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Exam 22: Performance Measurement and Responsibility Accounting

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Question 1

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A company produces two joint products (called 301 and 302)in a single operation that uses one raw material called Fruge.Four hundred gallons of Fruge were purchased at a cost of $800 and were used to produce 150 gallons of Product 301,selling for $5 per gallon,and 75 gallons of Product 302,selling for $15 per gallon.How much of the $800 cost should be allocated to each product,assuming that the company allocates cost based on sales revenue?

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Question 2

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Expenses that are not easily traced to a specific department,and which are incurred for the joint benefit of more than one department,are:

A) Fixed expenses.
B) Indirect expenses.
C) Direct expenses.
D) Uncontrollable expenses.
E) Variable expenses.

F) B) and E)
G) A) and B)

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Question 3

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Calculating return on investment for an investment center is defined by the following formula:

The cash conversion cycle is calculated by days' sales in accounts receivable plus ________ less days' payable outstanding.

An example of a service department is the human resources department.

The ________ measures the average time it takes to convert cash outflows into cash inflows from customers.

The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be:

Dartford Company reported the following financial data for one of its divisions for the year; average investment center total assets of $3,500,000; investment center income $610,000; a target income of 12% of average invested assets.The residual income for the division is:

Profit margin for an investment center measures:

A firm produces and sells two products,Plus and Max.The following information is available relating to setup costs (a part of factory overhead) : -Using direct labor hours as the allocation base,the setup cost portion of overhead that is allocated to each unit of product for Plus and Max,respectively is:

Fallow Corporation has two separate profit centers.The following information is available for the most recent year: The West Division occupies 5,000 square feet in the plant.The East Division occupies 3,000 square feet.Rent,which was $40,000 for the year,is an indirect expense and is allocated based on square footage.Compute operating income for the West Division.

Investment center managers are evaluated on their use of investment center assets to generate income.

Which of the following is not one of the perspectives used to analyze performance using the balanced scorecard?

A company rents a building with a total of 50,000 square feet,which are evenly divided between two floors.The company allocates the rent for space on the first floor at twice the rate of space on the second floor.The total monthly rent for the building is $30,000.How much of the monthly rental expense should be allocated to a department that occupies 10,000 square feet on the second floor?

Wren Pork Company uses the value basis of allocating joint costs in its production of pork products.Relevant information for the current period follows: The total joint cost for the current period was $43,000.How much of this cost should Wren Pork allocate to Loin chops?

Direct expenses require allocation across departments because they cannot be readily traced to one department.

Indirect expenses are allocated to departments based upon the benefits received by each department.

Part 7B costs the Midwest Division of Frackle Corporation $30 to make,of which $21 is variable.Midwest Division sells Part 7B to other companies for $47.The Northern Division of Frackle Corporation can use Part 7B in one of its products.The Midwest Division has enough idle capacity to produce all of the units of Part 7B that the Northern Division would require.What is the lowest transfer price at which the Midwest Division should be willing to sell Part 7B to the Northern Division?

The type of department that generates revenues and incurs costs,and its manager is responsible for the investments made in operating assets is called a(n) :

A cost incurred to produce or purchase two or more products at the same time is a(n) :