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Exam 24: Departmental Accounting

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Question 31

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An example of a cost center is:

A) a Holiday Inn.
B) the restaurant in a motel.
C) the administrative department in a motel.
D) the catering department in a motel.

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Question 32

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Advertising totaled $10,000;$3,000 was indirect.What would be the best choice to use to allocate the indirect cost?

A) Allocate the indirect expense based on square feet.
B) Allocate the indirect expense based on gross sales.
C) Charge indirect expense to administrative expense.
D) Allocate the indirect expense based on goods shipped.

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Question 33

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Prepare an income statement showing departmental contribution margin based on the following: $\begin{array} { l r r r } & \text { Dept. X } & \text { Dept. Y } & \text { Rent Expense } \\\text { Space (square feet) } & 17,500 & 35,000 & \\\text { Net Sales } & \$ 60,000 & \$ 40,000 & \\\text { Cost of Goods Sold } & 18,000 & 16,000 & \\\text { Rent Expense (allocated based on square feet) } & & & \$ 2,700\end{array}$

Insurance paid on employees working in high risk areas of a machine shop.________

Departmental income statements are prepared to indicate how well each department is performing.

Gross profit by department appears on the:

To calculate gross profit,subtract cost of goods sold from net sales.

A company has three departments (A,B,and C) and the net sales are $350,000;$410,000;and $285,000 respectively.The cost of goods sold per department is $295,000;$360,000;and $245,000 respectively.What department has the highest gross profit?

The photography department in a department store experienced the following revenue and expenses during October: $\begin{array} { | l | r | } \hline \text { Sales } & \$ 23,500 \\\hline \text { Cost of Goods Sold } & 8,200 \\\hline \text { Direct Operating Expenses } & 2,300 \\\hline \text { Indirect Operating Expenses } & 1,000 \\\hline\end{array}$ The photography department's contribution margin is:

To calculate departmental gross profit,separate accounts should be set up for Sales,Purchases,etc. ,for each department.

Which of the following statements is false as it relates to direct and indirect expenses?

Given the following,calculate contribution margin and net income: $\begin{array} { l r r r } & & & \text { Indirect } \\& \text { DVD } & \mathrm { CD } & \text { Expense } \\\text { Net Sales } & \$ 10,000 & \$ 5,000 & \\\text { Cost of Goods Sold } & 5,500 & 2,300 & \\ \\ \text { Operating Expenses (Indirect) }& & & \$ 3,000\end{array}$

Hawkeye Golf is considering dropping the clothing department because it is not generating a profit as disclosed by the following data: $\begin{array} { l r } \text { Sales } & \$ 1,800 \\\text { Cost of Goods Sold } & \$ \underline { 800 } \\\text { Gross Profit } & \$ 1,000 \\\text { Direct Expenses } & 700 \\\text { Contribution Margin } & 300 \\\text { Indirect Expenses } & ( \underline { 500 } ) \\\text { Net Loss } & \$ ( 200 )\end{array}$ Note: None of the indirect expenses can be avoided by dropping the department. Should Hawkeye drop the department? Show your computations.

Department contribution margin equals gross profit on sales minus direct departmental expenses.

Eliminating one department may increase the sales of another department.

Below is a list of departments; you are to identify each as either [1] a profit center or [2] a cost center. -The human resource office for a department store.________

The catering department of a construction firm is a(n) :

Below is a list of expenses (direct and indirect).You are to determine the total direct cost for departments A and B. Direct cost for department A $ ________ B $ ________

If the music department in a department store is 8,000 square feet and the total square feet is 40,000,how much of the total building cost of $50,000 will be allocated to music?

Direct expenses are assigned to departments based on the actual expenses incurred.