Deck 22: Responsibility Accounting and Transfer Pricing

Question 1

Which of the following costs is traceable to an individual sales department in a department store such as Sears?

A) Salary of the store manager.
B) Depreciation on the store building.
C) Salaries of store security guards.
D) Salary of a sales associate.

Answer 1

Salary of a sales associate.

Question 2

The Sports Arena location of Burger Heaven reports monthly sales of $140,000, variable costs of $63,000, and traceable fixed costs of $54,000. The contribution margin ratio of this business unit is:

A) 70%.
B) 45%.
C) 55%.
D) 16.4%.

Answer 2

55%.

Question 3

In deciding which responsibility centers can benefit most from short-term marketing efforts, such as advertising specific products, management should give greatest consideration to the relationship between a center's sales and:

A) Traceable fixed costs.
B) Income from operations.
C) Contribution margin.
D) Responsibility margin.

Answer 3

Contribution margin.

Question 4

From a long-term perspective, when evaluating the contribution of a particular profit center to the overall profitability of the company, management should be most interested in the center's:

A) Traceable fixed costs.
B) Income from operations.
C) Contribution margin.
D) Responsibility margin.

Question 5

The Molding Department of Acadia Corporation is a cost center. The transfer price used to transfer goods from the Molding Department to the Assembly Department would most likely be based upon:

A) The cost of the units transferred.
B) The market value of the units transferred.
C) A negotiated amount set by the department managers.
D) The average fixed cost per unit transferred.

Question 6

The uptown branch of Kenny's Deli is organized as an investment center. The following information is available for the current year:
If you select answer d for question 5, indicate the correct amount in the space provided.

-Refer to the above data. The contribution margin at Kenny's uptown branch during the current year is:

A) $9,000.
B) $84,000.
C) $120,000.
D) $56,000.

Question 7

The uptown branch of Kenny's Deli is organized as an investment center. The following information is available for the current year:
If you select answer d for question 5, indicate the correct amount in the space provided.

-Refer to the above data. The contribution margin ratio is:

A) 40%.
B) 50%.
C) 55%.
D) 25%.

Question 8

The uptown branch of Kenny's Deli is organized as an investment center. The following information is available for the current year:
If you select answer d for question 5, indicate the correct amount in the space provided.

-Refer to the above data. The responsibility margin for the uptown branch during the year is:

A) $164,000.
B) $44,000.
C) $120,000.
D) $64,000.

Question 9

The uptown branch of Kenny's Deli is organized as an investment center. The following information is available for the current year:
If you select answer d for question 5, indicate the correct amount in the space provided.

-Refer to the above data. If sales volume decreased by 10% and traceable fixed costs decreased by 20% what would be the new contribution margin?

A) 75,600.
B) 108,000.
C) 79,200.
D) $80,000.

Question 10

The uptown branch of Kenny's Deli is organized as an investment center. The following information is available for the current year:
If you select answer d for question 5, indicate the correct amount in the space provided.

-Refer to the above data. A 10% increase in the sales volume at the uptown store would be expected to increase the location's responsibility margin by:

A) $30,000.
B) $12,000.
C) $20,000.
D) Some other amount. $____________

Question 11

The downtown branch of Emily's Bakery is organized as an investment center. The following information is available for the current year.
Instructions:Compute the following measures for this investment center:
a) Contribution margin:$____________
b) Contribution margin ratio (round your answer to 1 decimal place):____________%
c) Responsibility margin:$____________
d) Return on assets:____________%
e) Increase in responsibility margin that would be expected to result from a 10% increase in sales volume.$____________