array}{|l|r|r|}
\hline & \text { Connections } & \begin{array}{r}
\text { Time on } \
\text { Network (hours) }
\end{array} \
\hline \text { Commercial } & 70,000 & 120,000 \
\hline \text { Retail } & 90,000 & 150,000 \
\hline \text { Research } & 20,000 & 100,000 \
\hline \text { Consumer } & 100,000 & 330,000 \
\hline
\end{array}$
Required (use three decimal places in your calculations):
a.What is the allocation rate for the upcoming year assuming Sumner uses the single-rate method and allocates common costs based on the number of connections?
b.What is the allocation rate for the upcoming year assuming Sumner uses the single-rate method and allocates common costs based on the time on network? Calculate the allocated amount for each division.

Accepted Answer

a.Allocation rate = $12.50 per connect

Question 5

Which of the following items would not be classified as a contingent compensation item?

Accepted Answer

A)  Administrative salaries. 
B)  Sales commissions. 
C)  Stock options. 
D)  Piece rates. 
A)  Administrative salaries. 
B)  Sales commissions. 
C)  Stock options. 
D)  Piece rates.

Question 6

The Michael Vamosi Corporation operates one central plant that has two divisions,the Lamp Division and the Flashlight Division.The following data apply to the coming budget year:
   
 Assume that practical capacity is used to calculate the allocation rates.Further assume that actual usage of the Lamp Division was 700 hours and the Flashlight Division was 400 hours for the month of June.Required:
a.If a single-rate cost-allocation method is used,what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month?
b.For the month of June,if a single-rate cost-allocation method is used,what amount of cost will be allocated to the Lamp Division? To the Flashlight Division? Assume actual usage is used to allocate operating costs.c.If a dual-rate cost-allocation method is used,what amount of operating costs will be budgeted for the Lamp Division each month? For the Flashlight Division each month?
d.For the month of June,if a dual-rate cost-allocation method is used,what amount of cost will be allocated to the Lamp Division? To the Flashlight Division? Assume budgeted usage is used to allocate fixed operating costs and actual usage is used to allocate variable operating costs.

Accepted Answer

a.@#IMG-DLM& 
b.\[\begin{array} { | l | l | r | l

Question 7

Koski Corporation's Maintenance Department provides services to the company's two operating divisions - the Paints Division and the Stains Division.The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments.The fixed costs of the Maintenance Department are determined based on the number of cases produced by the operating departments during the peak period.Data appear below: 
Required:
a.Prepare a report showing how much of the Maintenance Department's costs should be charged to each of the operating divisions at the end of the year.b.How much of the actual Maintenance Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?

Accepted Answer

a.The operating divisions would be char

Question 8

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

Accepted Answer

A)  only for costs. 
B)  only for revenues. 
C)  for costs and revenues. 
D)  for investments in assets. 
A)  only for costs. 
B)  only for revenues. 
C)  for costs and revenues. 
D)  for investments in assets.

Question 9

Darren Corporation's Maintenance Department provides services to the company's two operating divisions - the Paints Division and the Stains Division.The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments.The fixed costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments during the peak period.Data appear below:
$\begin{array}{c}
\begin{array}{|l|}
\hline \text {Maintenance Department:}\
\hline \text {Budgeted variable cost}\
\
\hline \text {Budgeted total fued cost}\
\hline \text {Paints Diwision:}\
\hline \text {Percentage of peak period capacity}\
 \text { required}\
\hline \text {Actual cases}\
\hline \text {Stains Division:}\
\hline \text {Percentage of peak period capacity}\
\hline \text { required}\
 \text { Actual cases}\
\hline
\end{array}
\begin{array}{r|}
\hline\
\hline\$ 2 \text { per } \
\text { case }\
\hline \$ 830,000 \
\hline\
\hline 30 \% \
\
\hline 20,000 \
\hline\
\hline70\%\
\
\hline 63,000\
\hline
\end{array}
\end{array}$ For performance evaluation purposes,how much Maintenance Department cost should be charged to the Paints Division at the end of the year?

Accepted Answer

A)  $298,800. 
B)  $498,000. 
C)  $289,000. 
D)  $240,000. 
A)  $298,800. 
B)  $498,000. 
C)  $289,000. 
D)  $240,000.

