Question 1

Jamesway Corporation has two separate divisions that operate as profit centers.The following information is available for the most recent year:
  White Division  Grey Division  sales (net)  $200,000$400,000 salary expense 28,00048,000 Cost of goods sold ...... 100,000159,000\begin{array} { l r r r } & 	ext { White Division } & & 	ext { Grey Division } \	ext { sales (net)  } & \$ 200,000 & & \$ 400,000 \	ext { salary expense } & 28,000 & & 48,000 \	ext { Cost of goods sold ...... } & 100,000 & & 159,000\end{array} sales (net)   salary expense  Cost of goods sold ...... ​ White Division $200,00028,000100,000​​ Grey Division $400,00048,000159,000​  The White Division occupies 20,000 square feet in the plant.The Grey Division occupies 30,000 square feet.Rent is an indirect expense and is allocated based on square footage.Rent expense for the year was $50,000.Compute departmental income for the White and Grey Divisions,respectively.

Accepted Answer

A)  $52,000; $163,000.
B)  $172,000; $352,000.
C)  $72,000; $163,000.
D)  $72,000; $193,000.
E)  $100,000; $241,000. F) None of the above
G) A) and D)

Question 2

A selling department is usually evaluated as a profit center.

Accepted Answer

A) True 
 B)False

Question 3

What is the main difference between a cost center and a profit center?

Accepted Answer

A cost center incurs costs but does not directly generate revenues.A profit center incurs costs and also directly generates revenues.This difference implies that managers of two types of these centers must be evaluated differently.

Question 4

Match between columns
                        Premises: Departmental contribution to overhead
Profit center
Cost center
Investment center
Performance report
Responsibility accounting system

Accepted Answer

The Answer of A department whose manager is judged on is...

Question 5

A company pays $15,000 per period to rent a small building that has 10,000 square feet of space.This cost is allocated to the company's three departments on the basis of the amount and value of the space occupied by each.Department One occupies 2,000 square feet of ground-floor space,Department Two occupies 3,000 square feet of ground-floor space,and Department Three occupies 5,000 square feet of second-floor space.If rents for comparable floor space in the neighborhood average $2.20 per square foot for ground-floor space and $1.10 per square foot for second-floor space and the rent is allocated based on the total value of the space,Department One should be charged rent expense for the period of:

Accepted Answer

A)  $4,400.
B)  $4,000.
C)  $3,000.
D)  $2,200.
E)  $2,000.F) B) and D)
G) A) and B)

Question 6

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

Accepted Answer

A)  Fixed expenses.
B)  Indirect expenses.
C)  Direct expenses.
D)  Uncontrollable expenses.
E)  Variable expenses.F) A) and B)
G) A) and E) B

Question 7

A measure used to evaluate the manager of an investment center is return on total costs for the investment center.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  $29,375.
B)  $30,462.
C)  $30,500.
D)  $30,775.
E)  $32,160.F) A) and B)
G) C) and D)

Question 9

Scottie is the manager of an investment center within Hamilton Company.Using the information below,calculate (a)return on total assets and (b)investment center residual income.
Net Income…………………… $315,900
Average Invested Assets……..$2,100,000
Target Net Income…………… 6% of division assets

Accepted Answer

(a)Investment Center Return on Total Ass...

Question 10

Dresden,Inc.has four departments.Information about these departments is listed below.If allocated maintenance cost is based on floor space occupied by each,compute the amount of maintenance cost allocated to the Cutting Department.

Accepted Answer

A)  $ 2,769.
B)  $ 3,000.
C)  $ 3,724.
D)  $ 6,000.
E)  $18,000.F) B) and D)
G) D) and E)

Question 11

A ______________________ incurs costs without directly generating revenues.

Accepted Answer

The answer of A ______________________ incurs costs without directly generating...

Question 12

What is the purpose of a responsibility accounting system?

Accepted Answer

A responsibility accounting sy...

Question 13

An expense that does not require allocation between departments is a(n) :

Accepted Answer

A)  Common expense.
B)  Indirect expense.
C)  Direct expense.
D)  Administrative expense.
E)  All of the options are correct.F) A) and C)
G) C) and E) C

Question 14

Departmental contribution to overhead is calculated as revenues of the department less:

Accepted Answer

A)  Controllable costs.
B)  Product and period costs.
C)  Direct expenses.
D)  Direct and indirect costs.
E)  Joint costs.F) B) and E)
G) C) and D)

Question 15

The most useful evaluation of a manager's cost performance is based on:

Accepted Answer

A)  Controllable costs.
B)  Contribution percentages.
C)  Departmental contributions to overhead.
D)  Uncontrollable expenses.
E)  Direct costs.F) A) and D)
G) A) and C)

Question 16

For an investment center,the hurdle rate is:

Accepted Answer

A)  The cost of obtaining financing.
B)  The desired return on investments.
C)  The difference between the projected rate and the earned rate.
D)  Not evaluated in determining the performance of an investment center.
E)  Not important to management.F) B) and E)
G) C) and D)

Question 17

The Milk Chocolate Division of Mmmm Foods,Inc.had the following operating results last year:  Milk Chocolate expects identical operating results this year.The Milk Chocolate Division has the ability to produce and sell 200,000 pounds of chocolate annually.Assume that the Peanut Butter Division of Mmmm Foods wants to purchase an additional 20,000 pounds of chocolate from the Milk Chocolate Division.Milk Chocolate will be able to increase its profit by accepting any transfer price above:

Accepted Answer

A)  $0.40 per pound
B)  $0.08 per pound
C)  $0.15 per pound
D)  $0.25 per pound
E)  $0.10 per poundF) None of the above
G) C) and E)

Question 18

Yoho Company reported the following financial numbers for one of its divisions for the year; average total assets of $5,800,000; sales of $5,375,000; cost of goods sold of $3,225,000; and operating expenses of $1,147,000.Assume a target income of 15% of average invested assets.Compute residual income for the division:

Accepted Answer

A)  $150,450.
B)  $196,750.
C)  $150,500.
D)  $133,000.
E)  $100,300.F) C) and E)
G) A) and D)

Question 19

Baker Corporation has two operating departments,Machining and Assembly,and an office.The three categories of office expenses are allocated to the two departments using different allocation bases.The following information is available for the current period:
 The amount of the total office expenses that should be allocated to Assembly for the current period is:

Accepted Answer

A)  $ 35,750.
B)  $ 45,000.
C)  $ 54,250.
D)  $ 90,000.
E)  $600,000.F) A) and D)
G) None of the above

Question 20

Calculating return on total assets for an investment center is defined by the following formula for an investment center:

Accepted Answer

A)  Contribution margin/Ending assets.
B)  Gross profit/Ending assets.
C)  Net income/Ending assets.
D)  Net income/Average invested assets.
E)  Contribution margin/Average invested assets.F) D) and E)
G) A) and B)

Exam 24: Performance Measurement and Responsibility Accounting

Correct Answer
verified

A selling department is usually evaluated as a profit center.

Correct Answer
verified

What is the main difference between a cost center and a profit center?

Correct Answer
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A cost center incurs costs but does not directly generate revenues.A profit center incurs costs and also directly generates revenues.This difference implies that managers of two types of these centers must be evaluated differently.

Match the appropriate definition a through h with the following terms:

Correct Answer
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Expenses that are not easily associated with a specific department,and which are incurred for the benefit of more than one department,are:

Correct Answer
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B

A measure used to evaluate the manager of an investment center is return on total costs for the investment center.

Correct Answer
verified

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

Correct Answer
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Correct Answer
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(a)Investment Center Return on Total Ass...
View Answer

Dresden,Inc.has four departments.Information about these departments is listed below.If allocated maintenance cost is based on floor space occupied by each,compute the amount of maintenance cost allocated to the Cutting Department.

Correct Answer
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A ______________________ incurs costs without directly generating revenues.

Correct Answer
verified

What is the purpose of a responsibility accounting system?

Correct Answer
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A responsibility accounting sy...
View Answer

An expense that does not require allocation between departments is a(n) :

Correct Answer
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C

Departmental contribution to overhead is calculated as revenues of the department less:

Correct Answer
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The most useful evaluation of a manager's cost performance is based on:

Correct Answer
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For an investment center,the hurdle rate is:

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Calculating return on total assets for an investment center is defined by the following formula for an investment center:

Correct Answer
verified

Exam 24: Performance Measurement and Responsibility Accounting

Correct AnswerverifiedShow Answer

A selling department is usually evaluated as a profit center.

Correct AnswerverifiedShow Answer

What is the main difference between a cost center and a profit center?

Correct AnswerverifiedA cost center incurs costs but does not directly generate revenues.A profit center incurs costs and also directly generates revenues.This difference implies that managers of two types of these centers must be evaluated differently.

Match the appropriate definition a through h with the following terms:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

A measure used to evaluate the manager of an investment center is return on total costs for the investment center.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answerverified(a)Investment Center Return on Total Ass...View AnswerShow Answer

Dresden,Inc.has four departments.Information about these departments is listed below.If allocated maintenance cost is based on floor space occupied by each,compute the amount of maintenance cost allocated to the Cutting Department.

Correct AnswerverifiedShow Answer

A ______________________ incurs costs without directly generating revenues.

Correct AnswerverifiedShow Answer

What is the purpose of a responsibility accounting system?

Correct AnswerverifiedA responsibility accounting sy...View AnswerShow Answer

An expense that does not require allocation between departments is a(n) :

Correct AnswerverifiedC

Departmental contribution to overhead is calculated as revenues of the department less:

Correct AnswerverifiedShow Answer

The most useful evaluation of a manager's cost performance is based on:

Correct AnswerverifiedShow Answer

For an investment center,the hurdle rate is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Calculating return on total assets for an investment center is defined by the following formula for an investment center:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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A cost center incurs costs but does not directly generate revenues.A profit center incurs costs and also directly generates revenues.This difference implies that managers of two types of these centers must be evaluated differently.

Correct Answer
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Correct Answer
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B

Correct Answer
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(a)Investment Center Return on Total Ass...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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A responsibility accounting sy...
View Answer

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C

Correct Answer
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Correct Answer
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Correct Answer
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