Question 1

In general,calculating ROI based on the gross book value of assets gives managers an incentive to continue using old,outdated equipment.

Accepted Answer

A) True 
 B)False

Question 2

In a decentralized company,all the planning and controlling decisions are made by top management.

Accepted Answer

A) True 
 B)False

Question 3

In many cases,the amount of the transfer price does not affect overall company profits.

Accepted Answer

A) True 
 B)False

Question 4

Net income is used in the numerator of the return on investment formula.

Accepted Answer

A) True 
 B)False

Question 5

List the four types of responsibility centers.For each center,state the responsibility of the manager.
 $$\begin{array} { | c | l | } 
\hline \begin{array} { c } 
\text { Type of } \
\text { responsibility center }
\end{array} & \text { Responsibility of the manager } \
\hline & \
\hline & \
\hline & \
\hline & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | } 
\hline {

Question 6

Revenue center responsibility reports show all costs incurred by the department and are useful when management needs to know the full cost of operating the department.

Accepted Answer

A) True 
 B)False

Question 7

The return on investment formula focuses on the amount of operating income earned before considering other revenue and expense items,such as interest expense.

Accepted Answer

A) True 
 B)False

Question 8

Louie's Music Co.produces three types of harmonicas: the junior model,the standard model and the professional model.The junior model requires 8 setups,the standard model requires 12 setups and the professional model requires 20 setups.The company expects to incur overhead costs of $28,000 where the cost driver is machine setups.How much overhead is assigned to each product?

Accepted Answer

A)  $$\begin{array} { | c | c | c | } 
\hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \
\hline \$ 9,333 & \$ 9,333 & \$ 9,334 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | c | } 
\hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \
\hline \$ 7,000 & \$ 7,000 & \$ 14,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | c | } 
\hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \
\hline \$ 5,600 & \$ 8,400 & \$ 14,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | c | c | } 
\hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \
\hline \$ 3,500 & \$ 7,000 & \$ 17,500 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | c | c | } 
\hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \
\hline \$ 9,333 & \$ 9,333 & \$ 9,334 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | c | } 
\hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \
\hline \$ 7,000 & \$ 7,000 & \$ 14,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | c | } 
\hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \
\hline \$ 5,600 & \$ 8,400 & \$ 14,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | c | c | } 
\hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \
\hline \$ 3,500 & \$ 7,000 & \$ 17,500 \
\hline
\end{array}$$

Question 9

Murphy Construction Materials Company has a sales office that sells concrete culvert pipes to property developers.The sales office is a revenue center and prepares a monthly responsibility report.The partially completed responsibility report is provided. $$\begin{array}{l}
\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Revenue Center Respansibility Report }\
\begin{array} { |c | c | c | l | c | c | c | c| } 
\hline \begin{array} { c } 
\text { Product } \
\text { Type }
\end{array} & \begin{array} { c } 
\text { Actual } \
\text { Sales } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Flexible } \
\text { Budget } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Flexible } \
\text { Budget }
\end{array} & \begin{array} { c } 
\text { Sales } \
\text { Volume } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Static } \
\text { Budget }
\end{array} \
\hline 40 \text { inch } & \$ 31,500 & & & \$ 30,750 & & & \$ 40,600 \
\hline 36 \text { inch long } & 40,150 & & & 42,200 & & & 33,200 \
\hline 36 \text { inch short } & 36,100 & & & 33,100 & & & 31,100 \
\hline \text { 32 inch } & 19,100 & & & 19,700 & & & 28,450 \
\hline
\end{array}
\end{array}$$ The company uses management by exception to address flexible budget variances.On which product type would the company first focus?

Accepted Answer

A)  40 inch 
B)  36 inch long 
C)  36 inch short 
D)  32 inch 
A)  40 inch 
B)  36 inch long 
C)  36 inch short 
D)  32 inch

Question 10

Direct material costs and direct labor costs cannot be easily traced to products.Therefore,they are allocated to products.

Accepted Answer

A) True 
 B)False

Question 11

Kurtz Logistics provides the following information: $$\begin{array} { | l | r | } 
\hline \text { Operating income } & \$ 1,550,000 \
\hline \text { Net sales } & \$ 15,000,000 \
\hline \text { Average total assets } & \$ 1,950,000 \
\hline \text { Management's target rate of return } & 30 \% \
\hline
\end{array}$$ What is the company's profit margin ratio?

Accepted Answer

A)  13.0% 
B)  10.3% 
C)  79.5% 
D)  27.9% 
A)  13.0% 
B)  10.3% 
C)  79.5% 
D)  27.9%

Question 12

Oscar,Inc.,a manufacturer of gift articles,uses a single plantwide rate to allocate indirect costs with machine hours as the allocation base.Estimated overhead costs for the year are $7,000,000.Estimated machine hours are 25,000.During the year,the actual machine hours used were 43,000.Calculate the predetermined overhead allocation rate.(Round your answer to the nearest dollar.)

Accepted Answer

A)  $163 
B)  $109 
C)  $280 
D)  $82 
A)  $163 
B)  $109 
C)  $280 
D)  $82

Question 13

Which of the following four perspectives of the balanced scorecard enables management to answer the question,"How can we continue to improve and create value?"

Accepted Answer

A)  financial 
B)  customer 
C)  internal business 
D)  learning and growth 
A)  financial 
B)  customer 
C)  internal business 
D)  learning and growth

Question 14

Manufacturing overhead costs,which are also known as indirect costs,cannot be cost-effectively traced to products.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is the correct formula for the asset turnover ratio?

Accepted Answer

A)  Net sales / Average total assets 
B)  Net sales / Cost of goods sold 
C)  Net sales / Net assets 
D)  Net profit / Net sales 
A)  Net sales / Average total assets 
B)  Net sales / Cost of goods sold 
C)  Net sales / Net assets 
D)  Net profit / Net sales

Question 16

Modiste,Inc.manufactures two kinds of bags-totes and satchels.The company allocates manufacturing overhead using a single plantwide rate with direct labor cost as the allocation base.Estimated overhead costs for the year are $26,000.Additional estimated information is given below. $$\begin{array} { | l | r | r | } 
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 32 & \$ 45 \
\hline \text { Direct labor cost per unit } & \$ 55 & \$ 63 \
\hline \text { Number of units } & 510 & 390 \
\hline
\end{array}$$ Calculate the predetermined overhead allocation rate.(Round your answer to two decimal places.)

Accepted Answer

A)  92.69% 
B)  49.41% 
C)  94.50% 
D)  1.58% 
A)  92.69% 
B)  49.41% 
C)  94.50% 
D)  1.58%

Question 17

A modification of the overhead allocation method which uses a single plantwide rate,is to use multiple predetermined overhead allocation rates that have different allocation bases.

Accepted Answer

A) True 
 B)False

Question 18

Bernaise,Inc.sells cosmetic products in the United States.Which one of the following is most likely to be a revenue center for Bernaise?

Accepted Answer

A)  a Bernaise retail store in Dallas 
B)  the Bernaise human resource department 
C)  a Bernaise kiosk at a mall for selling its products 
D)  the Bernaise product lines 
A)  a Bernaise retail store in Dallas 
B)  the Bernaise human resource department 
C)  a Bernaise kiosk at a mall for selling its products 
D)  the Bernaise product lines

Question 19

If managers are measured on short-term financial performance only,they may not introduce new products.

Accepted Answer

A) True 
 B)False

Question 20

An investment center manager is responsible for generating profits and managing invested capital.

Accepted Answer

A) True 
 B)False

In general,calculating ROI based on the gross book value of assets gives managers an incentive to continue using old,outdated equipment.

In a decentralized company,all the planning and controlling decisions are made by top management.

In many cases,the amount of the transfer price does not affect overall company profits.

Net income is used in the numerator of the return on investment formula.

List the four types of responsibility centers.For each center,state the responsibility of the manager. Type of responsibility center Responsibility of the manager

Revenue center responsibility reports show all costs incurred by the department and are useful when management needs to know the full cost of operating the department.

The return on investment formula focuses on the amount of operating income earned before considering other revenue and expense items,such as interest expense.

Direct material costs and direct labor costs cannot be easily traced to products.Therefore,they are allocated to products.

Kurtz Logistics provides the following information: Operating income \ 1,550,000 Net sales \ 15,000,000 Average total assets \ 1,950,000 Management's target rate of return 30\% What is the company's profit margin ratio?

Which of the following four perspectives of the balanced scorecard enables management to answer the question,"How can we continue to improve and create value?"

Manufacturing overhead costs,which are also known as indirect costs,cannot be cost-effectively traced to products.

Which of the following is the correct formula for the asset turnover ratio?

A modification of the overhead allocation method which uses a single plantwide rate,is to use multiple predetermined overhead allocation rates that have different allocation bases.

Bernaise,Inc.sells cosmetic products in the United States.Which one of the following is most likely to be a revenue center for Bernaise?

If managers are measured on short-term financial performance only,they may not introduce new products.

An investment center manager is responsible for generating profits and managing invested capital.

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

Filters

Exam 24: Cost Allocation and Responsibility Accounting

In general,calculating ROI based on the gross book value of assets gives managers an incentive to continue using old,outdated equipment.

In a decentralized company,all the planning and controlling decisions are made by top management.

In many cases,the amount of the transfer price does not affect overall company profits.

Net income is used in the numerator of the return on investment formula.

List the four types of responsibility centers.For each center,state the responsibility of the manager. Type of responsibility center Responsibility of the manager

Revenue center responsibility reports show all costs incurred by the department and are useful when management needs to know the full cost of operating the department.

The return on investment formula focuses on the amount of operating income earned before considering other revenue and expense items,such as interest expense.

Direct material costs and direct labor costs cannot be easily traced to products.Therefore,they are allocated to products.

Kurtz Logistics provides the following information: Operating income \ 1,550,000 Net sales \ 15,000,000 Average total assets \ 1,950,000 Management's target rate of return 30\% What is the company's profit margin ratio?

Which of the following four perspectives of the balanced scorecard enables management to answer the question,"How can we continue to improve and create value?"

Manufacturing overhead costs,which are also known as indirect costs,cannot be cost-effectively traced to products.

Which of the following is the correct formula for the asset turnover ratio?

A modification of the overhead allocation method which uses a single plantwide rate,is to use multiple predetermined overhead allocation rates that have different allocation bases.

Bernaise,Inc.sells cosmetic products in the United States.Which one of the following is most likely to be a revenue center for Bernaise?

If managers are measured on short-term financial performance only,they may not introduce new products.

An investment center manager is responsible for generating profits and managing invested capital.

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

Filters