Question 1

A joint cost of producing two products can be allocated between those products on the basis of the relative physical quantities of each product produced.

Accepted Answer

A) True 
 B)False

Question 2

Cycle efficiency is the ratio of value-added time to total cycle time.

Accepted Answer

A) True 
 B)False

Question 3

Explain the difference between direct and indirect expenses in accounting for departments.

Accepted Answer

Direct expenses are readily traced to a ...

Question 4

What is the main difference between a cost center and a profit center?

Accepted Answer

A cost center incurs costs but does not ...

Question 5

An accounting system that provides information that management can use to evaluate the performance of a department's manager is called a:

Accepted Answer

A)  Cost accounting system.
B)  Managerial accounting system.
C)  Responsibility accounting system.
D)  Financial accounting system.
E)  Activity-based accounting system.

Question 6

Which of the following is most likely to be considered a profit center?

Accepted Answer

A)  An individual retail store in a large chain.
B)  The grocery department of a Walmart Supercenter or Target Superstore.
C)  The maintenance department of a large retail operation.
D)  The personnel office of a business.
E)  A stand-alone eye clinic.

Question 7

Which of the following is an example of a financial performance measure that would be found in a balanced scorecard?

Accepted Answer

A)  Percentage of sales from new customers.
B)  Money spent on employee training programs.
C)  Product costs.
D)  Return on investment.
E)  Money spent on research and development.

Question 8

Direct expenses

Accepted Answer

A)  A department or unit that incurs costs without directly generating revenues.
B)  A center in which a manager is responsible for using the center's assets to generate income for the center.
C)  Costs that are incurred for the joint benefit of more than one department and cannot be readily traced to only one department.
D)  Costs readily traced to a specific department because they are incurred for the sole benefit of that department.
E)  Costs incurred to produce two or more products at the same time.F) Costs that a manager can strongly influence or control.G) A department that incurs costs and generates revenues.H) Assigns managers the responsibility for costs and expenses under their control.

Question 9

Departmental contribution to overhead is calculated as revenues of the department less:

Accepted Answer

A)  Controllable costs.
B)  Product and period costs.
C)  Direct costs and expenses.
D)  Direct and indirect costs.
E)  Joint costs.

Question 10

The process of preparing departmental income statements starts with allocating service departments.

Accepted Answer

A) True 
 B)False

Question 11

A company's Pacific division had sales of $15 billion, net income of $3 billion, and average invested assets of $4 billion.What is this division's investment turnover?

Accepted Answer

A)  1.33
B)  0.20
C)  5.00
D)  3.75
E)  0.27

Question 12

The allocation bases for assigning indirect costs include:

Accepted Answer

A)  Only physical bases.
B)  Only cost bases.
C)  Only value bases.
D)  Only unit bases.
E)  Any appropriate and reasonable bases.

Question 13

An accounting system that provides information that management can use to evaluate the profitability and/or cost effectiveness of a department's activities is a:

Accepted Answer

A)  Departmental accounting system.
B)  Cost accounting system.
C)  Service accounting system.
D)  Revenue accounting system.
E)  Standard accounting system.

Question 14

Contribution to overhead generated by a department is the same as gross profit generated by that department.

Accepted Answer

A) True 
 B)False

Question 15

The investment center return on total assets is __________________________ divided by ______________________________.

Accepted Answer

investment center ne...

Question 16

Under which of the following conditions is a market-based transfer price likely to be used?

Accepted Answer

A)  There is no excess capacity.
B)  No market price exists.
C)  Excess capacity exists.
D)  Excess capacity exists and the market price covers fixed costs.
E)  There is only an internal market for the item in question.

Question 17

The concepts of direct expenses and controllable costs are essentially the same.

Accepted Answer

A) True 
 B)False

Question 18

A responsibility accounting system:

Accepted Answer

A)  Is designed to measure the performance of managers in terms of uncontrollable costs.
B)  Assigns responsibility for costs to the top managerial level.
C)  Is designed to hold a manager responsible for costs over which the manager has no influence.
D)  Can be applied at any level of an organization.
E)  Is well suited to work in an environment without clear lines of responsibility and authority.

Question 19

Responsibility accounting system

Accepted Answer

A)  A department or unit that incurs costs without directly generating revenues.
B)  A center in which a manager is responsible for using the center's assets to generate income for the center.
C)  Costs that are incurred for the joint benefit of more than one department and cannot be readily traced to only one department.
D)  Costs readily traced to a specific department because they are incurred for the sole benefit of that department.
E)  Costs incurred to produce two or more products at the same time.F) Costs that a manager can strongly influence or control.G) A department that incurs costs and generates revenues.H) Assigns managers the responsibility for costs and expenses under their control.

Question 20

A ______________________ incurs costs without directly generating revenues.

Accepted Answer

The answer of A ______________________ incurs costs without directly generating...

Exam 9: Performance Measurement and Responsibility Accounting

A company's Pacific division had sales of $15 billion, net income of $3 billion, and average invested assets of $4 billion.What is this division's investment turnover?

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Departmental contribution to overhead is calculated as revenues of the department less:

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The allocation bases for assigning indirect costs include:

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Responsibility accounting system

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The investment center return on total assets is __________________________ divided by ______________________________.

Correct Answerverifiedinvestment center ne...View AnswerShow Answer

Which of the following is most likely to be considered a profit center?

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Explain the difference between direct and indirect expenses in accounting for departments.

Correct AnswerverifiedDirect expenses are readily traced to a ...View AnswerShow Answer

An accounting system that provides information that management can use to evaluate the performance of a department's manager is called a:

Correct AnswerverifiedShow Answer

An accounting system that provides information that management can use to evaluate the profitability and/or cost effectiveness of a department's activities is a:

Correct AnswerverifiedShow Answer

A responsibility accounting system:

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Under which of the following conditions is a market-based transfer price likely to be used?

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The concepts of direct expenses and controllable costs are essentially the same.

Correct AnswerverifiedShow Answer

The process of preparing departmental income statements starts with allocating service departments.

Correct AnswerverifiedShow Answer

What is the main difference between a cost center and a profit center?

Correct AnswerverifiedA cost center incurs costs but does not ...View AnswerShow Answer

Direct expenses

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A ______________________ incurs costs without directly generating revenues.

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Cycle efficiency is the ratio of value-added time to total cycle time.

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Contribution to overhead generated by a department is the same as gross profit generated by that department.

Correct AnswerverifiedShow Answer

A joint cost of producing two products can be allocated between those products on the basis of the relative physical quantities of each product produced.

Correct AnswerverifiedShow Answer

Which of the following is an example of a financial performance measure that would be found in a balanced scorecard?

Correct AnswerverifiedShow Answer

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The investment center return on total assets is divided by ____.

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investment center ne...
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Direct expenses are readily traced to a ...
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A cost center incurs costs but does not ...
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