Deck 9: Allocating Service Department Costs and Responsibility Accounting

Question 1

The human resources department is an example of a shared service department.

Answer 1

True

Question 2

The accounting department is NOT a shared service department.

Answer 2

False

Question 3

Shared service departments are departments that work together to convert raw materials into finished goods.

Answer 3

False

Question 4

A service department is a centralized, non-revenue generating department that provides services to many other departments at a customer's company.

Question 5

A service department is a decentralized, revenue generating department that provides services to many other departments within the company.

Question 6

Bob-Co allocates all copying charges to the departments that use their services. This means Bob-Co's copying department is a shared service department.

Question 7

Which of the following is NOT likely to be a shared service department?

A) Copying department
B) Accounting department
C) Advertising for a single department
D) Payroll department

Question 8

Burrito Blast manufactures two types of burritos-bean and beef. Which of the following is NOT likely to be a shared service department for Burrito Blast?

A) Physical plant department
B) Human resources department
C) Copying department
D) Work in progress-bean

Question 9

Burrito Blast manufactures two types of burritos-bean and beef. Which of the following is MOST likely to be a shared service department for Burrito Blast?

A) Advertising-beef
B) Work in progress-beef
C) Copying department
D) Work in progress-bean

Question 10

Burrito Blast manufactures two types of burritos-bean and beef. They share payroll and human resource department services with other departments. What is the typical allocation base for the payroll and human resource department costs?

A) Number of reports prepared
B) Pieces of mail processed
C) Number of hours spent
D) Number of employees

Question 11

Burrito Blast manufactures two types of burritos-bean and beef. They share accounting department services with other departments. What is the typical allocation base for the accounting department costs?

A) Number of reports prepared
B) Pieces of mail processed
C) Number of hours spent
D) Number of employees

Question 12

Burrito Blast manufactures two types of burritos-bean and beef. They share mail department services with other departments. What is the typical allocation base for the mail department costs?

A) Number of reports prepared
B) Pieces of mail processed
C) Number of hours spent
D) Number of employees

Question 13

Burrito Blast manufactures two types of burritos-bean and beef. They share legal department services with other departments. What is the typical allocation base for the legal department costs?

A) Number of reports prepared
B) Pieces of mail processed
C) Number of hours spent on legal issues
D) Number of employees

Question 14

City Inspections has three departments using the services of the Legal Department. Total monthly shared legal department cost is $20,000. The Annual inspections department has 5 employees that used 100 hours of legal services. The Emergency services department has 8 employees that used 200 hours of legal services. The Roads Division has 7 employees that used 300 hours of legal services. Which is the best method to allocate shared legal costs?

A) Number of employees
B) Operating income
C) Number of hours of legal services
D) Either B or C

Question 15

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $20,000. The Annual inspections department has 5 employees that make 20 requests. The Emergency services department has 8 employees that make 50 requests. The Roads Division has 7 employees that make 30 requests. Which is the best method to allocate shared payroll costs?

A) Number of employees
B) Operating income
C) Number of employee requests
D) Either A or C

Question 16

Shoppers paradise, a wholesaler, ships various products worldwide. Some shipments are made to an individual customer and some are made on bulk orders that are mailed to multiple addresses. The company is considering how to best allocate the cost of shipping. Total monthly shared cost for the department is $20,000. The following data are available:
Which is the best method to allocate shared shipping costs?

A) Number of Addresses processed
B) Number of requests processed
C) Operating income
D) Either A or B

Question 17

Bright College is a community college located in Bright, CA. It provides instruction in five areas: Art, Business, Computer Science, Graphic Design, and Nursing. The college shares copy services with a total monthly cost of $10,000. The college is considering allocating costs using either number of copies or operating income as its allocation base. Data for the month of September, 2012 follows:
Which is the best method to allocate shared copy costs?

A) Number of copies
B) Operating income
C) Either A or B
D) Neither A nor B

Question 18

Stretchmore, Inc. has two product divisions-Rubber Bands and Bungee Cords. The Rubber Band Division products budgets an average sales price of $4 and budgets variable costs of $2 per unit. The Bungee Cord Division budgets an average sales price of $50 and budgets variable costs of $12 per unit. Both divisions use the Accounting Department, which incurs monthly shared cost of $10,000. Data for the month of July follows:
Which is the best method to allocate shared accounting costs?

A) Number of reports
B) Operating income
C) Either A or B
D) Neither A nor B

Question 19

Trips to Remember, Inc. provides vacation trips to various locations around the world. The company's
Headquarters are located in Meadows Place, TX. The headquarters provide two main services to the four tourist locales: accounting and customer services (reservations).
Budget and actual data for each of the four tourist locations are as follows:
The Accounting Services Department actually incurred $11,000 in accounting costs for May 2012. The Reservation Department incurred $23,000 in actual costs, of which $20,000 were traceable to the locations. Which is the best method to allocate traceable accounting costs?

A) Contribution Margin
B) Operating Income
C) Number of calls by location
D) Number of reports requested

Question 20

Cool Surfboards has two departments that both use a conference room (shared facilities). Total monthly conference room cost is $1,000. The Wave Blaster department has 15 employees that reserved 60 hours of conference room time. The Boogie Break department has 5 employees that reserved 100 hours of conference room time. Wave Blaster would receive less allocated shared facilities cost if the number of employees were used as the allocation method.

Question 21

Cool Surfboards has two departments that both use the services of a department. The Wave Blaster department has 15 employees that reserved 60 hours of conference room time. The Boogie Break department has 5 employees that reserved 100 hours of conference room time. Which of the following is TRUE?

A) Allocation based on employees would allocate a smaller amount of cost to Boogie Break.
B) Allocation based on time used would allocate a larger amount of cost to Wave Blaster.
C) Allocation based on operating income would allocate a larger amount of cost to Wave Blaster.
D) We cannot determine the answer from the information given.

Question 22

Cool Surfboards has two departments using the services of the Payroll department. Total monthly payroll shared cost is $6,000. The Wave Blaster department has 15 employees that make 20 requests of the payroll department a month. The Boogie Break department has 5 employees that make 20 requests of the payroll department a month. Which of the following is TRUE?

A) If number of employees is used, Wave Blaster will receive a larger allocation of payroll costs than Boogie Break.
B) If number of requests is used, the departments will receive equal allocations of payroll costs.
C) Both of the above are correct.
D) Neither of the above are correct.

Question 23

Cool Surfboards has two departments using the services of the Payroll department. Total monthly payroll shared cost is $6,000. The departments allocate payroll costs based on number of employees. The Wave Blaster department has 15 employees and the Boogie Break department has 5 employees. What is the amount of payroll costs allocated to the Boogie Break department?

A) $1,500
B) $3,000
C) $2,000
D) $4,500

Question 24

Cool Surfboards has two departments using the services of the Payroll department. Total monthly payroll shared cost is $6,000. The departments allocate payroll costs based on number of employees. The Wave Blaster department has 15 employees and the Boogie Break department has 5 employees. What is the amount of payroll costs allocated to the Wave Blaster department?

A) $1,500
B) $3,000
C) $2,000
D) $4,500

Question 25

Cool Surfboards has two departments that both use a conference room (shared facilities). Total monthly conference room cost is $1,000. The Wave Blaster department has 15 employees that reserved 60 hours of conference room time. The Boogie Break department has 5 employees that reserved 100 hours of conference room time. If Cool Surfboards allocates shared facilities cost based on hours of use, what is the amount of share facilities costs allocated to the Boogie Break department?

A) $625
B) $375
C) $500
D) $250

Question 26

Cool Surfboards has two departments that both use a conference room (shared facilities). Total monthly conference room cost is $1,000. The Wave Blaster department has 15 employees that reserved 60 hours of conference room time. The Boogie Break department has 5 employees that reserved 100 hours of conference room time. If Cool Surfboards allocates shared facilities cost based on hours of use, what is the amount of share facilities costs allocated to the Wave Blaster department?

A) $625
B) $375
C) $500
D) $250

Question 27

Cool Surfboards has two departments that both use a conference room (shared facilities). Total monthly conference room cost is $1,000. The Wave Blaster department has 15 employees that reserved 60 hours of conference room time. The Boogie Break department has 5 employees that reserved 100 hours of conference room time. If Cool Surfboards allocates shared facilities cost based on number of employees, what is the amount of share facilities costs allocated to the Boogie Break department?

A) $625
B) $375
C) $750
D) $250

Question 28

Cool Surfboards has two departments that both use a conference room (shared facilities). Total monthly conference room cost is $1,000. The Wave Blaster department has 15 employees that reserved 60 hours of conference room time. The Boogie Break department has 5 employees that reserved 100 hours of conference room time. If Cool Surfboards allocates shared facilities cost based on number of employees, what is the amount of share facilities costs allocated to the Wave Blaster department?

A) $625
B) $375
C) $750
D) $250

Question 29

Cool Surfboards has two departments that both use a conference room (shared facilities). Total monthly conference room cost is $1,000. The Wave Blaster department has 15 employees that reserved 60 hours of conference room time. The Boogie Break department has 5 employees that reserved 100 hours of conference room time. Which allocation method would be best for the Wave Blaster department?

A) Number of employees
B) Hours of use
C) Operating income
D) Cannot be determined

Question 30

City Inspections has three departments using the services of the Legal Department. Total monthly shared legal department cost is $18,000. The Annual inspections department has 5 employees that used 100 hours of legal services. The Emergency services department has 8 employees that used 200 hours of legal services. The Roads department has 7 employees that used 300 hours of legal services. If City Inspections allocates shared legal costs using number of hours of use as the allocation base, how much of the legal costs will be allocated to Emergency services department?

A) $6,000
B) $12,000
C) $3,000
D) $9,000

Question 31

City Inspections has three departments using the services of the Legal Department. Total monthly shared legal department cost is $18,000. The Annual inspections department has 5 employees that used 100 hours of legal services. The Emergency services department has 8 employees that used 200 hours of legal services. The Roads department has 7 employees that used 300 hours of legal services.

- If City Inspections allocates shared legal costs using number of hours of use as the allocation base, how much of the legal costs will be allocated to the Roads department?

A) $6,000
B) $12,000
C) $3,000
D) $9,000

Question 32

City Inspections has three departments using the services of the Legal Department. Total monthly shared legal department cost is $18,000. The Annual inspections department has 5 employees that used 100 hours of legal services. The Emergency services department has 8 employees that used 200 hours of legal services. The Roads department has 7 employees that used 300 hours of legal services.

-If City Inspections allocates shared legal costs using number of hours of use as the allocation base, how much of the legal costs will be allocated to Annual inspections department?

A) $6,000
B) $12,000
C) $3,000
D) $9,000

Question 33

City Inspections has three departments using the services of the Legal Department. Total monthly shared legal department cost is $18,000. The Annual inspections department has 5 employees that used 100 hours of legal services. The Emergency services department has 8 employees that used 200 hours of legal services. The Roads department has 7 employees that used 300 hours of legal services.

- If City Inspections allocates shared legal costs using number of employees as the allocation base, how much of the legal costs will be allocated to Emergency services department?

A) $7,200
B) $6,300
C) $4,500
D) $9,000

Question 34

City Inspections has three departments using the services of the Legal Department. Total monthly shared legal department cost is $18,000. The Annual inspections department has 5 employees that used 100 hours of legal services. The Emergency services department has 8 employees that used 200 hours of legal services. The Roads department has 7 employees that used 300 hours of legal services.

-If City Inspections allocates shared legal costs number of employees as the allocation base, how much of the legal costs will be allocated to the Roads department?

A) $7,200
B) $6,300
C) $4,500
D) $9,000

Question 35

City Inspections has three departments using the services of the Legal Department. Total monthly shared legal department cost is $18,000. The Annual inspections department has 5 employees that used 100 hours of legal services. The Emergency services department has 8 employees that used 200 hours of legal services. The Roads department has 7 employees that used 300 hours of legal services.

- If City Inspections allocates shared legal costs number of employees as the allocation base, how much of the legal costs will be allocated to Annual inspections department?

A) $7,200
B) $6,300
C) $4,500
D) $9,000

Question 36

City Inspections has three departments using the services of the Payroll department. Total monthly payroll shared cost is $10,000. The Annual inspections department has 5 employees that make 20 requests. The Emergency services department has 8 employees that make 50 requests. The Roads department has 7 employees that make 30 requests. If City Inspections allocates shared payroll costs using number of reports as the allocation base, how much of the payroll costs will be allocated to Emergency services department?

A) $5,000
B) $3,000
C) $2,000
D) $4,000

Question 37

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $10,000. The Annual inspections department has 5 employees that make 20 requests. The Emergency services department has 8 employees that make 50 requests. The Roads department has 7 employees that make 30 requests. If City Inspections allocates shared payroll costs using number of reports as the allocation base, how much of the payroll costs will be allocated to the Roads department?

A) $5,000
B) $3,000
C) $2,000
D) $4,000

Question 38

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $10,000. The Annual inspections department has 5 employees that make 20 requests. The Emergency services department has 8 employees that make 50 requests. The Roads department has 7 employees that make 30 requests. If City Inspections allocates shared payroll costs using number of reports as the allocation base, how much of the payroll costs will be allocated to the Annual inspections department?

A) $5,000
B) $3,000
C) $2,000
D) $4,000

Question 39

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $20,000. The Annual inspections department has 5 employees that make 20 requests. The Emergency services department has 8 employees that make 50 requests. The Roads department has 7 employees that make 30 requests. If City Inspections allocates shared payroll costs using number of requests as the allocation base, how much of the payroll costs will be allocated to each department?

A) Annual inspections $5,000; Emergency services $3,000; Roads $2,000
B) Annual inspections $3,333; Emergency services $3,333; Roads $3,334
C) Annual inspections $3,000; Emergency services $5,000; Roads $2,000
D) Annual inspections $2,000; Emergency services $5,000; Roads $3,000

Question 40

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $10,000. The Annual inspections department has 5 employees that make 20 requests. The Emergency services department has 8 employees that make 50 requests. The Roads department has 7 employees that make 30 requests. If City Inspections allocates shared payroll costs using number of employees as the allocation base, how much of the payroll costs will be allocated to the Annual inspections department?

A) $2,500
B) $3,000
C) $3,500
D) $4,000

Question 41

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $10,000. The Annual inspections department has 5 employees that make 20 requests. The Emergency services department has 8 employees that make 50 requests. The Roads department has 7 employees that make 30 requests. If City Inspections allocates shared payroll costs using number of employees as the allocation base, how much of the payroll costs will be allocated to the Emergency services department?

A) $2,500
B) $3,000
C) $3,500
D) $4,000

Question 42

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $10,000. The Annual inspections department has 5 employees that make 20 requests. The Emergency services department has 8 employees that make 50 requests. The Roads department has 7 employees that make 30 requests. If City Inspections allocates shared payroll costs using number of employees as the allocation base, how much of the payroll costs will be allocated to the Roads department?

A) $2,500
B) $3,000
C) $3,500
D) $4,000

Question 43

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $10,000. The Annual inspections department has 5 employees that make 20 requests. The Emergency services department has 8 employees that make 50 requests. The Roads department has 7 employees that make 30 requests. If City Inspections allocates shared payroll costs using number of employees as the allocation base, how much of the payroll costs will be allocated to each department?

A) Annual inspections $4,000; Emergency services $3,500; Roads $2,500
B) Annual inspections $3,333; Emergency services $3,333; Roads $3,334
C) Annual inspections $3,500; Emergency services $4,000; Roads $2,500
D) Annual inspections $2,500; Emergency services $4,000; Roads $3,500

Question 44

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $10,000. The operating income for each for the departments is as follows: Annual inspections department $10,000; Emergency services department $50,000; Roads department $40,000 If City Inspections allocates shared payroll costs using operating income as the allocation base, how much of the payroll costs will be allocated to each department?

A) Annual inspections $1,000; Emergency services $5,000; Roads $4,000
B) Annual inspections $3,333; Emergency services $3,333; Roads $3,334
C) Annual inspections $4,000; Emergency services $5,000; Roads $1,000
D) Annual inspections $2,000; Emergency services $4,000; Roads $4,000

Question 45

City Inspections has three departments using the services of the Payroll Department. Total monthly payroll shared cost is $20,000. The operating income for each for the departments is as follows: Annual inspections department $10,000; Emergency services department $50,000; Roads department $40,000 If City Inspections allocates shared payroll costs using operating income as the allocation base, what will be the net income of each department after allocating shared payroll costs.

A) Annual inspections $1,000; Emergency services $5,000; Roads $4,000
B) Annual inspections $9,000; Emergency services $45,000; Roads $36,000
C) Annual inspections $11,000; Emergency services $55,000; Roads $44,000
D) Annual inspections $6,667; Emergency services $46,667; Roads $36,666

Question 46

Shoppers paradise, a wholesaler, ships various products worldwide. Some shipments are made to an individual customer and some are made on bulk orders that are mailed to multiple addresses. The company is considering how to best allocate the cost of shipping. It has come up with three alternatives: charge based on each address processed (parcel), charge based on the total number of requests (bulk shipments to multiple addressed would be assessed as one request), or allocate based on operating income. Total monthly shared cost for the department is $20,000.
The following data are available:


-What amount of shipping service costs would be allocated to each division if Shoppers Paradise uses total number of requests as the allocation cost base?

A) Hat $8,500; Shoe $4,500; Luggage $4,000; Purse $3,000
B) Hat $4,500; Shoe $4,000; Luggage $8,500; Purse $3,000
C) Hat $4,000; Shoe $3,000; Luggage $8,500; Purse $4,500
D) Hat $5,000; Shoe $5,000; Luggage $5,000; Purse $5,000

Question 47

Shoppers paradise, a wholesaler, ships various products worldwide. Some shipments are made to an individual customer and some are made on bulk orders that are mailed to multiple addresses. The company is considering how to best allocate the cost of shipping. It has come up with three alternatives: charge based on each address processed (parcel), charge based on the total number of requests (bulk shipments to multiple addressed would be assessed as one request), or allocate based on operating income. Total monthly shared cost for the department is $20,000.
The following data are available:


-What amount of shipping service costs would be allocated to each division if Shoppers Paradise uses total number of addresses as the allocation cost base?

A) Hat $5,000; Shoe $4,000; Luggage $6,000; Purse $5,000
B) Hat $5,000; Shoe $6,000; Luggage $4,000; Purse $5,000
C) Hat $4,000; Shoe $5,000; Luggage $5,000; Purse $6,000
D) Hat $5,000; Shoe $5,000; Luggage $5,000; Purse $5,000

Question 48

Shoppers paradise, a wholesaler, ships various products worldwide. Some shipments are made to an individual customer and some are made on bulk orders that are mailed to multiple addresses. The company is considering how to best allocate the cost of shipping. It has come up with three alternatives: charge based on each address processed (parcel), charge based on the total number of requests (bulk shipments to multiple addressed would be assessed as one request), or allocate based on operating income. Total monthly shared cost for the department is $20,000.
The following data are available:


- What amount of shipping service costs would be allocated to each division if Shoppers Paradise uses operating income as the allocation cost base?

A) Hat $5,000; Shoe $5,000; Luggage $5,000; Purse $5,000
B) Hat $7,000; Shoe $3,000; Luggage $2,500; Purse $7,500
C) Hat $2,500; Shoe $7,000; Luggage $7,500; Purse $3,000
D) Hat $2,500; Shoe $7,000; Luggage $3,000; Purse $7,500

Question 49

Shoppers paradise, a wholesaler, ships various products worldwide. Some shipments are made to an individual customer and some are made on bulk orders that are mailed to multiple addresses. The company is considering how to best allocate the cost of shipping. It has come up with three alternatives: charge based on each address processed (parcel), charge based on the total number of requests (bulk shipments to multiple addressed would be assessed as one request), or allocate based on operating income. Total monthly shared cost for the department is $20,000.
The following data are available:


- If Shoppers Paradise uses operating income as the allocation cost base, what amount of net income would be reported after allocating shared shipping costs to each division?

A) Hat $25,000; Shoe $70,000; Luggage $30,000; Purse $75,000
B) Hat $20,500; Shoe $66,000; Luggage $21,500; Purse $72,000
C) Hat $22,500; Shoe $63,000; Luggage $27,000; Purse $67,500
D) Hat $27,500; Shoe $77,000; Luggage $33,000; Purse $82,500

Question 50

Shoppers paradise, a wholesaler, ships various products worldwide. Some shipments are made to an individual customer and some are made on bulk orders that are mailed to multiple addresses. The company is considering how to best allocate the cost of shipping. It has come up with three alternatives: charge based on each address processed (parcel), charge based on the total number of requests (bulk shipments to multiple addressed would be assessed as one request), or allocate based on operating income. Total monthly shared cost for the department is $20,000.
The following data are available:


- If Shoppers Paradise uses number of requests as the allocation cost base, what amount of net income would be reported after allocating shared shipping costs to each division?

A) Hat $25,000; Shoe $70,000; Luggage $30,000; Purse $75,000
B) Hat $20,500; Shoe $66,000; Luggage $21,500; Purse $72,000
C) Hat $22,500; Shoe $63,000; Luggage $27,000; Purse $67,500
D) Hat $27,500; Shoe $77,000; Luggage $33,000; Purse $82,500

Question 51

Shoppers paradise, a wholesaler, ships various products worldwide. Some shipments are made to an individual customer and some are made on bulk orders that are mailed to multiple addresses. The company is considering how to best allocate the cost of shipping. It has come up with three alternatives: charge based on each address processed (parcel), charge based on the total number of requests (bulk shipments to multiple addressed would be assessed as one request), or allocate based on operating income. Total monthly shared cost for the department is $20,000.
The following data are available:


- If Shoppers Paradise uses number of addresses as the allocation cost base, what amount of net income would be reported after allocating shared shipping costs to each division?

A) Hat $20,000; Shoe $66,000; Luggage $24,000; Purse $70,000
B) Hat $20,500; Shoe $66,000; Luggage $21,500; Purse $72,000
C) Hat $22,500; Shoe $63,000; Luggage $27,000; Purse $67,500
D) Hat $27,500; Shoe $77,000; Luggage $33,000; Purse $82,500

Question 52

Shoppers paradise, a wholesaler, ships various products worldwide. Some shipments are made to an individual customer and some are made on bulk orders that are mailed to multiple addresses. The company is considering how to best allocate the cost of shipping. It has come up with three alternatives: charge based on each address processed (parcel), charge based on the total number of requests (bulk shipments to multiple addressed would be assessed as one request), or allocate based on operating income. Total monthly shared cost for the department is $20,000.
The following data are available:


- If Shoppers Paradise uses number of requests as the allocation cost base, what percentage would be used to allocate shared shipping costs to each division?

A) Hat 22.5%; Shoe 42.5%; Luggage 20.0%; Purse 15.0%
B) Hat 22.5%; Shoe 20.0%; Luggage 42.5%; Purse 15.0%
C) Hat 25.0%; Shoe 20.0%; Luggage 30.0%; Purse 25.0%
D) Hat 12.5%; Shoe 35.0%; Luggage 15.0%; Purse 37.5%

Question 53

Shoppers paradise, a wholesaler, ships various products worldwide. Some shipments are made to an individual customer and some are made on bulk orders that are mailed to multiple addresses. The company is considering how to best allocate the cost of shipping. It has come up with three alternatives: charge based on each address processed (parcel), charge based on the total number of requests (bulk shipments to multiple addressed would be assessed as one request), or allocate based on operating income. Total monthly shared cost for the department is $20,000.
The following data are available:


-If Shoppers Paradise uses number of addresses as the allocation cost base, what percentage would be used to allocate shared shipping costs to each division?

