The senior management of Teens Love Chocolate (TLC), an operator of day-care facilities, wants the company's profit to be subdivided by centre. The firm's management accountant has provided the following data for the period ended December 31, 2012: $\begin{array} { | l | r | r | r | r | } \hline { \text { Centre } } & \text { Actual Revenue } & \text { Budgeted Revenue } & \text { Actual Direct Costs } & \begin{array} { c } \text { Budgeted Direct } \\ \text { Costs } \end{array} \\ \hline \text { Brooklyn } & \$ 440,000 & \$ 420,000 & \$ 400,000 & 400,000 \\ \hline \text { Manhattan } & 634,200 & 660,000 & \$ 440,000 & 610,000 \\ \hline \text { Queens } & \underline { 845,300 } & \underline { 820,000 } & \underline { 840,000 } & \underline { 790,000 } \\ \hline \text { Totals } & \underline { \$ 1.919,700 } & \underline { \$ 1,900,000 } & \$ \underline { \$ 180,000 } & \$ 1.800,000 \\ \hline \end{array}$ TLC's advertising, which is handled by the home office, is not reflected in the preceding figures and amounted to $80,000. Assume that management used the allocation base that is most influenced by advertising effort and consistent with sound managerial accounting practices. How much advertising would be allocated to Manhattan?

A) $24,270. B) $26,249. C) $27,111. D) $27,790. E) $80,000. A) $24,270. B) $26,249. C) $27,111. D) $27,790. E) $80,000.

Sassy Scents operates two retail outlets in Vaughan Mills and Yorkville. The following information relates to the Yorkville location: $\begin{array} { l r } \text { Sales Revenue } & \$ 800,000 \\ \text { Variable operating expenses } & 300,000 \\ \text { Fixed expenses: } & \\ \text { Traceable to Yorkville and controllable by Yorkville } & 175,000 \\ \text { Traceable to Yorkville and controllable by others } & 100,000 \end{array}$ Yorkville's segment profit margin is:

A) $225,000. B) $325,000. C) $400,000. D) $500,000. E) $525,000. A) $225,000. B) $325,000. C) $400,000. D) $500,000. E) $525,000.

Montreal Corporation has two divisions, Longueuil and Verdun, and evaluates management on the basis of return on investment. Longueuil currently makes a part that it sells to both Verdun and outsiders. Selected data follow. $\begin{array} { | l | r | } \hline \text { Selling price to Verdun } & \$ \\ \hline \text { Variable cost } & 18 \\ \hline \text { Fixed costs } & 80,000 \\ \hline \end{array}$ Longueuil is seeking an increase in its selling price to $28 per unit because of rising costs. Verdun can obtain comparable units from an outside supplier for $23; however, if Verdun uses the supplier, Longueuil will have idle capacity because of an inability to increase sales to outsiders. From the perspective of Montreal Corporation.

A) Longueuil should continue to do business with Verdun and charge $28 per unit. B) Longueuil should continue to do business with Longueuil and charge $25 per unit. C) Longueuil should continue to do business with Verdun because Longueuil's variable cost per unit is only $18. D) Verdun should do business with the outside supplier. E) Verdun should split its business between Longueuil and the outside supplier. A) Longueuil should continue to do business with Verdun and charge $28 per unit. B) Longueuil should continue to do business with Longueuil and charge $25 per unit. C) Longueuil should continue to do business with Verdun because Longueuil's variable cost per unit is only $18. D) Verdun should do business with the outside supplier. E) Verdun should split its business between Longueuil and the outside supplier.

The senior management of Teens Love Chocolate (TLC), an operator of day-care facilities, wants the company's profit to be subdivided by centre. The firm's management accountant has provided the following data for the period ended December 31, 2012: $\begin{array} { | l | r | r | r | r | } \hline { \text { Centre } } & \text { Actual Revenue } & \text { Budgeted Revenue } & \text { Actual Direct Costs } & \begin{array} { c } \text { Budgeted Direct } \\ \text { Costs } \end{array} \\ \hline \text { Brooklyn } & \$ 440,000 & \$ 420,000 & \$ 400,000 & 400,000 \\ \hline \text { Manhattan } & 634,200 & 660,000 & \$ 440,000 & 610,000 \\ \hline \text { Queens } & \underline { 845,300 } & \underline { 820,000 } & \underline { 840,000 } & \underline { 790,000 } \\ \hline \text { Totals } & \underline { \$ 1.919,700 } & \underline { \$ 1,900,000 } & \$ 1.780,000 & \$ 1.800,000 \\ \hline \end{array}$ TLC's advertising, which is handled by the home office, is not reflected in the preceding figures and amounted to $80,000. If advertising expense were allocated to centres based on actual centre profitability, how much advertising would be allocated to Manhattan?

A) $17,684. B) $24,270. C) $26,429. D) $53,920. E) $80,000. A) $17,684. B) $24,270. C) $26,429. D) $53,920. E) $80,000.

A) are always traceable to a segment's activities: B) are easily related to a segment's activities. C) are charged to a company's operating segments when preparing a segmented income statement. D) are not charged to a company's operating segments when preparing a segmented income statement. E) are not easily related to a segment's activities and are not charged to a company's operating segments when preparing a segmented income statement. A) are always traceable to a segment's activities: B) are easily related to a segment's activities. C) are charged to a company's operating segments when preparing a segmented income statement. D) are not charged to a company's operating segments when preparing a segmented income statement. E) are not easily related to a segment's activities and are not charged to a company's operating segments when preparing a segmented income statement.

Which of the following measures would reflect the variable costs incurred by a business segment? $\begin{array} { | l | c | c | c | c | } \hline & \begin{array} { c } \text { Segment } \\ \text { Contribution } \\ \text { Margin } \end{array} & { \begin{array} { c } \text { Profit Margin } \\ \text { Controllable by Segment } \\ \text { Manager } \end{array} } & \begin{array} { c } \text { Segment } \\ \text { Profit Margin } \end{array} \\ \hline 1 & \text { Yes } & \text { No } & \text { No } \\ \hline 2 & \text { Yes } & \text { No } & \text { Yes } \\ \hline 3 & \text { Yes } & \text { Yes } & \text { No } \\ \hline 4 & \text { Yes } & \text { Yes } & \text { Yes } \\ \hline 5 & \text { No } & \text { Yes } & \text { Yes } \\ \hline \end{array}$

A) 1 B) 2 C) 3 D) 4 E) 5 A) 1 B) 2 C) 3 D) 4 E) 5

Exam 11: Responsibility Accounting, Investment Centres, and Transfer Pricing

Major Scale Corporation's Gauge Division manufactures and sells product no. 1256, which is used in home bathroom scales. Per-unit variable manufacturing and selling costs amount to $33 and $7, respectively. The Division can sell this item to external domestic customers for $60 or, alternatively, transfer the product to the company's Assembly Division. Assembly is currently purchasing a similar unit from Vietnam for $52. Assume use of the general transfer-pricing rule. Required: A. What is the most that the Assembly Division would be willing to pay the Gauge Division for one unit? B. If Gauge had excess capacity, what transfer price would the Division's management set? C. If Gauge had no excess capacity, what transfer price would the Division's management set? D. Repeat part "C," assuming that Gauge was able to reduce the variable cost of internal transfers by $9 per unit.

(Essay)

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Question 41

The senior management of Teens Love Chocolate (TLC), an operator of day-care facilities, wants the company's profit to be subdivided by centre. The firm's management accountant has provided the following data for the period ended December 31, 2012: Centre Actual Revenue Budgeted Revenue Actual Direct Costs Budgeted Direct Costs Brooklyn \ 440,000 \ 420,000 \ 400,000 400,000 Manhattan 634,200 660,000 \ 440,000 610,000 Queens Totals \ \ 1.800,000 TLC's advertising, which is handled by the home office, is not reflected in the preceding figures and amounted to $80,000. Assume that management used the allocation base that is most influenced by advertising effort and consistent with sound managerial accounting practices. How much advertising would be allocated to Manhattan?

(Multiple Choice)

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Question 42

Sassy Scents operates two retail outlets in Vaughan Mills and Yorkville. The following information relates to the Yorkville location: Sales Revenue \ 800,000 Variable operating expenses 300,000 Fixed expenses: Traceable to Yorkville and controllable by Yorkville 175,000 Traceable to Yorkville and controllable by others 100,000 Yorkville's segment profit margin is:

(Multiple Choice)

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Question 43

Montreal Corporation has two divisions, Longueuil and Verdun, and evaluates management on the basis of return on investment. Longueuil currently makes a part that it sells to both Verdun and outsiders. Selected data follow. Selling price to Verdun \ Variable cost 18 Fixed costs 80,000 Longueuil is seeking an increase in its selling price to $28 per unit because of rising costs. Verdun can obtain comparable units from an outside supplier for $23; however, if Verdun uses the supplier, Longueuil will have idle capacity because of an inability to increase sales to outsiders. From the perspective of Montreal Corporation.

(Multiple Choice)

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Question 44

Vacation Properties Limited owns six hotels in the province of Quebec, collectively known as the Eastern Townships Division. The various hotels, including the Richelieu Hotel, have operating departments (such as Maintenance, Housekeeping, and Food and Beverage) that are evaluated as either cost centres or profit centres. The Food and Beverage Department, for example, is a profit centre, with activities divided into three segments: Banquets and Catering, Restaurants, and Kitchen. If Vacation Properties Limited uses a performance-reporting system that is based on responsibility accounting, which of the following disclosures is likely to occur?

(Multiple Choice)

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Question 45

Which of the following is not an example of a responsibility centre?

(Multiple Choice)

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Question 46

Performance reports help managers:

(Multiple Choice)

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Question 47

Laissez Faire has two divisions: the Cologne Division and the Bottle Division. The Bottle Division produces containers that can be used by the Cologne Division. The Bottle Division's variable manufacturing cost is $2, shipping cost is $0.10, and the external sales price is $3. No shipping costs are incurred on sales to the Cologne Division, and the Cologne Division can purchase similar containers in the external market for $2.60. Assume the Bottle Division has no excess capacity. Using the general rule, the transfer price from the Bottle Division to the Cologne Division would be:

(Multiple Choice)

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Question 48

Sonoma Corporation is a multi-divisional company whose managers have been delegated full profit responsibility and complete autonomy to accept or reject transfers from other divisions. Division X produces 2,000 units of a subassembly that has a ready market. One of these subassemblies is currently used by Division Y for each final product manufactured, the latter of which is sold to outsiders for $1,600. Y's sales during the current period amounted to 2,000 completed units. Division X charges Division Y the $1,100 market price for the subassembly; variable costs are $850 and $600 for Divisions X and Y, respectively. The manager of Division Y feels that X should transfer the subassembly at a lower price because Y is currently unable to make a profit. Required: A. Calculate the contribution margins (total dollars and per unit) of Divisions X and Y, as well as the company as a whole, if transfers are made at market price. B. Assume that conditions have changed and X can sell only 1,000 units in the market at $900 per unit. From the company's perspective, should X transfer all 2,000 units to Y or sell 1,000 in the market and transfer the remainder? Note: Y's sales would decrease to 1,000 units if the latter alternative is pursued.

(Essay)

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Question 49

Webb Brothers Inc. had sales revenue and operating expenses of $6,000,000 and $5,400,000, respectively, for the year just ended. If invested capital amounted to $8,000,000, the firm's ROI was:

(Multiple Choice)

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Question 50

Century Limited is preparing a segmented income statement, subdivided into departments (billing, purchasing, and telemarketing). Which of the following choices correctly describes the accounting treatment of the firm's compensation cost for key executives (president and vice-presidents)?