Question 10

Barrington Box Enterprises has two divisions,large and small,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: 
$$\begin{array} { | l | r | r | } 
\hline & \text { Calls } & \begin{array} { r } 
\text { Time on } \
\text { Network (hous) }
\end{array} \
\hline \text { Large } & 100,000 & 120,000 \
\hline \text { Small } & 80,000 & 330,000 \
\hline
\end{array}$$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 total communication network costs allocated to the Small Box Division,assuming the company uses dual-rates to allocate common costs?

Accepted Answer

A)  $2,520,000. 
B)  $1,800,000. 
C)  $1,320,000. 
D)  $1,200,000. 
A)  $2,520,000. 
B)  $1,800,000. 
C)  $1,320,000. 
D)  $1,200,000.

Question 11

Assets invested in a responsibility center are included in a performance report of a: $$\begin{array} { | l | c | c | } 
\hline & \text { Proft Center } & \text { Investment Center } \
\hline \text { A. } & \text { Yes } & \text { No } \
\hline \text { B. } & \text { Yes } & \text { Yes } \
\hline \text { C. } & \text { No } & \text { No } \
\hline \text { D. } & \text { No } & \text { Yes } \
\hline
\end{array}$$

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 12

The use of dual rates in a cost allocation system assumes that common costs can be:

Accepted Answer

A)  separated into their fixed and variable components. 
B)  traced directly to a specific division or manager. 
C)  allocated based on a physical quantities measure. 
D)  assigned to an investment responsibility center. 
A)  separated into their fixed and variable components. 
B)  traced directly to a specific division or manager. 
C)  allocated based on a physical quantities measure. 
D)  assigned to an investment responsibility center.

Question 13

An operating unit that is responsible for revenues and costs is commonly referred to as a(n):

Accepted Answer

A)  expense center. 
B)  revenue center. 
C)  profit center. 
D)  asset center. 
A)  expense center. 
B)  revenue center. 
C)  profit center. 
D)  asset center.

Question 14

Atlantic Resorts operates a centralized call center for the reservation needs of its time-share units.Costs associated with use of the center are charged to the time-share group (Luxury,Standard,and Budget)where a reservation is made on the basis of time spent on a call.Due to recent increased competition in the time-share business,the company has decided that it is necessary to more accurately allocate its costs to price its services competitively and profitably.During the current period,the use of the call center for each group was as follows (in thousands of seconds for time usage and in number of reservations):$$\begin{array} { | l | r | r | } 
\hline \text { Division } & \text { Time Usage } & \begin{array} { r } 
\text { Number of } \
\text { Resenations }
\end{array} \
\hline \text { Luxury } & 500,000 & 50,000 \
\hline \text { Standard } & 2,000,000 & 300,000 \
\hline \text { Budget } & 1,500,000 & 250,000 \
\hline
\end{array}$$
During this period,the cost of the computer center amounted to $1,760,000 for personnel and $1,240,000 for equipment and other costs.Required:
Determine the allocation to each of the divisions using (round all decimals to three places):
a.a single rate based on time used.b.multiple rates based on time used (for personnel costs)and number of reservations (for equipment and other cost).

Accepted Answer

a.Luxury: $375,000;Standard: $1,500,000

Question 15

Cost allocation of shared facilities cost is intended to remind managers of:

Accepted Answer

A)  The cost of using a shared resource. 
B)  Both the cost and value of using shared resources. 
C)  How much capacity a firm has. 
D)  Why the firm invests in these facilities. 
A)  The cost of using a shared resource. 
B)  Both the cost and value of using shared resources. 
C)  How much capacity a firm has. 
D)  Why the firm invests in these facilities.

Question 16

Decentralized organizations can delegate authority and still maintain control and monitor managers' performance by designing appropriate management control systems.Which of the following responsibility centers would be evaluated similar to an independent business? (CMA,adapted)

Accepted Answer

A)  Profit center. 
B)  Revenue center. 
C)  Investment center. 
D)  Discretionary cost center. 
A)  Profit center. 
B)  Revenue center. 
C)  Investment center. 
D)  Discretionary cost center.

Question 17

A successful responsibility accounting reporting system is dependent upon (CMA adapted):

Accepted Answer

A)  The correct allocation of controllable variable costs. 
B)  Identification of the management level at which all costs are controllable. 
C)  The proper delegation of responsibility and authority. 
D)  A reasonable separation of costs into their fixed and variable components since fixed costs are not controllable and must be eliminated from the responsibility report. 
A)  The correct allocation of controllable variable costs. 
B)  Identification of the management level at which all costs are controllable. 
C)  The proper delegation of responsibility and authority. 
D)  A reasonable separation of costs into their fixed and variable components since fixed costs are not controllable and must be eliminated from the responsibility report.

Question 18

Dual allocation is a cost allocation approach that separates direct and indirect costs,tracing the direct costs directly to the department that:

Accepted Answer

A)  can bear the cost. 
B)  relates best to the cost. 
C)  is first identified with the cost. 
D)  caused the cost. 
A)  can bear the cost. 
B)  relates best to the cost. 
C)  is first identified with the cost. 
D)  caused the cost.

Question 19

Which of the following is not a characteristic of a decentralized organization?

Accepted Answer

A)  Better use of local knowledge. 
B)  Better use of top management's time. 
C)  Reduced response time to environmental changes. 
D)  More decisions made by relatively few individuals. 
A)  Better use of local knowledge. 
B)  Better use of top management's time. 
C)  Reduced response time to environmental changes. 
D)  More decisions made by relatively few individuals.

Question 20

Maryland Hotels operates a centralized call center for the reservation needs of its time-share units.Costs associated with use of the center are charged to the time-share group (Luxury,Resort,Standard,and Budget)where a reservation is made on the basis of time on a call.Idle time of the reservation agents,time spent on calls where no reservation is made,and the fixed cost of the equipment are allocated on the number of reservations made in each group.Due to recent increased competition in the time-share business,the company has decided that it is necessary to more accurately allocate its costs to price its services competitively and profitably.During the current period,the use of the call center for each group was as follows (in thousands of seconds for time usage and in number of reservations):$$\begin{array} { | l | r | r | } 
\hline \text { Disision } & \text { Time Usage } & \text { Number of Resenrations } \
\hline \text { Luxury } & 750,000 & 50,000 \
\hline \text { Resort } & 1,250,000 & 100,000 \
\hline \text { Standard } & 2,000,000 & 300,000 \
\hline \text { Budget } & 1,500,000 & 250,000 \
\hline
\end{array}$$ 
During this period,the cost of the computer center amounted to $2,410,000 for personnel and $1,240,000 for equipment and other costs.Required:
Determine the allocation to each of the divisions using (you may round all decimals to three places):
a.a single rate based on time used.b.multiple rates based on time used (for personnel costs)and number of reservations (for equipment and other cost).

Accepted Answer

a.Luxury: $496,400;Resort: $828,550;Stan

Revenue center and profit center managers are both responsible for meeting:

Managers in a cost center are held responsible for both the costs and volumes of inputs used to produce a product or provide a service.

Which of the following items would not be classified as a contingent compensation item?

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

Assets invested in a responsibility center are included in a performance report of a: Proft Center Investment Center A. Yes No B. Yes Yes C. No No D. No Yes

The use of dual rates in a cost allocation system assumes that common costs can be:

An operating unit that is responsible for revenues and costs is commonly referred to as a(n):

Cost allocation of shared facilities cost is intended to remind managers of:

Decentralized organizations can delegate authority and still maintain control and monitor managers' performance by designing appropriate management control systems.Which of the following responsibility centers would be evaluated similar to an independent business? (CMA,adapted)

A successful responsibility accounting reporting system is dependent upon (CMA adapted):

Dual allocation is a cost allocation approach that separates direct and indirect costs,tracing the direct costs directly to the department that:

Which of the following is not a characteristic of a decentralized organization?

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters

Exam 12: Fundamentals of Management Control Systems

Revenue center and profit center managers are both responsible for meeting:

Managers in a cost center are held responsible for both the costs and volumes of inputs used to produce a product or provide a service.

Which of the following items would not be classified as a contingent compensation item?

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

Assets invested in a responsibility center are included in a performance report of a: Proft Center Investment Center A. Yes No B. Yes Yes C. No No D. No Yes

The use of dual rates in a cost allocation system assumes that common costs can be:

An operating unit that is responsible for revenues and costs is commonly referred to as a(n):

Cost allocation of shared facilities cost is intended to remind managers of:

Decentralized organizations can delegate authority and still maintain control and monitor managers' performance by designing appropriate management control systems.Which of the following responsibility centers would be evaluated similar to an independent business? (CMA,adapted)

A successful responsibility accounting reporting system is dependent upon (CMA adapted):

Dual allocation is a cost allocation approach that separates direct and indirect costs,tracing the direct costs directly to the department that:

Which of the following is not a characteristic of a decentralized organization?

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters