Exam 21: Cost Allocation and Performance Measurement

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

An accounting system that provides information that management can use to evaluate the performance of a department's manager is called a:

A responsibility accounting performance report usually compares actual costs to budgeted costs amounts.

A report that accumulates the actual costs that a manager is responsible for and their budgeted amounts is a:

Precision Brackets, Co. is considering switching from traditional allocation of overhead based on direct labor hours to an activity-based costing system. The manager has accumulated the following information on engineering changes for two of the company's major products: Compute the cost per unit using: (1) The traditional two-stage allocation of the costs of engineering changes based on direct labor hours. (2) The activity-based cost allocation of the costs of engineering changes.

Plans that identify costs and expenses under each manager's control prior to the reporting period are called:

Mace Department store allocates its service department expenses to its various operating (sales) departments. The following data is available: The following information is available for its three operating (sales) departments: What is the total expense allocated to Department B?

Abbe Company reported the following financial numbers for one of its divisions for the year; average total assets of $4,100,000; sales of $4,525,000; cost of goods sold of $2,550,000; and operating expenses of $1,372,000. Assume a target income of 10% of average invested assets. Compute residual income for the division:

A company produces two joint products (called 101 and 202) in a single operation that uses one raw material called Casko. Four hundred gallons of Casko were purchased at a cost of $800 and were used to produce 150 gallons of Product 101, selling for $5 per gallon, and 75 gallons of Product 202, selling for $15 per gallon. How much of the $800 cost should be allocated to each product, assuming that the company allocates cost based on sales revenue?

An activity __________________ is a temporary account accumulating the costs a company incurs to support an identified set of activities.

The difference between a profit center and an investment center is

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

Unit costs can be significantly different when using activity-based costing compared to traditional cost allocation methods.

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. Assume a target income of 15% of average invested assets. Compute residual income for the division:

What is the main difference between a cost center and a profit center?

A(n) _______________________ is a department whose manager is responsible for using the center's assets to generate income for the center.

How do companies decide what allocation bases to use to allocate indirect costs to departments?

Briefly describe the process of activity-based costing.

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

Texas Toys, a retail store, has four sales departments supported by three service departments. Cost and operational data for each department follow: Determine the service department expenses to be allocated to Sales Department 1 for: Advertising ___________________ Maintenance __________________ Purchasing ___________________