Ch 9 Flashcards
In responsibility accounting, unit managers are evaluated only on things that they can …
control
A department that incurs costs without generating revenues is considered a(n):
cost center
Match the center on the left with the center’s method of evaluation.
Cost center
Profit center
Investment center
Cost center: success in controlling actual costs compared to budgeted costs.
Profit center: sucess in generating revenue.
Investment center: success on use of assets to generate income.
A _____ center manager is evaluated on their success in generating income.
profit center
A department that incurs costs, generates revenues, and is responsible for effectively using department assets is considered a(n):
investment center
In responsibility accounting, unit managers are evaluated on:
costs they can control
An example of a cost that a department manager would not control is:
the manager’s own salary
The accounting department of a manufacturing company is a(n):
cost center
A cost that is not within a manager’s control or influence is called a(n) … cost.
uncontrollable
Each of the following are a type of responsibility accounting center:
profit
investment
cost
A department that is evaluated on their success in generating income is a(n):
profit center
The purpose of a responsibility accounting system is to provide information to: (Check all that apply.)
assign costs and expenses to the managers responsible for controlling them.
evaluate managers’ performance.
The manager of a certain division at Alpha Manufacturing is evaluated on how efficiently the division uses equipment, buildings, and other assets to generate profits. This division is considered a(n):
investment center
A responsibility accounting performance report contains which of the following items? (Check all that apply.)
A list of all controllable costs
Budgeted amounts
Actual amounts
A list of all controllable direct costs
The difference between actual and budgeted amounts
A cost that a manager can determine or influence is called a(n)
cost.
controllable
When comparing responsibility accounting performance reports for higher-level management to those of lower-level management, responsibility and control are ________ for upper-level management.
less detailed
A(n) _____ cost is not within the manager’s control or influence.
uncontrollable
Profit centers commonly use _____ to report profit center performance:
departmental income statements
A responsibility accounting system recognizes that control over costs and expenses belong to:
several levels of management
Reports to ______ managers are usually less detailed because they need to concentrate on the key issues.
upper-level
A responsibility accounting system provides: (Check all that apply.)
differences between budgeted and actual amounts
actual cost information
Determine if the following costs would be considered direct or indirect for a division which manufactures bicycles.
Property insurance
Depreciation on manufacturing equipment
Property insurance: indirect
Depreciation on manufacturing equipment: direct
Costs readily traced to a department because they are incurred for that department’s sole benefit are called … expenses.
direct
Decisions related to allocating expenses include: (Check all that apply).
how to allocate service department expenses
how to allocate indirect expenses
Costs that are incurred for the joint benefit of more than one department and cannot be readily traced to only one department are called … expenses.
Indirect
A(n) … accounting system provides information that management can use to evaluate a department’s manager.
responsibility
True or false: Standard rules exist to help managers identify appropriate allocation bases.
False
Which service department is most likely to use square feet of floor space occupied as the allocation base to assign its costs to operating departments?
Maintenance
True or false: Controllable costs are the same as direct costs.
False.
manager may or may not have control over all direct costs.
A retail store has 10,000 square feet of space and incurs rent costs of $5,000 per month. If Department A uses 2,000 square feet of space, the amount of rent allocated to the department will be $…
$1000
(2,000÷10,000)×5,000
Julie works in the production department. Julie’s wages are an example of ______ expenses for the production department.
direct
Departmental income statements include:
direct and indirect expenses
Jane works in the maintenance department which supports both the production department and the research department. Jane’s wages are an example of which type expenses? (Check all that apply.)
Indirect to the production department
Indirect to the research department
Direct to the maintenance department
Operating department income statements are used to evaluate the performance of ______ centers.
profit
Match each indirect expense to the most likely allocation base.
Supervisor salaries
Rent
Advertising
Insurance
Supervisor salaries: # of employees in department.
Rent: sq.ft. of floor space occupied.
Advertising: % of total sales.
Insurance: value of insured assets.
Personnel expenses would most likely be allocated to operating departments using which allocation base?
Number of employees
List the sections of a departmental expense allocation spreadsheet with the first section on top:
- Direct expenses
- Indirect expenses
- Service department expenses
- Total expense allocated to operating department
A company incurs advertising costs of $10,000. The company’s three selling departments have the following sales: Department 1—$10,000; Department 2—$30,000; Department 3—$40,000. Advertising is allocated based on percent of sales. The amount of advertising allocated to Department 3 will be $…
5000 HOW
List the steps in allocating costs to operating departments and preparing departmental income statements, with the first step on top.
- Accumulate she’s, direct expenses, indirect expenses by department.
- Allocate indirect expenses to service and operating departments.
- Applicate service department expenses to operating departments
Which report is more effective in evaluating the performance of profit centers?
Departmental contribution to overhead reports
A … center is evaluated based on control of costs so a performance report is prepared instead of an income statement.
cost