(Multiple Choice)

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Question 51

The senior management of Teens Love Chocolate (TLC), an operator of day-care facilities, wants the company's profit to be subdivided by centre. The firm's management accountant has provided the following data for the period ended December 31, 2012: Centre Actual Revenue Budgeted Revenue Actual Direct Costs Budgeted Direct Costs Brooklyn \ 440,000 \ 420,000 \ 400,000 400,000 Manhattan 634,200 660,000 \ 440,000 610,000 Queens Totals \ 1.780,000 \ 1.800,000 TLC's advertising, which is handled by the home office, is not reflected in the preceding figures and amounted to $80,000. If advertising expense were allocated to centres based on actual centre profitability, how much advertising would be allocated to Manhattan?

(Multiple Choice)

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Question 52

Common costs:

(Multiple Choice)

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Question 53

Which of the following is an appropriate base to distribute the cost of building depreciation to responsibility centres?

(Multiple Choice)

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Question 54

The amounts charged for goods and services exchanged between two divisions are known as:

(Multiple Choice)

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Question 55

Which of the following transfer-pricing methods can lead to dysfunctional decision-making behaviour by managers?

(Multiple Choice)

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Question 56

A general calculation method for transfer prices that achieves goal congruence begins with the additional outlay cost per unit incurred because goods are transferred and then

(Multiple Choice)

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Question 57

Which of the following measures would reflect the variable costs incurred by a business segment? Segment Contribution Margin Profit Margin Controllable by Segment Manager Segment Profit Margin 1 Yes No No 2 Yes No Yes 3 Yes Yes No 4 Yes Yes Yes 5 No Yes Yes

(Multiple Choice)

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Question 58

The difference between the profit margin controllable by a segment manager and the segment profit margin is caused by:

(Multiple Choice)

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Question 59

Deborah Lewis, general manager of the Northwest Division of Berkshire Enterprises, has significant authority over pricing decisions as well as programs that involve cost reduction/control. The data that follow relate to upcoming divisional operations: Average invested capital: $15,000,000 Annual fixed costs: $3,900,000 Variable cost per unit: $80 Number of units expected to be sold: 120,000 Required: A. Top management will promote Deborah if she can earn a 14% return on investment for the year. What unit selling price should she establish to get her promotion? B. Independent of part "A," assume the unit selling price is $132 and that Berkshire has a 16% imputed interest charge. Top management will promote Deborah to corporate headquarters if her division can generate $200,000 of residual income. If Deborah desires to move to corporate, what must the division do to the amount of annual fixed costs incurred? Show your calculations.

(Essay)

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Question 60

Showing 41 - 60 of 85

Which of the following is not an example of a responsibility centre?

Performance reports help managers:

Webb Brothers Inc. had sales revenue and operating expenses of $6,000,000 and $5,400,000, respectively, for the year just ended. If invested capital amounted to $8,000,000, the firm's ROI was:

Century Limited is preparing a segmented income statement, subdivided into departments (billing, purchasing, and telemarketing). Which of the following choices correctly describes the accounting treatment of the firm's compensation cost for key executives (president and vice-presidents)?

Common costs:

Which of the following is an appropriate base to distribute the cost of building depreciation to responsibility centres?

The amounts charged for goods and services exchanged between two divisions are known as:

Which of the following transfer-pricing methods can lead to dysfunctional decision-making behaviour by managers?

A general calculation method for transfer prices that achieves goal congruence begins with the additional outlay cost per unit incurred because goods are transferred and then

Which of the following measures would reflect the variable costs incurred by a business segment? Segment Contribution Margin Profit Margin Controllable by Segment Manager Segment Profit Margin 1 Yes No No 2 Yes No Yes 3 Yes Yes No 4 Yes Yes Yes 5 No Yes Yes

The difference between the profit margin controllable by a segment manager and the segment profit margin is caused by:

The Changing Role of Managerial Accounting

Basic Cost Management Concepts

Product Costing and Cost Accumulation

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behaviour, and Cost Estimation

Cost-Volume-Profit Analysis, Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Standard Costing and Flexible Budgeting

Cost Management Tools

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

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