Question 1

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.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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:

Accepted Answer

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

Question 4

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

Accepted Answer

A) A cost center. 
B) A profit center. 
C) An investment center. 
D) A revenue center.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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.

Accepted Answer

The answer of Responsibility income statement-cost classification
Milton's,a large department store,prepares...

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The bookstore of a university would be considered:

Accepted Answer

A) A cost center. 
B) A profit center. 
C) An investment center. 
D) A revenue center.

Question 9

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:

Accepted Answer

A) Whether the costs are variable or fixed and whether they are material in dollar amount. 
B) Whether the costs are traceable to the responsibility center and whether the responsibility center is organized as a profit center or an investment center. 
C) Whether the costs are variable or fixed and whether they are directly traceable to the responsibility center. 
D) Whether the costs are traceable to the responsibility center and whether they are material in dollar amount.

Question 10

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:

Accepted Answer

A) Using a transfer price based on full cost. 
B) Using a transfer price to transfer as much income as possible to the subsidiary located in the lower tax country. 
C) Using a transfer price based on market value. 
D) Using a transfer price to transfer as much income as possible to the subsidiary located in the higher tax country.

Question 11

Depreciation on the factory would be an example of a:

Accepted Answer

A) Controllable fixed cost. 
B) Period cost. 
C) Responsibility cost. 
D) Committed fixed cost.

Question 12

An example of a profit center is:

Accepted Answer

A) The accounting department in a manufacturing company. 
B) The maintenance department of a university. 
C) The furniture department of a retail department store. 
D) The human resources department in a hospital.

Question 13

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:

Accepted Answer

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

Question 14

The concept of contribution margin applies:

Accepted Answer

A) Only to investment centers. 
B) Only to profit centers. 
C) Only to cost centers. 
D) To all types of responsibility centers.

Question 15

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

Accepted Answer

A) Market price. 
B) Transfer price. 
C) Fair price. 
D) Agreed-upon price.

Question 16

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.

Question 17

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.

Question 18

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:

Accepted Answer

A) $30,000. 
B) $60,000. 
C) $90,000. 
D) $3,000.

Question 19

All costs become traceable at some level of the organization.

Accepted Answer

A) True 
 B)False

Question 20

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:

Accepted Answer

A) $180,000. 
B) $120,000. 
C) $150,000. 
D) $5,000.

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.

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: