Question 1

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

Accepted Answer

A) True 
 B)False  False

Question 2

Burien, Inc., operates a retail store with two departments, A and
B. Its departmental income statement for the current year follows:
Burien allocates building depreciation, maintenance, and utilities on the basis of square footage. Office expenses are allocated on the basis of sales.
Management is considering an expansion to a three-department operation. The proposed Department C would generate $120,000 in additional sales and have a 17.5% contribution to overhead. The company owns its building. Opening Department C would redistribute the square footage to each department as follows: A, 19,040; B, 21,760 sq. ft.; C, 13,600. Increases in indirect expenses would include: maintenance, $500; utilities, $3,800; and office expenses, $1,200.
Complete the following departmental income statements, showing projected results of operations for the three sales departments. (Round amounts to the nearest whole dollar.)

Accepted Answer

* $3,300 + $500 = $3,800
** $12,520 + $3,800 = $16,320
*** $3,800 + $1,200 = $5,000

Question 3

Samm's Department Store operates three departments (A, B and C). If total costs of $4,500 are to be allocated on the basis of square feet of space (Dept. A = 1,500 Sq. Ft.; Dept. B = 900 Sq. Ft.; Dept. C = 600 Sq. Ft.) then Dept A's share (in percent) of the $4,500 cost would be __________%; Dept. B would be ________%, and Dept C would be ____________%. The amount of cost allocated to Dept. C would be $__________.

Accepted Answer

1,500sqft/3,000sqft = 50%; 900sqft/3,000sqft = 30%; 600sqft/3,000sqft = 20%; 20% x $4,500 = $900

Question 4

In the two-stage cost allocation, ______________________ costs are allocated to operating departments, and the operating department costs are allocated to ______________.

Accepted Answer

Service de

Question 5

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 6

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

Accepted Answer

A) True 
 B)False

Question 7

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 8

The following is taken from Ames Company's internal records of its factory with two operating departments. The cost driver for indirect labor is direct labor costs, and the cost driver for the remaining items is number of hours of machine use. Compute the total amount of overhead allocated to Dept.2 using activity-based costing.

Accepted Answer

A)  $18,720. 
B)  $12,930. 
C)  $13,400. 
D)  $19,190. 
E)  $19,440. 
A)  $18,720. 
B)  $12,930. 
C)  $13,400. 
D)  $19,190. 
E)  $19,440.

Question 9

Under traditional cost allocation methods, low-volume complex products are often __________________ and high-volume simpler products are likely to be ______________.

Accepted Answer

undercoste

Question 10

Renton Co. has two operating (production) departments supported by a number of service departments. The following information was collected for a recent period:
Indirect costs are allocated as follows: salaries on the basis of sales, office expenses on the basis of the number of employees, and all other costs on the basis of square footage. Additional information about the production departments follows:
Sales for the Machining Department are $724,404 and sales for the Assembly Department are $356,796.
Determine the departmental contribution to overhead and the departmental net income for each production department.

Accepted Answer

The answer of Renton Co. has two operating (production) departments...

Question 11

A _________________ is a factor that causes the cost of an activity to go up and down.

Accepted Answer

The answer of A _________________ is a factor that causes...

Question 12

Return on investment is a useful measure to evaluate the performance of a cost center manager.

Accepted Answer

A) True 
 B)False

Question 13

A company rents a small building with 10,000 square feet of space for $100,000 per year. The rent is allocated to the company's three departments on the basis of the value of the space occupied by each. Department One occupies 1,500 square feet of ground-floor space, Department Two occupies 3,500 square feet of ground-floor space, and Department Three occupies 5,000 square feet of second-floor space. If rent for comparable floor space in the neighborhood averages $15.00 per sq. ft. for ground-floor space and $10.00 per sq. ft. for second-floor space, what annual rent expense should be charged to each department?

Accepted Answer

The answer of A company rents a small building with...

Question 14

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 15

The ________________________________ is a report of the amount of sales less direct expenses for a department.

Accepted Answer

Department

Question 16

Activity-based costing attempts to better allocate costs to the proper users of overhead by focusing on activities.

Accepted Answer

A) True 
 B)False

Question 17

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 18

A department can never be considered to be a profit center.

Accepted Answer

A) True 
 B)False

Question 19

The salaries of employees who spend all their time working in one department are:

Accepted Answer

A)  Variable expenses. 
B)  Indirect expenses. 
C)  Direct expenses. 
D)  Responsibility expenses. 
E)  Unavoidable expenses. 
A)  Variable expenses. 
B)  Indirect expenses. 
C)  Direct expenses. 
D)  Responsibility expenses. 
E)  Unavoidable expenses.

Question 20

A cost center does not directly generate revenues.

Accepted Answer

A) True 
 B)False

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

In the two-stage cost allocation, ________ costs are allocated to operating departments, and the operating department costs are allocated to .

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

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. Compute the division's return on assets:

Under traditional cost allocation methods, low-volume complex products are often ____ and high-volume simpler products are likely to be .

A _________________ is a factor that causes the cost of an activity to go up and down.

Return on investment is a useful measure to evaluate the performance of a cost center manager.

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

The ________________________________ is a report of the amount of sales less direct expenses for a department.

Activity-based costing attempts to better allocate costs to the proper users of overhead by focusing on activities.

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

A department can never be considered to be a profit center.

The salaries of employees who spend all their time working in one department are:

A cost center does not directly generate revenues.

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

Long-Term Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

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

Filters

Exam 21: Cost Allocation and Performance Measurement

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

In the two-stage cost allocation, ______________________ costs are allocated to operating departments, and the operating department costs are allocated to ______________.

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

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. Compute the division's return on assets:

Under traditional cost allocation methods, low-volume complex products are often __________________ and high-volume simpler products are likely to be ______________.

A _________________ is a factor that causes the cost of an activity to go up and down.

Return on investment is a useful measure to evaluate the performance of a cost center manager.

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

The ________________________________ is a report of the amount of sales less direct expenses for a department.

Activity-based costing attempts to better allocate costs to the proper users of overhead by focusing on activities.

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

A department can never be considered to be a profit center.

The salaries of employees who spend all their time working in one department are:

A cost center does not directly generate revenues.

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

Long-Term Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

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

Filters

In the two-stage cost allocation, ________ costs are allocated to operating departments, and the operating department costs are allocated to .

Under traditional cost allocation methods, low-volume complex products are often ____ and high-volume simpler products are likely to be .