Q&A Hero

Q: The most useful 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.

Q: 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. All of the individuals would be evaluated in terms of controllable costs.

Q: Plans that identify costs and expenses under each managers control prior to the reporting period are called: A. Cost accounting systems. B. Managerial accounting systems. C. Responsibility accounting systems. D. Responsibility accounting budgets. E. Activity-based accounting systems.

Q: Costs that the manager does not have the power to determine or at least strongly influence are: A. Variable costs. B. Uncontrollable costs. C. Indirect costs. D. Direct costs. E. Joint costs.

Q: An accounting system that provides information that management can use to evaluate the performance of a department's manager is called a: A. Cost accounting system. B. Managerial accounting system. C. Responsibility accounting system. D. Financial accounting system. E. Activity-based accounting system.

Q: A report that accumulates the actual costs 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.

Q: Costs that the manager has the power to determine or at least strongly influence are called: A. Uncontrollable costs. B. Controllable costs. C. Joint costs. D. Direct costs. E. Indirect costs.

Q: 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.

Q: The allocation bases for assigning indirect costs include: A. Only physical bases. B. Only cost bases. C. Only value bases. D. Only unit bases. E. Any appropriate and reasonable bases.

Q: A company has two departments, A and B that incur delivery expenses. An analysis of the total delivery expense of $9,000 indicates that Dept. A had a direct expense of $1,000 for deliveries and Dept. B had no direct expense. The indirect expenses are $8,000. The analysis also indicates that 60% of regular delivery requests originate in Dept. A and 40% originate in Dept. B. Departmental delivery expenses for Dept. A and Dept. B, respectively, are: A. $4,500; $4,500. B. $5,800; $3,200. C. $5,500; $3,500. D. $5,500; $4,500. E. $5,400; $3,600.

Q: A difficult problem 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. Assigning indirect expenses to the department. D. Determining the amount of sales of the department. E. Determining the direct expenses of the department.

Q: 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.

Q: 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.

Q: Expenses that are not easily associated with a specific department, and which are incurred for the benefit of more than one department, are: A. Fixed expenses. B. Indirect expenses. C. Direct expenses. D. Uncontrollable expenses. E. Variable expenses.

Q: 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.

Q: An expense that does not require allocation between departments is a(n): A. Common expense. B. Indirect expense. C. Direct expense. D. Administrative expense. E. All of the options are correct.

Q: 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 effectively using center assets. D. an investment center provides services to profit centers. E. There is no difference; investment center and profit center are synonymous.

Q: 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.

Q: An accounting system that provides information that management can use to evaluate the profitability and/or cost effectiveness of a department's activities is a: A. Departmental accounting system. B. Cost accounting system. C. Service accounting system. D. Revenue accounting system. E. Standard accounting system.

Q: A profit center: A. Incurs costs, but does not directly generate revenues. B. Incurs costs and directly generates revenues. C. Has a manager who is evaluated solely on efficiency in controlling costs. D. Incurs only indirect costs and directly generates revenues. E. Incurs only indirect costs and generates revenues.

Q: A unit of a business that not only incurs costs, but also generates revenues, is called a: A. Performance center. B. Profit center. C. Cost center. D. Responsibility center. E. Expense center.

Q: A cost center is a unit of a business that incurs costs but does not directly generate revenues. All of the following are considered cost centers except: A. Accounting department. B. Purchasing department. C. Research department. D. Advertising department. E. All of these could be considered cost centers.

Q: Departmental contribution to overhead is the same as gross profit generated by that department.

Q: Departmental contribution to overhead is the amount of revenues for that department less its direct expenses.

Q: Departmental income statements are prepared for operating as well as service departments.

Q: The process of preparing departmental income statements starts with allocating service departments.

Q: A single basis for allocating service department costs to production departments should be used for all service departments.

Q: Traditional two-stage cost allocation means that indirect costs are first allocated to both operating and service departments, then operating department costs are allocated to service departments.

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

Q: A measure used to evaluate the manager of an investment center is return on total costs for the investment center.

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

Q: Investment center managers are evaluated on their use of center assets to generate income.

Q: 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.

Q: 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.

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

Q: Joint costs are a group of several costs incurred in producing or purchasing a single product.

Q: A responsibility accounting performance report usually compares actual costs to budgeted costs amounts.

Q: A department's direct expenses can be entirely avoided if the department manager carefully controls and monitors operations.

Q: Generally, it does not matter how cost allocations are designed and explained, because most managers do not care whether the allocations appear to be fair or not.

Q: Advertising expense can be reasonably allocated to departments on the basis of sales.

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

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

Q: Indirect expenses should be allocated to departments based upon the benefits received by each department.

Q: A department that is responsible for maximizing revenues is known as a profit center.

Q: Departmental information is important and always disclosed to the public as part of the company's annual report and footnotes.

Q: Evaluation of the performance of managers of profit centers assumes that the managers can control or influence both costs and revenue generation.

Q: The __________ is a report of the amount of sales less direct expenses for a department.

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

Q:

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

Q:

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?

Q:

Q: