Exam 13: Responsibility Accounting,support Department Allocations,and Transfer Pricing

A service department provides specific functional tasks for other internal units.Which of the following activities would not be engaged in by a service department?

An administrative department provides services that benefit other internal units of an organization.

Crosby Corporation Crosby Corporation has two service departments: Data Processing and Administration/Personnel.The company also has three divisions: X,Y,and Z.Data Processing costs are allocated based on hours of use and Administration/Personnel costs are allocated based on number of employees. Administration /Personnel \ 400,000 10 3,300 Data Processing 850,000 5 1,100 X 450,000 30 1,800 Y 300,000 15 2,200 Z 550.000 25 4,500 Assume that Data Processing provides more service than Administration/Personnel. Refer to Crosby Corporation.Assume that Data Processing costs have been allocated and the balance in Administration is $600,000.Using the step method,what amount is allocated to Z?

Decentralization is a transfer of authority from the top to the lower level of an organization.

Tri-Cities Savings and Loan Tri-Cities Savings and Loan has three departments that generate revenue: loans,checking accounts,and savings accounts.Tri-Cities Savings and Loan has two service departments: Administration/Personnel and Maintenance.The service departments provide service in the order of their listing.The following information is available for direct costs.Administration/ Personnel costs are best allocated based on number of employees while Maintenance costs are best allocated based on square footage occupied. Admin / Pers. \ 530,000 10 30,000 Maintenance 450,000 8 16,500 Loans 900,000 15 45,000 Checking 600,000 6 10,000 Saving 240,500 5 42,000 Refer to Tri-Cities Savings and Loan.Using the step method,compute the amount allocated to each department from Maintenance.

Ecology Solutions Corporation The Green Division of Ecology Solutions Co.has developed a wind generator that requires a special "S" ball bearing.The Ball Bearing Division of Ecology Solutions Co.has the capability to produce such a ball bearing. Unfortunately,the Ball Bearing Division is operating at capacity and will need to reduce production of another existing product,the "T" bearing,by 1,000 units per month to provide the 600 "S" bearings needed each month by the Green Division.The "T" bearing currently sells for $50 per unit.Variable costs incurred to produce the "T" bearing are $30 per unit;variable costs to produce the new "S" bearing would be $60 per unit. The Green Division has found an external supplier that would furnish the needed "S" bearings at $100 per unit.Assume that both the Green Division and Ball Bearing Division are independent,autonomous investment centers. Refer to Ecology Solutions Co.What is the minimum price that Ball Bearing Division would consider to produce the "S" bearing?

After service department costs have been allocated,what is the final step in determining full product cost?

Which of the following is not a method for allocating service department costs?

When the majority of authority is maintained by top management personnel,the organization is said to be

Crosby Corporation Crosby Corporation has two service departments: Data Processing and Administration/Personnel.The company also has three divisions: X,Y,and Z.Data Processing costs are allocated based on hours of use and Administration/Personnel costs are allocated based on number of employees. Administration /Personnel \ 400,000 10 3,300 Data Processing 850,000 5 1,100 X 450,000 30 1,800 Y 300,000 15 2,200 Z 550.000 25 4,500 Assume that Data Processing provides more service than Administration/Personnel. Refer to Crosby Corporation.Using the direct method,what amount of Data Processing costs is allocated to Y (round to the nearest dollar)?

An organizational unit whose manager is responsible for acquiring,using,and disposing of assets in order to maximize return on assets is referred to as a(n)______________________________.

To evaluate the performance of individual departments,interdepartmental transfers of a product should preferably be made at prices

Costs of decentralization include all of the following except

An organizational unit that provides specific tasks for other internal units is referred to as a(n)______________________________.

Which service department cost allocation method considers all interrelationships of the departments and reflects these relationships in equations?

Market based transfer prices are most effective for common high-cost and high-volume standardized services.

Which service department cost allocation method provides for reciprocal allocation of service costs among the service department as well as to the revenue producing departments?

Service departments provide functional tasks for which of the following? $\text {\underline{Internal units } }$                               $\text {\underline{ External units} }$

When management by exception is employed,favorable variances should not be investigated.

Bradley Corporation Bradley Corporation has three production departments A,B,and C.Bradley Corporation also has two service departments,Administration and Personnel.Administration costs are allocated based on value of assets employed,and Personnel costs are allocated based on number of employees.Assume that Administration provides more service to the other departments than does the Personnel Department. Admin. \ 900,000 25 \ 450,000 Personnel 350,000 10 600,000 A 700,000 15 300,000 B 200,000 5 150,000 C 250,000 10 800,000 Refer to Bradley Corporation.Using the step method,what amount of Administration costs is allocated to A (round to the nearest dollar)?