55) Responsibility accounting defines an operating center that is responsible for revenue and
costs as a(n): (CMA adapted)
A) profit center.
B) revenue center.
C) division.
D) operating unit.
56) The least complex segment or area of responsibility for which costs are allocated is a(n):
(CMA adapted)
A) profit center.
B) investment center.
C) contribution center.
D) cost center.
57) Which of the following statements is/are correct?
I. A profit center has control over both costs and revenues.
II. An investment center has control over invested funds, but not over costs and revenues.
III. A cost center has no control over sales.
A) Only I.
B) Only II.
C) Only I and III.
D) Only I and II.
58) The purpose of the Data Processing Department of Haslam Corporation is to assist the
various departments of the corporation with their information needs free of charge. The Data
Processing Department would best be evaluated as a(n):
A) cost center.
B) revenue center.
C) profit center.
D) investment center.
59) Which of the following departments would not be a cost center?
A) County fire department.
B) University book store.
C) University power plant.
D) City building and grounds department.
60) Which of the following subunits would most likely be considered a cost center?
A) Jewelry department.
B) Parts department.
C) Legal department.
D) Electronics department.
61) A successful responsibility accounting reporting system is dependent upon (CMA adapted):
A) The correct allocation of controllable variable costs.
B) Identification of the management level at which all costs are controllable.
C) The proper delegation of responsibility and authority.
D) A reasonable separation of costs into their fixed and variable components since fixed costs
are not controllable and must be eliminated from the responsibility report.
62) The following is a summarized income statement for McClaron Manor Co.’s profit center
12608 for April:
Contribution Margin $ 175,000
Period Expenses $ 11,000
Manager’ s Salary $ 2,000
Corporate Expense Allocation $ 8,000 $ (21,000 )
Net Income $ 154,000
Which of the following amounts is most likely subject to the control of the profit center‘s
manager? (CPA, adapted)
A) Contribution Margin of $175,000.
B) Contribution Margin of $175,000 and Period Expenses of $11,000.
C) Contribution Margin of $175,000 and Period Expenses of $13,000.
D) Contribution Margin of $175,000 and Period Expenses of $21,000.
63) Revenue center and profit center managers are both responsible for meeting:
A) Budgeted income.
B) Budgeted costs.
C) Budgeted revenues.
D) Minimum return on investment as established by the company as a whole.
64) Which of the following subunits is most likely to be considered an investment center?
A) Accounting department.
B) Assembly department.
C) Petrochemical division.
D) Research and development department.
65) The controllability concept states that managers should be held responsible for:
A) all items over which they have decision-making authority.
B) costs and revenues, but not investments in assets used in their division.
C) only items that are allocated to their divisions on a per-unit basis.
D) fixed compensation items, but not contingent compensation items.
66) Relative performance evaluations (RPE) are not designed to:
A) compare managers to other comparable managers.
B) compare divisions with other comparable divisions.
C) remove the effect of environmental factors that are beyond a manager’s control.
D) restate departmental goals so meaningful comparisons can be made.
67) Which of the following items would be classified as a fixed compensation item?
A) Administrative salaries.
B) Sales commissions.
C) Stock options.
D) Piece rates.
68) Which of the following items would not be classified as a contingent compensation item?
A) Administrative salaries.
B) Sales commissions.
C) Stock options.
D) Piece rates.
69) Which of the following statements is/are true regarding compensation?
(A) Fixed compensation is generally not linked to measured performance; i.e., it is independent
of measured performance.
(B) Properly designed management control systems have contingent compensation items but not
fixed compensation items.
A) Only A is true.
B) Only B is true.
C) Both of these are true.
D) None of these is true.
70) In responsibility accounting, a center‘s performance is measured by those costs which are
controllable. Controllable costs are best described as including: (CMA adapted)
A) direct materials and direct labor only.
B) only those costs that the manager can influence in the current period.
C) only discretionary costs.
D) those costs about which the manager is knowledgeable and informed.
71) Banglor Manufacturing Corporation uses a responsibility accounting system in its operations.
Which one of the following items is least likely to appear in a performance report for a manager
of one of Banglor’s assembly lines? (CMA adapted)
A) Direct labor.
B) Materials.
C) Repairs and maintenance.
D) Depreciation on the manufacturing facility.
72) When comparing performance report information for top management with that of lower-
level management: (CMA adapted)
A) top management reports are more detailed.
B) lower-level management reports are typically for longer time periods.
C) top management reports show control over fewer costs.
D) lower-level management reports are likely to contain more quantitative data and less financial
data.
73) Which of the following is the purpose of relative performance evaluation (RPE)?
A) To ensure that all managers are subjected to identical evaluations.
B) To hold managers accountable for all divisions, regardless of control or responsibility.
C) To evaluate management on internal targets only to avoid ambiguity.
D) To compare managers or divisions to other comparable managers and divisions.
74) The use of dual rates in a cost allocation system assumes that common costs can be:
A) separated into their fixed and variable components.
B) traced directly to a specific division or manager.
C) allocated based on a physical quantities measure.
D) assigned to an investment responsibility center.
75) Which of the following statements is/are false regarding the effective use of management
control systems?
(A) In general, single rate cost allocations should not be used in management control systems
because clear control over the cost being allocated cannot be determined.
(B) The primary reason to use a dual rate allocation system is to focus a manager’s performance
evaluation on factors under the manager’s direct control.
A) Only A is false.
B) Only B is false.
C) Both of these are false.
D) None of these is false.
76) Barrington Box Enterprises has two divisions, large and small, that share the common costs
of the company’s communications network. The annual common costs are $4,500,000. You have
been provided with the following information for the upcoming year:
Calls Time on Network (hours)
Large 100,000 120,000
Small 80,000 330,000
What is the allocation rate for the upcoming year, assuming Barrington Box uses the single-rate
method and allocates common costs based on the number of calls?
A) $10.00.
B) $15.00.
C) $20.00.
D) $25.00.
77) Barrington Box Enterprises has two divisions, large and small, that share the common costs
of the company’s communications network. The annual common costs are $4,500,000. You have
been provided with the following information for the upcoming year:
Calls Time on Network (hours)
Large 100,000 120,000
Small 80,000 330,000
What is the allocation rate for the upcoming, year assuming Barrington Box uses the single-rate
method and allocates common costs based on the time on the network ?
A) $10.98.
B) $10.00.
C) $8.00.
D) $7.14.
78) Barrington Box Enterprises has two divisions, large and small, that share the common costs
of the company’s communications network. The annual common costs are $4,500,000. You have
been provided with the following information for the upcoming year:
Calls Time on Network (hours)
Large 100,000 120,000
Small 80,000 330,000
The cost accountant determined $2,700,000 of the communication network’s costs were fixed
and should be allocated based on the number of calls. The remaining costs should be allocated
based on the time on the network. What is the total communication network costs allocated to the
Large Box Division, assuming the company uses dual-rates to allocate common costs?
A) $2,700,000.
B) $2,520,000.
C) $1,980,000.
D) $1,500,000.
79) Barrington Box Enterprises has two divisions, large and small, that share the common costs
of the company’s communications network. The annual common costs are $4,500,000. You have
been provided with the following information for the upcoming year:
Calls Time on Network (hours)
Large 100,000 120,000
Small 80,000 330,000
The cost accountant determined $2,700,000 of the communication network’s costs were fixed
and should be allocated based on the number of calls. The remaining costs should be allocated
based on the time on the network. What is total communication network costs allocated to the
Small Box Division, assuming the company uses dual-rates to allocate common costs?
A) $2,520,000.
B) $1,800,000.
C) $1,320,000.
D) $1,200,000.
80) The Copy Department in the College of Business at State University provides photocopying
services for both the Marketing and Economics Departments. The following budget has been
prepared for the year.
Available capacity 6,000,000 pages
Budgeted usage:
Marketing 3,600,000 pages
Economics 1,800,000 pages
Cost equation $120,000 + $0.025 per page
If the Copy Department uses a dual rate for allocating its costs based on usage, how much cost
will be allocated to the Marketing Department?
A) $85,000.
B) $90,000.
C) $150,000.
D) $170,000.
81) The Copy Department in the College of Business at State University provides photocopying
services for both the Marketing and Economics Departments. The following budget has been
prepared for the year.
Available capacity 6,000,000 pages
Budgeted usage:
Marketing 3,600,000 pages
Economics 1,800,000 pages
Cost equation $120,000 + $0.025 per page
If the Copy Department uses a dual rate for allocating its costs based on usage, how much cost
will be allocated to the Economics Department?
A) $85,000.
B) $90,000.
C) $105,000.
D) $120,000.
82) The Copy Department in the College of Business at State University provides photocopying
services for both the Marketing and Economics Departments. The following budget has been
prepared for the year.
Available capacity 6,000,000 pages
Budgeted usage:
Marketing 3,600,000 pages
Economics 1,800,000 pages
Cost equation $120,000 + $0.025 per page
If the Copy Department uses a dual-rate for allocating its costs, how much cost will be allocated
to the Economics Department, assuming the Economics Department actually made 2,100,000
copies during the year?
A) $85,000.
B) $92,500.
C) $132,500.
D) $112,500.
83) The Copy Department in the College of Business at State University provides photocopying
services for both the Marketing and Economics Departments. The following budget has been
prepared for the year
Available capacity 6,000,000 pages
Budgeted usage:
Marketing 3,600,000 pages
Economics 1,800,000 pages
Cost equation $120,000 + $0.025 per page
If the Copy Department uses a dual-rate for allocating its costs, how much cost will be allocated
to the Marketing Department, assuming the Marketing Department actually made 3,000,000
copies during the year?
A) $135,000.
B) $150,000.
C) $155,000.
D) $170,000.
84) The Copy Department in the College of Business at State University provides photocopying
services for both the Marketing and Economics Departments. The following budget has been
prepared for the year.
Available capacity 6,000,000 pages
Budgeted usage:
Marketing 3,600,000 pages
Economics 1,800,000 pages
Cost equation $120,000 + $0.025 per page
If the Copy Department uses a dual-rate for allocating its costs, how much cost will be allocated
to the Economics Department, assuming the Economics Department actually made 1,500,000
copies during the year?
A) $77,500.
B) $92,500.
C) $132,500.
D) $112,500.
85) The Copy Department in the College of Business at State University provides photocopying
services for both the Marketing and Economics Departments. The following budget has been
prepared for the year.
Available capacity 6,000,000 pages
Budgeted usage:
Marketing 3,600,000 pages
Economics 1,800,000 pages
Cost equation $120,000 + $0.025 per page
If the Copy Department uses a dual-rate for allocating its costs, how much cost will be allocated
to the Marketing Department, assuming the Marketing Department actually made 3,800,000
copies during the year?
A) $135,000.
B) $150,000.
C) $155,000.
D) $175,000.
86) Mesa Telcom has three divisions, commercial, retail, and consumer, that share the common
costs of the company’s computer server network. The annual common costs are $2,400,000. You
have been provided with the following information for the upcoming year:
Connections Time on Network (hours)
Commercial 60,000 120,000
Retail 80,000 150,000
Consumer 100,000 330,000
What is the allocation rate for the upcoming year, assuming Mesa Telcom uses the single-rate
method and allocates common costs based on the number of connections?
A) $10.00.
B) $15.00.
C) $20.00.
D) $40.00.