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Exam 25: Departmentalized Profit and Cost Centers

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Question 31

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Departmental income statements provide management with the information necessary for decision-making. Which of the following is NOT a decision made possible by these statements?

A) Where improvements in the profitable departments are needed.
B) Which departments to expand.
C) Whether or not to eliminate a department.
D) What base to use to allocate costs.

E) C) and D)
F) None of the above

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Question 32

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Costs that cannot be directly assigned to a specific department, but are closely related to departmental activities are categorized as:

A) indirect expenses.
B) direct expenses.
C) semidirect expenses.
D) general expenses.

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

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Question 33

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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 Operating Expenses section of the Income Statement for Cody's Conundrums. Note: The last line item will be Total Indirect Expense.

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 B is:

Expenses of a business that do not change in total with fluctuations in sales are----------expenses.

An example of a direct expense in a department store is:

Department XYZ had sales of $96,000, direct expenses of $58,000 and indirect expenses of $53,000. The indirect expenses allocated to this department would have been incurred whether or not the department existed. If this department had been eliminated, the company's reported net income would have been:

A department's------------- is usually more heavily relied on than its net income or net loss when management is considering whether to eliminate the department.

The difficulty of fairly allocating direct expenses is one limitation of departmental income statements.

Management decisions involving the elimination of a department should be based primarily on the contribution margin of the department.

Managerial accounting is generally utilized to provide financial information about all of the following except

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

Which of the following is NOT a cost center?

Contribution margin figures are provided in traditional financial reports such as the Income Statement.

A business segment or department with a positive contribution margin contributes to increasing the net income of the business.

Match the following definitions with correct terms on the line provided

Non-departmentalized expenses include items often found under the "Other Income and Other expense" section of the Income Statement.

Use the following information for the questions. Bamboozle Solutions has two departments, A and B. The total indirect expenses by category are given as are the Cost of the Assets, information on Square Feet, and the amount of Sales for each department. $\begin{array}{lr}\text { Indirect Expense } &{\text { Total }} \\\text { Insurance Expense } & \$ 32,000 \\\text { Rent Expense } & 36,000 \\\text { Utilities Expense } & 15,000 \\\text { Office Salaries Expense } & 78,000 \\\text { Other Office Expense } & 4,000 \\\text { Uncollectible Accounts Expense } & 21,000\end{array}$ -Based on the information given, determine the basis for the allocation (value of the assets Equipment and Inventory; square feet of space; or sales)of each expense that will be allocated to the departments.

Complete the table of Uncollectible Accounts given below.

In a store with several sales departments, departmentalized accounts would be used for