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Exam 24: Performance Measurement and Responsibility Accounting

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Question 51

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Return on investment is a useful measure to evaluate the performance of a cost center manager.

A) True
B) False

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Question 52

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Pleasant Hills Properties is developing a golf course subdivision that includes 250 home lots;100 lots are golf course lots and will sell for $95,000 each;150 are street frontage lots and will sell for $65,000.The developer acquired the land for $1,800,000 and spent another $1,400,000 on street and utilities improvement.Compute the amount of joint cost to be allocated to the golf course lots using value basis.

A) $1,920,000.
B) $720,000.
C) $1,620,800.
D) $1,579,200.
E) $1,080,000.

F) A) and B)
G) B) and D)

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Question 53

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Which of the following is not a step in creating operating department income statements?

Investment center is another name for profit center.

Using the information below,compute the cycle efficiency:

The __________ is a report of the amount of sales less direct expenses for a department.

Holo Company reported the following financial numbers for one of its divisions for the year;average total assets of $5,800,000;sales of $5,375,000;cost of goods sold of $3,225,000;and operating expenses of $1,147,000.Compute the division's return on investment:

Dartford Company reported the following financial data for one of its divisions for the year;average investment center total assets of $3,500,000;investment center income $610,000;a target income of 12% of average invested assets.The residual income for the division is:

Franklin Co.has three departments: purchasing,human resources,and assembly.In a recent month the three departments incurred two shared indirect expenses.The amounts of the indirect expenses and the bases used to allocate them follow.Use this information to allocate each of the two indirect expenses across the three departments using the tables provided below. Departmental data for the company's recent reporting period follow.

In regard to joint cost allocation,the "split-off point" is:

If a company reports profit margin of 31.6% and investment turnover of 1.30 for one of its investment centers,the return on investment must be:

A joint cost of producing two products can be allocated between those products on the basis of the relative physical quantities of each product produced.

The Menswear Department of Major's Department Store had sales of $188,000,cost of goods sold of $132,500,indirect expenses of $13,250,and direct expenses of $27,500 for the current period.The Menswear Department's contribution to overhead as a percent of sales is:

An accounting system that accumulates and reports costs incurred by each service department for management to evaluate the performance of a department is a:

Investment center managers are usually evaluated using performance measures

A department's direct expenses are usually considered uncontrollable costs.

No standard rule identifies the best basis of allocating expenses across departments,so it is impossible to allocate costs in a manner that will be perceived as fair.

A firm produces and sells two products,Plus and Max.The following information is available relating to setup costs (a part of factory overhead) : Using number of setups as the activity base,the amount of setup cost allocated to each unit of product for Plus and Max,respectively is:

A company rents a small building with 10,000 square feet of space for $100,000 per year.The rent is allocated to the company's three departments on the basis of the value of the space occupied by each.Department One occupies 1,500 square feet of ground-floor space,Department Two occupies 3,500 square feet of ground-floor space,and Department Three occupies 5,000 square feet of second-floor space.If rent for comparable floor space in the neighborhood averages $15.00 per sq.ft.for ground-floor space and $10.00 per sq.ft.for second-floor space,what annual rent expense should be charged to each department?

Advertising expense can be reasonably allocated to departments on the basis of each department's proportion of sales.