Question 1

Brad Turret,one of the managers of a multi-national company,is responsible for generating revenues and controlling costs in order to increase the operating income of his division.However,he is not concerned about investment-related decisions.Brad is most likely to be the manager of a(n)________.

Accepted Answer

A)  cost center 
B)  investment center 
C)  profit center 
D)  revenue center

Question 2

In addition to considering both the division's operating income and its average total assets,residual income incorporates top management's target rate of return.

Accepted Answer

A) True 
 B)False

Question 3

When a manufacturer changes from using a single plantwide predetermined overhead rate to multiple predetermined overhead allocation rates,the product unit cost may be more accurate.

Accepted Answer

A) True 
 B)False

Question 4

Percentage of market share and rate of on-time deliveries are indicators of the ________ perspective.

Accepted Answer

A)  quality management 
B)  internal business 
C)  customer 
D)  learning and growth

Question 5

Which of the following can increase a company's return on investment?

Accepted Answer

A)  decrease in operating income 
B)  decrease in total assets 
C)  decrease in asset turnover ratio 
D)  decrease in residual income

Question 6

Both the sales volume variance and the flexible budget variance help revenue center managers understand why they have exceeded or fallen short of budgeted revenue.

Accepted Answer

A) True 
 B)False

Question 7

The level of employee satisfaction is a key performance indicator of the ________ perspective of a balanced scorecard.

Accepted Answer

A)  financial 
B)  learning and growth 
C)  internal business 
D)  customer

Question 8

A furniture manufacturer has decided that its use of a single plantwide predetermined overhead allocation rate is no longer accurate.In making the transition to using multiple predetermined overhead allocation rates,which of the following statements is incorrect?

Accepted Answer

A)  In selecting machine usage as the primary cost driver for the Production Department, management feels that there is a direct relationship between the number of machine hours used and the amount of overhead costs incurred. 
B)  Management must analyze the expected overhead costs and separate them into a cost pool for each department. 
C)  The allocation process changes because there are now multiple cost pools and multiple allocation bases. 
D)  The use of multiple predetermined overhead allocation rates is more complex, but it may be more accurate.

Question 9

Johnson Construction Materials Company has a sales office that sells concrete culvert pipes to property developers.The sales office is a revenue center and prepares a monthly responsibility report.The following information is provided. $$\begin{array}{l}
\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Revenue Center Responsibility Report }\
\begin{array} { |c | c | c | l | c | c | c | c| } 
\hline \begin{array} { c } 
\text { Product } \
\text { Type }
\end{array} & \begin{array} { c } 
\text { Actual } \
\text { Sales } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Flexible } \
\text { Budget } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Flexible } \
\text { Budget }
\end{array} & \begin{array} { c } 
\text { Sales } \
\text { Volume } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Static } \
\text { Budget }
\end{array} \
\hline 40 \text { inch } & \$ 31,700 & & & \$ 30,750 & & & \$ 40,800 \
\hline 36 \text { inch long } & 40,150 & & & 42,000 & & & 33,200 \
\hline 36 \text { inch short } & 36,000 & & & 33,200 & & & 31,100 \
\hline \text { 32 inch } & 19,100 & & & 20,900 & & & 28,400 \
\hline
\end{array}
\end{array}$$ What is the flexible budget variance for the 40-inch pipe?

Accepted Answer

A)  $950 U 
B)  $10,050 F 
C)  $10,050 U 
D)  $950 F

Question 10

A modification of the overhead allocation method which uses a single plantwide rate,is to use multiple predetermined overhead allocation rates that have a single allocation base.

Accepted Answer

A) True 
 B)False

Question 11

Summarize the four steps in an activity-based costing system:
 $$\begin{array} { | l | l | } 
\hline \text { Step 1 } &\quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \
\hline \text { Step 2 } & \
\hline \text { Step 3 } & \
\hline \text { Step 4 } & \
\hline
\end{array}$$

Accepted Answer

The answer of Summarize the four steps in an activity-based...

Question 12

Huntswell Corporation has two major divisions: Agricultural Products and Industrial Products.It provides the following information for the year. $$\begin{array} { | l | r | r | } 
\hline & \text { Agriculture Division } & \text { Industrial Division } \
\hline \text { Net sales } & \$ 140,000 & \$ 1,250,000 \
\hline \text { Operating income } & \$ 17,600 & \$ 230,000 \
\hline \text { Average assets } & \$ 330,000 & \$ 5,540,000 \
\hline
\end{array}$$ Calculate the profit margin for the Industrial Division of the company.(Round your answer to two decimal places.)

Accepted Answer

A)  4.15% 
B)  5.33% 
C)  18.40% 
D)  12.57%

Question 13

Residual income indicates how ________.

Accepted Answer

A)  efficiently a division uses its average assets to generate sales and thereby profits 
B)  much operating income the division earns on every dollar of sales 
C)  much return a division generates on average assets 
D)  much extra operating income a division generates above the minimum acceptable level

Question 14

Lakefront Equipment Company has several divisions that are investment centers.Data for the Boat Division and the Trailer Division are shown here: $$\begin{array} { | l | r | r | } 
\hline & \text { Boat Division } & \text { Trailer Division } \
\hline \text { Operating income } & \$ 85,000 & \$ 50,000 \
\hline \text { Total assets at Jan. 1 } & \$ 670,000 & \$ 215,000 \
\hline \text { Total assets at Dec .31 } & \$ 800,000 & \$ 220,000 \
\hline
\end{array}$$ Which of the following statements would be the most meaningful interpretation of this data?

Accepted Answer

A)  The Boat Division's performance is better than that of the Trailer Division because it has higher assets. 
B)  The Boat Division uses its assets less efficiently than the Trailer Division does because it has a lower return on investment. 
C)  The Boat Division shows a more efficient use of assets than the Trailer Division because it has a higher operating income. 
D)  The Boat Division is financially more successful than the Trailer Division because it shows an increase in assets.

Question 15

The manager of a cost center is responsible for controlling costs and generating revenues for the company.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following would most likely be evaluated using residual income?

Accepted Answer

A)  cost center 
B)  profit center 
C)  revenue center 
D)  investment center

Question 17

Opportunity cost is the benefit ________.

Accepted Answer

A)  received by selling goods on behalf of another division 
B)  received by selling goods to one of the other divisions within the company 
C)  given up by purchasing goods at a price lower than its total manufacturing cost 
D)  given up by choosing an alternate course of action

Question 18

Dellarte Corporation has two major divisions-Agricultural Products and Industrial Products.It provides the following information for the year. $$\begin{array} { | l | r | r | } 
\hline & \text { Agriculture Division } & \text { Industrial Division } \
\hline \text { Net sales } & \$ 160,000 & \$ 1,250,000 \
\hline \text { Operating income } & \$ 47,000 & \$ 225,000 \
\hline \text { Average assets } & \$ 310,000 & \$ 5,580,000 \
\hline \text { Target rate of return } & 10.0 \% & 12.0 \% \
\hline
\end{array}$$ Calculate the residual income for the Agriculture Division.

Accepted Answer

A)  $31,000 
B)  $16,000 
C)  $113,000 
D)  $47,000

Question 19

Which of the following is an advantage of decentralization?

Accepted Answer

A)  Managers' motivation and retention can be increased by empowering segment managers to make decisions. 
B)  Certain costs of activities may be duplicated. 
C)  Customer response time is generally decreased. 
D)  Top management can concentrate on decisions that relate to day-to-day operations of segments.

Question 20

For each of the following responsibility centers,state the typical focus of the responsibility report and briefly discuss the focus.
 $$\begin{array} { | l | l | l | } 
\hline \begin{array} { c } 
\text { Responsibility } \
\text { Center }
\end{array} & \begin{array} { c } 
\text { Focus of the } \
\text { Responsibility Report }
\end{array} & \text { Brief Discussion of the Focus } \
\hline \text { Cost } & & \
\hline \text { Revenue } & & \
\hline \text { Profit } & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following responsibility centers,state...

Exam 24: Cost Allocation and Responsibility Accounting

Brad Turret,one of the managers of a multi-national company,is responsible for generating revenues and controlling costs in order to increase the operating income of his division.However,he is not concerned about investment-related decisions.Brad is most likely to be the manager of a(n) ________.

In addition to considering both the division's operating income and its average total assets,residual income incorporates top management's target rate of return.

When a manufacturer changes from using a single plantwide predetermined overhead rate to multiple predetermined overhead allocation rates,the product unit cost may be more accurate.

Percentage of market share and rate of on-time deliveries are indicators of the ________ perspective.

Which of the following can increase a company's return on investment?

Both the sales volume variance and the flexible budget variance help revenue center managers understand why they have exceeded or fallen short of budgeted revenue.

The level of employee satisfaction is a key performance indicator of the ________ perspective of a balanced scorecard.

A furniture manufacturer has decided that its use of a single plantwide predetermined overhead allocation rate is no longer accurate.In making the transition to using multiple predetermined overhead allocation rates,which of the following statements is incorrect?

A modification of the overhead allocation method which uses a single plantwide rate,is to use multiple predetermined overhead allocation rates that have a single allocation base.

Residual income indicates how ________.

The manager of a cost center is responsible for controlling costs and generating revenues for the company.

Which of the following would most likely be evaluated using residual income?

Opportunity cost is the benefit ________.

Which of the following is an advantage of decentralization?