Exam 9: Performance Measurement and Responsibility Accounting

City Park College allocates administrative costs to its teaching departments based on the number of students enrolled, while maintenance and utilities are allocated based on square feet of classrooms. Based on the information below, what is the total amount of expenses allocated to each department (rounded to the nearest dollar) if administrative costs for the college were $180,000, maintenance expenses were $70,000, and utilities were $85,000? Teaching Size of Department Students Classroom Electronics……………. 117 900 sq. ft. Automotive…………... 156 750 sq. ft. Computers………….... 429 1,200 sq. ft. Plumbing…………….. 78 150 sq. ft.

Which of the following statements is not correct concerning the elements of the cash conversion cycle time?

Kragle Corporation reported the following financial data for one of its divisions for the year; average invested assets of $470,000; sales of $930,000; and income of $105,000. The investment center profit margin is:

Pepper Department store allocates its service department expenses to its various operating (sales) departments. The following data is available for its service departments: The following information is available for its three operating (sales) departments: What is the total advertising expense allocated to Department B?

Product lines are often evaluated as profit centers.

Two investment centers at Marshman Corporation have the following current-year income and asset data: The return on investment (ROI) for Investment Center B is:

Ready Company has two operating (production) departments: Assembly and Painting. Assembly has 150 employees and occupies 44,000 square feet; Painting has 100 employees and occupies 36,000 square feet. Indirect factory expenses for the current period are as follows: Administration \ 80,000 Maintenance \ 100,000 Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The amount of administration expenses that should be allocated to the Painting Department for the current period is:

The type of department that generates revenues and incurs costs, and its manager is responsible for the investments made in operating assets is called a(n):

Division A produces a part with the following characteristics: Division B, another division in the company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $28 per unit. If Division A sells to Division B, $1 in variable costs can be avoided. Suppose Division A is currently operating at capacity and can sell all of the units it produces on the outside market for its usual selling price. From the point of view of Division A, any sales to Division B should be priced no lower than:

In the process of preparing department income statements, a company uses there are three steps before the statements can be completed. Describe those steps.

Brownley Company has two service departments and two operating (production) departments. The Payroll Department services all three of the other departments in proportion to the number of employees in each. The Maintenance Department costs are allocated to the two operating departments in proportion to the floor space used by each. Listed below are the operating data for the current period: The total cost of operating the Maintenance Department for the current period is:

Describe the information found on a responsibility accounting performance report.

No standard rule identifies the best basis of allocating expenses across departments, so it is impossible to allocate costs in a manner that will be perceived as fair.

In the preparation of departmental income statements, the preparer completes the following steps in the following order:

A cost center is a unit of a business that incurs costs without directly generating revenues. All of the following are considered cost centers except:

In producing oat bran, the joint cost of milling the oats into bran, oatmeal, and animal feed is considered a direct cost to the oat bran, because the oat bran cannot be produced without incurring the joint cost.

Investment center managers are typically evaluated using performance measures that combine income and assets.

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

A company rents a building with a total of 50,000 square feet, which are evenly divided between two floors. The company allocates the rent for space on the first floor at twice the rate of space on the second floor. The total monthly rent for the building is $30,000. How much of the monthly rental expense should be allocated to a department that occupies 10,000 square feet on the first floor?

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?