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Exam 24: Performance Measurement and Responsibility Accounting

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Question 41

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Departmental information is usually distributed to the public as part of the company's annual report and footnotes.

A) True
B) False

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Question 42

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Profit margin for an investment center measures:

A) Investment center income generated from its invested assets.
B) Departmental contribution to overhead.
C) How efficiently an investment center generates sales from its invested assets.
D) Investment center income compared to target investment center income.
E) Investment center income earned per dollar of sales.

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

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Question 43

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When the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred, then the lowest acceptable transfer price as far as the selling division is concerned is:

The ________ is a report of the amount of sales less direct expenses for a department.

Costs that the manager does not have the power to determine or at least significantly affect are:

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 $ 80,000 Maintenance $ 100,000 - 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:

A_____________ accumulates and reports costs and expenses that a manager is responsible for, including budgeted amounts.

A department's direct expenses are usually considered uncontrollable costs.

Data pertaining to a company's joint production for the current period follows: $\begin{array}{llr}& \text { L } & \text { M }\\ \text { Quantities produced } &200 Ibs&150Ibs\\ \text { Market value at split-off point } &\$8/Ib&\$16/Ib\end{array}$ Compute the cost to be allocated to Product L for this period's $660 of joint costs if the value basis is used. (Do not round your intermediate calculations.)

________ are costs incurred to produce or purchase two or more products at the same time.

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:

Pepper Department store allocates its service department expenses to its various operating (sales) departments. The following data is available for its service departments: $\begin{array}{l}\begin{array} { l l l } \text { Expense } & \text { Basis for allocation } & \text { Amount } \\\text { Rent } & \text { Square feet of floor space } & \$ 24,000 \\\text { Advertising } & \text { Amount of dollar sales } & \$ 30,000 \\\text { Administrative } & \text { Number of employees } & \$ 45,000\end{array}\\\\\text { The following information is available for its three operating (sales) departments: }\\\\\begin{array} { l c c r c } \text { Department } & \begin{array} { c } \text { Square } \\\text { Feet }\end{array} & \text { Dollar Sales } & \begin{array} { c } \text { Number of } \\\text { employees }\end{array} \\\text { A } & 3,000 & \$280,000 & 6 \\\text { B } & 3,400 & \$300,000 & 8 \\\text { C } & 3,600 & \$420,000 & 10 \\\text { Totals } & \underline { 10,000 } &\$1,000,000 &24 \\\hline\end{array}\end{array}$ - What is the total expense allocated to Department B?

Advertising expense can be reasonably allocated to departments on the basis of each department's proportion of sales.

A department can never be considered to be a profit center.

Marian Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year: $\begin{array} { l r r } & \text { Black Division } & \text { Navy Division } \\\text { Sales (net) } & \$ 200,000 & \$ 400,000 \\\text { Salary expents } & 28,000 & 48,000 \\\text { Cost af goods sold } & 100,000 & 159,000\end{array}$ 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.

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 Grinding for the current period is:

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: $\begin{array}{ccccc}\text{Dept.}&\text {Sales}&\text {Cost of Goods Sold}&\text {Direct Expenses}&\text {Indirect Expenses}\\1&\$ 1,000,000 &\$ 700,000 & \$ 100,000 &\$80,000 \\2 & 400,000 & 150,000 & 40,000 & 100,000 \\ 3 & 700,000 & 300,000 & 150,000 & 20,000 \\\end{array}$

If a company reports profit margin of 31.6% and investment turnover of 1.30 for one of its investment centers, the return on investment must be:

What is the cycle time for a manufacturer? What does it reveal about the manufacturing process?

A responsibility accounting performance report displays: