Question 1

A responsibility accounting performance report reports:

Accepted Answer

A)  Only actual costs. 
B)  Only budgeted costs. 
C)  Both actual costs and budgeted costs. 
D)  Only direct costs. 
E)  Only indirect costs. 
A)  Only actual costs. 
B)  Only budgeted costs. 
C)  Both actual costs and budgeted costs. 
D)  Only direct costs. 
E)  Only indirect costs.

Question 2

A unit of a business that not only incurs costs, but also generates revenues, is called a:

Accepted Answer

A)  Performance center. 
B)  Profit center. 
C)  Cost center. 
D)  Responsibility center. 
E)  Expense center. 
A)  Performance center. 
B)  Profit center. 
C)  Cost center. 
D)  Responsibility center. 
E)  Expense center.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Indirect expenses should be allocated to departments based upon the benefits received by each department.

Accepted Answer

A) True 
 B)False

Question 5

Mach Co. operates three production departments as profit centers. The following information is available for its most recent year. Department 1's contribution to overhead as a percent of sales is:

Accepted Answer

A)  8%. 
B)  40%. 
C)  20%. 
D)  30%. 
E)  12%. 
A)  8%. 
B)  40%. 
C)  20%. 
D)  30%. 
E)  12%.

Question 6

A joint cost of producing two products can be allocated between those products on the basis of the relative physical quantities of each product produced.

Accepted Answer

A) True 
 B)False

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

A department that is responsible for maximizing revenues is known as a profit center.

Accepted Answer

A) True 
 B)False

Question 9

Expenses that are not easily associated with a specific department, and which are incurred for the benefit of more than one department, are:

Accepted Answer

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

Question 10

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

Accepted Answer

A)  Segmental accounting report. 
B)  Managerial cost report. 
C)  Controllable expense report. 
D)  Departmental accounting report. 
E)  Responsibility accounting performance report. 
A)  Segmental accounting report. 
B)  Managerial cost report. 
C)  Controllable expense report. 
D)  Departmental accounting report. 
E)  Responsibility accounting performance report.

Question 11

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 12

A useful measure used to evaluate the performance of an investment center is investment center residual income.

Accepted Answer

A) True 
 B)False

Question 13

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 departmental income for the White and Grey Divisions, respectively.

Accepted Answer

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

Question 14

Direct costs require allocation across departments.

Accepted Answer

A) True 
 B)False

Question 15

A profit center:

Accepted Answer

A)  Incurs costs, but does not directly generate revenues. 
B)  Incurs costs and directly generates revenues. 
C)  Has a manager who is evaluated solely on efficiency in controlling costs. 
D)  Incurs only indirect costs and directly generates revenues. 
E)  Incurs only indirect costs and generates revenues. 
A)  Incurs costs, but does not directly generate revenues. 
B)  Incurs costs and directly generates revenues. 
C)  Has a manager who is evaluated solely on efficiency in controlling costs. 
D)  Incurs only indirect costs and directly generates revenues. 
E)  Incurs only indirect costs and generates revenues.

Question 16

Match the appropriate definition with the following terms:

Accepted Answer

The answer of Match the appropriate definition with the following...

Question 17

Wilson Trade School allocates administrative costs to its respective departments based on the number of students enrolled, while maintenance and utilities are allocated per square feet of the classrooms. Based on the information below, what is the total amount allocated to the Automotive Department (rounded to the nearest dollar) if administrative costs for the school were $50,000, maintenance fees were $12,000, and utilities were $6,000?

Accepted Answer

A)  $0. 
B)  $17,000. 
C)  $18,500. 
D)  $22,667. 
E)  $30,000. 
A)  $0. 
B)  $17,000. 
C)  $18,500. 
D)  $22,667. 
E)  $30,000.

Question 18

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 19

Activity-based costing assigns costs first to activity pools, and then costs from activity cost pools are assigned to the cost objects benefiting from the activities.

Accepted Answer

A) True 
 B)False

Question 20

A company produces two products, X and Y, from a single raw material called ZZ. ZZ is purchased in 55-gallon drums, and the contents of one drum are sufficient to produce 30 gallons of X and 15 gallons of Y. X sells for $10.00 per gallon and Y sells for $30.00 per gallon. During the current period, the company used 400 drums of ZZ to produce X and Y. The cost of ZZ was $90 per drum.
Required:
(1) If the cost of ZZ is allocated to the X and Y products on the basis of the number of gallons produced, how much of the total cost of the 400 drums should be charged to each product?
(2) If the cost of ZZ is allocated to the X and Y products in proportion to their market values, how much of the total cost of the 400 drums should be charged to each product?
(3) Which basis of allocating the cost is most likely to be used by the company?
Check one and briefly explain.
_________ The relative number of gallons of each product produced.
_________ The relative market values of each product at the point of separation.

Accepted Answer

Preliminary calculations:
Total joint co

Exam 21: Cost Allocation and Performance Measurement

A responsibility accounting performance report reports:

A unit of a business that not only incurs costs, but also generates revenues, is called a:

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

Indirect expenses should be allocated to departments based upon the benefits received by each department.

Mach Co. operates three production departments as profit centers. The following information is available for its most recent year. Department 1's contribution to overhead as a percent of sales is:

A joint cost of producing two products can be allocated between those products on the basis of the relative physical quantities of each product produced.

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):

A department that is responsible for maximizing revenues is known as a profit center.

Expenses that are not easily associated with a specific department, and which are incurred for the benefit of more than one department, are:

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

A useful measure used to evaluate the performance of an investment center is investment center residual income.

Direct costs require allocation across departments.

A profit center:

Match the appropriate definition with the following terms:

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 assigns costs first to activity pools, and then costs from activity cost pools are assigned to the cost objects benefiting from the activities.

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

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