Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

Old Jeans,Inc.has two divisions or profit centers,one makes regular fit jeans and the other makes relaxed fit jeans.The information for the two centers follows:   There are also common fixed costs of $27,500.
Required:
Prepare a responsibility income statement by profit center and in total.

Accepted Answer

The answer of Old Jeans,Inc.has two divisions or profit centers,one...

Question 4

A responsibility accounting system measures the performance of each of the following centers except:

Accepted Answer

A) Profit center. 
B) Investment center. 
C) Control center. 
D) Cost center. 
A) Profit center. 
B) Investment center. 
C) Control center. 
D) Cost center.

Question 5

Which of the following is not a valid reason for developing responsibility center information?

Accepted Answer

A) Responsibility center information is useful in deciding how to allocate resources among segments of the business. 
B) Separately measuring the revenue and expenses of each responsibility center is a necessary step in developing financial statements for the business entity viewed as a whole. 
C) Responsibility center information is useful in evaluating the performance of segment managers. 
D) Responsibility center information helps management to quickly identify sections of the business that are performing poorly. 
A) Responsibility center information is useful in deciding how to allocate resources among segments of the business. 
B) Separately measuring the revenue and expenses of each responsibility center is a necessary step in developing financial statements for the business entity viewed as a whole. 
C) Responsibility center information is useful in evaluating the performance of segment managers. 
D) Responsibility center information helps management to quickly identify sections of the business that are performing poorly.

Question 6

A responsibility income statement shows the revenue and expenses of each cost center within a particular part of a business.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) Profit centers generate revenue. 
B) Cost centers incur costs. 
C) Profit centers are evaluated using return on investment criteria. 
D) Profit centers provide services to other centers in the organization. 
A) Profit centers generate revenue. 
B) Cost centers incur costs. 
C) Profit centers are evaluated using return on investment criteria. 
D) Profit centers provide services to other centers in the organization.

Question 8

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:

Accepted Answer

A) A cost center. 
B) An investment center. 
C) A profit center (other than an investment center). 
D) A revenue center. 
A) A cost center. 
B) An investment center. 
C) A profit center (other than an investment center). 
D) A revenue center.

Question 9

San Francisco's famous St.Francis Hotel is owned by Westin Hotel and Resort Group.Westin should evaluate the St.Francis as:

Accepted Answer

A) A cost center. 
B) A historical landmark. 
C) An investment center. 
D) A profit center (other than an investment center). 
A) A cost center. 
B) A historical landmark. 
C) An investment center. 
D) A profit center (other than an investment center).

Question 10

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.(Round your percentage computations to nearest whole percent)

Accepted Answer

The answer of Preparation of responsibility income statements
Hal-Marts,Inc.has two sales...

Question 11

Evaluation of responsibility centers
Shown below are the current-year data for two investment centers of Chelsea Trading,Inc.The total assets utilized by each of these investment centers during the year amount to $1,500,000:   (a)Compute the following measures for each investment center:   (b)Assume that a $3,000 monthly expenditure for advertising could increase the monthly sales of either investment center by $20,000.Which center should the company advertise to receive the maximum benefit from its advertising expenditure? Center _________.Explain your reasoning:

Accepted Answer

(a) @#IMG-DLM& (b)Center 2.Since Center 2 has the

Question 12

Performance margin is equal to controllable fixed costs minus the contribution margin.

Accepted Answer

A) True 
 B)False

Question 13

A responsibility income statement generally does not show the:

Accepted Answer

A) Contribution margin of each responsibility center. 
B) Traceable fixed costs allocated to each responsibility center. 
C) Segment margin of each responsibility center. 
D) Net income of each responsibility center. 
A) Contribution margin of each responsibility center. 
B) Traceable fixed costs allocated to each responsibility center. 
C) Segment margin of each responsibility center. 
D) Net income of each responsibility center.

Question 14

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

Accepted Answer

A) Highest performance margins. 
B) Lowest traceable fixed costs. 
C) Highest contribution margin ratios. 
D) Highest responsibility margins. 
A) Highest performance margins. 
B) Lowest traceable fixed costs. 
C) Highest contribution margin ratios. 
D) Highest responsibility margins.

Question 15

Revenue,less variable costs,less traceable fixed costs,is called the contribution margin.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Business units
(a)Define what is meant by each of the following: profit center,investment center,and cost center.Your answer should make clear the distinction between each of these types of centers.
(b)Briefly describe the criteria used to evaluate each of the three types of centers listed in part a.

Accepted Answer

(a)A profit center generates revenue as

Question 18

In a responsibility income statement,the term common fixed costs describes fixed costs that:

Accepted Answer

A) Are under the manager's immediate control. 
B) Jointly benefit several responsibility centers of the business. 
C) Occur in virtually every responsibility center of the business (such as salaries). 
D) Are easily traceable to specific profit centers. 
A) Are under the manager's immediate control. 
B) Jointly benefit several responsibility centers of the business. 
C) Occur in virtually every responsibility center of the business (such as salaries). 
D) Are easily traceable to specific profit centers.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

One of the unique services provided by San Francisco's St.Francis Hotel is cleaning and polishing coins (pocket change)for the guests.From the standpoint of hotel management,this "money laundry" should be viewed as:

Accepted Answer

A) A contribution center. 
B) A cost center. 
C) An investment center. 
D) A profit center (other than an investment center). 
A) A contribution center. 
B) A cost center. 
C) An investment center. 
D) A profit center (other than an investment center).

Exam 22: Responsibility Accounting and Transfer Pricing

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

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

Old Jeans,Inc.has two divisions or profit centers,one makes regular fit jeans and the other makes relaxed fit jeans.The information for the two centers follows: There are also common fixed costs of $27,500. Required: Prepare a responsibility income statement by profit center and in total.

A responsibility accounting system measures the performance of each of the following centers except:

Which of the following is not a valid reason for developing responsibility center information?

A responsibility income statement shows the revenue and expenses of each cost center within a particular part of a business.

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

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:

San Francisco's famous St.Francis Hotel is owned by Westin Hotel and Resort Group.Westin should evaluate the St.Francis as:

Performance margin is equal to controllable fixed costs minus the contribution margin.

A responsibility income statement generally does not show the:

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

Revenue,less variable costs,less traceable fixed costs,is called the contribution margin.

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

In a responsibility income statement,the term common fixed costs describes fixed costs that:

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

One of the unique services provided by San Francisco's St.Francis Hotel is cleaning and polishing coins (pocket change)for the guests.From the standpoint of hotel management,this "money laundry" should be viewed as:

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

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