Exam 24: Performance Measurement and Responsibility Accounting

The Footwear Department of Lee's Department Store had sales of $188,000,cost of goods sold of $132,500,indirect expenses of $13,250,and direct expenses of $27,500 for the current period.The Footwear Department's contribution to overhead as a percent of sales is:

The following is a partially completed lower section of a departmental expense allocation spreadsheet for Stoneham.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 Fabrication.

What is a profit center?

Define an investment center.How are investment centers evaluated?

General Chemical produced 10,000 gallons of Breon and 20,000 gallons of Baron.Joint costs incurred in producing the two products totaled $7,500.At the split-off point,Breon has a market value of $6.00 per gallon and Baron $2.00 per gallon.Compute the portion of the joint costs to be allocated to Breon if the value basis is used.

A firm produces and sells two products,Mica and Plax.The following information is available relating to setup costs (a part of factory overhead): With traditional two-stage allocation of overhead costs,using direct labor hours as the allocation base,the setup cost portion of overhead that is allocated to each unit of product for Mica and Plax,respectively is:

White Company has two service departments and two operating (production)departments.The Payroll Department services all three of the other departments in proportion to the number of employees in each.The Maintenance Department costs are allocated to the two operating departments in proportion to the floor space used by each.Listed below are the operating data for the current period: The total cost of operating the Milling Department for the current period is:

A responsibility accounting performance report usually compares actual costs to budgeted costs amounts.

Controllable costs are the same as direct costs.

A department that incurs costs without directly generating revenues is a:

Breon Beef Company uses the relative market value method of allocating joint costs in its production of beef products.Relevant information for the current period follows: The total joint cost for the current period was $43,000.How much of this cost should Breon Beef allocate to sirloin?

What is the purpose of a departmental accounting system?

In the preparation of departmental income statements,the preparer completes the following steps in the following order:

Belgrade Lakes Properties is developing a golf course subdivision that includes 225 home lots; 100 lots are golf course lots and will sell for $95,000 each; 125 are street frontage lots and will sell for $65,000.The developer acquired the land for $1,800,000 and spent another $1,400,000 on street and utilities improvement.Compute the amount of joint cost to be allocated to the street frontage lots using value basis.

Evaluation of the performance of managers of profit centers assumes that the managers can control or influence both costs and revenue generation.

Laurel and Hardy are managers of two product lines for Keaton Company.One of them is a candidate for promotion based on performance.Using the data below,determine who had the better performance using performance measures such as net income,profit margin,and return on assets.Show your calculations and support your answer. Revenue \ldots\ldots\ldots\ldots\ldots\ldots \ 412,000 \ 450,000 Costs \ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots 380,000 411,000 Average Assets \ldots\ldots 400,000 600,000

In a responsibility accounting system:

Mach Co.operates three production departments as profit centers.The following information is available for its most recent year.Department 1's contribution to overhead as a percent of sales is: Cost of Direct Indirect Dept.Sales Goods Sold Expenses Expenses 1 \ 1,000,000 \ 700,000 \ 100,000 \ 80,000 2 400,000 150,000 40,000 100,000 3 700,000 300,000 150,000 20,000

Departmental information is important and always disclosed to the public as part of the company's annual report and footnotes.

Direct costs require allocation across departments.