Exam 21: Cost Allocation and Performance Measurement

The China Department of the Coulsen Department Store had sales of $282,000, cost of goods sold of $198,750, indirect expenses of $19,875, and direct expenses of $41,250 for the current period. What is the China Department's contribution to overhead as a percent of sales?

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:

Investment center managers are usually evaluated using performance measures

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

A firm produces and sells two products, Mica and Plax. The following information is available relating to setup costs (a part of factory overhead): With traditional two-stage allocation of overhead costs, using direct labor hours as the allocation base, the setup cost portion of overhead that is allocated to each unit of product for Mica and Plax, respectively is:

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

Calculating return on total assets for an investment center is defined by the following formula for an investment center:

Investment center is another name for profit center.

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

A cost incurred in producing or purchasing two or more products at the same time is a(n):

Advertising expense can be reasonably allocated to departments on the basis of sales.

Vaughn Co. operates three separate departments (A, B, C). The data below is provided for the current year: Required: Prepare an income statement showing the departmental contributions to overhead for the current year.

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

A factor that causes the cost of an activity to go up or down is a(n):

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

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:

The amount by which a department's revenues exceed its direct expenses is:

An activity-based cost allocation system:

Departmental contribution to overhead is the same as gross profit generated by that department.

Describe the two-stage allocation of overhead costs.