Q&A Hero

Q: In the two-stage cost allocation, ___________________ costs are allocated to operating departments, and the operating department costs are allocated to ________________.

Q: A(n) _______________________ is a department whose manager is responsible for using the center's assets to generate income for the center.

Q: ___________________ are costs incurred to produce or purchase two or more products at the same time.

Q: A ______________________________ accumulates and reports costs and expenses that a manager is responsible for, including budgeted amounts.

Q: Samm's 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 $__________.

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

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

Q: With respect to cycle time, companies strive to reduce non-value added time in order to improve ________________________.

Q: Cycle time is calculated by process time plus inspection time plus move time plus _____________.

Q: Naples operates a retail store and has two service departments and two operating departments, Shoes and Clothing. During the current year, the departments had the following direct expenses and occupied the flowing amount of floor space. Department Direct Expenses Square Feet Advertising $50,000 750 Administrative 100,000 1,500 Shoes 150,000 3,000 Clothing 200,000 9,750 The advertising department developed and aired 150 spots. Of these spots, 60 spots were for Shoes and 90 spots were for Clothing. The store sold $1,500,000 of merchandise during the year; $675,000 in Shoes and $825,000 in Clothing. 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 Naples. 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 departments expenses to the two operating departments on the basis of ad spots placed promoting each departments products, (4) the administrative departments expenses based on the amount of sales. Complete the departmental expense allocation spreadsheet below. Provide supporting computations for the expense allocations below the spreadsheet. Naples Departmental Expense Allocations For Year Ended December 31 Advertising Administrative Shoes Clothing Direct Expenses Direct expenses Indirect expenses Indirect expenses

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Q: Eleanor Reed, the manager of the Marinette Plant of the Wisconsin 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. A Budget B Total A Actual B Total Employee wages $3,500 $4,000 $7,500 $3,200 $4,700 $7,900 Department Manager's salary 800 800 1,600 800 800 1,600 Supplies 750 600 1,350 700 590 1,290 Building rent 1,500 1,500 3,000 1,400 1,400 2,800 Utilities 300 300 600 375 375 750 Maintenance 3,300 3,300 6,600 3,000 3,000 6,000 Totals $10,150 $10,500 $20,650 $9,475 $10,865 $20,340 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. 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 Marinette plant. Budgeted amount Actual amount Over (under) budget Manager, Marinette Plant Controllable costs: Manager, Department A Controllable costs: Manager, Department B Controllable Costs:

Q: The following data is available for the Cleaning Services Department of Amitol Co. Revenues..................................................... $216,000 Cost of Sales ..................................................... 168,000 Expenses: Supplies-Direct.................................... 12,000 Salaries-Indirect Allocated.................................... 34,000 Rent-Direct.................................... 8,000 Rent-Indirect Allocated.................................... 4,500 Required: Calculate departmental contribution to overhead for the Cleaning Services Department, including the department's contribution as a percentage of revenues.

Q: Vaughn Co. operates three separate departments (A, B, C). 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 A; 25% from B; 25% from C) Direct Expense $ 26,000 ($6,000 from A; $12,000 from B; $8,000 from C) Indirect Expenses $ 9,000 Required: Prepare an income statement showing the departmental contributions to overhead for the current year.

Q: Burien, Inc., operates a retail store with two departments, A and B. Its departmental income statement for the current year follows: BURIEN, INC. Departmental Income Statement For Year Ended December 31 Dept. A Dept. B Combined Sales............................................................. $180,000 $200,000 $380,000 Direct expenses............................................................. 129,900 142,870 272,770 Contributions to overhead............................................................. $ 50,100 $ 57,130 $107,230 Indirect expenses: Depreciation--Building ...................................................... 10,000 11,760 21,760 Maintenance...................................................... 1,600 1,700 3,300 Utilities...................................................... 6,200 6,320 12,520 Office expenses...................................................... 1,800 2,000 3,800 Total indirect expenses ...................................................... $ 19,600 $ 21,780 $ 41,380 Net income............................................................. $ 30,500 $ 35,350 $ 65,850 Burien 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.) Dept. A Dept. B Dept. C Combined Sales......................................................................... $180,000 $200,000 Direct expenses....................................................... 129,900 142,870 Contributions to overhead...................................... $ 50,100 $ 57,130 Indirect expenses...................................................... Depreciationbuilding...................................... Maintenance....................................................... Utilities.............................................................. Office expenses.................................................. Total indirect expenses...................................... Net income...............................................................

Q: Renton Co. has two operating (production) departments supported by a number of service departments. The following information was collected for a recent period: Direct Costs Indirect Cost Machining Department Assembly Department Salaries................................ $122,400 $ 85,700 $36,700 Insurance................................ 20,200 11,000 5,500 Utilities................................ 23,900 13,900 2,000 Depreciation................................ 20,700 11,500 13,800 Maintenance................................ 7,000 4,700 29,400 Office expenses................................ -0- -0- 71,100 Cost of goods sold................................ 327,600 121,200 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.

Q: Precision Brackets, Co. uses a traditional allocation of overhead based on direct labor hours system. The manager has accumulated the following information on engineering changes for two of the company's major products: Automotive Brackets Computer Brackets Total units produced.................................... 5,000 2,500 Cost per engineering change.................................... $400 $ 400 Number of engineering changes.................................... 5 25 Direct labor hours per unit.................................... 4 4 Compute the cost per unit using: The traditional two-stage allocation of the costs of engineering changes based on direct labor hours.

Q: Blower 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: Dept. A Dept. B Dept. 1 Dept. 2 Services of: Department A............ 50% 20% 30% Department B............ 40% 60% Direct costs incurred by each department...... $60,000 $50,000 $70,000 $80,000 Complete the following table: Allocation of Expenses to Departments Department A Department B Department C Department D Total direct Department expenses.. $60,000 $50,000 $ 70,000 $ 80,000 Service department expenses Department A............ Subtotal........................ Department B............ Total.............................

Q: 1...... $92,160 $36,864 1,728 1,260 2...... 69,120 32,832 3,024 1,680 3...... 80,640 32,256 1,296 2,310 4...... 46,080 27,648 2,592 1,750 Service Departments Allocation Basis Cost Advertising.. Sales $10,000 Maintenance Square footage 6,900 Purchasing... No. of purchase orders issued 12,000 Determine the service department expenses to be allocated to Sales Department 1 for: Advertising ___________________ Maintenance __________________ Purchasing ___________________

Q: CommunityTechnicalCollege 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 $150,000, 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.

Q: Scottie is the manager of an investment center within Hamilton Company. Using the information below, calculate (a) return on total assets and (b) investment center residual income. Net Income $315,900 Average Invested Assets.. $2,100,000 Target Net Income 6% of division assets

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Q: A company produces two products, X and Y, from a single raw material called ZZ. ZZ is purchased in 55-gallon drums, and the contents of one drum are sufficient to produce 30 gallons of X and 15 gallons of Y. X sells for $10.00 per gallon and Y sells for $30.00 per gallon. During the current period, the company used 400 drums of ZZ to produce X and Y. The cost of ZZ was $90 per drum. Required: (1) If the cost of ZZ is allocated to the X and Y 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 ZZ is allocated to the X and Y 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? The relative number of gallons of each product produced or the relative market values of each product at the point of separation.

Q: A company produces two joint products (called 101 and 202) in a single operation that uses one raw material called Casko. Four hundred gallons of Casko were purchased at a cost of $800 and were used to produce 150 gallons of Product 101, selling for $5 per gallon, and 75 gallons of Product 202, 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?

Q: 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 $356,250 Department B 641,250 Department C 427,500 How much advertising expense should be allocated to each department?

Q: 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?

Q: Eclectic Furniture Company allocates its indirect salaries of $12,500 on the basis of sales. Determine the indirect salaries allocated to Departments 1 and 2 using the following information. Dept.1 Dept.2 Combined Revenues from sales........ $182,000 $78,000 $260,000 Direct Salaries................. 42,250 22,750 65,000 Salaries allocated to Dept. 1 _______________ Salaries allocated to Dept. 2 _______________

Q: Leontif Corporation has a Parts Division that does work for other Divisions in the company as well as for outside customers. The company's Equipment 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 Equipment 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 J789 that it presently is producing. The J789 sells for $34.00 per unit, and requires $22.00 per unit in variable production costs. Packaging and shipping costs of the J789 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 J789 each year. Production and sales of the J789 would drop by 10% if the new special part is produced for the Equipment 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 Equipment Division? b. Is it in the best interests of Leontif Corporation for this transfer to take place? Explain.

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

Q: Explain the difference between direct and indirect expenses in accounting for departments.

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

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Q: 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

Q: 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.

Q: The Milk Chocolate Division of Mmmm Foods, Inc. had the following operating results last year: Milk Chocolate expects identical operating results this year. The Milk Chocolate Division has the ability to produce and sell 200,000 pounds of chocolate annually. Assume that the Peanut Butter Division of Mmmm Foods wants to purchase an additional 20,000 pounds of chocolate from the Milk Chocolate Division. Assume that the Milk Chocolate Division is currently operating at its capacity of 200,000 pounds of chocolate. Also assume again that the Peanut Butter Division wants to purchase an additional 20,000 pounds of chocolate from Milk Chocolate. Under these conditions, what amount per pound of chocolate would Milk 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

