Chapter 24 – Performance Measurement | Test Bank with Answers 24e

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Fundamental Accounting Principles, 24e (Wild)

Chapter 24 Performance Measurement and Responsibility Accounting

1) Evaluation of the performance of an investment center involves only financial measures.

2) Profit center managers are evaluated on their ability to generate revenues in excess of costs.

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

4) Investment center is another name for profit center.

5) Investment center managers are evaluated on their use of investment center assets to generate income.

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

7) A cost center does not directly generate revenues.

8) A selling department is usually evaluated as a profit center.

9) Product lines are often evaluated as profit centers.

10) A profit center generates revenue, incurs costs, and has the authority to make significant investing decisions.

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

12) Indirect expenses are allocated to departments based upon the benefits received by each department.

13) Indirect expenses are incurred for the joint benefit of more than one department; they cannot be readily traced to only one department.

14) Direct expenses are incurred for the joint benefit of more than one department; they cannot be readily traced to only one department.

15) Direct expenses require allocation across departments because they cannot be readily traced to one department.

16) Departmental salary expenses are direct expenses of that department.

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

18) The number of hours that a department uses equipment and machinery is a reasonable basis for allocating depreciation.

19) Direct expenses are costs readily traced to a department because they are incurred for that department's sole benefit.

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

21) No standard rule identifies the best basis of allocating expenses across departments, so it is impossible to allocate costs in a manner that will be perceived as fair.

22) No standard rule identifies the best basis of allocating expenses across departments.

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

24) An example of a controllable cost is equipment depreciation expense.

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

26) Joint costs are costs incurred in producing or purchasing a single product.

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

28) A joint cost of producing two products can be allocated between those products on the basis of the relative physical quantities of each product produced.

29) In producing oat bran, the joint cost of milling the oats into bran, oatmeal, and animal feed is considered a direct cost to the oat bran, because the oat bran cannot be produced without incurring the joint cost.

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

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

32) Measures used to evaluate the manager of an investment center include investment turnover and profit margin.

33) A useful measure used to evaluate the performance of an investment center is investment center residual income.

34) An example of a service department is the human resources department.

35) Allocating costs to service departments involves accumulating revenues and direct expenses, allocating indirect expenses, and preparing the department income statement.

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

37) The process of preparing departmental income statements begins with allocating service department expenses.

38) Departmental income statements are prepared for service departments but not operating departments.

39) Departmental income statements are prepared for operating departments (profit centers) but not service departments (cost centers).

40) Departmental contribution to overhead is the amount of sales for that department, less its direct expenses.

41) Departmental contribution to overhead is the same as gross profit generated by that department.

42) Decentralization refers to companies that have multiple locations.

43) In a decentralized organization, decisions are made by managers throughout the company rather than by a few top executives.

44) A cost center is a unit of a business that incurs costs without directly generating revenues. All of the following are considered cost centers except:

A) Accounting department at Warner Bros.

B) Purchasing department at Best Buy.

C) Research department at Microsoft.

D) Advertising department at Hertz.

E) Juice division at Coca Cola.

45) A unit of a business that generates revenues and incurs costs is called a:

A) Performance center.

B) Profit center.

C) Cost center.

D) Responsibility center.

E) Expense center.

46) The type of department that generates revenues and incurs costs, and its manager is responsible for the investments made in operating assets is called a(n):

A) Profit center

B) Cost center

C) Service department

D) Investment center

E) Responsibility center

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

A) Departmental accounting system.

B) Cost accounting system.

C) Service accounting system.

D) Revenue accounting system.

E) Standard accounting system.

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

A) Service center.

B) Production center.

C) Profit center.

D) Cost center.

E) Performance center.

49) The difference between a profit center and an investment center is

A) An investment center incurs costs, but does not directly generate revenues.

B) An investment center incurs no costs but does generate revenues.

C) An investment center is responsible for investments made in operating assets.

D) An investment center provides services to profit centers.

E) There is no difference; investment center and profit center are synonymous.

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

A) Common expense.

B) Indirect expense.

C) Direct expense.

D) Administrative expense.

E) Recurring expense.

51) Expenses that are easily traced and assigned to a specific department because they are incurred for the sole benefit of that department are called:

A) Direct expenses.

B) Indirect expenses.

C) Controllable expenses.

D) Uncontrollable expenses.

E) Fixed expenses.

52) Expenses that are not easily traced to a specific department, and which are incurred for the joint benefit of more than one department, are:

A) Fixed expenses.

B) Indirect expenses.

C) Direct expenses.

D) Uncontrollable expenses.

E) Variable expenses.

53) Regardless of the system used in departmental cost analysis:

A) Direct costs are allocated, indirect costs are not.

B) Indirect costs are allocated, direct costs are not.

C) Both direct and indirect costs are allocated.

D) Neither direct nor indirect costs are allocated.

E) Total departmental costs will always be the same.

54) The salaries of employees who spend all their time working in one department are:

A) Variable expenses.

B) Indirect expenses.

C) Direct expenses.

D) Responsibility expenses.

E) Unavoidable expenses.

55) A challenge in calculating the total costs and expenses of a department is:

A) Determining the gross profit ratio.

B) Assigning direct costs to the department.

C) Allocating indirect expenses to the department.

D) Determining the amount of sales of the department.

E) Determining the direct expenses of the department.

56) 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) $4,500; $4,500.

B) $4,200; $4,800.

C) $5,500; $3,500.

D) $4,800; $4,200.

E) $5,400; $3,600.

57) A company has two departments, Y and Z that incur wage expenses. An analysis of the total wage expense of $19,000 indicates that Dept. Y had a direct wage expense of $2,000 and Dept. Z had a direct wage expense of $3,500. The remaining expenses are indirect and analysis indicates they should be allocated evenly between the two departments. Departmental wage expenses for Dept. Y and Dept. Z, respectively, are:

A) $8,750; $10,250.

B) $10,250; $8,750.

C) $9,500; $9,500.

D) $2,000; $3,500.

E) $6,750; $6,750.

58) Which of the following is not a step in creating operating department income statements?

A) Prepare the departmental income statements.

B) Accumulate revenues and direct expenses by department.

C) Allocate indirect expenses across departments.

D) Allocate service department expenses to operating departments.

E) Eliminate the uncontrollable costs for each department.

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

A) Floor space of each department.

B) Relative number of items each department had on sale.

C) Number of customers to enter each department.

D) An equal amount of cost for each department.

E) Proportion of sales of each department.

60) Costs that the manager has the power to determine or significantly affect are called:

A) Uncontrollable costs.

B) Controllable costs.

C) Joint costs.

D) Direct costs.

E) Indirect costs.

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

A) Segmental accounting report.

B) Managerial cost report.

C) Controllable expense report.

D) Departmental accounting report.

E) Responsibility accounting performance report.

62) An accounting system that is set up to control costs and evaluate managers' performance by assigning costs to the managers responsible for controlling them is called a(n):

A) Cost accounting system.

B) Managerial accounting system.

C) Responsibility accounting system.

D) Financial accounting system.

E) Activity-based accounting system.

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

A) Variable costs.

B) Uncontrollable costs.

C) Indirect costs.

D) Direct costs.

E) Joint costs.

64) All of the following are associated with reporting controllable costs except:

A) At lower levels, management have fewer controllable costs.

B) Responsibility and control broaden for higher-level managers.

C) Lower-level managers are responsible for detailed costs and so receive detailed reports.

D) Uncontrollable costs are allocated equally.

E) Higher-level managers receive summarized reports for focusing on broader issues.

65) Within an organizational structure, the person most likely to be evaluated in terms of controllable costs would be:

A) A payroll clerk.

B) A cost center manager.

C) A production line worker.

D) A maintenance worker.

E) A sales representative.

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

A) Controllable costs.

B) Contribution percentages.

C) Departmental contributions to overhead.

D) Uncontrollable expenses.

E) Direct costs.

67) 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.

68) Responsibility accounting performance reports:

A) Become more detailed at higher levels of management.

B) Are usually summarized at higher levels of management.

C) Are equally detailed at all levels of management.

D) Are useful in any format.

E) Are irrelevant at the highest level of management.

69) A responsibility accounting performance report displays:

A) Only actual costs.

B) Only budgeted costs.

C) Both actual costs and budgeted costs.

D) Only direct costs.

E) Only indirect costs.

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

A) It is designed to measure the performance of managers in terms of controllable costs.

B) It assigns responsibility for costs to the appropriate managerial level that controls those costs.

C) It should not hold a manager responsible for costs over which the manager has no influence.

D) It can be applied at any level of an organization.

E) It is only relevant in manufacturing companies.

71) A cost incurred to produce or purchase two or more products at the same time is a(n):

A) Product cost.

B) Incremental cost.

C) Differential cost.

D) Joint cost.

E) Fixed cost.

72) In regard to joint cost allocation, the "split-off point" is:

A) A physical basis method to allocate costs based on ratio of some physical characteristic.

B) The difference between the actual and market value of joint costs.

C) The point at which some products are sold and some remain in inventory.

D) The point at which separate products can be identified.

E) Not acceptable when using the value basis for allocating joint costs.

73) Allocating joint costs to products using a value basis method is based on their relative:

A) Sales values.

B) Direct costs.

C) Gross margins.

D) Total costs.

E) Variable costs.

74) Differential Chemical produced 10,000 gallons of Preon and 20,000 gallons of Paron. Joint costs incurred in producing the two products totaled $7,500. At the split-off point, Preon has a market value of $6.00 per gallon and Paron $2.00 per gallon. Compute the portion of the joint costs to be allocated to Preon if the value basis is used.

A) $2,500.

B) $3,000.

C) $4,500.

D) $5,625.

E) $1,500.

75) Data pertaining to a company's joint production for the current period follows:

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.)

A) $264.

B) $396.

C) $330.

D) $1,364.

E) $796.

76) Data pertaining to a company's joint production for the current period follows:

Compute the cost to be allocated to Product M for this period's $660 of joint costs if the value basis is used.

A) $264.

B) $396.

C) $330.

D) $1,364.

E) $796.

77) 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.

78) A lumber mill paid $70,000 for logs that produced 200,000 board feet of lumber in 3 different grades and amounts as follows:

Compute the portion of the $70,000 joint cost to be allocated to No. 2 Common if the value basis is used.

A) $0.

B) $17,500.

C) $23,333.

D) $35,000.

E) $70,000.

