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Exam 22: Performance Measurement and Responsibility Accounting

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Question 71

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What is an investment center and how is its performance evaluated?

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An investment center generates revenues ...

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Question 72

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A lumber mill bought a shipment of logs for $40,000.When cut,the logs produced a million board feet of lumber in the following grades.Compute the cost to be allocated to Type 1 and Type 2 lumber,respectively,if the value basis is used. Type 1-400,000 bd.ft.priced to sell at $0.12 per bd.ft. Type 2- 400,000 bd.ft.priced to sell at $0.06 per bd.ft. Type 3- 200,000 bd.ft.priced to sell at $0.04 per bd.ft.

A) $16,000; $16,000.
B) $13,333; $4,444.
C) $40,000; $24,000.
D) $24,000; $12,000.
E) $24,000; $8,000.

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

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Question 73

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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.Compute the amount of Purchasing department expense to be allocated to Fabrication.

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

An accounting system that accumulates and reports costs incurred by each service department for management to evaluate the performance of a department is a:

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 allocated to the Welding 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?

Decentralization refers to companies that have multiple locations.

Regardless of the system used in departmental cost analysis:

An expense that is readily traced to a department because it is incurred for that department's sole benefit is a(n) :

Which of the following is not true regarding a responsibility accounting system?

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

Holliday,Inc.,operates a retail store with two departments,A and B.Its departmental income statement for the current year follows: Holliday allocates building depreciation,maintenance,and utilities on the basis of square footage.Office expenses are allocated on the basis of sales. Management is considering an expansion to a three-department operation.The proposed Department C would generate $120,000 in additional sales and have a 17.5% contribution to overhead.The company owns its building.Opening Department C would redistribute the square footage to each department as follows: A,19,040; B,21,760 sq.ft.; C,13,600.Increases in indirect expenses would include: maintenance,$500; utilities,$3,800; and office expenses,$1,200. Complete the following departmental income statements,showing projected results of operations for the three sales departments.(Round amounts to the nearest whole dollar.)

Joint costs can be allocated either using a physical basis or a value basis.

Ultimo Co.operates three production departments as profit centers.The following information is available for its most recent year.Department 2's contribution to overhead in dollars is:

The Linens Department of the Krafton Department Store had sales of $282,000,cost of goods sold of $173,500,indirect expenses of $19,875,and direct expenses of $41,250 for the current period.What is the Linens Department's contribution to overhead as a percent of sales?

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 total amount of indirect factory expenses that should be allocated to the Painting Department for the current period is:

Division M makes a part that it sells to customers outside of the company.Data concerning this part appear below: Division O of the same company would like to use the part manufactured by Division M in one of its products.Division O currently purchases a similar part made by an outside company for $70 per unit and would substitute the part made by Division M.Division O requires 5,000 units of the part each period.Division M can sell every unit it produces on the outside market.What should be the lowest acceptable transfer price?

What is the cash conversion cycle and what does it indicate about the company?

A department that incurs costs without directly generating revenues is a:

A ________ generates revenues and incurs costs.