Q: The Milk Chocolate Division of Mmmm Foods, Inc. had the following operating results last year: Milk Chocolate expects identical operating results this year. The Milk Chocolate Division has the ability to produce and sell 200,000 pounds of chocolate annually. Assume that the Peanut Butter Division of Mmmm Foods wants to purchase an additional 20,000 pounds of chocolate from the Milk Chocolate Division. Milk Chocolate will be able to increase its profit by accepting any transfer price above: A. $0.40 per pound B. $0.08 per pound C. $0.15 per pound D. $0.25 per pound E. $0.10 per pound

Q: 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 should be the lowest acceptable transfer price from the perspective of Division A? A. $40 B. $38 C. $30 D. $29 E. $10

Q: 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. According to the formula in the text, what is the lowest acceptable transfer price from the standpoint of the selling division? A. $50 B. $49 C. $46 D. $30 E. $20

Q: Division P of Turbo 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 Turbo 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

Q: Part WY4 costs the Eastern Division of Tyble Corporation $26 to make-direct materials are $10, direct labor is $4, variable manufacturing overhead is $9, and fixed manufacturing overhead is $3. Eastern Division sells Part WY4 to other companies for $30. The Western Division of Tyble Corporation can use Part WY4 in one of its products. The Eastern Division has enough idle capacity to produce all of the units of Part WY4 that the Western Division would require. What is the lowest transfer price at which the Eastern Division should be willing to sell Part WY4 to the Central Division? A. $30 B. $26 C. $23 D. $27 E. $21

Q: 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 $70 per unit and would substitute the part made by Division X. Division Y requires 5,000 units of the part each period. Division X can already sell all of the units it can produce on the outside market. What should be the lowest acceptable transfer price from the perspective of Division X? A. $75 B. $66 C. $16 D. $50 E. $25

Q: 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, less costs saved by transferring internally. 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.

Q: Using the information below, compute the manufacturing cycle time: A. 7.5 hours. B. 6.5 hours. C. 8.0 hours. D. 80.0 hours. E. 7.1 hours.

Q: Which of the following statements is correct concerning the elements of cycle time? A. Move time is the time spent moving (1) raw materials from storage to production and (2) goods in process from one factory location to another factory location. B. Inspection time is the time spent producing the product. C. Process time is considered non-value-added time. D. Wait time is considered value-added time. E. Cycle efficiency is the ratio of non-value-added time to total cycle time.

Q: Which of the following represents the correct formula for calculating cycle time for a manufacturer? A. Process time + inspection time - move time - wait time. B. Process time - inspection time + move time + wait time. C. Process time + inspection time + move time + wait time. D. Process time - inspection time - move time - wait time. E. Process time + inspection time + move time - wait time.

Q: The following is a partially completed lower section of a departmental expense allocation spreadsheet for Stoneham. 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 Fabrication. Purchasing Maintenance Fabrication Assembly Operating costs $32,000 $18,000 $96,000 $62,000 No. of purchase orders............... 16 4 Sq. ft. of space 3,300 2,700 A. $6,400. B. $9,900. C. $8,100. D. $9,000. E. $25,600.

Q: The following is a partially completed lower section of a departmental expense allocation spreadsheet for Stoneham. 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 Assembly. Purchasing Maintenance Fabrication Assembly Operating costs $32,000 $18,000 $96,000 $62,000 No. of purchase orders............... 16 4 Sq. ft. of space 3,300 2,700 A. $6,400. B. $9,900. C. $8,100. D. $14,400. E. $25,600.

Q: The following is a partially completed lower section of a departmental expense allocation spreadsheet for Stoneham. 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. Purchasing Maintenance Fabrication Assembly Operating costs $32,000 $18,000 $96,000 $62,000 No. of purchase orders............... 16 4 Sq. ft. of space 3,300 2,700 A. $6,400. B. $9,900. C. $8,100. D. $17,600. E. $25,600.

Q: Yoho 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.

Q: Yoho 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 divisions return on assets: A. 18.6%. B. 21.3%. C. 17.3%. D. 10.4%. E. 14.7%.

Q: Abbe 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.

Q: Abbe 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 divisions return on assets: A. 30.3%. B. 23.6%. C. 13.3%. D. 10.4%. E. 14.7%.

Q: 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.

Q: For an investment center, the hurdle rate is: A. The cost of obtaining financing. B. The desired return on investments. C. The difference between the projected rate and the earned rate. D. Not evaluated in determining the performance of an investment center. E. Not important to management.

Q: Mach 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 and what is the amount contributed? Cost of Direct Indirect Dept. Sales Goods Sold Expenses 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 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.

Q: Mach 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: Cost of Direct Indirect Dept. Sales Goods Sold Expenses 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 A. 8%. B. 40%. C. 20%. D. 30%. E. 12%.

Q: The Footwear Department of Lee'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 Footwear 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%.

Q: Departmental contribution to overhead is calculated as revenues of the department less: A. Controllable costs. B. Product and period costs. C. Direct expenses. D. Direct and indirect costs. E. Joint costs.

