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Exam 24: Performance Measurement and Responsibility Accounting

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Question 31

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The concepts of direct expenses and uncontrollable costs are essentially the same; also, indirect expenses and controllable costs are essentially the same.

A) True
B) False

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Question 32

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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: $\begin{array}{lll}\text { Ottice Expenses } & \text { Total } & \text { Allocation Basis } \\\text { Salaries } & \$ 30,000 & \text { Number of employees } \\\text { Depreciation } & 20,000 & \text { Cost of goods sold } \\\text { Advertising } & 40,000 & \text { Net sales }\end{array}$ $\begin{array}{lrrrr}\text {Item}&\text {Drilling}&\text {Grinding}&\text {Total}\\\text { Number of emplovees } & 1,000 & 1,500 & 2,500 \\\text { Net sales } & \$ 325,000 & \$ 475,000 & \$ 800,000 \\\text { Cost of goods sold } & \$ 75,000 & \$ 125,000 & \$ 200,000\end{array}$ - The amount of depreciation that should be allocated to Drilling for the current period is:

A) $12,500.
B) $ 7,500.
C) $40,000.
D) $25,000.
E) $20,000.

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

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Question 33

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Regal Furniture Company allocates its indirect salaries of $22,500 on the basis of sales. Determine the indirect salaries allocated to Departments 1 and 2 using the following information. $\begin{array} { l | l | l | l | } & \text { Dept. 1 } & \text { Dept. 2 } & \text { Combined } \\\hline \text { Revenues from sales......... } & \$ 182,000 & \$ 78,000 & \$ 260,000 \\\hline \text { Direct Salaries ................. } & 42,250 & 22,750 & 65,000\end{array}$ Salaries allocated to Dept. 1 ________ Salaries allocated to Dept. 2 ________

A responsibility accounting performance report usually compares actual costs to budgeted costs amounts by management level.

A system of performance measures, including nonfinancial measures, used to assess company and division manager performance is:

Which of the following represents the correct formula for calculating cycle time for a manufacturer?

Cost center managers are evaluated on their success in controlling costs compared to budgeted costs.

Wren Pork Company uses the value basis of allocating joint costs in its production of pork products. Relevant information for the current period follows: $\begin{array} { l r r } \text { Product } & \text { Pounds } & \text { Price/Ib. } \\\text { Loin chops } & 3,000 & \$ 5.00 \\\text { Ground } & 10,000 & 2.00 \\\text { Ribs } & 4,000 & 4.75 \\\text { Bacon } & 6,000 & 3.50\end{array}$ The total joint cost for the current period was $43,000. How much of this cost should Wren Pork allocate to Loin chops?

Decentralization refers to companies that have multiple locations.

A_____________ generates revenues and incurs costs.

The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be:

Return on investment is a useful measure to evaluate the performance of a cost center manager.

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? $\begin{array} { l c r l } \text { Department } & \text { Students } & & \text { Classrooms } \\\text { Electrical } & 120 & 10,000 & \text { sq. ft. } \\\text { Welding } & 70 & 12,000 & \text { sq. ft. } \\\text { Accounting } & 50 & 8,000 & \text { sq. ft. } \\\text { Carpentry } & 40 & 6,000 & \text { sq. ft. } \\\text { Total } & 280 & 36,000 & \text { sq. ft. } \\\hline\end{array}$

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

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

Cycle time is calculated by process time plus inspection time plus move time plus ________.

A report that accumulates the actual expenses that a manager is responsible for and their budgeted amounts is a:

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

Part 7B costs the Midwest Division of Frackle Corporation $30 to make, of which $21 is variable. Midwest Division sells Part 7B to other companies for $47. The Northern Division of Frackle Corporation can use Part 7B in one of its products. The Midwest Division has enough idle capacity to produce all of the units of Part 7B that the Northern Division would require. What is the lowest transfer price at which the Midwest Division should be willing to sell Part 7B to the Northern Division?

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