Exam 22: Responsibility Accounting and Transfer Pricing

Cost centers are evaluated primarily on the basis of their ability to control costs and:

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

Carrier Corporation produces heating and air conditioning equipment at a number of plants throughout the United States including one in Syracuse,New York.Carrier should evaluate its Syracuse plant as:

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

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

Responsibility income statement-cost classification Milton's,a large department store,prepares income statements by sales department.These statements follow the contribution margin approach,showing contribution margin and responsibility margin for each profit center as well as monthly income from operations for the store.Indicate the classification of each of the costs listed below by inserting the appropriate code letters in the space provided. Costs ____ (a)The cost of merchandise sold in the Women's Sportswear Department. ____ (b)Advertising a sale in the Housewares Department (classify as a fixed cost). ____ (c)Depreciation on equipment used in the Automotive Service Department. ____ (d)Depreciation on the store's heating and air conditioning system. ____ (e)Monthly salary of the manager of the Toy Department. ____ (f)Sales taxes collected from customers and paid to local tax authorities. ____ (g)Monthly salaries of store security guards.

An investment center is a profit center where management can make related capital investment choices.

The bookstore of a university would be considered:

In preparing a responsibility income statement that shows contribution margin and responsibility margin,generally two concepts are involved in allocating costs to the various centers.These concepts are:

Company MHF operates subsidiaries in two countries.One of the subsidiaries consumes the output of the other in the production of a good for sale to the public.The company could increase cash flows by:

Depreciation on the factory would be an example of a:

An example of a profit center is:

Disneyland charges visitors for admission to the park but not for individual rides or attractions."Splash Mountain" is one of the rides in Disneyland.The Walt Disney Company should evaluate "Splash Mountain" as:

The concept of contribution margin applies:

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

Responsibility accounting systems should begin with:

The most common value used for transfer pricing is:

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:

All costs become traceable at some level of the organization.

Division X supplies partially completed units of product to division Y.The divisions' negotiated price is $30 plus 20% per unit.Assuming Division X completed and transferred 5,000 units to division Y,the total transfer price on this transaction is: