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Exam 11: Responsibility Accounting Systems

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Question 141

Multiple Choice

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Verbeke Incorporated reported the following results from last year's operations: Last year's turnover was closest to:

A) 16.67
B) 0.06
C) 2.10
D) 0.48

E) A) and C)
F) A) and D)

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Question 142

Multiple Choice

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The long-run average or peak period needs of operating departments would be the most suitable base for allocating:

A) the variable element of power costs.
B) the fixed element of power costs.
C) total power costs.
D) any spending variance associated with power costs.

E) All of the above
F) A) and B)

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Question 143

Multiple Choice

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Fingado Products, Incorporated, has a Detector Division that manufactures and sells a number of products, including a standard detector that could be used by another division in the company, the Commercial Security Division, in one of its products. Data concerning that detector appear below: The Commercial Security Division is currently purchasing 6,000 of these detectors per year from an overseas supplier at a cost of $91 per detector.Assume that the Detector Division is selling all of the detectors it can produce to outside customers. What should be the minimum acceptable transfer price for the detectors from the standpoint of the Detector Division?

Agustin Industries is a division of a major corporation. Data concerning the most recent year appears below: The division's margin is closest to:

Ganus Products, Incorporated, has a Relay Division that manufactures and sells a number of products, including a standard relay that could be used by another division in the company, the Electronics Division, in one of its products. Data concerning that relay appear below: The Electronics Division is currently purchasing 7,000 of these relays per year from an overseas supplier at a cost of $59 per relay.Assume that the Valve Division is selling all of the valves it can produce to outside customers. Also assume that $4 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. Does there exist a transfer price that would make both the Valve and Pump Division financially better off than if the Pump Division were to continue buying its valves from the outside supplier?

Royal Products, Incorporated, has a Connector Division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the Transmission Division, in one of its products. Data concerning that connector appear below: The Transmission Division is currently purchasing 6,000 of these connectors per year from an overseas supplier at a cost of $65 per connector.What is the maximum price that the Transmission Division should be willing to pay for connectors transferred from the Connector Division?

Wollan Corporation has two operating divisions-an East Division and a West Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $44 per shipment. The Logistics Department's fixed costs are budgeted at $237,600 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year, actual Logistics Department variable costs totaled $332,880 and fixed costs totaled $253,960. The East Division had a total of 4,300 shipments and the West Division had a total of 3,000 shipments for the year.How much Logistics Department cost should be allocated to the West Division at the end of the year?

Creaser Products, Incorporated, has a Sensor Division that manufactures and sells a number of products, including a standard sensor. Data concerning that sensor appear below: The company has a Safety Products Division that could use this sensor in one of its products. The Safety Products Division is currently purchasing 8,000 of these sensors per year from an overseas supplier at a cost of $76 per sensor. Required: The Sensor Division is selling all of the sensors it can produce to outside customers. Also assume that $10 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What is the acceptable range, if any, for the transfer price between the two divisions?

A change in sales has no effect on margin and turnover.

Frame Corporation's Maintenance Department provides services to the company's two operating divisions-the Paints Division and the Stains Division. The variable costs of the Maintenance Department are budgeted based on the number of cases produced by the operating departments. The fixed costs of the Maintenance Department are determined by the number of cases produced by the operating departments during the peak-period. Data appear below: How much Maintenance Department cost should be allocated to the Stains Division at the end of the year?

The Casket Division of Saal Corporation had average operating assets of $1,070,000 and net operating income of $255,200 in January. The company uses residual income to evaluate the performance of its divisions, with a minimum required rate of return of 16%.Required:What was the Casket Division's residual income in January?

If net operating income is $39,000, average operating assets are $351,000, and the minimum required rate of return is 10%, what is the residual income?

The following information relates to last year's operations at the Legumes Division of Gervani Corporation: What was the Legume Division's net operating income last year?

Division G makes a part that it sells to customers outside of the company. Data concerning this part appear below: Division H of the same company would like to use the part manufactured by Division G in one of its products. Division H currently purchases a similar part made by an outside company for $83 per unit and would substitute the part made by Division G. Division H requires 500 units of the part each period. Division G has ample capacity to produce the units for Division H without any increase in fixed costs and without cutting into sales to outside customers. If Division G sells to Division H rather than to outside customers, the variable cost be unit would be $2 lower. What should be the lowest acceptable transfer price from the perspective of Division G?

The following information relates to last year's operations at the Legumes Division of Gervani Corporation: What was the Legume Division's net operating income last year?

Parsa Incorporated reported the following results from last year's operations: At the beginning of this year, the company has a $1,100,000 investment opportunity with the following characteristics: Last year's return on investment (ROI) was closest to:

Fabbri Wares is a division of a major corporation. The following data are for the latest year of operations: Required:a. What is the division's return on investment (ROI)?b. What is the division's residual income?

Division P of the Nyers Company makes a part that can either be sold to outside customers or transferred internally to Division Q for further processing. Annual data relating to this part are as follows: Division Q of the Nyers Company requires 15,000 units per year and is currently paying an outside supplier $33 per unit. Consider each part below independently.If outside customers demand 80,000 units and if, by selling to Division Q, Division P could avoid $4 per unit in variable selling expense, then according to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?

Ibale Industries is a division of a major corporation. The following data are for the latest year of operations: Required: What is the division's residual income?

The Downstate Block Company has a trucking department that delivers crushed stone from the company's quarry to its two cement block production facilities-the West Plant and the East Plant. Budgeted costs for the trucking department are $399,000 per year in fixed costs and $.20 per ton variable cost. Last year, 78,000 tons of crushed stone were budgeted to be delivered to the West Plant and 118,000 tons of crushed stone to the East Plant. During the year, the trucking department actually delivered 87,000 tons of crushed stone to the West Plant and 105,000 tons to the East Plant. Its actual costs for the year were $78,000 variable and $414,000 fixed. The level of budgeted fixed costs is determined by peak-period requirements. The West Plant requires 40% of the peak-period capacity and the East Plant requires 60%. The company allocates fixed and variable costs separately. For performance evaluation purposes, how much of the actual trucking department cost should not be charged to the plants at the end of the year?