Question 1

Division X supplies partially completed units of product to division Y.The divisions negotiated a price of $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. A

Question 2

[The following information applies to the questions displayed below.]
Chic Jewelers views each branch location as an investment center.The local branch reported the following results for the current year:
 
-The contribution margin ratio of the local branch is closest to:

Accepted Answer

A)  59%.
B)  41%.
C)  49%.
D)  52%. B

Question 3

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. A

Question 4

In a responsibility accounting system,the recording of revenue and costs begins with the:

Accepted Answer

A)  Most profitable segments of the business.
B)  Least profitable segments of the business.
C)  Broadest areas of management responsibility.
D)  Smallest areas of management responsibility.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

The part of a business a particular manager is held responsible for is called a:

Accepted Answer

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

Question 7

[The following information applies to the questions displayed below.]
Steel Fabricating,Inc.manufactures furniture at its plants in Akron,Greensboro,and Schenectady.The company prepares monthly income statements segmented by plant.These income statements are organized to disclose contribution margin,performance margin,and responsibility margin for each plant,in addition to operating income for the company as a whole.
-Of the following,which should be classified as a common fixed cost?

Accepted Answer

A)  Depreciation on the Schenectady factory.
B)  Salaries of the plant managers.
C)  Salaries of the company's legal staff.
D)  Property taxes on the Akron factory.

Question 8

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 9

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

Accepted Answer

A) True 
 B)False

Question 10

In deciding how the store will benefit most from increasing the sales of selected departments,the store manager should be most interested in the:

Accepted Answer

A)  Total sales of each department.
B)  Contribution margin ratios of each department.
C)  Fixed costs traceable to each department.
D)  Responsibility margins of each department.

Question 11

Disneyland is one of several theme parks owned by The Walt Disney Company.Disneyland should be evaluated as:

Accepted Answer

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

Question 12

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 13

Parker's newly hired director of accounting services feels that the property taxes on the Cairo factory should be allocated to the fabricating,assembly,and finishing departments based upon the square footage they occupy.Of the following,which is not a valid reason to reject this recommendation?

Accepted Answer

A)  The property taxes would not change even if one or more of the departments were eliminated.
B)  Such an allocation violates GAAP.
C)  The property taxes are not under the control of department managers.
D)  The allocation may imply changes in efficiency that are unrelated to center performance.

Question 14

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 15

[The following information applies to the questions displayed below.]
Chic Jewelers views each branch location as an investment center.The local branch reported the following results for the current year:
 
-The contribution margin of the local branch is:

Accepted Answer

A)  $5,500,000.
B)  $2,400,000.
C)  $2,246,000.
D)  $3,254,000.

Question 16

[The following information applies to the questions displayed below.]
Dalton Co.follows a policy of allocating all common costs equally among its profit centers.A partial responsibility income statement for a typical month is shown below:
  After evaluating these data,Dalton Co.decides to close Profit Center 3.This action eliminates all revenue,variable costs,and fixed costs traceable to Center 3,but eliminates only $35,000 in common fixed costs.Closing Profit Center 3 has no effect upon the responsibility margins of Centers 1 and 2.
-Closing Profit Center 3 should cause Dalton's monthly operating income to:

Accepted Answer

A)  Increase by $5,000.
B)  Decrease by $15,000.
C)  Decrease by $7,000.
D)  Decrease by $20,000.

Question 17

An investment center:

Accepted Answer

A)  Is a profit center for which management is able to objectively measure the cost of the assets used in the center's operations.
B)  Is a cost center for which management is able to identify the original amount invested.
C)  May be either a cost center or a profit center.
D)  Is a subunit of the organization that provides services to other centers within the organization.

Question 18

In responsibility income statements,revenue is first assigned to the centers responsible for creating that revenue.

Accepted Answer

A) True 
 B)False

Question 19

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 20

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.

Exam 22: Responsibility Accounting and Transfer Pricing

Division X supplies partially completed units of product to division Y.The divisions negotiated a price of $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:

[The following information applies to the questions displayed below.] Chic Jewelers views each branch location as an investment center.The local branch reported the following results for the current year: -The contribution margin ratio of the local branch is closest to:

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

In a responsibility accounting system,the recording of revenue and costs begins with the:

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

The part of a business a particular manager is held responsible for is called a:

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

In deciding how the store will benefit most from increasing the sales of selected departments,the store manager should be most interested in the:

Disneyland is one of several theme parks owned by The Walt Disney Company.Disneyland should be evaluated as:

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:

Parker's newly hired director of accounting services feels that the property taxes on the Cairo factory should be allocated to the fabricating,assembly,and finishing departments based upon the square footage they occupy.Of the following,which is not a valid reason to reject this recommendation?

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

[The following information applies to the questions displayed below.] Chic Jewelers views each branch location as an investment center.The local branch reported the following results for the current year: -The contribution margin of the local branch is:

An investment center:

In responsibility income statements,revenue is first assigned to the centers responsible for creating that revenue.

An example of a profit center is:

A responsibility income statement generally does not show the: