Question 1

Many companies view performance margin as a more useful tool than responsibility margin for evaluating segment managers. This is because:

Accepted Answer

A)  Managers have no control over traceable fixed costs. 
B)  Performance margin is not affected by the size of the department. 
C)  Performance margin indicates the change in operating income that would result from closing the department. 
D)  Performance margin includes only those revenue and costs under the manager's direct control. 
A)  Managers have no control over traceable fixed costs. 
B)  Performance margin is not affected by the size of the department. 
C)  Performance margin indicates the change in operating income that would result from closing the department. 
D)  Performance margin includes only those revenue and costs under the manager's direct control.

Question 2

Responsibility accounting systems measures the performance of:

Accepted Answer

A)  The entire company. 
B)  Each center individually. 
C)  Both the entire company and each center individually. 
D)  Neither the entire company nor each center individually. 
A)  The entire company. 
B)  Each center individually. 
C)  Both the entire company and each center individually. 
D)  Neither the entire company nor each center individually.

Question 3

Which of the following is a common fixed cost to the sales departments in a department store?

Accepted Answer

A)  Salaries of store security personnel. 
B)  Salaries of sales department managers. 
C)  Cost of goods sold. 
D)  Depreciation on fixtures used exclusively in a specific sales department. 
A)  Salaries of store security personnel. 
B)  Salaries of sales department managers. 
C)  Cost of goods sold. 
D)  Depreciation on fixtures used exclusively in a specific sales department.

Question 4

The contribution margin ratio of the local branch is:

Accepted Answer

A)  50%. 
B)  41%. 
C)  49%. 
D)  52%. 
A)  50%. 
B)  41%. 
C)  49%. 
D)  52%.

Question 5

After the closing of Profit Center 3, the monthly income from operations for Profit Center 1, as measured by Dalton Co. should be approximately:

Accepted Answer

A)  $25,000. 
B)  $17,500. 
C)  $10,000. 
D)  $80,000. 
A)  $25,000. 
B)  $17,500. 
C)  $10,000. 
D)  $80,000.

Question 6

The most common value used for transfer pricing is:

Accepted Answer

A)  Total variable costs. 
B)  Total fixed and variable costs. 
C)  Market value less fixed costs. 
D)  Market value. 
A)  Total variable costs. 
B)  Total fixed and variable costs. 
C)  Market value less fixed costs. 
D)  Market value.

Question 7

In preparing an income statement that measures contribution margin and responsibility margin for a responsibility center, two concepts are applied in classifying costs. One is whether the costs are variable or fixed. The other is whether the costs are:

Accepted Answer

A)  Product costs or period costs. 
B)  Traceable to the responsibility center. 
C)  Under the control of the manager. 
D)  Transfer prices. 
A)  Product costs or period costs. 
B)  Traceable to the responsibility center. 
C)  Under the control of the manager. 
D)  Transfer prices.

Question 8

All of the following costs are traceable to a specific factory except:

Accepted Answer

A)  Depreciation on the company's fleet of tractor trailer trucks. 
B)  Direct materials. 
C)  Salaries of production supervisors. 
D)  Wages of production set-up laborers. 
A)  Depreciation on the company's fleet of tractor trailer trucks. 
B)  Direct materials. 
C)  Salaries of production supervisors. 
D)  Wages of production set-up laborers.

Question 9

The transfer price is the dollar amount used in recording sales to primary customers.

Accepted Answer

A) True 
 B)False

Question 10

One purpose of a responsibility accounting system is to evaluate the performance of center managers.

Accepted Answer

A) True 
 B)False

Question 11

Closing Profit Center 3 should cause Dalton's monthly operating income to:

Accepted Answer

A)  Increase by $5,000. 
B)  Decrease by $15,000. 
C)  Decrease by $7,000. 
D)  Change by some other amount. 
A)  Increase by $5,000. 
B)  Decrease by $15,000. 
C)  Decrease by $7,000. 
D)  Change by some other amount.

Question 12

The contribution margin approach to preparing reports for managers classifies costs into fixed and variable costs.

Accepted Answer

A) True 
 B)False

Question 13

Responsibility margin: $_____________

Accepted Answer

The answer of Responsibility margin: $_____________...

Question 14

Contribution margin: $_____________

Accepted Answer

The answer of Contribution margin: $_____________...

Question 15

When an external market exists for a transferred product or service, most companies use either negotiated transfer prices or cost-plus transfer prices.

Accepted Answer

A) True 
 B)False

Question 16

Return on assets: _____________%

Accepted Answer

The answer of Return on assets: _____________%...

Question 17

In a responsibility accounting system, the recording of revenue and costs begins with the:

Accepted Answer

A)  Most profitable segments of the business. 
B)  Least profitable segments of the business. 
C)  Broadest areas of managerial responsibility. 
D)  Smallest areas of managerial responsibility. 
A)  Most profitable segments of the business. 
B)  Least profitable segments of the business. 
C)  Broadest areas of managerial responsibility. 
D)  Smallest areas of managerial responsibility.

Question 18

Responsibility accounting systems should begin with:

Accepted Answer

A)  A budget by center. 
B)  A performance report by center. 
C)  A measure of corporate performance. 
D)  A company-wide income statement. 
A)  A budget by center. 
B)  A performance report by center. 
C)  A measure of corporate performance. 
D)  A company-wide income statement.

Question 19

Responsibility income statement
Classico's Pizza, a chain of pizza parlors, views each branch location as an investment center. The local branch reported the following results for the current year:
Compute the following measures for this investment center:
(a) Contribution margin: $________________
(b) Contribution margin ratio: ________________%
(c) Responsibility margin: $________________
(d) Increase in annual responsibility margin that would be expected to result from a 10% increase in sales volume: $________________

Accepted Answer

(a) $630,0

Question 20

The company's CEO must decide which of the three factories to expand in order to increase productive capacity. She should be most interested in the:

Accepted Answer

A)  Sales of each factory. 
B)  Contribution margin at each factory. 
C)  Fixed costs traceable to each factory. 
D)  Responsibility margins of each factory. 
A)  Sales of each factory. 
B)  Contribution margin at each factory. 
C)  Fixed costs traceable to each factory. 
D)  Responsibility margins of each factory.

Exam 22: Responsibility Accounting and Transfer Pricing

Many companies view performance margin as a more useful tool than responsibility margin for evaluating segment managers. This is because:

Responsibility accounting systems measures the performance of:

Which of the following is a common fixed cost to the sales departments in a department store?

The contribution margin ratio of the local branch is:

After the closing of Profit Center 3, the monthly income from operations for Profit Center 1, as measured by Dalton Co. should be approximately:

The most common value used for transfer pricing is:

In preparing an income statement that measures contribution margin and responsibility margin for a responsibility center, two concepts are applied in classifying costs. One is whether the costs are variable or fixed. The other is whether the costs are:

All of the following costs are traceable to a specific factory except:

The transfer price is the dollar amount used in recording sales to primary customers.

One purpose of a responsibility accounting system is to evaluate the performance of center managers.

Closing Profit Center 3 should cause Dalton's monthly operating income to:

The contribution margin approach to preparing reports for managers classifies costs into fixed and variable costs.

Responsibility margin: $_____________

Contribution margin: $_____________

When an external market exists for a transferred product or service, most companies use either negotiated transfer prices or cost-plus transfer prices.

Return on assets: _____________%

In a responsibility accounting system, the recording of revenue and costs begins with the:

Responsibility accounting systems should begin with:

The company's CEO must decide which of the three factories to expand in order to increase productive capacity. She should be most interested in the:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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