Question 1

Departmental contribution to overhead is calculated as revenues of the department less:

Accepted Answer

A)  Controllable costs. 
B)  Product and period costs. 
C)  Direct expenses. 
D)  Direct and indirect costs. 
E)  Joint costs. 
A)  Controllable costs. 
B)  Product and period costs. 
C)  Direct expenses. 
D)  Direct and indirect costs. 
E)  Joint costs.

Question 2

A cost center is a unit of a business that incurs costs but does not directly generate revenues. All of the following are considered cost centers except:

Accepted Answer

A)  Accounting department. 
B)  Purchasing department. 
C)  Research department. 
D)  Advertising department. 
E)  All of these could be considered cost centers. 
A)  Accounting department. 
B)  Purchasing department. 
C)  Research department. 
D)  Advertising department. 
E)  All of these could be considered cost centers.

Question 3

The investment center return on total assets is __________________________ divided by ____________________________.

Accepted Answer

Investment center ne

Question 4

Evaluation of the performance of managers of profit centers assumes that the managers can control or influence both costs and revenue generation.

Accepted Answer

A) True 
 B)False

Question 5

Explain the difference between direct and indirect expenses in accounting for departments.

Accepted Answer

Direct expenses are readily traced to a

Question 6

A dairy allocates the cost of unprocessed milk to the production of milk, cream, butter and cheese. For the current period, unprocessed milk was purchased for $240,000, and the following quantities of product and sales revenues were produced.   How much of the $240,000 cost should be allocated to milk?

Accepted Answer

A)  $0. 
B)  $86,400. 
C)  $90,000. 
D)  $133,333. 
E)  $240,000. 
A)  $0. 
B)  $86,400. 
C)  $90,000. 
D)  $133,333. 
E)  $240,000.

Question 7

A basis for allocating the cost of a resource to an activity cost pool or allocating the cost of an activity cost pool to a cost object is a(n):

Accepted Answer

A)  Direct factor. 
B)  Indirect factor. 
C)  Cost driver. 
D)  Joint cost. 
E)  Opportunity cost. 
A)  Direct factor. 
B)  Indirect factor. 
C)  Cost driver. 
D)  Joint cost. 
E)  Opportunity cost.

Question 8

Scottie is the manager of an investment center within Hamilton Company. Using the information below, calculate (a) return on total assets and (b) investment center residual income.

Accepted Answer

The answer of Scottie is the manager of an investment...

Question 9

The concepts of direct costs and controllable costs are essentially the same; also, indirect costs and uncontrollable costs are essentially the same.

Accepted Answer

A) True 
 B)False

Question 10

Costs that the manager has the power to determine or at least strongly influence are called:

Accepted Answer

A)  Uncontrollable costs. 
B)  Controllable costs. 
C)  Joint costs. 
D)  Direct costs. 
E)  Indirect costs. 
A)  Uncontrollable costs. 
B)  Controllable costs. 
C)  Joint costs. 
D)  Direct costs. 
E)  Indirect costs.

Question 11

Expenses that are easily traced and assigned to a specific department because they are incurred for the sole benefit of that department are called:

Accepted Answer

A)  Direct expenses. 
B)  Indirect expenses. 
C)  Controllable expenses. 
D)  Uncontrollable expenses. 
E)  Fixed expenses. 
A)  Direct expenses. 
B)  Indirect expenses. 
C)  Controllable expenses. 
D)  Uncontrollable expenses. 
E)  Fixed expenses.

Question 12

An accounting system that provides information that management can use to evaluate the profitability and/or cost effectiveness of a department's activities is a:

Accepted Answer

A)  Departmental accounting system. 
B)  Cost accounting system. 
C)  Service accounting system. 
D)  Revenue accounting system. 
E)  Standard accounting system. 
A)  Departmental accounting system. 
B)  Cost accounting system. 
C)  Service accounting system. 
D)  Revenue accounting system. 
E)  Standard accounting system.

Question 13

Activity cost pools are an important part of the allocation of overhead costs using activity-based costing.

Accepted Answer

A) True 
 B)False

Question 14

In a firm that manufactures clothing, the department that is responsible for actually assembling the garments could best be described as a:

Accepted Answer

A)  Service department. 
B)  Operating or production department. 
C)  Cost center. 
D)  Department in which all of the costs incurred are direct expenses. 
E)  Department in which all of the costs incurred are indirect expenses. 
A)  Service department. 
B)  Operating or production department. 
C)  Cost center. 
D)  Department in which all of the costs incurred are direct expenses. 
E)  Department in which all of the costs incurred are indirect expenses.

Question 15

Allocating joint costs to products can be based on their relative:

Accepted Answer

A)  Sales values. 
B)  Direct costs. 
C)  Gross margins. 
D)  Total costs. 
E)  Variable costs. 
A)  Sales values. 
B)  Direct costs. 
C)  Gross margins. 
D)  Total costs. 
E)  Variable costs.

Question 16

Define an investment center. How are investment centers evaluated?

Accepted Answer

An investment center is a department who

Question 17

A department that incurs costs without directly generating revenues is a:

Accepted Answer

A)  Service center. 
B)  Production center. 
C)  Profit center. 
D)  Cost center. 
E)  Performance center. 
A)  Service center. 
B)  Production center. 
C)  Profit center. 
D)  Cost center. 
E)  Performance center.

Question 18

Activity-based costing can be especially effective in situations where many different products are manufactured in the same department or departments.

Accepted Answer

A) True 
 B)False

Question 19

Within an organizational structure, the person most likely to be evaluated in terms of controllable costs would be:

Accepted Answer

A)  A payroll clerk. 
B)  A cost center manager. 
C)  A production line worker. 
D)  A maintenance worker. 
E)  All of these. 
A)  A payroll clerk. 
B)  A cost center manager. 
C)  A production line worker. 
D)  A maintenance worker. 
E)  All of these.

Question 20

Laurel and Hardy are managers of two product lines for Keaton Company. One of them is a candidate for promotion based on performance. Using the data below, determine who had the better performance using performance measures such as net income, profit margin, and return on assets. Show your calculations and support your answer.

Accepted Answer

The answer of Laurel and Hardy are managers of two...

Exam 21: Cost Allocation and Performance Measurement

Departmental contribution to overhead is calculated as revenues of the department less:

A cost center is a unit of a business that incurs costs but does not directly generate revenues. All of the following are considered cost centers except:

The investment center return on total assets is __________________________ divided by ____________________________.

Evaluation of the performance of managers of profit centers assumes that the managers can control or influence both costs and revenue generation.

Explain the difference between direct and indirect expenses in accounting for departments.

A basis for allocating the cost of a resource to an activity cost pool or allocating the cost of an activity cost pool to a cost object is a(n):

Scottie is the manager of an investment center within Hamilton Company. Using the information below, calculate (a) return on total assets and (b) investment center residual income.

The concepts of direct costs and controllable costs are essentially the same; also, indirect costs and uncontrollable costs are essentially the same.

Costs that the manager has the power to determine or at least strongly influence are called:

Expenses that are easily traced and assigned to a specific department because they are incurred for the sole benefit of that department are called:

An accounting system that provides information that management can use to evaluate the profitability and/or cost effectiveness of a department's activities is a:

Activity cost pools are an important part of the allocation of overhead costs using activity-based costing.

In a firm that manufactures clothing, the department that is responsible for actually assembling the garments could best be described as a:

Allocating joint costs to products can be based on their relative:

Define an investment center. How are investment centers evaluated?

A department that incurs costs without directly generating revenues is a:

Activity-based costing can be especially effective in situations where many different products are manufactured in the same department or departments.

Within an organizational structure, the person most likely to be evaluated in terms of controllable costs would be:

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

Filters

The investment center return on total assets is divided by __.