A) Hat 22.5%; Shoe 42.5%; Luggage 20.0%; Purse 15.0%
B) Hat 22.5%; Shoe 20.0%; Luggage 42.5%; Purse 15.0%
C) Hat 25.0%; Shoe 20.0%; Luggage 30.0%; Purse 25.0%
D) Hat 12.5%; Shoe 35.0%; Luggage 15.0%; Purse 37.5%

Question 54

Shoppers paradise, a wholesaler, ships various products worldwide. Some shipments are made to an individual customer and some are made on bulk orders that are mailed to multiple addresses. The company is considering how to best allocate the cost of shipping. It has come up with three alternatives: charge based on each address processed (parcel), charge based on the total number of requests (bulk shipments to multiple addressed would be assessed as one request), or allocate based on operating income. Total monthly shared cost for the department is $20,000.
The following data are available:


- If Shoppers Paradise uses operating income as the allocation cost base, what percentage would be used to allocate shared shipping costs to each division?

A) Hat 22.5%; Shoe 42.5%; Luggage 20.0%; Purse 15.0%
B) Hat 22.5%; Shoe 20.0%; Luggage 42.5%; Purse 15.0%
C) Hat 25.0%; Shoe 20.0%; Luggage 30.0%; Purse 25.0%
D) Hat 12.5%; Shoe 35.0%; Luggage 15.0%; Purse 37.5%

Question 55

Bright College is a community college located in Bright, CA. It provides instruction in five areas: Art, Business, Computer Science, GraphicDesign, and Nursing. The college shares copy services with a total
Monthly cost of $10,000. The college is considering allocating costs using either number of copies or
Operating income as its allocation base. Data for the month of September, 2012 follows:


- If Bright College uses number of copies as the allocation cost base, what percentage would be used to allocate shared copy costs to each division?

A) Art 20%; Business 25%; Computer Science 30%; Graphic Design 10%; Nursing 15%
B) Art 20%; Business 20%; Computer Science 20%; Graphic Design 20%; Nursing 20%
C) Art 20%; Business 25%; Computer Science 30%; Graphic Design 15%; Nursing 10%
D) Art 20%; Business 30%; Computer Science 25%; Graphic Design 10%; Nursing 15%

Question 56

Bright College is a community college located in Bright, CA. It provides instruction in five areas: Art, Business, Computer Science, Graphic Design, and Nursing. The college shares copy services with a total monthly cost of $10,000. The college is considering allocating costs using either number of copies or operating income as its allocation base. Data for the month of September, 2012 follows:


- If Bright College uses operating income as the allocation cost base, what percentage would be used to allocate shared copy costs to each division?

A) Art 20%; Business 25%; Computer Science 10%; Graphic Design 25%; Nursing 20%
B) Art 20%; Business 20%; Computer Science 20%; Graphic Design 20%; Nursing 20%
C) Art 20%; Business 25%; Computer Science 30%; Graphic Design 15%; Nursing 10%
D) Art 20%; Business 30%; Computer Science 25%; Graphic Design 10%; Nursing 15%

Question 57

Bright College is a community college located in Bright, CA. It provides instruction in five areas: Art, Business, Computer Science, Graphic Design, and Nursing. The college shares copy services with a total monthly cost of $15,000. The college is considering allocating costs using either number of copies or operating income as its allocation base. Data for the month of September, 2012 follows:


- If Bright College uses operating income as the allocation cost base, how much copy costs would be allocated to the Graphic Design Division?

A) $3,750
B) $1,500
C) $3,000
D) $1,500.

Question 58

Bright College is a community college located in Bright, CA. It provides instruction in five areas: Art, Business, Computer Science, Graphic Design, and Nursing. The college shares copy services with a total monthly cost of $15,000. The college is considering allocating costs using either number of copies or operating income as its allocation base. Data for the month of September, 2012 follows:


- If Bright College uses operating income as the allocation cost base, how much copy costs would be allocated to the Nursing Division?

A) $3,750
B) $1,500
C) $3,000
D) $2,250

Question 59

Bright College is a community college located in Bright, CA. It provides instruction in five areas: Art, Business, Computer Science, Graphic Design, and Nursing. The college shares copy services with a total monthly cost of $15,000. The college is considering allocating costs using either number of copies or operating income as its allocation base. Data for the month of September, 2012 follows:


- If Bright College uses number of copies as the allocation cost base, how much copy costs would be allocated to the Graphic Design Division?

A) $3,750
B) $1,500
C) $3,000
D) $1,500.

Question 60

Bright College is a community college located in Bright, CA. It provides instruction in five areas: Art, Business, Computer Science, Graphic Design, and Nursing. The college shares copy services with a total monthly cost of $15,000. The college is considering allocating costs using either number of copies or operating income as its allocation base. Data for the month of September, 2012 follows:


- If Bright College uses number of copies as the allocation cost base, how much copy costs would be allocated to the Nursing Division?

A) $3,750
B) $1,500
C) $3,000
D) $2,250

Question 61

Stretchmore, Inc. has two product divisions: Rubber Bands and Bungee Cords. The Rubber Band Division products budgets an average sales price of $4 and budgets variable costs of $2 per unit. The Bungee Cord Division budgets an average sales price of $50 and budgets variable costs of $12 per unit. Both divisions use the Accounting Department, which incurs monthly shared cost of $10,000. Data for the month of July follows:


- If Stetchmore uses number of reports as the allocation cost base, how much accounting costs would be allocated to the Rubber Band Division?

A) $6,000
B) $4,000
C) $2,400
D) $1,500

Question 62

Stretchmore, Inc. has two product divisions: Rubber Bands and Bungee Cords. The Rubber Band Division products budgets an average sales price of $4 and budgets variable costs of $2 per unit. The Bungee Cord Division budgets an average sales price of $50 and budgets variable costs of $12 per unit. Both divisions use the Accounting Department, which incurs monthly shared cost of $10,000. Data for the month of July follows:


- If Stetchmore uses number of reports as the allocation cost base, how much accounting costs would be allocated to the Bungee Cord Division?

A) $6,000
B) $4,000
C) $2,400
D) $7,600

Question 63

Stretchmore, Inc. has two product divisions: Rubber Bands and Bungee Cords. The Rubber Band Division products budgets an average sales price of $4 and budgets variable costs of $2 per unit. The Bungee Cord Division budgets an average sales price of $50 and budgets variable costs of $12 per unit. Both divisions use the Accounting Department, which incurs monthly shared cost of $10,000. Data for the month of July follows:


- If Stetchmore uses budgeted contribution margin as the allocation cost base, how much accounting costs would be allocated to the Rubber Band Division?

A) $6,000
B) $4,000
C) $2,400
D) $1,500

Question 64

Stretchmore, Inc. has two product divisions: Rubber Bands and Bungee Cords. The Rubber Band Division products budgets an average sales price of $4 and budgets variable costs of $2 per unit. The Bungee Cord Division budgets an average sales price of $50 and budgets variable costs of $12 per unit. Both divisions use the Accounting Department, which incurs monthly shared cost of $10,000. Data for the month of July follows:


- If Stetchmore uses budgeted contribution margin as the allocation cost base, how much accounting costs would be allocated to the Bungee Cord Division?

A) $6,000
B) $4,000
C) $2,400
D) $7,600

Question 65

Trips to Remember, Inc. provides vacation trips to various locations around the world. The company's headquarters are located in Meadows Place, TX. The headquarters provide two main services to the four tourist locales: accounting and customer services (reservations). Budget and actual data for each of the four tourist locations are as follows:


- The Accounting Services Department actually incurred $11,000 in accounting costs for May 2012. The Reservation Department incurred $23,000 in actual costs, of which $20,000 were traceable to the locations. What is the amount of accounting costs allocated to the Niceville location, assuming accounting costs are allocated based on the number of reports requested?

A) $5,500
B) $2,750
C) $3,300
D) $11,000

Question 66

Trips to Remember, Inc. provides vacation trips to various locations around the world. The company's headquarters are located in Meadows Place, TX. The headquarters provide two main services to the four tourist locales: accounting and customer services (reservations).
Budget and actual data for each of the four tourist locations are as follows:


- The Accounting Services Department actually incurred $11,000 in accounting costs for May 2012. The Reservation Department incurred $23,000 in actual costs, of which $20,000 were traceable to the locations. What is the amount of accounting costs allocated to the Danville location, assuming accounting costs are allocated based on the number of reports requested?

A) $5,500
B) $2,750
C) $3,300
D) $11,000

Question 67

Trips to Remember, Inc. provides vacation trips to various locations around the world. The company's headquarters are located in Meadows Place, TX. The headquarters provide two main services to the four tourist locales: accounting and customer services (reservations).
Budget and actual data for each of the four tourist locations are as follows:


-The Accounting Services Department actually incurred $11,000 in accounting costs for May 2012. The Reservation Department incurred $23,000 in actual costs, of which $20,000 were traceable to the locations. What is the amount of customer service(reservation) costs allocated to the Niceville location, assuming customer service costs are allocated based on the number of calls at each location?

A) $4,000
B) $3,500
C) $7,000
D) $5,000

Question 68

Trips to Remember, Inc. provides vacation trips to various locations around the world. The company's headquarters are located in Meadows Place, TX. The headquarters provide two main services to the four tourist locales: accounting and customer services (reservations).
Budget and actual data for each of the four tourist locations are as follows:


- The Accounting Services Department actually incurred $11,000 in accounting costs for May 2012. The Reservation Department incurred $23,000 in actual costs, of which $20,000 were traceable to the locations. What is the amount of customer service (reservation) costs allocated to the Prattville location, assuming customer service costs are allocated based on the number of calls at each location?

A) $4,000
B) $3,500
C) $7,000
D) $5,000

Question 69

Trips to Remember, Inc. provides vacation trips to various locations around the world. The company's headquarters are located in Meadows Place, TX. The headquarters provide two main services to the four tourist locales: accounting and customer services (reservations).
Budget and actual data for each of the four tourist locations are as follows:


- The Accounting Services Department actually incurred $11,000 in accounting costs for May 2012. The Reservation Department incurred $23,000 in actual costs, of which $20,000 were traceable to the locations. What is the amount of customer service (reservation) costs allocated to the Huntsville location, assuming customer service costs are allocated based on the number of calls at each location?

A) $4,000
B) $3,500
C) $7,000
D) $5,000

Question 70

Trips to Remember, Inc. provides vacation trips to various locations around the world. The company's headquarters are located in Meadows Place, TX. The headquarters provide two main services to the four tourist locales: accounting and customer services (reservations).
Budget and actual data for each of the four tourist locations are as follows:


-The Accounting Services Department actually incurred $11,000 in accounting costs for May 2012. The Reservation Department incurred $23,000 in actual costs, of which $20,000 were traceable to the locations. Assume the call volume for Prattville increases to 22,000. The amount of customer service (reservation) costs are allocated to locations based on the number of calls at each location. Which of the following would be true regarding the allocation of customer service costs?

A) Huntsville's allocated customer service costs would decrease.
B) Niceville's allocated customer service costs would increase.
C) All locations allocated customer service costs would decrease.
D) Cannot be determined from the information given.

Question 71

Trips to Remember, Inc. provides vacation trips to various locations around the world. The company's headquarters are located in Meadows Place, TX. The headquarters provide two main services to the four tourist locales: accounting and customer services (reservations).
Budget and actual data for each of the four tourist locations are as follows:


- The Accounting Services Department actually incurred $11,000 in accounting costs for May 2012. The Reservation Department incurred $23,000 in actual costs, of which $20,000 were traceable to the locations. Assume the call volume for Prattville decreases to 10,000. The amount of customer service (reservation) costs are allocated to locations based on the number of calls at each location. Which of the following would be true regarding the allocation of customer service costs?

A) Huntsville's allocated customer service costs would decrease.
B) Niceville's allocated customer service costs would decrease.
C) Prattville's allocated customer service costs would decrease.
D) All locations allocated customer service costs would increase.

Question 72

Trips to Remember, Inc. provides vacation trips to various locations around the world. The company's headquarters are located in Meadows Place, TX. The headquarters provide two main services to the four tourist locales: accounting and customer services (reservations).
Budget and actual data for each of the four tourist locations are as follows:


- The Accounting Services Department actually incurred $11,000 in accounting costs for May 2012. The Reservation Department incurred $23,000 in actual costs, of which $20,000 were traceable to the locations. Assume the number of reports requested by the Niceville location was 50 and the number of reports requested by Danville was 60. The amount of customer service (reservation) costs are allocated to locations based on the number of calls at each location. Which of the following would be true regarding the allocation of customer service costs?

A) Niceville's allocated accounting cost would decrease.
B) Danville's allocated accounting cost would decrease.
C) Both Niceville and Danville's allocated accounting cost would decrease.
D) Allocated accounting costs for all locations would change.

Question 73

Bright College is a community college located in Bright, CA. It provides instruction in five areas: Art, Business, Computer Science, Graphic Design, and Nursing. The college shares copy services with a total monthly cost of $10,000. The college is considering allocating costs using either number of copies or operating income as its allocation base. Data for the month of September, 2012 follows:
Allocate the cost to each division using total number of copies as the allocation cost base.

Question 74

A profit center is a responsibility center in which a manager is accountable for maximizing revenue and expenses for a particular division or area.

Question 75

April, Cherry Company had actual sales of $180,000 compared to budgeted sales of $195,000. Actual cost of goods sold was $135,000, compared to a budget of $136,500. Monthly operating expenses, budgeted at $28,000, totaled $25,000. Interest revenue of $2,500 was earned during April but had not been included in the budget. The performance report for April would show a net income variance of what amount?

A) $8,000
B) $13,000
C) $(8,000)
D) $(13,000)

Question 76

July, Neptune Company had actual sales of $144,000 compared to budgeted sales of $156,000. Actual cost of goods sold was $108,000, compared to a budget of $109,200. Monthly operating expenses, budgeted at $22,400, totaled $20,000. Interest revenue of $2,000 was earned during July but had not been included in the budget. The performance report for July would show a net income variance of what amount?

A) $6,400
B) $10,400
C) $(6,400)
D) $(10,400)

Question 77

XYZ Company budgeted $4 million for customer service costs, but actually spent only $3 million. Which of the following statements indicates the best course of action for management to take?

A) Because this $1 million variance is favorable, management does not need to investigate further.
B) Management will investigate this $1 million favorable variance to ensure that the cost savings do not reflect skimping on customer service.
C) Management will investigate this $1 million unfavorable variance to try to identify and correct the problem.
D) Management should investigate every variance, especially unfavorable ones.

Question 78

A cost center is a responsibility center which is likely also a shared services department.

Question 79

Which of the following is not a responsibility center?

A) Cost center
B) Profit center
C) Equity center
D) Investment center

Question 80

Decentralization allows decision making to occur at many levels throughout the organization.