Question 1

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 2

Accounting terminology
Listed below are seven technical accounting terms introduced or emphasized in this chapter:
   Each of the following statements may (or may not)describe one of these technical terms.In the space provided beside each statement,indicate the accounting term described,or answer "None" if the statement does not correctly describe any of the terms.
________ (a)Costs that jointly benefit several responsibility centers of the business and that do not vary significantly with changes in sales volume.
________ (b)The amount charged by a responsibility center for the goods it sells to another responsibility center.
________ (c)Used to evaluate the performance of a manager based solely on revenue and costs under the manager's control.
________ (d)A responsibility center of a business that may be evaluated by the return earned on assets.
________ (e)The subtotal in a responsibility income statement that is most useful in evaluating the short-term effects of various marketing strategies on profitability.

Accepted Answer

(a)Common fixed costs
(b)Trans

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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 5

Responsibility margin is useful in evaluating the consequences of short-run marketing strategies,while contribution margin is more useful in evaluating long-term profitability.

Accepted Answer

A) True 
 B)False

Question 6

Responsibility accounting systems measures the performance of:

Accepted Answer

A) The entire company. 
B) Each center individually. 
C) Both the entire company and each center individually. 
D) Neither the entire company nor each center individually. 
A) The entire company. 
B) Each center individually. 
C) Both the entire company and each center individually. 
D) Neither the entire company nor each center individually.

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

Many companies view performance margin as a more useful tool than responsibility margin for evaluating segment managers.This is because:

Accepted Answer

A) Managers have no control over traceable fixed costs. 
B) Performance margin is not affected by the size of the department. 
C) Performance margin indicates the change in operating income that would result from closing the department. 
D) Performance margin includes only those revenue and costs under the manager's direct control. 
A) Managers have no control over traceable fixed costs. 
B) Performance margin is not affected by the size of the department. 
C) Performance margin indicates the change in operating income that would result from closing the department. 
D) Performance margin includes only those revenue and costs under the manager's direct control.

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

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

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

Responsibility margin is useful in evaluating the consequences of short-run marketing strategies,while contribution margin is more useful in evaluating long-term profitability.

Responsibility accounting systems measures the performance of:

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

Many companies view performance margin as a more useful tool than responsibility margin for evaluating segment managers.This is because:

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

Exam 22: Responsibility Accounting and Transfer Pricing

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

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

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

Responsibility margin is useful in evaluating the consequences of short-run marketing strategies,while contribution margin is more useful in evaluating long-term profitability.

Responsibility accounting systems measures the performance of:

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

Many companies view performance margin as a more useful tool than responsibility margin for evaluating segment managers.This is because:

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