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Exam 11: Responsibility Accounting Systems

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Question 121

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Erholm Corporation has two operating divisions-an Atlantic Division and a Pacific Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $37 per shipment. The Logistics Department's fixed costs are budgeted at $417,800 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year, actual Logistics Department variable costs totaled $296,700 and fixed costs totaled $437,950. The Atlantic Division had a total of 4,500 shipments and the Pacific Division had a total of 5,700 shipments for the year. How much Logistics Department cost should be charged to the Pacific Division at the end of the year for performance evaluation purposes?

A) $397,453
B) $482,470
C) $451,498
D) $466,202

E) A) and B)
F) A) and C)

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Question 122

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Nafth Company has an Equipment Services Department that performs all needed maintenance work on the equipment in the company's Fabrication and Assembly Departments. Costs of the equipment Services Department are charged to the Fabrication and Assembly Departments on the basis of direct labor-hours. Data on direct labor-hours for last year follow: For the year just ended, the company budgeted its variable maintenance costs at $210,000 for the year. Actual variable maintenance costs for the year totaled $255,000.How much (if any) of the $255,000 in variable maintenance cost should not be charged to the Fabrication and Assembly Departments?

A) $0
B) $15,000
C) $45,000
D) $60,000

E) None of the above
F) A) and C)

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Question 123

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The following data are for the Akron Division of Consolidated Rubber, Incorporated: For the past year, the turnover used in return on investment calculations was:

The Downstate Block Company has a trucking department that delivers crushed stone from the company's quarry to its two cement block production facilities-the West Plant and the East Plant. Budgeted costs for the trucking department are $740,000 per year in fixed costs and $0.90 per ton variable cost. Last year, 79,000 tons of crushed stone were budgeted to be delivered to the West Plant and 94,000 tons of crushed stone to the East Plant. During the year, the trucking department actually delivered 78,000 tons of crushed stone to the West Plant and 96,000 tons to the East Plant. Its actual costs for the year were $85,000 variable and $748,000 fixed. The level of budgeted fixed costs is determined by peak-period requirements. The West Plant requires 40% of the peak-period capacity and the East Plant requires 60%. The company allocates fixed and variable costs separately.How much fixed trucking department cost should be charged to the West Plant at the end of the year?

Meers Products, Incorporated, has a Detector Division that manufactures and sells a number of products, including a standard detector that could be used by another division in the company, the Commercial Security Division, in one of its products. Data concerning that detector appear below: The Commercial Security Division is currently purchasing 7,000 of these detectors per year from an overseas supplier at a cost of $93 per detector. Assume that the Valve Division is selling all of the valves it can produce to outside customers. From the standpoint of the Valve Division, what is the lost contribution margin if the valves are transferred internally rather than sold to outside customers?

Serie Incorporated reported the following results from last year's operations: At the beginning of this year, the company has a $2,100,000 investment opportunity with the following characteristics: If the company pursues the investment opportunity and otherwise performs the same as last year, the combined margin for the entire company will be closest to:

Division A makes a part with the following characteristics: Division B, another division of the same company, would like to purchase16,100 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $19 each.Suppose that Division A is operating at capacity and can sell all of its output to outside customers at itsusual selling price. If Division A agrees to sell the parts to Division B at $19 per unit, the company as a whole will be:

Haney Fabrication is a division of a major corporation. Last year the division had total sales of $21,560,000, net operating income of $1,897,280, and average operating assets of $7,000,000. The company's minimum required rate of return is 16%.Required:What is the division's return on investment (ROI)?

Minar Incorporated reported the following results from last year's operations: At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics: If the company pursues the investment opportunity and otherwise performs the same as last year, the combined turnover for the entire company will be closest to:

Division A makes a part with the following characteristics: Division B, another division of the same company, would like to purchase 16,100 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $19 each.Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into sales to outside customers. If Division A refuses to accept the $19 price internally and Division B continues to buy from the outside supplier, the company as a whole will be:

Dacker Products is a division of a major corporation. The following data are for the most recent year of operations: The division's turnover used to compute return on investment is closest to:

BR Company has a contribution margin of 40%. Sales are $312,500, net operating income is $25,000, and average operating assets are $200,000. What is the company's return on investment (ROI) ?

Division E of Harveq Company has the capacity for making 6,000 motors per month and regularly sells 5,400 motors each month to outside customers at a contribution margin of $54 per motor. The variable cost per motor is $41. Division F of Harveq Company would like to obtain 900 motors each month from Division E. What should be the lowest acceptable transfer price from the perspective of Division E?

Fregozo Products, Incorporated, has a Connector Division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the Transmission Division, in one of its products. Data concerning that connector appear below: The Transmission Division is currently purchasing 8,000 of these connectors per year from an overseas supplier at a cost of $45 per connector.Assume that the Connector Division has enough idle capacity to handle all of the Transmission Division's needs. What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division?

The Consumer Products Division of Goich Corporation had average operating assets of $1,000,000 and net operating income of $91,700 in May. The minimum required rate of return for performance evaluation purposes is 9%.What was the Consumer Products Division's residual income in May?

The Consumer Products Division of Goich Corporation had average operating assets of $800,000 and net operating income of $81,300 in May. The minimum required rate of return for performance evaluation purposes is 10%.What was the Consumer Products Division's minimum required return in May?

Ghia Manufacturing Corporation charges its Maintenance Department's service costs to two operating departments, Fabrication and Assembly. Charges are made on the basis of machine-hours. Information pertaining to machine-hours for the year follows: The following costs pertain to the Maintenance Department: For performance evaluation purposes, how much of the Maintenance Department's fixed cost should be charged to the Assembly Department at year-end?

For performance evaluation purposes, variable service department costs should be charged to operating departments in predetermined, lump-sum amounts.

Division Y has asked Division X of the same company to supply it with 8,800 units of part L763 this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $52 per unit. Division X has the capacity to produce 35,200 units of part L763 per year. Division X expects to sell 31,680 units of part L763 to outside customers this year at a price of $56.80 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X produces part L763 at a variable cost of $44 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y.Required:a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 8,800 parts this year from Division X to Division Y? (Round your final answers to 2 decimal places.)b. Is it in the best interests of the overall company for this transfer to take place?

Babak Industries is a division of a major corporation. Last year the division had total sales of $19,560,000, net operating income of $1,877,760, and average operating assets of $6,000,000.The division's turnover is closest to: