Exam 9: Performance Measurement and Responsibility Accounting

The following is a partially completed lower section of a departmental expense allocation spreadsheet for Brickland. 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 Purchasing department expense to be allocated to Fabrication.

Departmental income statements are prepared for service departments but not operating departments.

Holo 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:

Evaluation of the performance of an investment center involves only financial measures.

Which of the following is not true regarding a responsibility accounting system?

Nesbit 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: Square Number of Footage Employees Machining 14,535 78 Assembly 4,845 52 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.

The following data is available for the Janitorial Services Department of Glitterol Co. Required: Calculate departmental contribution to overhead for the Janitorial Services Department, including the department's contribution as a percentage of revenues.

Wren Pork Company uses the value basis of allocating joint costs in its production of pork products. Relevant information for the current period follows: The total joint cost for the current period was $43,000. How much of this cost should Wren Pork allocate to Loin chops?

A lumber mill paid $70,000 for logs that produced 200,000 board feet of lumber in 3 different grades and amounts as follows: Compute the portion of the $70,000 joint cost to be allocated to No. 2 Common if the value basis is used.