Exam 21: Cost Allocation and Performance Measurement

A system of performance measures, including nonfinancial measures, used to assess company and division manager performance is:

A retail store has three departments, A, B, and C, each of which has four full-time employees. The store does general advertising that benefits all departments. Advertising expense totaled $90,000 for the current year, and departmental sales were: How much advertising expense should be allocated to each department?

The allocation bases for assigning indirect costs include:

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.

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 gross profit for the White and Grey Divisions, respectively.

Blower Company is divided into four departments. Departments A and B are service departments and Departments 1 and 2 are operating (production) departments. The services of the two service departments are used by the other departments as follows: Complete the following table:

A ______________________ incurs costs without directly generating revenues.

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

The Footwear Department of Lee's Department Store had sales of $188,000, cost of goods sold of $132,500, indirect expenses of $13,250, and direct expenses of $27,500 for the current period. The Footwear Department's contribution to overhead as a percent of sales is:

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

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. Compute the division's return on assets:

Joint costs are a group of several costs incurred in producing or purchasing a single product.