Question 1

The Akron factory employs two quality control inspectors at an annual salary of $70,000 each.These salaries should be classified as:

Accepted Answer

A) Common fixed cost. 
B) Variable cost. 
C) Committed fixed cost. 
D) Controllable fixed cost. 
A) Common fixed cost. 
B) Variable cost. 
C) Committed fixed cost. 
D) Controllable fixed cost.

Question 2

The most common value used for transfer pricing is:

Accepted Answer

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

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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)
HAL-MARTS,INC
Income Statement by Product Lines
For the Month Ended February 28,20__

Accepted Answer

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

Question 6

Responsibility income statements
Identify and discuss briefly the two concepts generally used in assigning costs to responsibility centers of a business.

Accepted Answer

In assigning costs to parts of a busines

Question 7

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 8

The contribution margin is calculated by:

Accepted Answer

A) Subtracting fixed costs from sales. 
B) Subtracting variable costs from sales. 
C) Subtracting fixed and variable costs from sales. 
D) Subtracting common costs from sales. 
A) Subtracting fixed costs from sales. 
B) Subtracting variable costs from sales. 
C) Subtracting fixed and variable costs from sales. 
D) Subtracting common costs from sales.

Question 9

Traceable fixed costs usually cannot be eliminated even if the center is closed.

Accepted Answer

A) True 
 B)False

Question 10

Transfer prices and cash flow
Satellite Products,Inc.owns two subsidiaries,Saturn Systems and Neptune Audio.Saturn supplies printed circuit boards used by Neptune Audio in its state of the art stereo radio.Neptune receives 20,000 boards from Saturn annually.Each radio produced requires a single board.The market price of these boards is $40.Their total variable cost of production is $20.The market price of the radios is $105.The unit variable cost of the radio is $30 excluding the cost of the circuit board.
Saturn Systems is currently operating at full capacity of 35,000 boards per year (including those transferred to Neptune Audio).Demand for the boards is strong and all 35,000 could be sold to outside customers.Saturn uses the full market price as the transfer price charged to Neptune Audio.
The manager of Neptune Audio argues that Saturn Systems benefits from intercompany transfers because of reduced advertising and other selling costs.Thus,he wants to negotiate a lower transfer price of $35.
Required:
1.Calculate the contribution margins for the two subsidiaries using the $40 transfer price.
2.Recalculate the contribution margins at the $35 price suggested by the manager of Neptune Audio.What effect would the change in transfer price have on the company as a whole?
3.Suppose that Neptune Audio operates in a country that imposes a 40% tax rate on corporate income.Saturn Systems is located in a country where the tax rate is only 10%.What would you recommend regarding the transfer price charged by Saturn for the boards transferred to Neptune?

Accepted Answer

1.Contribution margins at transfer price

Question 11

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 12

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

Question 13

The responsibility margin of the local branch is:

Accepted Answer

A) $5,500,000. 
B) $1,926,000. 
C) $2,246,000. 
D) $2,400,000. 
A) $5,500,000. 
B) $1,926,000. 
C) $2,246,000. 
D) $2,400,000.

Question 14

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

Accepted Answer

A) Their return on assets. 
B) Residual income. 
C) The quantity and quality of the services they provide. 
D) Their contribution margin ratio. 
A) Their return on assets. 
B) Residual income. 
C) The quantity and quality of the services they provide. 
D) Their contribution margin ratio.

Question 15

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) $15,000. 
A) $25,000. 
B) $17,500. 
C) $10,000. 
D) $15,000.

Question 16

If a business activity qualifies as a profit center,it cannot also qualify as an investment center.

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

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 19

Traceable fixed costs that the manager of a department cannot change are called:

Accepted Answer

A) Controllable. 
B) Committed. 
C) Conditional. 
D) Common. 
A) Controllable. 
B) Committed. 
C) Conditional. 
D) Common.

Question 20

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...

Exam 22: Responsibility Accounting and Transfer Pricing

The Akron factory employs two quality control inspectors at an annual salary of $70,000 each.These salaries should be classified as:

The most common value used for transfer pricing is:

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

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

Responsibility income statements Identify and discuss briefly the two concepts generally used in assigning costs to responsibility centers of a business.

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:

The contribution margin is calculated by:

Traceable fixed costs usually cannot be eliminated even if the center is closed.

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:

The responsibility margin of the local branch is:

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

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

If a business activity qualifies as a profit center,it cannot also qualify as an investment center.

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

Traceable fixed costs that the manager of a department cannot change are called:

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.

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

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

the Time Value of Money: Future Amounts and Present Values

Forms of Business Organization

Filters