Question 1

What are four common methods used to allocate service department costs?

Accepted Answer

Direct method--assigns service departmen

Question 2

Castle Homes Corporation
The Carpet Division of Castle Homes Corporation manufactures a single grade of residential grade carpeting.The division has the capacity to produce 500,000 square yards of carpet each year.Its current costs and revenues are shown here:
 Sales (400,000 square yards)                                $\$ 2,000,000$
Variable costs per square yard:
Production                                                             $ \$ 2.00 $
SG&A                                                                      1.00
Fixed costs per square yard (based on 500,000 yard capacity)
 Production                                                              $ \$ 0.50 $
SG&A                                                                      1.00

The Housing Division currently purchases 40,000 yards of carpeting (of the grade produced by the Carpet Division)each year at a cost of $6.50 per square yard from an outside vendor.
Refer to Castle Homes Corporation.If the Housing and Carpet Divisions agree on the internal transfer of 40,000 square yards of carpet at a price of $4.00 per square yard,how will overall corporate profits be affected?

Accepted Answer

Current out side purchase price per squa

Question 3

In a decentralized organization,the cost objective is referred to as a ______________________________.

Accepted Answer

responsibi

Question 4

A service department provides services that benefit other internal units of an organization.

Accepted Answer

A) True 
 B)False

Question 5

Terrell Corporation
Terrell Corporation produces various products used in the construction industry.The Plumbing Division produces and sells 100,000 copper fittings each month.Relevant information for last month follows:
$\begin{array}{lc}
\text { Total sales(all external) } & \$ 250,00 \
\text { Expenses(all on a urit base): } & \
\text { Variable manufacturing } &  \$ 0.50 \
\text { Fixed manufacturing } & .25 \
\text { Variable selling } & .30 \
\text { Fixed selling } & .40 \
\text { Variable G\&A } &.15\
\text { Fixed G\&A } & \underline{.50}\
\text { Total} &\underline{ \$ 2.10}
\end{array}$

Top-level managers are trying to determine how a transfer price can be set on a transfer of 10,000 of the copper fittings from the Plumbing Division to the Bathroom Products Division.
Refer to Terrell Corporation.If the Plumbing Division is operated as an autonomous investment center and its capacity is 100,000 fittings per month,the per-unit transfer price is not likely to be below

Accepted Answer

A) $0.75. 
B) $1.60. 
C) $2.10. 
D) $2.50. 
A) $0.75. 
B) $1.60. 
C) $2.10. 
D) $2.50.

Question 6

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.
$\begin{array}{llcc}
\underline{\text { Dept. }} &\underline{ \text { DirectCosts } }&\underline{ \text { Employees } }&\underline{ \text { Asset Value }} \
\text { Admin. } & \$ 900,000 & 25 &\$ 450,000 \
\text { Personnel } & 350,000 & 10 & 600,000 \
\text { A } & 700,000 & 15 & 300,000 \
\text { B } & 200,000 & 5 & 150,000\
\text { C } & 250,000 & 10 & 800,000
\end{array}$

Refer to Bradley Corporation.Using the step method,what amount of Administration costs is allocated to B (round to the nearest dollar)?

Accepted Answer

A) $72,973 
B) $291,892 
C) $145,946 
D) $389,189 
A) $72,973 
B) $291,892 
C) $145,946 
D) $389,189

Question 7

An organizational unit whose manager is solely responsible for generating revenues is referred to as a ______________________________.

Accepted Answer

The answer of An organizational unit whose manager is solely...

Question 8

Can the performance evaluation measures (for autonomous subunit managers)create goal congruence problems in transfer pricing situations? Explain.

Accepted Answer

Yes,at times,performance-based incentive

Question 9

An administrative department provides services that benefit the entire organization.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

A ____ is a document that reflects the revenues and/or costs that are under the control of a particular manager.

Accepted Answer

A) quality audit report 
B) responsibility report 
C) performance evaluation report 
D) project report 
A) quality audit report 
B) responsibility report 
C) performance evaluation report 
D) project report

Question 12

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.
$\begin{array}{llcc}
\underline{\text { Dept. }} &\underline{ \text { DirectCosts } }&\underline{ \text { Employees } }&\underline{ \text { Asset Value }} \
\text { Admin. } & \$ 900,000 & 25 &\$ 450,000 \
\text { Personnel } & 350,000 & 10 & 600,000 \
\text { A } & 700,000 & 15 & 300,000 \
\text { B } & 200,000 & 5 & 150,000\
\text { C } & 250,000 & 10 & 800,000
\end{array}$

Refer to Bradley Corporation.Using the direct method,what amount of Administration costs is allocated to A (round to the nearest dollar)?

Accepted Answer

A) $216,000 
B) $150,000 
C) $288,000 
D) $54,000 
A) $216,000 
B) $150,000 
C) $288,000 
D) $54,000

Question 13

Negotiated transfer prices are most appropriate for customized high-volume and high-cost services.

Accepted Answer

A) True 
 B)False

Question 14

Decentralization increases the time required for decision-making.

Accepted Answer

A) True 
 B)False

Question 15

Why is "standard cost" a better measure for a transfer price than "actual cost"?

Accepted Answer

When a transfer is based on actual cost,

Question 16

An automotive company has three divisions.One division manufactures new replacements parts for automobiles,another rebuilds engines,and the third does repair and overhaul work on a line of trucks.All three divisions use the services of a central payroll department.The best method of allocating the cost of the payroll department to the various operating divisions is

Accepted Answer

A) total labor hours incurred in the divisions. 
B) value of production in the divisions. 
C) direct labor costs incurred in the divisions. 
D) machine hours used in the divisions. 
A) total labor hours incurred in the divisions. 
B) value of production in the divisions. 
C) direct labor costs incurred in the divisions. 
D) machine hours used in the divisions.

Question 17

Decentralization can lead to greater job enrichment and satisfaction.

Accepted Answer

A) True 
 B)False

Question 18

Responsibility reports at lower levels of the organization are less detailed than reports at the higher levels.

Accepted Answer

A) True 
 B)False

Question 19

Seminole Wire Corporation
The Wire Products Division of Seminole Wire Corporation produces "bales" of steel wire that are used in various commercial applications.The bales sell for an average of $20 each and The Wire Products Division has the capacity to produce 10,000 bales per month.The Consumer Products Division of Seminole Wire Corporation uses approximately 2,000 bales of steel wire each month in its production of various appliances.The operating information for the Wire Products Division at its present level of operations (8,000 bales per month)follows:
 Sales (all external)                                         $ \$ 160,000 $
Variable costs per bale:
Production                                                      $ \$ 5 $
Selling                                                             2
G\&A                                                               3
Fixed costs per bale (based on a 10,000 urit capacity):
Production                                                     $ \$ 2 $
Selling                                                            3
$ \mathrm{Ct} \& \mathrm{~A} $                                                          4

The Consumer Products Division currently pays $15 per bale for wire obtained from its external supplier.
Refer to Seminole Wire Corporation.Assuming,for this question only,that the Wire Products Division would not incur any variable selling costs on internal sales,what is the minimum price that it would consider accepting for sales of bales to the Consumer Products Division?

Accepted Answer

Wire Division must cover its out of pock

Question 20

When using a negotiated transfer price,a determination must be made if comparable substitutes are available externally.

Accepted Answer

A) True 
 B)False

What are four common methods used to allocate service department costs?

In a decentralized organization,the cost objective is referred to as a ______________________________.

A service department provides services that benefit other internal units of an organization.

An organizational unit whose manager is solely responsible for generating revenues is referred to as a ______________________________.

Can the performance evaluation measures (for autonomous subunit managers)create goal congruence problems in transfer pricing situations? Explain.

An administrative department provides services that benefit the entire organization.

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

A ____ is a document that reflects the revenues and/or costs that are under the control of a particular manager.

Negotiated transfer prices are most appropriate for customized high-volume and high-cost services.

Decentralization increases the time required for decision-making.

Why is "standard cost" a better measure for a transfer price than "actual cost"?

Decentralization can lead to greater job enrichment and satisfaction.

Responsibility reports at lower levels of the organization are less detailed than reports at the higher levels.

When using a negotiated transfer price,a determination must be made if comparable substitutes are available externally.

Introduction to Cost Accounting

Cost Terminology and Cost Behaviors

Predetermined Overhead Rates, Flexible Budgets, and Absorptionvariable Costing

Activity-Based Management and Activity-Based Costing

Job Order Costing

Process Costing

Standard Costing and Variance Analysis

The Master Budget

Break-Even Point and Cost-Volume-Profit Analysis

Relevant Information for Decision Making

Allocation of Joint Costs and Accounting for By-Products

Introduction to Cost Management Systems

Performance Measurement, balanced Scorecards, and Performance Rewards

Capital Budgeting

Managing Costs and Uncertainty

Implementing Quality Concepts

Inventory and Production Management

Emerging Management Practices

Filters

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

What are four common methods used to allocate service department costs?

In a decentralized organization,the cost objective is referred to as a ______________________________.

A service department provides services that benefit other internal units of an organization.

An organizational unit whose manager is solely responsible for generating revenues is referred to as a ______________________________.

Can the performance evaluation measures (for autonomous subunit managers)create goal congruence problems in transfer pricing situations? Explain.

An administrative department provides services that benefit the entire organization.

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

A ____ is a document that reflects the revenues and/or costs that are under the control of a particular manager.

Negotiated transfer prices are most appropriate for customized high-volume and high-cost services.

Decentralization increases the time required for decision-making.

Why is "standard cost" a better measure for a transfer price than "actual cost"?

Decentralization can lead to greater job enrichment and satisfaction.

Responsibility reports at lower levels of the organization are less detailed than reports at the higher levels.

When using a negotiated transfer price,a determination must be made if comparable substitutes are available externally.

Introduction to Cost Accounting

Cost Terminology and Cost Behaviors

Predetermined Overhead Rates, Flexible Budgets, and Absorptionvariable Costing

Activity-Based Management and Activity-Based Costing

Job Order Costing

Process Costing

Standard Costing and Variance Analysis

The Master Budget

Break-Even Point and Cost-Volume-Profit Analysis

Relevant Information for Decision Making

Allocation of Joint Costs and Accounting for By-Products

Introduction to Cost Management Systems

Performance Measurement, balanced Scorecards, and Performance Rewards

Capital Budgeting

Managing Costs and Uncertainty

Implementing Quality Concepts

Inventory and Production Management

Emerging Management Practices

Filters