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Exam 22: Performance Measurement and Responsibility Accounting

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Question 91

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Marks Corporation has two operating departments,Drilling and Grinding,and an office.The three categories of office expenses are allocated to the two departments using different allocation bases.The following information is available for the current period: -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.

F) B) and E)
G) A) and B)

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Question 92

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

A) True
B) False

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Question 93

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

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

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?

Using the information below,compute the cycle efficiency:

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.

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

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.

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

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

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

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

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

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.

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 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.

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 $________.

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?

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.