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Exam 25: Departmentalized Profit and Cost Centers

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Question 21

Multiple Choice

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Which of the following measurements provides a better basis for eliminating a department?

A) a positive contribution margin and income from operations.
B) fixed expenses that exceed contribution margin.
C) fixed and variable expenses that exceed contribution margin.
D) the contribution margin equals fixed expenses.

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

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Question 22

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Department A had total sales of $84,000 and Department B had total sales of $36,000. Other Office Expenses, totaling $3,100, are allocated to the departments based on total sales. -The amount of Other Office Expense allocated to Department A is:

A) $750.
B) $930.
C) $1,250.
D) $2,170.

E) A) and C)
F) B) and C)

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Question 23

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Department B had net sales of $70,000, gross profit on sales of $32,000, total direct expenses of $10,200, and total indirect expenses of $5,800. Department B's contribution margin is:

Eliminating a department that has a negative contribution margin would result in------------------ net income for the company than if the department were not eliminated.

Department A had total sales of $60,000 and Department B had total sales of $20,000. If office salaries expense is allocated on the basis of total sales,---------- percent of the office salaries expense would be allocated to Department B.

The procedure for assigning indirect expenses to departments at the end of an accounting period is called

TBS Toys purchases a product from overseas, including insurance and shipping costs, for $62 per unit. TBS marks the toy up by 35% to $83.70. Other traceable direct costs amount to $4.10 per unit. The indirect costs associated with this product amount to $51,920. How many toys must TBS sell in order to break even?

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

The fixed expenses of a business total $41,800. The company sells only one product for $46 per unit. The corresponding variable cost of the item sold is $24 per unit. To breakeven, the company must sell---------- units.

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

A common way to allocate janitorial wages to various departments would be on the basis of------------.

Which of the following is NOT a limitation to using departmental operating income?

When a departmentalized income statement is prepared, the sales journal must also be departmentalized.

Which of the following enables management to evaluate the performance of each business segment?

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 Cost of Goods Sold section of the Income Statement for Cody's Conundrums.

Operating expenses that cannot be easily assigned to particular departments at the time transactions occur and are recorded are------------ expenses.

Expenses that are closely related to the activities in each department, but cannot be allocated to any specific department are----------- expenses.

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

Eldercare One, Two and Three are managed as a profit centers by the parent company. Revenues were $1,200,000, $500,000 and $300,000, respectively, and patients numbered 270, 80 and 50, respectively. Insurance costs of $625,000 are allocated to each center based on number of patients. Eldercare Two would be allocated cost of:

The contribution margin of a department is the difference between: