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Exam 22: Decentralization and Performance Measurement

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Question 41

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

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Question 42

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The ________________________________ is sales less direct expenses for a department.

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Question 43

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

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

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

Bevo Beef Company uses the relative market value method of allocating joint costs in their production of beef products.Relevant information for the current period follows: $\begin{array}{lcc}& \text { Production in } & \text { Market } \\\text { Product } & \text { Pounds } & \text { Price/Pound }\\\text { Sirloin } & 3,000 & \$ 5.00 \\\text { Hamburger } & 10,000 & 2.00 \\\text { Rib eye } & 4,000 & 4.75 \\\text { Roast } & 6,000 & 3.50\end{array}$ The total joint cost for the current period was $43,000.How much of this cost should Bevo Beef allocate to sirloin?

A _____________________________ provides information for managers to use to evaluate the profitability or cost effectiveness of each department's activities.

Match the following definitions with the appropriate terms

Describe the information found on a responsibility accounting performance report.

Indirect expenses should be allocated to departments based on the benefits received by each department.

Midwest Rocks receives and produces an order.What is the company's cycle time assuming the following times were measured during production of this order? Process time: .7 days Inspection time: .25 days Move time: 1.05 days Wait time: .5 days

Joint costs are a group of several costs incurred in producing or purchasing a single product.

The ________________________________ is a system of performance measures,including nonfinancial measures,used to assess company and division manager performance.

A department that incurs costs without directly generating revenues is a:

Reference: 22_02 Jamesway Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year: $\begin{array} { l c c c } & \text { White } & & \text { Grey } \\& \text { Division } & & \text { Division } \\ \text { Sales (nat) } & \$ 200,000 & & \$ 400,000 \\\text { Salary expense } & 28,000 & & 48,000 \\\text { Cost of goods sold } & 100,000 & & 159,000\end{array}$ The White Division occupies 20,000 square feet in the plant. The Grey Division occupies 30,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $50,000. -Gross profit for the White and Grey Divisions is: $\begin{array}{lll} &&\text {White}&&\text {Grey}\end{array}$ A. $\begin{array}{lll}& \$ 72,000 & \$ 193,000 \\\end{array}$ B. $\begin{array}{lll} & \$ 172,000 & \$ 352,000 \\\end{array}$ C. $\begin{array}{lll}& \$ 100,000 & \$ 241,000 \\\end{array}$ D. $\begin{array}{lll} & \$ 52,000 & \$ 163,000 \\\end{array}$ E. $\begin{array}{lll} & \$ 72,000 & \$ 163,000\end{array}$

Midwest Rocks receives and produces an order.What is the company's cycle efficiency assuming the following times were measured during production of this order? Process time: .7 days Inspection time: .25 days Move time: 1.05 days Wait time: .5 days

Within an organizational structure,the person most likely to be evaluated in terms of controllable costs would be:

Reference: 22_07 Assume Rock Bottom Golf is divided into four departments that operate as profit centers and that the data below is from the most recent fiscal year. $\begin{array}{lrrrr}&\text { Golf Clubs}&\text { Golf Bags}&\text { Golf Balls }&\text { Golf Apparel }\\\text { Sales } & \$ 200,000 & \$ 400,000 & \$ 800,000 & \$ 1,600,000 \\\text { Cost of goods } & 90,000 & 220,000 & 400,000 & 960,000\\\text { Sold}\\\text { Direct expenses}\\\text { Salaries } & 18,000 & 54,000 & 90,000 & 226,000 \\\text { Insurance } & 2,000 & 3,000 & 6,000 & 120,000 \\\text { Utilities } & 1,000 & 2,000 & 3,000 & 10,000\end{array}$ -Given the information above,which of Rock Bottom Golf's departments has the highest contribution margin as a percent of sales?

Reference: 22_03 Bridgestreet, Inc. has three operating departments: Cutting, Assembling, and Finishing. Cutting has 5,000 employees and occupies 15,000 square feet. Assembling has 4,000 employees and occupies 12,000 square feet. Finishing has 1,000 employees and occupies 23,000 square feet. Indirect factory costs for the current period were Administrative $170,000 and Maintenance $212,000. Administrative costs are allocated to operating departments based on the number of workers and maintenance costs are allocated to operating departments based on square footage occupied. -Based on the above data,determine the maintenance cost allocated to each operating department of Bridgestreet,Inc. A. $\begin{array}{llll}& \text { Cutting: } \$ 70,666 & \text { Assembling: } \$ 70,666 & \text { Finishing: } \$ 70,666 \\\end{array}$ B. $\begin{array}{llll}& \text { Cutting: } \$ 15,000 & \text { Assembling: } \$ 12,000 & \text { Finishing: } \$ 23,000 \\\end{array}$ C. $\begin{array}{llll}& \text { Cutting: } \$ 63,600 & \text { Assembling: } \$ 50,880 & \text { Finishing: } \$ 97,520 \\\end{array}$ D. $\begin{array}{llll}& \text { Cutting: } \$ 127,333 & \text { Assembling: } \$ 127,333 & \text { Finishing: } \$ 127,333 \\\end{array}$ E. $\begin{array}{llll} & \text { Cutting: } \$ 115,000 & \text { Assembling: } \$ 91,680 & \text { Finishing: } \$ 175,720\end{array}$

A report that specifies the expected and actual costs under the control of a manager is a: