Bradley Corporation Bradley Corporation has three production departments A,B,andC.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 Personnel (round to the nearest dollar)?

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

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.A transfer price based on market price would be set at ____ per unit.

A) $2.10 B) $2.50 C) $1.60 D) $2.25 A) $2.10 B) $2.50 C) $1.60 D) $2.25

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.A transfer price based on variable cost will be set at ____ per unit.

A) $0.50 B) $0.65 C) $0.95 D) $1.10 A) $0.50 B) $0.65 C) $0.95 D) $1.10

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.Assume that Administration costs have been allocated and the balance in Personnel is $860,000.What amount is allocated to A (round to the nearest dollar)?

A) $213,964 B) $106,982 C) $430,000 D) $0 A) $213,964 B) $106,982 C) $430,000 D) $0

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

With two autonomous division managers,the price of goods transferred between the divisions needs to be approved by

(Multiple Choice)

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Question 121

To identify costs that relate to a specific product,an allocation base should be chosen that

(Multiple Choice)

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Question 122

When using a negotiated transfer price,a decision must be made which market price to use.

(True/False)

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Question 123

In computing a transfer price,the minimum price should be no lower than the incremental costs associated with the goods plus the opportunity cost of the facilities used.

(True/False)

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Question 124

Bradley Corporation Bradley Corporation has three production departments A,B,andC.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 Personnel (round to the nearest dollar)?

(Multiple Choice)

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Question 125

In computing a transfer price,the maximum price should be no higher than the lowest market price at which the buying segment can obtain the good or service externally.

(True/False)

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Question 126

St.Paul Medical Clinic has two service departments: Building Operations and Utilities,and three operating departments: Rehabilitation,Preventative Medicine,and Geriatrics.St.Paul Medical Clinic allocates the cost of Building Operations on the basis of square footage and Utilities on the basis of patient days.Fixed and variable costs are not separated. Budgeted operating data for the previous year are presented below:

Service Building Operations Departments Utilities Operating Rehabilitation Departments Preventative Medicine Geriatrics

Budgeted costs before allocation $20,000 $10,000 $90,000 $60,000 $100,000

Square Footage 1,000 4,000 6,000 18,000 12,000

Patient Days - - 5,500 7,700 8,800

Required: a. Prepare a schedule to allocate service department costs to operating departments by the chrect method (round all dollar amounts to the ne arest whole dollar). b. Prepare a schechule to allocate service department costs to operating departments by the step method, allocating Building Operations first (round all amounts to the nearest whole dollar).

	Service Building Operations	Departments Utilities	Operating Rehabilitation	Departments Preventative Medicine	Geriatrics
Budgeted costs before allocation	$20,000	$10,000	$90,000	$60,000	$100,000
Square Footage	1,000	4,000	6,000	18,000	12,000
Patient Days	-	-	5,500	7,700	8,800

(Essay)

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Question 127

When one responsibility center uses a transfer price to transfer goods or services to another responsibility center a ___________________________________ is created.

(Short Answer)

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Question 128

Transfer prices can be used to promote goal congruence among operating segments of an organization.

(True/False)

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Question 129

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: Total sales(all external) \ 250,00 Expenses(all on a urit base): Variable manufacturing \ 0.50 Fixed manufacturing .25 Variable selling .30 Fixed selling .40 Variable G\&A .15 Fixed G\&A Total 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.A transfer price based on market price would be set at ____ per unit.

(Multiple Choice)

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Question 130

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: Total sales(all external) \ 250,00 Expenses(all on a urit base): Variable manufacturing \ 0.50 Fixed manufacturing .25 Variable selling .30 Fixed selling .40 Variable G\&A .15 Fixed G\&A Total 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.A transfer price based on variable cost will be set at ____ per unit.

(Multiple Choice)

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Question 131

An internal reconciliation account is not required for internal transfers based on

(Multiple Choice)

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Question 132

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.Assume that Administration costs have been allocated and the balance in Personnel is $860,000.What amount is allocated to A (round to the nearest dollar)?

(Multiple Choice)

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Question 133

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 autonomous Housing and Carpet Divisions enter negotiations on the internal transfer of 40,000 square yards of carpeting,what is the Carpet Division's minimum price?

(Essay)

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Question 134

Decentralization can result in a lack of goal congruence among departments.

(True/False)

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Question 135

Why don't upper-level managers simply dictate transfer prices to divisional managers,and thereby avoid all the hassles and expense of the negotiations between them (divisional managers)?

(Essay)

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Question 136

An advance pricing agreement can eliminate the possibility of double taxation on multinational exchanges of goods.

(True/False)

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Question 137

The manager of a revenue center has the authority to establish selling prices of product.

(True/False)

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Question 138

As the internal transfer price is increased,

(Multiple Choice)

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Question 139

Indirect costs should be allocated for all of the following reasons except to

(Multiple Choice)

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Question 140

With two autonomous division managers,the price of goods transferred between the divisions needs to be approved by

To identify costs that relate to a specific product,an allocation base should be chosen that

When using a negotiated transfer price,a decision must be made which market price to use.

In computing a transfer price,the minimum price should be no lower than the incremental costs associated with the goods plus the opportunity cost of the facilities used.

In computing a transfer price,the maximum price should be no higher than the lowest market price at which the buying segment can obtain the good or service externally.

When one responsibility center uses a transfer price to transfer goods or services to another responsibility center a ___________________________________ is created.

Transfer prices can be used to promote goal congruence among operating segments of an organization.

An internal reconciliation account is not required for internal transfers based on

Decentralization can result in a lack of goal congruence among departments.

Why don't upper-level managers simply dictate transfer prices to divisional managers,and thereby avoid all the hassles and expense of the negotiations between them (divisional managers)?

An advance pricing agreement can eliminate the possibility of double taxation on multinational exchanges of goods.

The manager of a revenue center has the authority to establish selling prices of product.

As the internal transfer price is increased,

Indirect costs should be allocated for all of the following reasons except to

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