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Exam 22: Performance Measurement and Responsibility Accounting

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Question 31

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In a responsibility accounting system:

A) Managers are responsible for their departments' controllable costs.
B) Each accounting report contains all items allocated to a responsibility center.
C) Organized and clear lines of authority and responsibility are only incidental.
D) All managers at a given level have equal authority and responsibility.
E) Outputs of the departments are not part of the evaluation process.

F) A) and B)
G) C) and D)

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Question 32

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A firm produces and sells two products,Plus and Max.The following information is available relating to setup costs (a part of factory overhead) : -Using number of setups as the activity base,the amount of setup cost allocated to each unit of product for Plus and Max,respectively is:

A) $21.60; $.54.
B) $54.00; $27.00.
C) $60.00; $60.00.
D) $108.00; $2.70.
E) $200.00; $16,000.00

F) B) and E)
G) A) and E)

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Question 33

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How do companies decide what allocation bases to use to allocate indirect costs to departments?

Investment center managers are usually evaluated using performance measures

Investment center managers are typically evaluated using performance measures that combine income and assets.

Marian Corporation has two separate divisions that operate as profit centers.The following information is available for the most recent year: The Black Division occupies 20,000 square feet in the plant.The Navy 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 Black and Navy Divisions,respectively.

The Menswear Department of Major's Department Store had sales of $188,000,cost of goods sold of $132,500,indirect expenses of $13,250,and direct expenses of $27,500 for the current period.The Menswear Department's contribution to overhead as a percent of sales is:

The Dark Chocolate Division of Yummy Snacks,Inc.had the following operating results last year: Assume that the Dark Chocolate Division is currently operating at its capacity of 150,000 pounds of chocolate.Also assume again that the Peanut Butter Division wants to purchase an additional 20,000 pounds of chocolate from Dark Chocolate.Under these conditions,what amount per pound of chocolate would Dark Chocolate have to charge Peanut Butter in order to maintain its current profit?

Canfield Technical School allocates administrative costs to its respective departments based on the number of students enrolled,while maintenance and utilities are allocated per square feet of the classrooms.Based on the information below, -What is the total amount of maintenance cost to the Carpentry Department (rounded to the nearest dollar) if administrative costs for the school were $50,000,maintenance fees were $12,000,and utilities were $6,000?

Carter Company reported the following financial numbers for one of its divisions for the year; average total assets of $4,100,000; sales of $4,525,000; cost of goods sold of $2,550,000; and operating expenses of $1,372,000.Compute the division's return on investment:

A company has two departments,Y and Z that incur delivery expenses.An analysis of the total delivery expense of $9,000 indicates that Dept.Y had a direct expense of $1,000 for deliveries and Dept.Z had no direct expense.The indirect expenses are $8,000.The analysis also indicates that 40% of regular delivery requests originate in Dept.Y and 60% originate in Dept.Z.Departmental delivery expenses for Dept.Y and Dept.Z,respectively,are:

A ________ provides information for managers to use to evaluate the profitability or cost effectiveness of each department's activities.

Match the appropriate definition with the following terms:

Since service departments do not generate revenues,it is unnecessary to accumulate and allocate their costs.

A ________ helps control costs and expenses and evaluates managers' performance by assigning costs and expenses to the managers responsible for controlling them.

Ready Company has two operating (production) departments: Assembly and Painting.Assembly has 150 employees and occupies 44,000 square feet; Painting has 100 employees and occupies 36,000 square feet.Indirect factory expenses for the current period are as follows: Administration is allocated based on workers in each department; maintenance is allocated based on square footage. -The amount of maintenance expenses that should be allocated to the Assembly Department for the current period is:

A company rents a building with a total of 50,000 square feet,which are evenly divided between two floors.The company allocates the rent for space on the first floor at twice the rate of space on the second floor.The total monthly rent for the building is $30,000.How much of the monthly rental expense should be allocated to a department that occupies 10,000 square feet on the first floor?

Marks Corporation has two operating departments,Drilling and Grinding,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 salaries that should be allocated to Grinding for the current period is:

A retail store has three departments,S,T,and U,and does general advertising that benefits all departments.Advertising expense totaled $50,000 for the year,and departmental sales were as follows.Allocate advertising expense to Department T based on departmental sales.

The following is a partially completed lower section of a departmental expense allocation spreadsheet for Brickland.It reports the total amounts of direct and indirect expenses for the four departments.Purchasing department expenses are allocated to the operating departments on the basis of purchase orders.Maintenance department expenses are allocated based on square footage. Required: Compute the amount of Purchasing department expense to be allocated to Assembly.