Question 1

The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be:

Accepted Answer

A)  Floor space of each department. 
B)  Relative number of items each department had on sale. 
C)  Number of customers to enter each department. 
D)  An equal amount of cost for each department. 
E)  Proportion of sales of each department. 
A)  Floor space of each department. 
B)  Relative number of items each department had on sale. 
C)  Number of customers to enter each department. 
D)  An equal amount of cost for each department. 
E)  Proportion of sales of each department.

Question 2

Yoho Company reported the following financial numbers for one of its divisions for the year; average total assets of $5,800,000; sales of $5,375,000; cost of goods sold of $3,225,000; and operating expenses of $1,147,000. Compute the division's return on assets:

Accepted Answer

A)  18.6%. 
B)  21.3%. 
C)  17.3%. 
D)  10.4%. 
E)  14.7%. 
A)  18.6%. 
B)  21.3%. 
C)  17.3%. 
D)  10.4%. 
E)  14.7%.

Question 3

Investment center is another name for profit center.

Accepted Answer

A) True 
 B)False

Question 4

Data pertaining to a company's joint production for the current period follows:   Compute the cost to be allocated to Product A for this period's $660 of joint costs if the value basis is used.

Accepted Answer

A)  $330.00. 
B)  $440.00. 
C)  $220.00. 
D)  $194.12. 
E)  $484.00. 
A)  $330.00. 
B)  $440.00. 
C)  $220.00. 
D)  $194.12. 
E)  $484.00.

Question 5

Jamesway Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year:   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. Compute gross profit for the White and Grey Divisions, respectively.

Accepted Answer

A)  $72,000; $193,000. 
B)  $172,000; $352,000. 
C)  $100,000; $241,000. 
D)  $52,000; $163,000. 
E)  $72,000; $163,000. 
A)  $72,000; $193,000. 
B)  $172,000; $352,000. 
C)  $100,000; $241,000. 
D)  $52,000; $163,000. 
E)  $72,000; $163,000.

Question 6

Activity based costing can be applied to:

Accepted Answer

A)  Manufacturing activities only. 
B)  Service activities only. 
C)  Merchandising activities only. 
D)  Any company in any industry. 
E)  Government only. 
A)  Manufacturing activities only. 
B)  Service activities only. 
C)  Merchandising activities only. 
D)  Any company in any industry. 
E)  Government only.

Question 7

The following data is available for the Cleaning Services Department of Amitol Co.   Required: Calculate departmental contribution to overhead for the Cleaning Services Department, including the department's contribution as a percentage of revenues.

Accepted Answer

The answer of The following data is available for the...

Question 8

Baker Corporation has two operating departments, Machining and Assembly, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period:   The amount of the total office expenses that should be allocated to Assembly for the current period is:

Accepted Answer

A)  $35,750. 
B)  $45,000. 
C)  $54,250. 
D)  $90,000. 
E)  $600,000. 
A)  $35,750. 
B)  $45,000. 
C)  $54,250. 
D)  $90,000. 
E)  $600,000.

Question 9

Belgrade Lakes Properties is developing a golf course subdivision that includes 225 home lots; 100 lots are golf course lots and will sell for $95,000 each; 125 are street frontage lots and will sell for $65,000. The developer acquired the land for $1,800,000 and spent another $1,400,000 on street and utilities improvement. Compute the amount of joint cost to be allocated to the street frontage lots using value basis.

Accepted Answer

A)  $1,724,800. 
B)  $1,777,920. 
C)  $2,018,920. 
D)  $1,422,080. 
E)  $1,475,200. 
A)  $1,724,800. 
B)  $1,777,920. 
C)  $2,018,920. 
D)  $1,422,080. 
E)  $1,475,200.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

A measure used to evaluate the manager of an investment center is return on total costs for the investment center.

Accepted Answer

A) True 
 B)False

Question 12

Rent and maintenance expenses would most likely be allocated based on:

Accepted Answer

A)  Sales volume by department. 
B)  Square feet of floor space occupied. 
C)  Number of hours worked. 
D)  Number of invoices processed. 
E)  Number of employees in each department. 
A)  Sales volume by department. 
B)  Square feet of floor space occupied. 
C)  Number of hours worked. 
D)  Number of invoices processed. 
E)  Number of employees in each department.

Question 13

If a firm uses activity-based costing to allocate costs, it must:

Accepted Answer

A)  Combine costs in appropriate pools. 
B)  Select appropriate cost drivers. 
C)  Calculate an appropriate rate for each pool. 
D)  Allocate costs based on predetermined rates for cost pools. 
E)  Perform all of these steps. 
A)  Combine costs in appropriate pools. 
B)  Select appropriate cost drivers. 
C)  Calculate an appropriate rate for each pool. 
D)  Allocate costs based on predetermined rates for cost pools. 
E)  Perform all of these steps.

Question 14

The following is a partially completed lower section of a departmental expense allocation spreadsheet for Stoneham. It reports the total amounts of direct and indirect expenses for the four departments. Purchasing department expenses are allocated to the operating departments on the basis of purchase orders. Maintenance department expenses are allocated based on square footage. Compute the amount of Maintenance department expense to be allocated to Fabrication.

Accepted Answer

A)  $6,400. 
B)  $9,900. 
C)  $8,100. 
D)  $9,000. 
E)  $25,600. 
A)  $6,400. 
B)  $9,900. 
C)  $8,100. 
D)  $9,000. 
E)  $25,600.

Question 15

Keegan Co. has four departments: purchasing, human resources, manufacturing, and assembly. In a recent month the four departments incurred two shared indirect expenses. The amounts of the indirect expenses and the bases used to allocate them follow. (1) Use this information to allocate each of the two indirect across the four departments using the tables provided below.   Departmental data for the company's recent reporting period follow.

Accepted Answer

The answer of Keegan Co. has four departments: purchasing, human...

Question 16

Departmental income statements are prepared for operating as well as service departments.

Accepted Answer

A) True 
 B)False

Question 17

A difficult problem in calculating the total costs and expenses of a department is:

Accepted Answer

A)  Determining the gross profit ratio. 
B)  Assigning direct costs to the department. 
C)  Assigning indirect expenses to the department. 
D)  Determining the amount of sales of the department. 
E)  Determining the direct expenses of the department. 
A)  Determining the gross profit ratio. 
B)  Assigning direct costs to the department. 
C)  Assigning indirect expenses to the department. 
D)  Determining the amount of sales of the department. 
E)  Determining the direct expenses of the department.

Question 18

A selling department is usually evaluated as a profit center.

Accepted Answer

A) True 
 B)False

Question 19

An example of a service department is the human resources department.

Accepted Answer

A) True 
 B)False

Question 20

In the preparation of departmental income statements, the preparer completes the following steps in the following order:

Accepted Answer

A)  Identify direct expenses; allocate indirect expenses; allocate service department expenses. 
B)  Identify indirect expenses; allocate direct expenses; allocate service department expenses. 
C)  Identify service department expenses; allocate direct expenses; allocate indirect expenses. 
D)  Identify direct expenses, allocate service department expenses, allocate indirect expenses. 
E)  Allocate all expenses. 
A)  Identify direct expenses; allocate indirect expenses; allocate service department expenses. 
B)  Identify indirect expenses; allocate direct expenses; allocate service department expenses. 
C)  Identify service department expenses; allocate direct expenses; allocate indirect expenses. 
D)  Identify direct expenses, allocate service department expenses, allocate indirect expenses. 
E)  Allocate all expenses.

Exam 21: Cost Allocation and Performance Measurement

The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be:

Yoho Company reported the following financial numbers for one of its divisions for the year; average total assets of $5,800,000; sales of $5,375,000; cost of goods sold of $3,225,000; and operating expenses of $1,147,000. Compute the division's return on assets:

Investment center is another name for profit center.

Data pertaining to a company's joint production for the current period follows: Compute the cost to be allocated to Product A for this period's $660 of joint costs if the value basis is used.

Activity based costing can be applied to:

The following data is available for the Cleaning Services Department of Amitol Co. Required: Calculate departmental contribution to overhead for the Cleaning Services Department, including the department's contribution as a percentage of revenues.

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

A measure used to evaluate the manager of an investment center is return on total costs for the investment center.

Rent and maintenance expenses would most likely be allocated based on:

If a firm uses activity-based costing to allocate costs, it must:

Departmental income statements are prepared for operating as well as service departments.

A difficult problem in calculating the total costs and expenses of a department is:

A selling department is usually evaluated as a profit center.

An example of a service department is the human resources department.

In the preparation of departmental income statements, the preparer completes the following steps in the following order:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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