79) A granary allocates the cost of unprocessed wheat to the production of feed, flour, and starch. For the current period, unprocessed wheat was purchased for $120,000, and the following quantities of product and sales revenues were produced.

How much of the $120,000 cost should be allocated to feed if the value basis is used?

A) $12,250.

B) $42,000.

C) $45,000.

D) $70,000.

E) $100,000.

80) A granary allocates the cost of unprocessed wheat to the production of feed, flour, and starch. For the current period, unprocessed wheat was purchased for $120,000, and the following quantities of product and sales revenues were produced.

How much of the $120,000 cost should be allocated to flour if the value basis is used?

A) $24,500.

B) $84,000.

C) $66,000.

D) $70,000.

E) $200,000.

81) Wren Pork Company uses the value basis of allocating joint costs in its production of pork products. Relevant information for the current period follows:

The total joint cost for the current period was $43,000. How much of this cost should Wren Pork allocate to Loin chops?

A) $0.

B) $5,909.

C) $8,600.

D) $10,750.

E) $43,000.

82) Calculating return on investment for an investment center is defined by the following formula:

A) Contribution margin/Ending assets.

B) Gross profit/Ending assets.

C) Net income/Ending assets.

D) Income/Average invested assets.

E) Contribution margin/Average invested assets.

83) Investment center managers are usually evaluated using performance measures

A) that combine income and assets.

B) that combine income and capital.

C) based on assets only.

D) based on income only.

E) that combine assets and capital.

84) Two investment centers at Marshman Corporation have the following current-year income and asset data:

The return on investment (ROI) for Investment Center A is:

A) 578.3%

B) 24.1%

C) 17.3%

D) 39.2%

E) 19.1%

85) Two investment centers at Marshman Corporation have the following current-year income and asset data:

The return on investment (ROI) for Investment Center B is:

A) 371.4%

B) 26.9%

C) 24.1%

D) 39.2%

E) 21.7%

86) 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.

A) $11,000.

B) $14,000.

C) $16,667.

D) $22,500.

E) $50,000.

87) 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.

A) $500.

B) $4,500.

C) $3,724.

D) $6,000.

E) $4,153.

88) CakeCo, Inc. has three operating departments. Information about these departments is listed below. Maintenance is service department at CakeCo that incurred $12,000 of costs during the period. If allocated maintenance cost is based on floor space occupied by each of the operating departments, compute the amount of maintenance cost allocated to the Baking Department.

A) $400.

B) $1,200.

C) $4,000.

D) $7,500.

E) $6,000.

89) 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 the total office expenses that should be allocated to Grinding for the current period is:

A) $35,750.

B) $45,000.

C) $54,250.

D) $90,000.

E) $600,000.

90) 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) $30,000.

B) $18,000.

C) $15,000.

D) $10,000.

E) $12,500.

91) 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 depreciation that should be allocated to Grinding for the current period is:

A) $20,000.

B) $25,000.

C) $7,500.

D) $12,500.

E) $40,000.

92) 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 the advertising cost that should be allocated to Grinding for the current period is:

A) $16,250.

B) $45,000.

C) $23,750.

D) $325,000.

E) $54,250.

93) 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 the total office expenses that should be allocated to Drilling for the current period is:

A) $35,750.

B) $45,000.

C) $54,250.

D) $90,000.

E) $600,000.

94) 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 Drilling for the current period is:

A) $30,000.

B) $18,000.

C) $15,000.

D) $10,000.

E) $12,000.

95) 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 depreciation that should be allocated to Drilling for the current period is:

A) $20,000.

B) $25,000.

C) $7,500.

D) $12,500.

E) $40,000.

96) 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 the advertising cost that should be allocated to Drilling for the current period is:

A) $16,250.

B) $45,000.

C) $23,750.

D) $325,000.

E) $54,250.

97) In a firm that manufactures clothing, the department that is responsible for actually assembling the garments could best be described as a(n):

A) Service department.

B) Operating or production department.

C) Cost center.

D) Department in which all of the costs incurred are direct expenses.

E) Department in which all of the costs incurred are indirect expenses.

98) 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?

A) $8,000.

B) $5,000.

C) $3,000.

D) $4,000.

E) $2,000.

99) 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 second floor?

A) $8,000.

B) $5,000.

C) $3,000.

D) $4,000.

E) $2,000.

100) 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 of the space occupied by each. Department One occupies 2,000 square feet of floor space, Department Two occupies 3,000 square feet of floor space, and Department Three occupies 5,000 square feet of floor space. If the rent is allocated based on the total square footage of the space, Department One should be charged rent expense for the period of:

A) $4,400.

B) $3,000.

C) $4,000.

D) $2,200.

E) $2,000.

101) 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 Assembly Department for the current period is:

A) $48,000.

B) $55,000.

C) $103,000.

D) $104,000.

E) $110,000.

102) 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 administration expenses that should be allocated to the Assembly Department for the current period is:

A) $48,000.

B) $55,000.

C) $103,000.

D) $104,000.

E) $110,000.

103) 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) $48,000.

B) $ 55,000.

C) $103,000.

D) $104,000.

E) $110,000.

104) 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:

A) $48,000.

B) $55,000.

C) $77,000.

D) $103,000.

E) $110,000.

105) 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 administration expenses that should be allocated to the Painting Department for the current period is:

A) $48,000.

