Exam 12: Fundamentals of Management Control Systems

Which of the following elements is not part of a management control system?

Cost allocation of shared facilities cost is intended to remind managers of:

Mesa Telcom has three divisions, commercial, retail, and consumer, that share the common costs of the company's computer server network. The annual common costs are $2,400,000. You have been provided with the following information for the upcoming year: Connections Time on Network (hours) Commercial 60,000 120,000 Retail 80,000 150,000 Consumer 100,000 330,000 - The cost accountant determined $1,700,000 of the server network's costs were fixed and should be allocated based on the number of connections. The remaining costs should be allocated based on the time on the network. What is total server network costs allocated to the Retail Division (rounded to the nearest whole dollar), assuming the company uses dual-rates to allocate common costs?

Layton Company operates a cafeteria for the benefit of its employees. The company subsidizes the cafeteria heavily by allowing employees to purchase meals at greatly reduced prices. Budgeted and actual costs in the cafeteria for the year just ended are as follows: Budgeted Actual Variable costs \ 500,000 \ 436,000 Fixed costs \ 340,000 \ 352,000 Costs of the cafeteria are charged to producing departments on the basis of the number of employees in these departments. Fixed costs are charged on the basis of the peak-period number of employees. Data on employees in the company's producing departments follows: Machining Assembly Total Budgeted number of employees 300 500 800 Actual number of employees 200 400 600 Peak-period number of employees 400 600 1,000 Required: a. Compute the dollar amount of variable and fixed costs that should be charged to each of the producing departments at the end of the year for purposes of evaluating performance. b. Identify the amount, if any, of actual costs that should not be charged to the operating departments.

Which of the following correctly defines a principal-agent relationship?

An operating unit that is responsible for revenues only is commonly referred to as a(n):

Which of the following statements is/are correct? I. A profit center has control over both costs and revenues. II. An investment center has control over invested funds, but not over costs and revenues. III. A cost center has no control over sales.

The design and use of management control systems uses concepts from which of the following disciplines?

Which of the following statements is/are false regarding the effective use of management control systems? (A) In general, single rate cost allocations should not be used in management control systems because clear control over the cost being allocated cannot be determined. (B) The primary reason to use a dual rate allocation system is to focus a manager's performance evaluation on factors under the manager's direct control.

Internal controls are not legally required for publicly traded companies.

The Copy Department in the College of Business at State University provides photocopying services for both the Marketing and Economics Departments. The following budget has been prepared for the year. Available capacity 6,000,000 pages Budgeted usage: Marketing 3,600,000 pages Economics 1,800,00 pages Cost equation \ 120,000+\ 0.025 per page - If the Copy Department uses a dual rate for allocating its costs based on usage, how much cost will be allocated to the Economics Department?

Decentralized organizations can delegate authority and still maintain control and monitor managers' performance by designing appropriate management control systems. Which of the following responsibility centers would be evaluated similar to an independent business? (CMA, adapted)

Describe the five basic types of decentralized units in responsibility accounting.

What does dysfunctional decision-making refer to?

Which of the following items would be classified as a fixed compensation item?

The Barton Creek Company has three client-contact departments: Market Research, Branding, and Promotion. Each department requires the services of the Legal Department for the contracts that each undertakes. The size of the Legal Department was based on long-run estimates of contracts. Information on the Legal Department's budgeted and actual costs is as follows: The budget for the Legal Department is $300,000 + $10/contract. The budgeted volume of contracts is as follows: Market Research 300 Branding 500 Promotion 700 The actual number of contracts for Market Research was 315, for Branding was 450, and for Promotion was 720. Required: (Use three decimal places in your calculations.) a. If a single charging rate based on budgeted usage is used, how much of the cost of the Legal Department would be allocated to each of the producing departments? b. If a dual charging rate is used, how much of the cost of the Legal Department would be allocated to each of the producing departments?

The Document Creation Center (DCC) for Arlington Corp. provides photocopying and document services for three departments in the Minneapolis office. The following budget has been prepared for the year. Available capacity 8,000,000 pages Budgeted usage: Software Development 1,600,00 pages Training 3,000,00 pages Management 2,400,000 pages Cost equation \ 280,000+\ 0.03 per page - If DCC uses a dual-rate for allocating its costs, how much cost will be allocated to the Software Development Department, assuming the Software Development Department actually made 1,780,000 copies during the year?

Roadways Enterprises has two divisions, Production and Support, that share the common costs of the company's communications network. The annual common costs are $4,500,000. You have been provided with the following information for the upcoming year: Calls Time on Network (hours) Production 200,000 240,000 Support 160,000 660,000 Required: (Use three decimal places in your calculations.) a. What is the allocation rate for the upcoming year assuming Roadways uses the single-rate method and allocates common costs based on the number of calls? Calculate the costs allocated to each division. b. What is the allocation rate for the upcoming year assuming Roadways uses the single-rate method and allocates common costs based on the time on the network? Calculate the costs allocated to each division. c. The cost accountant determined $2,700,000 of the communication network's costs were fixed and should be allocated based on the number of calls. The remaining costs should be allocated based on the time on the network. What is the total communication network costs allocated to each division?

Controllable revenue is included in a performance report of a: Cost Center Profit Center A) Yes No B) Yes Yes C) No No D) No Yes

Talent Engineering has two divisions, Research and Sales, that share the common costs of the company's communications network. The annual common costs are $2,250,000. You have been provided with the following information for the upcoming year: Calls Time on Network (hours) Research 50,000 60,000 Sales 40,000 165,000 Required: The cost accountant determined $1,350,000 of the communication network's costs were fixed and should be allocated based on the number of calls. The remaining costs should be allocated based on the time on the network. What is the total communication network costs allocated to each division? (Use three decimal places in your calculations.)