Q: The amount by which a department's revenues exceed its direct expenses is: A. Net sales. B. Gross profit. C. Departmental profit. D. Contribution margin. E. Departmental contribution to overhead.

Q: Jamesway Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year: White Division Grey Division Sales (net).................. $200,000 $400,000 Salary expense........... 28,000 48,000 Cost of goods sold..... 100,000 159,000 The White Division occupies 20,000 square feet in the plant. The Grey 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 White and Grey 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.

Q: Jamesway Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year: White Division Grey Division Sales (net).................. $200,000 $400,000 Salary expense........... 28,000 48,000 Cost of goods sold...... 100,000 159,000 The White Division occupies 20,000 square feet in the plant. The Grey 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 White and Grey 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.

Q: 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.

Q: 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.

Q: A firm produces and sells two products, Mica and Plax. The following information is available relating to setup costs (a part of factory overhead): Mica Plax Units produced.................... 200 16,000 Batch size (units)................. 10 400 Number of setups............... 20 40 Direct labor hours per unit... 5 5 Total direct labor hours....... 1,000 80,000 Cost per setup.................... $ 1,080 Total setup cost.................. $64,800 Using number of setups as the activity base, the amount of setup cost allocated to each unit of product for Mica and Plax, 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

Q: A firm produces and sells two products, Mica and Plax. The following information is available relating to setup costs (a part of factory overhead): Mica Plax Units produced.................... 200 16,000 Batch size (units)................. 10 400 Number of setups................. 20 40 Direct labor hours per unit... 5 5 Total direct labor hours....... 1,000 80,000 Cost per setup...................... $ 1,080 Total setup cost................... $64,800 With traditional two-stage allocation of overhead costs, using direct labor hours as the allocation base, the setup cost portion of overhead that is allocated to each unit of product for Mica and Plax, 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.

Q: 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.

Q: Mace Department store allocates its service department expenses to its various operating (sales) departments. The following data is available: Expense Basis for allocation Amount Rent Square feet of floor space $24,000 Advertising Amount of dollar sales $30,000 Administrative Number of employees $45,000 The following information is available for its three operating (sales) departments: Square Dollar Number of Department Feet Sales employees A 3,000 $280,000 6 B 3,400 $300,000 8 C 3,600 $420,000 10 What is the total expense allocated to Department B? A. $29,375. B. $30,462. C. $30,500. D. $30,775. E. $32,160.

Q: Farber, 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: Operating costs................ No. of employees ................ Sq. ft. of space................ Admin. Maintenance Assembly Packaging $30,000 $15,000 2 $70,000 6 2,000 $45,000 4 3,000 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.

Q: White 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: Service Depts. Production Depts. Payroll Maintenance Milling Assembly Direct costs............... $20,400 $25,500 $76,500 $105,400 No. of personnel....... 15 15 45 Sq. ft. of space......... 10,000 15,000 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.

Q: Wilson Trade 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 Automotive 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? Department Students Classrooms Electrical............ 120 10,000 sq. ft. Automotive. 70 12,000 sq. ft. Secretarial 50 8,000 sq. ft. Plumbing. 40 6,000 sq. ft...................... . A. $ 0. B. $17,000. C. $18,500. D. $22,667. E. $30,000.

Q: Able Company has two operating (production) departments: Assembly and Fabricating. Assembly has 150 employees and occupies 44,000 square feet; Fabricating 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 Assembly Department for the current period is: A. $ 48,000. B. $ 55,000. C. $103,000. D. $104,000. E. $110,000.

Q: 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 and value of the space occupied by each. Department One occupies 2,000 square feet of ground-floor space, Department Two occupies 3,000 square feet of ground-floor space, and Department Three occupies 5,000 square feet of second-floor space. If rents for comparable floor space in the neighborhood average $2.20 per square foot for ground-floor space and $1.10 per square foot for second-floor space and the rent is allocated based on the total value of the space, Department One should be charged rent expense for the period of: A. $4,400. B. $4,000. C. $3,000. D. $2,200. E. $2,000.

Q: A company rents a building with a total of 100,000 square feet, which are evenly divided between two floors. The space on the first floor is considered twice as valuable as that 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. $6,000. B. $5,000. C. $3,000. D. $4,000. E. $2,000.

Q: In a firm that manufactures clothing, the department that is responsible for actually assembling the garments could best be described as a: 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.

Q: The amounts in a flexible budget are based on one expected level of sales or production.

Q: Fixed budget performance reports compare actual results with the expected amounts in the fixed budget.

Q: Management by exception allows managers to focus on the most significant variances in performance.

Q: Within the same budget performance report, it is impossible to have both favorable and unfavorable variances.

Q: A cost variance equals the sum of the quantity variance and the price variance.