Exam 12: Fundamentals of Management Control Systems

Which of the following is not a benefit of decentralization?

Controllable revenue is included in a performance report of a: Cost Center Profit Center A. Yes No B. Yes Yes C. No No D. No Yes

The Document Creation Center (DCC)for Atlas Corp.provides document services for three departments in the St.Louis office.The following budget has been prepared for the month. Budgeted usage: Pages Documents Software Development 320,000 2,500 Training 600,000 5,500 Management 480,000 6,000 Costs: Fixed \ 63,000 Variable \ 35,000 Required (use three decimal places in your calculations): If DCC uses a dual rate for allocating its costs;allocating fixed costs based on number of documents and variable costs based on number of pages,how much cost will be allocated to the three user departments?

Responsibility accounting defines an operating center that is responsible for revenue and costs as a(n): (CMA adapted)

The Copy Department in the College of Business at State University provides photocopying service for both the Marketing and Economics Department.The following budget has been prepared for the year Available capacity 6,000,000 pages Budgeted us age: Marketing 3,600,000 pages Economics 1,800,000 pages Cost equation \ 120,000+\ 0.025 per page .If the Copy Department uses a dual-rate for allocating its costs,how much cost will be allocated to the Marketing Department,assuming the Marketing Department actually made 3,800,000 copies during the year?

Seattle Corporation has two operating divisions - Inland Division and Coast Division.The company's Customer Service Department provides services to both divisions.The variable costs of the Customer Service Department are budgeted at $29 per order. Percentage of Peak Period Capacity Required Budgeted Orders Inland Division 25\% 1,500 Coast 75\% 5,700 Division The Customer Service Department's fixed costs are budgeted at $381,600 for the year.The fixed costs of the Customer Service Department are determined based on the peak period orders.At the end of the year,actual Customer Service Department variable costs totaled $219,905 and fixed costs totaled $383,860.The Inland Division had a total of 1,520 orders and the Coast Division had a total of 5,690 orders for the year.Required: a.Prepare a report showing how much of the Customer Service Department's costs should be charged to each of the operating divisions at the end of the year.b.How much of the actual Customer Service Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?

The Barton Creek Company has three client-contact departments: Market Research,Branding,and Promotion.Each department requires the services of the Legal Department for the contracts that each undertakes.The size of the Legal Department was based on long-run estimates of contracts.Information on the Legal Department's budgeted and actual costs is as follows: The budget for the Legal Department is $400,000 + $15/contract.The budgeted volume of contracts is as follows: Market Research 200 Branding 500 Promotion 800 The actual number of contracts for Market Research was 207,for Branding was 512,and for Promotion was 820.Required (use three decimal places in your calculations): a.If a single charging rate based on budgeted usage is used,how much of the cost of the Legal Department would be allocated to each of the producing departments? b.If a dual charging rate is used,how much of the cost of the Legal Department would be allocated to each of the producing departments

Which of the following statements is(are)correct? I.A profit center has control over both cost and revenue. II.An investment center has control over invested funds,but not over costs and revenue. III.A cost center has no control over sales.

The legal department for Trump Corporation provides legal services for four departments in the Manhattan office.The following budget has been prepared for the month. Budgeted us age: Purchasing 160 contracts Marketing 200 contracts Training 300 contracts Management 340 contracts Cost equation \ 167,500+\ 50 per contract Required (use three decimal places in your calculations): If Trump uses a dual rate for allocating its costs based on usage,how much cost will be allocated to the four user departments?

Which of the following departments would not be a cost center?

In general,organizations are more centralized in the early stages of their existence and more decentralized as they grow.

Collins Enterprises has four divisions,commercial,retail,research,and consumer,that share the common costs of the company's computer server network.The annual common costs are $2,400,000.You have been provided with the following information for the upcoming year: Connections Time on Network (hous) Commercial 60,000 120,000 Retail 80,000 150,000 Research 40,000 100,000 Consumer 100,000 330,000 Required (use three decimal places in your calculations): a.What is the allocation rate for the upcoming year assuming Collins uses the single-rate method and allocates common costs based on the number of connections? Calculate the allocated amount for each division.b.What is the allocation rate for the upcoming year assuming Collins uses the single-rate method and allocates common costs based on the time on network? Calculate the allocated amount for each division.c.The cost accountant determined $1,700,000 of the server network's costs were fixed and should be allocated based on the number of connections.The remaining costs should be allocated based on the time on the network.What is the total server network costs allocated to each division?

The primary reason to use a dual rate allocation system is to focus a manager's performance evaluation on factors under the manager's direct control.

The fixed costs of operating the maintenance facility of Indian River Hospital are $4,500,000 annually.Variable costs are incurred at the rate of $30 per maintenance-hour.The facility averages 40,000 maintenance-hours a year.Budgeted and actual hours per user for 20X3 are as follows: Budgeted hous Actual hours Building and grounds 10,000 12,000 Operating and emergency 8,000 8,000 Patient care 21,000 22,000 Administration Total 40,000 43,200 Assume that budgeted maintenance-hours are used to calculate the allocation rates.Required: a.If a single-rate cost-allocation method is used,what amount of maintenance cost will be budgeted for each department? b.If a single-rate cost-allocation method is used,what amount of maintenance cost will be allocated to each department based on actual usage? Based on budgeted usage? c.If a dual-rate cost-allocation method is used,what amount of maintenance cost will be budgeted for each department? d.If a dual-rate cost-allocation method is used,what amount of maintenance cost will be allocated to each department based on actual usage? Based on budgeted usage for fixed operating costs and actual usage for variable operating costs?

The purpose of the Data Processing Department of Haslam Corporation is to assist the various departments of the corporation with their information needs free of charge.The Data Processing Department would best be evaluated as a(n):

Waverley Services has three divisions,commercial,retail,and consumer,that share the common costs of the company's computer server network.The annual common costs are $1,200,000.You have been provided with the following information for the upcoming year: Connections Time on Network (hous) Commercial 30,000 120,000 Retail 40,000 150,000 Consumer 50,000 330,000 Required (use three decimal places in your calculations): a.What is the allocation rate for the upcoming year assuming Waverley uses the single-rate method and allocates common costs based on the number of connections? Calculate the allocated amount for each division.b.What is the allocation rate for the upcoming year assuming Waverley uses the single-rate method and allocates common costs based on the time on network? Calculate the allocated amount for each division.c.The cost accountant determined $850,000 of the server network's costs were fixed and should be allocated based on the number of connections.The remaining costs should be allocated based on the time on the network.What is the total server network costs allocated to each division?

The Barton Creek Company has three client-contact departments: Market Research,Branding,and Promotion.Each department requires the services of the Legal Department for the contracts that each undertakes.The size of the Legal Department was based on long-run estimates of contracts.Information on the Legal Department's budgeted and actual costs is as follows: The budget for the Legal Department is $200,000 + $7.50/contract.The budgeted volume of contracts is as follows: Market Research 300 Branding 500 Promotion 700 The actual number of contracts for Market Research was 286,for Branding was 450,and for Promotion was 675.Required (use three decimal places in your calculations): a.If a single charging rate based on budgeted usage is used,how much of the cost of the Legal Department would be allocated to each of the producing departments? b.If a dual charging rate is used,how much of the cost of the Legal Department would be allocated to each of the producing departments

Poole Corporation's Maintenance Department provides services to the company's two operating divisions - the Paints Division and the Stains Division.The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments.The fixed costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments during the peak period.Data appear below: For performance evaluation purposes,how much Maintenance Department cost should be charged to the Stains Division at the end of the year?

Rainier Company has a purchasing department that provides services to two factories located in Carbondale and the other in Peoria.Budgeted costs for the purchasing department consist of $55,000 per year of fixed costs and $8 per purchase order for variable costs.The level of budgeted fixed costs is determined by the peak-period requirements.The Carbondale factory requires 40% of the peak-period capacity and the Peoria factory requires 60%.During the coming year,1,800 purchase orders were processed for the Carbondale factory and 2,700 purchase orders for the Peoria factory.Required: Compute the amount of purchasing department cost that should be charged to each factory for the year.

Langsam,Inc.has used a decentralized form of organizational structure for the past five years.The controller,Ms.Terrance,has noticed that some of the divisions are still using fixed assets that are fully depreciated and that there has been little acquisition activity in these divisions.Coupled with this are very high ROIs,especially when compared to the other divisions that seem to have a regular program of disposition and replacement of fixed assets.She takes her concerns and observations to the Financial Vice President who says he will review her findings and look into the problem.Required: 1)What are the potential negative effects of decentralization? 2)Specifically discuss the issues involved in suboptimization.