B) $55,000.

C) $103,000.

D) $32,000.

E) $110,000.

106) 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 Painting Department for the current period is:

A) $48,000.

B) $55,000.

C) $103,000.

D) $45,000.

E) $110,000.

107) 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?

A) $0.

B) $17,000.

C) $18,500.

D) $22,667.

E) $30,000.

108) 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 administrative cost to the Accounting 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?

A) $8,929.

B) $17,000.

C) $18,500.

D) $22,667.

E) $11,111.

109) 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?

A) $1,714.

B) $12,000.

C) $1,850.

D) $2,000.

E) $1,111.

110) Brownley Company has two service departments and two operating (production) departments. The Payroll Department services all three of the other departments in proportion to the number of employees in each. The Maintenance Department costs are allocated to the two operating departments in proportion to the floor space used by each. Listed below are the operating data for the current period:

The total cost of operating the Milling Department for the current period is:

A) $14,280.

B) $15,912.

C) $76,500.

D) $90,780.

E) $92,412.

111) Brownley Company has two service departments and two operating (production) departments. The Payroll Department services all three of the other departments in proportion to the number of employees in each. The Maintenance Department costs are allocated to the two operating departments in proportion to the floor space used by each. Listed below are the operating data for the current period:

The total cost of operating the Maintenance Department for the current period is:

A) $14,280.

B) $15,912.

C) $25,500.

D) $29,580.

E) $22,412.

112) Flamingos, Inc. has four departments. The Administrative Department costs are allocated to the other three departments based on the number of employees in each and the Maintenance Department costs are allocated to the Assembly and Packaging Departments based on their occupied space. Data for these departments follows:

The total amount of the Administrative Department's cost that would eventually be allocated to the Packaging Department is: 

A) $4,800.

B) $12,000.

C) $10,000.

D) $18,000.

E) $13,000.

113) Pepper Department store allocates its service department expenses to its various operating (sales) departments. The following data is available for its service departments:

The following information is available for its three operating (sales) departments:

What is the total expense allocated to Department B?

A) $29,375.

B) $30,462.

C) $30,500.

D) $30,775.

E) $32,160.

114) Pepper Department store allocates its service department expenses to its various operating (sales) departments. The following data is available for its service departments:

The following information is available for its three operating (sales) departments:

What is the total advertising expense allocated to Department B?

A) $30,000.

B) $ 9,000.

C) $12,500.

D) $10,800.

E) $7,500.

115) Super Grocery store allocates its service department expenses to its various operating (sales) departments. The following data is available for its service departments:

The following information is available for its three operating (sales) departments:

What is the total administrative expense allocated to the Meats department?

A) $6,000.

B) $9,000.

C) $4,145.

D) $1,200.

E) $3,000.

116) A college uses advisors who work with all students in all divisions of the college. The most useful allocation basis for the salaries of these employees would likely be:

A) number of classes offered in each division.

B) student graduation rate.

C) square footage of each division.

D) number of students advised from each division.

E) relative salaries of division heads.

117) 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 direct labor hours as the allocation base, the setup cost portion of overhead that is allocated to each unit of product for Plus and Max, respectively is:

A) $.80; $.80.

B) $3.20; $3.20.

C) $4.00; $4.00.

D) $160.00; $12,800.00.

E) $200.00; $16,000.00.

118) 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

119) Rent and maintenance expenses would most likely be allocated based on:

A) Sales volume by department.

B) Square feet of floor space occupied.

C) Number of hours worked.

D) Number of invoices processed.

E) Number of employees in each department.

120) In the preparation of departmental income statements, the preparer completes the following steps in the following order:

A) Identify direct expenses; allocate indirect expenses; allocate service department expenses.

B) Identify indirect expenses; allocate direct expenses; allocate service department expenses.

C) Identify service department expenses; allocate direct expenses; allocate indirect expenses.

D) Identify direct expenses; allocate service department expenses; allocate indirect expenses.

E) Allocate all expenses.

121) 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 gross profit for the Black and Navy Divisions, respectively.

A) $72,000; $193,000.

B) $172,000; $352,000.

C) $100,000; $241,000.

D) $52,000; $163,000.

E) $72,000; $163,000.

122) 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.

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.

123) Fallow Corporation has two separate profit centers. The following information is available for the most recent year:

The West Division occupies 5,000 square feet in the plant. The East Division occupies 3,000 square feet. Rent, which was $40,000 for the year, is an indirect expense and is allocated based on square footage. Compute operating income for the West Division.

A) $120,000.

B) $95,000.

C) $94,000.

D) $69,000.

E) $54,000.

124) The amount by which a department's sales exceed its direct expenses is:

A) Net sales.

B) Gross profit.

C) Departmental profit.

D) Contribution margin.

E) Departmental contribution to overhead.

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

A) Controllable costs.

B) Product and period costs.

C) Direct expenses.

D) Direct and indirect costs.

E) Joint costs.

126) 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:

A) 7.8%.

B) 14.9%.

C) 29.5%.

D) 66.7%.

E) 85.4%.

127) Ultimo Co. operates three production departments as profit centers. The following information is available for its most recent year. Department 1's contribution to overhead as a percent of sales is:

A) 52.5%

B) 20.0%

C) 35.7%

D) 30.0%

E) 57.1%

128) 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:

A) $210,000.

B) $350,000.

C) $10,000.

D) $260,000.

E) $150,000.

129) Ultimo Co. operates three production departments as profit centers. The following information is available for its most recent year. Which department has the greatest departmental contribution to overhead (in dollars) and what is the amount contributed?

A) Dept. 3; $400,000.

B) Dept. 1; $1,000,000.

C) Dept. 2; $100,000.

D) Dept. 3; $250,000.

E) Dept. 2; $150,000.

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

A) Hurdle rate.

B) Return on investment.

C) Balanced scorecard.

D) Residual income.

E) Investment turnover.

131) Which of the following is not one of the perspectives used to analyze performance using the balanced scorecard?

A) Customer

B) Financial/owners

C) Internal process

D) Number of employees

E) Innovation and learning

132) Return on investment can be split into which of the following two measures?

A) Investment center income and profit margin.

B) Profit margin and net income.

C) Investment center average assets and investment turnover.

D) Residual income and operating income.

E) Profit margin and investment turnover.

133) Profit margin for an investment center measures:

A) Investment center income earned per dollar of sales.

B) How efficiently an investment center generates sales from its invested assets.

C) Investment center income compared to target investment center income.

D) Departmental contribution to overhead.

E) Investment center income generated from its invested assets.

134) 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) 30.3%.

B) 23.6%.

C) 13.3%.

D) 10.4%.

E) 14.7%.

135) 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. Assume a target income of 10% of average invested assets. Compute residual income for the division:

A) $203,000.

B) $193,000.

C) $150,500.

D) $60,300.

E) $197,500.

136) Dartford Company reported the following financial data for one of its divisions for the year; average investment center total assets of $3,500,000; investment center income $610,000; a target income of 12% of average invested assets. The residual income for the division is:

A) $536,800.

B) $1,030,000.

C) $190,000.

D) $683,200.

E) $493,200.

137) Kragle Corporation reported the following financial data for one of its divisions for the year; average invested assets of $470,000; sales of $930,000; and income of $105,000. The investment center profit margin is:

A) 22.3%.

B) 50.5%.

C) 197.9%.

D) 447.6%.

E) 11.3%.

138) Kragle Corporation reported the following financial data for one of its divisions for the year; average invested assets of $470,000; sales of $930,000; and income of $105,000. The investment turnover is:

A) 22.3.

B) 50.5.

C) 1.98.

D) 447.6.

E) 11.3.

139) 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:

A) 24.3%.

B) 41.1%.

C) 32.9%.

D) 30.3%.

E) 4.11%.

140) Holo 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. Compute the division's return on investment:

A) 18.6%.

B) 21.3%.

C) 17.3%.

D) 10.4%.

E) 14.7%.

141) Holo 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:

A) $150,450.

B) $196,750.

C) $150,500.

D) $133,000.

E) $100,300.

142) Pleasant Hills Properties is developing a golf course subdivision that includes 250 home lots; 100 lots are golf course lots and will sell for $95,000 each; 150 are street frontage lots and will sell for $65,000. The developer acquired the land for $1,800,000 and spent another $1,400,000 on street and utilities improvement. Compute the amount of joint cost to be allocated to the golf course lots using value basis. (Round your intermediate percentages to 2 decimal places.)

A) $1,920,000.

B) $720,000.

C) $1,620,800.

D) $1,579,200.

E) $1,080,000.

143) Pleasant Hills Properties is developing a golf course subdivision that includes 250 home lots; 100 lots are golf course lots and will sell for $95,000 each; 150 are street frontage lots and will sell for $65,000. The developer acquired the land for $1,800,000 and spent another $1,400,000 on street and utilities improvement. Compute the amount of joint cost to be allocated to the street frontage lots using value basis. (Round your intermediate percentages to 2 decimal places.)

A) $1,920,000.

B) $720,000.

C) $1,620,800.

D) $1,579,200.

E) $1,080,000.

144) 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.

A) $6,400.

B) $9,900.

C) $8,100.

D) $17,600.

E) $25,600.

145) 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.

A) $6,400.

B) $9,900.

C) $8,100.

D) $14,400.

E) $25,600.

146) The following is a partially completed departmental expense allocation spreadsheet for Brickland. It reports the total amounts of direct and indirect expenses for its 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 Maintenance department expense to be allocated to Fabrication.

A) $6,400.

B) $9,900.

C) $8,100.

D) $9,000.

E) $25,600.

147) 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 Maintenance department expense to be allocated to Assembly.

A) $6,400.

B) $9,900.

C) $8,100.

D) $9,000.

E) $25,600.

148) Which of the following represents the correct formula for calculating the cash conversion cycle?

A) Days' sales in inventory − Days' payable outstanding.

B) Days' sales in cost of goods sold + Days' sales in inventory − Days' payable outstanding.

C) Days' sales in accounts receivable + Days' sales in inventory − Days' payable outstanding.

D) Days' sales in cost of goods sold − Days' payable outstanding.

E) Days' sales in accounts receivable − Days' payable outstanding.

149) Which of the following statements is not correct concerning the elements of the cash conversion cycle time?

A) The higher the number of days in the cash conversion cycle, the more efficiently the company is managing its cash.

B) Effectively managing working capital is important for businesses to survive and profit.

C) The cash conversion cycle measures the average time it takes to convert cash outflows into cash inflows from customers.

D) Lean manufacturers may reduce the total cash conversion cycle time.

E) The cash conversion cycle is based on accounts receivable, accounts payable, and inventory.

150) Using the information below, compute the cash conversion cycle:

A) 12 days.

B) 87 days.

C) 42 days.

D) 47 days.

E) 51 days.

151) Using the information below, compute the cycle efficiency:

A) 51 days.

B) 87 days.

C) 37 days.

D) 52 days.

E) 63 days.

152) 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:

A) variable cost of producing a unit of product.

B) the full absorption cost of producing a unit of product.

C) the market price charged to outside customers.

D) the amount that the purchasing division would have to pay an outside seller to acquire a similar product for its use.

E) all the costs of producing a unit of product.

153) 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?

A) $75

B) $66

C) $16

D) $50

E) $25

154) Part AR3 costs the Southwestern Division of Luxon Corporation $26 to make-direct materials are $10, direct labor is $4, variable manufacturing overhead is $9, and fixed manufacturing overhead is $3. Southwestern Division sells Part AR3 to other companies for $30. The Northeastern Division of Luxon Corporation can use Part AR3 in one of its products. The Southwestern Division has enough idle capacity to produce all of the units of Part AR3 that the Northeastern Division would require. What is the lowest transfer price at which the Southwestern Division should be willing to sell Part AR3 to the Northeastern Division?

A) $30

B) $26

C) $23

D) $27

E) $21

155) 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?

A) $30

B) $21

C) $47

D) $17

E) $20

156) Division P of Launch Corporation has the capacity for making 75,000 wheel sets per year and regularly sells 60,000 each year on the outside market. The regular sales price is $100 per wheel set, and the variable production cost per unit is $65. Division Q of Launch Corporation currently buys 30,000 wheel sets (of the kind made by Division P) yearly from an outside supplier at a price of $90 per wheel set. If Division Q were to buy the 30,000 wheel sets it needs annually from Division P at $87 per wheel set, the change in annual net operating income for the company as a whole, compared to what it is currently, would be:

A) $600,000

B) $225,000

C) $750,000

D) $135,000

E) $700,000

157) Division X makes a part that it sells to customers outside of the company. Data concerning this part appear below:

Division Y of the same company would like to use the part manufactured by Division X in one of its products. Division Y currently purchases a similar part made by an outside company for $49 per unit and would substitute the part made by Division X. Division Y requires 5,000 units of the part each period. Division X has ample excess capacity to handle all of Division Y's needs without any increase in fixed costs and without cutting into outside sales. What is the lowest transfer price Division X will accept?

A) $50

B) $49

C) $46

D) $30

E) $20

158) Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below:

Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $38 per unit and would substitute the part made by Division A. Division B requires 5,000 units of the part each period. Division A has ample capacity to produce the units for Division B without any increase in fixed costs and without cutting into sales to outside customers. If Division A sells to Division B rather than to outside customers, the variable cost be unit would be $1 lower. What is the lowest acceptable transfer price Division A should accept?

A) $40

B) $38

C) $30

D) $29

E) $10

159) The Mixed Nuts Division of Yummy Snacks, Inc. had the following operating results last year:

Yummy expects identical operating results in the division this year. The Mixed Nuts Division has the ability to produce and sell 200,000 pounds of product annually. Assume that the Trail Mix Division of Yummy wants to purchase an additional 20,000 pounds of nuts from the Mixed Nuts Division. Mixed Nuts will be able to increase its profit by accepting any transfer price above:

A) $0.25 per pound

B) $0.08 per pound

C) $0.15 per pound

D) $0.30 per pound

E) $0.10 per pound

160) 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?

A) $0.40 per pound

B) $0.08 per pound

C) $0.15 per pound

D) $0.25 per pound

E) $0.30 per pound

161) Division X makes a part with the following characteristics:

Division Y of the same company would like to purchase 10,000 units each period from Division X. Division Y now purchases the part from an outside supplier at a price of $17 each. Suppose Division X has ample excess capacity to handle all of Division Y's needs without any increase in fixed costs and without cutting into sales to outside customers. If Division X refuses to accept the $17 price internally and Division Y continues to buy from the outside supplier, the company as a whole will be:

A) worse off by $70,000 each period.

B) better off by $10,000 each period.

C) worse off by $60,000 each period.

D) worse off by $20,000 each period.

E) better off by $60,000 each period.

162) Division A produces a part with the following characteristics:

Division B, another division in the company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $28 per unit. If Division A sells to Division B, $1 in variable costs can be avoided. Suppose Division A is currently operating at capacity and can sell all of the units it produces on the outside market for its usual selling price. From the point of view of Division A, any sales to Division B should be priced no lower than:

A) $27

B) $29

C) $20

D) $28

E) $21

163) Match the appropriate definition with the following terms:

(a) A department or unit that incurs costs without directly generating revenues.

(b) A department or unit that generates revenues and incurs costs, in which the manager is also responsible for investments made in operating assets.

(c) Costs that are incurred for the joint benefit of more than one department and cannot be readily traced to only one department.

(d) Costs readily traced to a specific department because they are incurred for the sole benefit of that department.

(e) Costs incurred to produce or purchase two or more products at the same time.

(f) Costs for which a manager has the power to determine or at least significantly affect.

(g) A department that generates revenues and incurs costs.

________ (1) Direct expenses

________ (2) Profit center

________ (3) Controllable costs

________ (4) Indirect expenses

________ (5) Cost center

________ (6) Joint cost

________ (7) Investment center

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

(a) A department whose manager is judged on the ability to generate revenues in excess of the department's costs.

(b) A department or unit that generates revenues and incurs costs, in which the manager is also responsible for investments made in operating assets.

(c) Set up to control costs and evaluate managers' performances by assigning costs to the managers responsible for controlling them.

(d) Compares actual and budgeted costs and expenses under the control of a manager.

(e) A department whose manager is judged on the ability to control costs by keeping them within a satisfactory range.

(f) A measure of departmental sales less direct expenses.

________ (1) Investment center

________ (2) Performance report

________ (3) Cost center

________ (4) Departmental contribution to overhead

________ (5) Profit center

________ (6) Responsibility accounting system

165) What is a profit center and how is its performance evaluated?

166) What is a cost center and how is its performance evaluated?

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

168) What is the purpose of a departmental accounting system?

169) What is the purpose of a responsibility accounting system?

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

171) Explain the difference between direct and indirect expenses in accounting for departments.

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

173) Describe the information found on a responsibility accounting performance report.

174) Define joint costs and explain how joint costs can be allocated.

175) In the process of preparing department income statements, a company uses there are three steps before the statements can be completed. Describe those steps.

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

177) Riu Corporation has a Parts Division that does work for other Divisions in the company as well as for outside customers. The company's Repair Division has asked the Parts Division to provide it with 2,000 special parts each year. The special parts would require $17.00 per unit in variable production costs. The Repair Division has a bid from an outside supplier for the special parts at $28.00 per unit. In order to have time and space to produce the special part, the Parts Division would have to cut back production of another part-the B83 that it presently is producing. The B83 sells for $34.00 per unit, and requires $22.00 per unit in variable production costs. Packaging and shipping costs of the B83 are $4.00 per unit. Packaging and shipping costs for the new special part would be only $0.50 per unit. The Parts Division is now producing and selling 10,000 units of the B83 each year. Production and sales of the B83 would drop by 10% if the new special part is produced for the Repair Division.

Required:

a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 2,000 special parts per year from the Parts Division to the Repair Division?

b. Is it in the best interests of Riu Corporation for this transfer to take place? Explain.

178) 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.

Salaries allocated to Dept. 1 ________

Salaries allocated to Dept. 2 ________

179) A company rents a small building with 10,000 square feet of space for $100,000 per year. The rent is allocated to the company's three departments on the basis of the value of the space occupied by each. Department One occupies 1,500 square feet of ground-floor space, Department Two occupies 3,500 square feet of ground-floor space, and Department Three occupies 5,000 square feet of second-floor space. If rent for comparable floor space in the neighborhood averages $15.00 per sq. ft. for ground-floor space and $10.00 per sq. ft. for second-floor space, what annual rent expense should be charged to each department?

180) A retail store has three departments, A, B, and C, each of which has four full-time employees. The store does general advertising that benefits all departments. Advertising expense totaled $90,000 for the current year, and departmental sales were:

Department A……………… $308,000

Department B……………… 644,000

Department C……………… 448,000

Total sales…………………. $1,400,000

Calculate the amount of advertising expense that should be allocated to each department?

181) A company produces two joint products (called 301 and 302) in a single operation that uses one raw material called Fruge. Four hundred gallons of Fruge were purchased at a cost of $800 and were used to produce 150 gallons of Product 301, selling for $5 per gallon, and 75 gallons of Product 302, selling for $15 per gallon. How much of the $800 cost should be allocated to each product, assuming that the company allocates cost based on sales revenue?

182) A company produces two products, XX and YY, from a single raw material called Zub. Zub is purchased in 55-gallon drums, and the contents of one drum are sufficient to produce 30 gallons of XX and 15 gallons of YY. XX sells for $10.00 per gallon and YY sells for $30.00 per gallon. During the current period, the company used 400 drums of Zub to produce XX and YY. The cost of Zub was $90 per drum.

Required:

(1) If the cost of Zub is allocated to the XX and YY products on the basis of the number of gallons produced, how much of the total cost of the 400 drums should be charged to each product?

(2) If the cost of Zub is allocated to the XX and YY products in proportion to their market values, how much of the total cost of the 400 drums should be charged to each product?

(3) Which basis of allocating the cost is most likely to be used by the company?

183) Karl and Grady are managers of two product lines for Brewster Company. One of them is a candidate for promotion based on performance. Using the data below, determine who had the better performance using performance measures such as net income, profit margin, and return on investment. Show your calculations and support your answer.

184) Use the Hamilton Company's investment center information below to calculate (a) return on total investment and (b) investment center residual income.

Net Income…………………… $315,900

Average Invested Assets…….. $2,100,000

Target Net Income…………… 6% of division assets

185) City Park College allocates administrative costs to its teaching departments based on the number of students enrolled, while maintenance and utilities are allocated based on square feet of classrooms. Based on the information below, what is the total amount of expenses allocated to each department (rounded to the nearest dollar) if administrative costs for the college were $180,000, maintenance expenses were $70,000, and utilities were $85,000?

Teaching Size of

Department Students Classroom

Electronics……………. 117 900 sq. ft.

Automotive…………... 156 750 sq. ft.

Computers………….... 429 1,200 sq. ft.

Plumbing…………….. 78 150 sq. ft.

186) Arkansas Toys, a retail store, has three sales departments supported by two service departments. Cost and operational data for each department follow:

Determine the service department expenses to be allocated to Sales Department 1 for (round answers to whole dollars):

Advertising ________

Purchasing ________

187) Chancellor Company is divided into four departments. Departments A and B are service departments and Departments 1 and 2 are operating (production) departments. The services of the two service departments are used by the other departments as follows:

Complete the following table:

188) Sturdivant Fasteners, Co. uses a traditional allocation of overhead based on direct labor hours. The manager has accumulated the following information on engineering changes, which are indirect cost of their products, for two of the company's major products:

Compute the cost per unit using: The traditional two-stage allocation of the costs of engineering changes based on direct labor hours.

189) Nesbit Co. has two operating (production) departments supported by a number of service departments. The following information was collected for a recent period:

Indirect costs are allocated as follows: salaries on the basis of sales, office expenses on the basis of the number of employees, and all other costs on the basis of square footage. Additional information about the production departments follows:

Square Number of

Footage Employees

Machining 14,535 78

Assembly 4,845 52

Sales for the Machining Department are $724,404 and sales for the Assembly Department are $356,796. Determine the departmental contribution to overhead and the departmental net income for each production department.

190) 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.)

191) Williams Co. operates three separate departments (R, S, T). The data below is provided for the current year:

Total Sales…………………. $120,000 ($40,000 from each department)

Cost of Goods Sold………… $ 80,000 (50% from R; 25% from S; 25% from T)

Direct Expense……………… $ 26,000 ($6,000 from R; $12,000 from S; $8,000 from T)

Indirect Expenses…………… $ 9,000

Required:

Prepare an income statement showing the departmental contributions to overhead for the current year.

192) The following data is available for the Janitorial Services Department of Glitterol Co.

Required: Calculate departmental contribution to overhead for the Janitorial Services Department, including the department's contribution as a percentage of revenues.

193) 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?

194) Marsha Hansen, the manager of the Flint Plant of the Michigan Company is responsible for all of the plant's costs except her own salary. There are two operating departments within the plant, Departments A and B. Each department has its own manager. There is also a maintenance department that provides services equally to the two operating departments. The following information is available.

Department managers are responsible for the wages and supplies in their department. They are not responsible for their own salary. Building rent, utilities, and maintenance are allocated to each department based on square footage.

Required: Complete the responsibility accounting performance reports below that list costs controllable by the manager of Department A, the manager of Department B, and the manager of the Flint plant.

195) Franklin Co. has three departments: purchasing, human resources, and assembly. In a recent month the three departments incurred two shared indirect expenses. The amounts of the indirect expenses and the bases used to allocate them follow. Use this information to allocate each of the two indirect expenses across the three departments using the tables provided below.

Departmental data for the company's recent reporting period follow.

196) Boiano Corp. operates a retail store and has two service departments and two operating departments, Hardware and Automotive. During the current year, the departments had the following direct expenses and occupied the following amount of floor space.

The advertising department developed and aired 150 spots. Of these spots, 60 spots were for Hardware and 90 spots were for Automotive. The store sold $1,500,000 of merchandise during the year; $675,000 in Hardware and $825,000 in Automotive. Indirect expenses include rent, utilities, and insurance expense. Total indirect expenses of $220,000 are allocated to all departments. Prepare a departmental expense allocation spreadsheet for Boiano. The spreadsheet should assign (1) direct expenses to each of the four departments, (2) allocate the indirect expenses to each department on the basis of floor space occupied, (3) the advertising department's expenses to the two operating departments on the basis of ad spots placed promoting each department's products, (4) the administrative department's expenses based on the amount of sales. Complete the departmental expense allocation spreadsheet below. Provide supporting computations for the expense allocations below the spreadsheet.

197) The cash conversion cycle is calculated by days' sales in accounts receivable plus ________ less days' payable outstanding.

198) The ________ measures the average time it takes to convert cash outflows into cash inflows from customers.

199) A ________ generates revenues and incurs costs.

200) A ________ incurs costs without directly generating revenues.

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

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

203) Jarrett Department Store operates three departments (A, B and C). If total costs of $4,500 are to be allocated on the basis of square feet of space (Dept. A = 1,500 Sq. Ft.; Dept. B = 900 Sq. Ft.; Dept. C = 600 Sq. Ft.) then Dept. A's share (in percent) of the $4,500 cost would be ________%; Dept. B would be ______%, and Dept. C would be ________%. The amount of cost allocated to Dept. C would be $________.

204) A ________ accumulates and reports costs and expenses that a manager is responsible for, including budgeted amounts.

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

206) A(n) ________ is a department that generates revenues and incurs costs and whose manager is also responsible for using the center's assets to generate income for the center.

207) The investment center return on investment is ________ divided by ________.

208) In the two-stage cost allocation, ________ costs are allocated to operating departments, and the operating department costs are allocated to ________.

209) The first three steps in preparing a departmental income statement are: (1) accumulate ________ of the department, (2) allocate ________ to the department, and (3) allocate ________ to the operating departments.

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