Exam 22: Responsibility Accounting and Transfer Pricing

Carrier Corporation's Syracuse plant is organized into Air Conditioning and Heating Products divisions. The management of the Syracuse plant should evaluate the Heating Products division as:

An accounting system designed to measure the performance of each center within a business is referred to as a profitability accounting system.

Sloan Sporting Goods has stores in four geographic regions. Each region has at least 20 stores. In the company's responsibility accounting system, sales are recorded separately for each sales department within each store. The total sales for a particular region are determined by:

The primary difference between profit centers and cost centers is that:

The dollar amount used by one division which supplies a good or a service to another division within a company is called a:

A 10% increase in the sales volume at the uptown store would be expected to increase the location's responsibility margin by:

In responsibility income statements, revenue is first assigned to the centers responsible for creating that revenue.

The human resources department of a large company would be considered:

Of the following, which should be classified as a common fixed cost?

Preparation of responsibility income statements Hal-Marts' Inc. has two sales departments: equipment and clothing. During February, these two departments reported the following operating results: In addition, fixed costs common to both departments amounted to $54,400. Complete the following responsibility income statement for Hal-Marts, Inc. Follow the contribution margin approach, and show percentages as well as dollar amounts. Conclude your income statement with the company's income from operations. HAL-MARTS, INC Income Statement by Product Lines For the Month Ended February 28, 20__ Hal-Mart, Inc. Segments Equipment Clothing Dollars \% Dollars \% Dollars \% Sales \ 490,000 \ 250,000 Contribution margin

A responsibility income statement generally does not show the:

In assigning costs to centers, each center is charged with costs attributed to the center and based on company-wide rates.

In the short run, the greatest increase in profitability will result from increasing sales in those profit centers with the:

The contribution margin is calculated by:

Evaluating the performance of cost centers involves subjective judgments as to the value of the services rendered by these centers.

If operations at a center are discontinued, all traceable costs attributed to the cost would be discontinued.

Using a responsibility income statement Shown below is the current monthly income statement of Metro Video, by profit centers: METRO VIDEO Income Statement by Profit Centers For the Month Ended April 30, 20__ On the basis of this information, compute the increase in monthly income from operations that may be expected to result from each of the following actions: (a) Spending $5,000 per month in advertising is expected to increase sales in the Equipment Sales Department by 35%. $_________________ (b) Closing the Equipment Sales Department and allowing the Video Rentals Department to expand is expected to increase the revenue of the Video Rentals Department by $105,000 per month. This action also is expected to increase fixed costs traceable to the Video Rentals Department by $40,000 per month. $________________

Division X supplies partially completed units of product to division Y. The divisions' negotiated price is $30 per unit. Assuming Division X completed and transferred 3,000 units to division Y, the total transfer price on this transaction is:

The cost of heating and air conditioning the store should be:

The Knuckles and Brackets Division transfers a component product to the Assembly Division. Both Divisions are part of Automakers Inc. and are organized as profit centers. Automakers has a general policy of using a 10 percent mark-up for cost-based transfer prices. Knuckles and Brackets also can sell the component product in the open market to other automobile companies for $75. The cost to make the component is $55. By transferring the component internally, the Knuckles and Brackets Division wants the transfer price to be $75 and the manager of the Assembly Division wants the transfer price to be $70. Which of the following are not true?