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Exam 11: Responsibility Accounting Systems

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Question 41

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The Southern Division of Barstol Company makes and sells a single product, which is a part used in manufacturing trucks. The annual production capacity is 40,000 units and the variable cost of each unit is $38. Presently the Southern Division sells 37,000 units per year to outside customers at $50 per unit. The Northern Division of Barstol Company would like to buy 20,000 units a year from Southern to use in its production. There would be no savings in variable costs from transferring the units internally rather than selling them externally. The lowest acceptable transfer price from the standpoint of the Southern Division should be closest to:

A) $48.20 per unit
B) $38.00 per unit
C) $50.00 per unit
D) $22.20 per unit

E) A) and B)
F) B) and D)

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Question 42

Multiple Choice

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Azotea Corporation has two operating divisions-a Consumer Division and a Commercial Division. The company's Order Fulfillment Department provides services to both divisions. The variable costs of the Order Fulfillment Department are budgeted at $56 per order. The Order Fulfillment Department's fixed costs are budgeted at $233,700 for the year. The fixed costs of the Order Fulfillment Department are budgeted based on the peak-period orders. At the end of the year, actual Order Fulfillment Department variable costs totaled $237,390 and fixed costs totaled $239,140. The Consumer Division had a total of 1,240 orders and the Commercial Division had a total of 2,860 orders for the year.How much Order Fulfillment Department cost should be allocated to the Commercial Division at the end of the year?

A) $300,380
B) $309,078
C) $332,409
D) $323,180

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

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Question 43

Multiple Choice

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The following data are for the Akron Division of Consolidated Rubber, Incorporated: For the past year, the minimum required rate of return was:

The Tipton Division of Dudley Company reported the following data last year: Tipton Division's average operating assets last year were:

Fregozo 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 8,000 of these connectors per year from an overseas supplier at a cost of $45 per connector.Assume that the Connector Division is selling all of the connectors it can produce to outside customers. What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division?

The Consumer Products Division of Goich Corporation had average operating assets of $540,000 and net operating income of $43,500 in May. The minimum required rate of return for performance evaluation purposes is 11%.What was the Consumer Products Division's minimum required return in May?

Sauseda Corporation has two operating divisions-an Inland Division and a Coast Division. The company's Customer Service Department provides services to both divisions. The variable costs of the Customer Service Department are budgeted at $30 per order. The Customer Service Department's fixed costs are budgeted at $474,000 for the year. The fixed costs of the Customer Service Department are determined based on the peak-period orders. At the end of the year, actual Customer Service Department variable costs totaled $239,295 and fixed costs totaled $476,350. The Inland Division had a total of 1,585 orders and the Coast Division had a total of 5,940 orders for the year. Required:a. Prepare a report showing how much of the Customer Service Department's costs should be charged to each of the operating divisions at the end of the year.b. How much of the actual Customer Service Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?

The following data are for the Akron Division of Consolidated Rubber, Incorporated: For the past year, the return on investment was:

The Northern Division of Fiscar Corporation sells Part X2 to other companies for $87.20 per unit. According to the company's cost accounting system, the costs to Northern Division to make a unit of Part X2 are: The Southern Division of Fiscar Corporation uses a part much like Part X2 in one of its products. The Southern Division can buy this part from an outside supplier for $79.95 per unit. However, the Southern Division could use Part X2 instead of this part that it purchases from outside suppliers. What is the most that the Southern Division would be willing to pay the Northern Division for Part X2?

Willing Incorporated reported the following results from last year's operations: At the beginning of this year, the company has a $1,200,000 investment opportunity with the following characteristics: The company's minimum required rate of return is 14%. Required: 1.What was last year's residual income? 2. What is the residual income of this year's investment opportunity? 3. If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall residual income this year? 4. If Westerville's chief executive officer earns a bonus only if residual income for this year exceeds residual income for last year, would the chief executive officer pursue the investment opportunity?

Bonilla Incorporated has a $700,000 investment opportunity with the following characteristics: The return on investment (ROI) for the investment opportunity is closest to:

Cabell Products is a division of a major corporation. Last year the division had total sales of $25,320,000, net operating income of $1,924,320, and average operating assets of $6,000,000. The company's minimum required rate of return is 10%.The division's return on investment (ROI) is closest to:

Canedo Incorporated reported the following results from last year's operations: At the beginning of this year, the company has a $700,000 investment opportunity with the following characteristics: If the company pursues the investment opportunity and otherwise performs the same as last year, the combined turnover for the entire company will be closest to:

BR Company has a contribution margin of 9%. Sales are $477,000, net operating income is $42,930, and average operating assets are $134,000. What is the company's return on investment (ROI) ?

Leslie Company operates a cafeteria for the benefit of its employees. The company subsidizes the cafeteria heavily by allowing employees to purchase meals at greatly reduced prices. Budgeted and actual costs in the cafeteria for the year just ended are as follows: *Unrecovered cost after deducting amounts received from employees.Costs of the cafeteria are charged to producing departments on the basis of the number of employees in these departments. Fixed costs are charged on the basis of the percentage of peak-period requirements. Data concerning the company's producing departments follows: Required:a. Compute the dollar amount of variable and fixed costs that should be charged to each of the producing departments at the end of the year for purposes of evaluating performance.b.Identify the amount, if any, of actual costs that should not be charged to the operating departments.

Bacot Products, Incorporated, has a Valve Division that manufactures and sells a number of products, including a standard valve that could be used by another division in the company, the Pump Division, in one of its products. Data concerning that valve appear below: The Pump Division is currently purchasing 8,000 of these valves per year from an overseas supplier at a cost of $47 per valve.Assume that the Valve Division has enough idle capacity to handle all of the Pump Division's needs. What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division?

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.Assume that the Connector Division has enough idle capacity to handle all of the Transmission Division's needs. What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division?

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.Assume that the Connector Division is selling all of the connectors it can produce to outside customers. What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division?

Azotea Corporation has two operating divisions-a Consumer Division and a Commercial Division. The company's Order Fulfillment Department provides services to both divisions. The variable costs of the Order Fulfillment Department are budgeted at $56 per order. The Order Fulfillment Department's fixed costs are budgeted at $233,700 for the year. The fixed costs of the Order Fulfillment Department are budgeted based on the peak-period orders. At the end of the year, actual Order Fulfillment Department variable costs totaled $237,390 and fixed costs totaled $239,140. The Consumer Division had a total of 1,240 orders and the Commercial Division had a total of 2,860 orders for the year.How much actual Order Fulfillment Department cost should not be allocated to the operating divisions at the end of the year?

Tadman Incorporated reported the following results from last year's operations: At the beginning of this year, the company has a $800,000 investment opportunity that involves sales of $2,800,000, fixed expenses of $756,000, and a contribution margin ratio of 30% of sales. If the company pursues the investment opportunity and otherwise performs the same as last year, the combined margin for the entire company will be closest to: