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Exam 25: Departmentalized Profit and Cost Centers

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Question 1

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Eliminating a department should eliminate all --------------expenses of the department.

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Question 2

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The breakeven point is when the---------- equals the fixed expenses of the business.

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The basic principle of---------- accounting is that management should be able to evaluate the performance of each segment of the business and assign responsibility for its financial results.

A company may have several cost centers, but it can have only one profit center.

Semidirect and indirect expenses are allocated to the sales department at the time the expenses are incurred.

Semidirect and indirect expenses are treated the same for accounting purposes. At the end of the accounting period they are:

Interest income and interest expense are treated as direct costs and are traced to departments or business segments.

Unit Manufacturing Company has a Northeast Division, a Central Division and a Southwest Division and a travel department which supports the employees in all three divisions. The $206,000 in travel department expenses is allocated to the divisions based on the number of reservations required by each of the divisions. If the Northeast Division requires 2,208 reservations and the Central Division requires 3,936 reservations, and the Southwest Division requires 3,456 reservations, calculate the amount of travel department costs that will be allocated to each of the divisions.

Shigley and Lothian, CPAs, allocate the expenses of the duplicating center to the Audit Department and the Tax Department, based on the number of copies that each department requests. During 2019, the Audit Department requested 80,000 copies and the Tax Department requested 120,000 copies. Total expenses of the duplicating center were $640,000 in 2019. How much of the duplicating center's expenses will be allocated to the Audit Department and the Tax Department?

Use the following information for the questions. Cody's Conundrums Income Statement Accounts (Partial) September 30, 2019 -Using the information provided, determine and present in good form, the Gross Profit section of the Income Statement for Cody's Conundrums.

The Copying Department occupied 9,000 square feet of space and the Printing Department occupied 16,000 square feet of space in the same building. If janitorial costs for the building were $15,000 and are allocated based on the floor space occupied, the amount of the janitorial costs allocated to the Copying Department would be------------- .

The departments of Cacophony Music Company are listed below. For each, determine whether it is a cost center or a profit center. -Sheet Music Department

A segment or department with a negative contribution margin is often in jeopardy of being eliminated.

The price at which goods are moved from one segment of a company to another is the------------price.

Department X began the current year with $26,000 in inventory. During the year, Department X net purchases amounted to $72,000 and its ending inventory was $13,600. Sales during the year totaled $162,000, other direct expenses were $33,800, and total indirect expenses of $24,200. Department X's contribution margin is

A systematic and logical way to allocate the---------- for a building to various sales departments would be on the basis of floor space.

If a segment of business is considered a profit center:

In departmental accounting, any costs and expenses not directly related to a specific department are allocated to all departments.

The purchasing, information systems, and maintenance departments are examples of profit centers of a company.

Department A had gross profit on sales of $29,000, contribution margin of $19,800, total direct expenses of $9,200, and total indirect expenses of $7,900. Department A has: