Exam 24: Performance Measurement and Responsibility Accounting

A granary allocates the cost of unprocessed wheat to the production of feed, flour, and starch. For the current period, unprocessed wheat was purchased for $120,000, and the following quantities of product and sales revenues were produced. Product Pounds Price per Pound Feed 100,000 \ 0.70 Flour 50,000 2.20 Starch 20,000 1.00 How much of the $120,000 cost should be allocated to feed if the value basis is used?

Departmental contribution to overhead is the same as gross profit generated by that department.

A challenge in calculating the total costs and expenses of a department is:

Two investment centers at Marshman Corporation have the following current-year income and asset data: Investment Center B Investment Center A Investment Center B Investment center income \ 415,000 \ 525,000 Investment center average inv ested assets \ 2,400,000 \ 1,950,000 - The return on investment (ROI) for Investment Center B is:

In regard to joint cost allocation, the "split-off point" is:

Joint costs can be allocated either using a physical basis or a value basis.

Using the information below, compute the cycle efficiency: Process time 6.0 hours Inspections time .5 hours Move time 6 hours Wait time .9 hours Warehouse storage time 72.0 hours

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: Ottice Expenses Total Allocation Basis Salaries \ 30,000 Number of employees Depreciation 20,000 Cost of goods sold Advertising 40,000 Net sales Item Drilling Grinding Total Number of emplovees 1,000 1,500 2,500 Net sales \ 325,000 \ 475,000 \ 800,000 Cost of goods sold \ 75,000 \ 125,000 \ 200,000 - The amount of the advertising cost that should be allocated to Grinding for the current period is:

Indirect expenses are allocated to departments based upon the benefits received by each department.

Departmental contribution to overhead is the amount of sales for that department, less its direct expenses.

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: Ottice Expenses Total Allocation Basis Salaries \ 30,000 Number of employees Depreciation 20,000 Cost of goods sold Advertising 40,000 Net sales Item Drilling Grinding Total Number of emplovees 1,000 1,500 2,500 Net sales \ 325,000 \ 475,000 \ 800,000 Cost of goods sold \ 75,000 \ 125,000 \ 200,000 - The amount of salaries that should be allocated to Drilling for the current period is:

Rent and maintenance expenses would most likely be allocated based on:

Direct expenses require allocation across departments because they cannot be readily traced to one department.

The following data is available for the Janitorial Services Department of Glitterol Co. Revenues \ 216,000 Cost of Sales 168,000 Expenses: Supplies-Direct 12,000 Salaries-Indirect Allocated 34,000 Rent-Direct 8,000 Rent-Indirect Allocated 4,500 Required: Calculate departmental contribution to overhead for the Janitorial Services Department, including the department's contribution as a percentage of revenues.

The Linens Department of the Krafton Department Store had sales of $282,000, cost of goods sold of $173,500, indirect expenses of $19,875, and direct expenses of $41,250 for the current period. What is the Linens Department's contribution to overhead as a percent of sales?

A retail store has three departments, S, T, and U, and does general advertising that benefits all departments. Advertising expense totaled $50,000 for the year, and departmental sales were as follows. Allocate advertising expense to Department T based on departmental sales. Department S \ 110,000 Department T 213,750 Department U 151,250 Total \ 475,000

A unit of a business that generates revenues and incurs costs is called a:

Division X makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers \ 75 Variable cost per unit \ 50 Total fixed costs \ 400,000 Capacity in units 25,000 Division Y of the same company would like to use the part manufactured by Division X in one of its products. Division Y currently purchases a similar part made by an outside company for $49 per unit and would substitute the part made by Division X. Division Y requires 5,000 units of the part each period. Division X has ample excess capacity to handle all of Division Y's needs without any increase in fixed costs and without cutting into outside sales. According to the formula in the text, what is the lowest acceptable transfer price from the standpoint of the selling division?

Williams Co. operates three separate departments (R, S, T). The data below is provided for the current year: Total Sales \ 120,000(\ 40,000 from each department) Cost of Goods Sold 80,000(50\% from R; 25\% from ;25\% from T) Direct Expense. \ 26,000(\ 6,000 from R;\ 12,000 from S;\ 8,000 from T) Indirect Expenses 9,000 Required: Prepare an income statement showing the departmental contributions to overhead for the current year.

No standard rule identifies the best basis of allocating expenses across departments, so it is impossible to allocate costs in a manner that will be perceived as fair.