112) Flamingos, Inc. has four departments. The Administrative Department costs are allocated to
the other three departments based on the number of employees in each and the Maintenance
Department costs are allocated to the Assembly and Packaging Departments based on their
occupied space. Data for these departments follows:
Admin. Maintenance Assembly Packaging
Operating costs $ 30,000 $ 15,000 $ 70,000 $ 45,000
No. of employees 2 6 4
Sq. ft. of space 2,000 3,000
The total amount of the Administrative Department’s cost that would eventually be allocated to
the Packaging Department is:
A) $4,800.
B) $12,000.
C) $10,000.
D) $18,000.
E) $13,000.
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113) Pepper Department store allocates its service department expenses to its various operating
(sales) departments. The following data is available for its service departments:
Expense Basis for allocation Amount
Rent Square feet of floor space $ 24,000
Advertising Amount of dollar sales $ 30,000
Administrative Number of employees $ 45,000
The following information is available for its three operating (sales) departments:
Department Square Feet Dollar Sales
Number of employees
A 3,000 $ 280,000 6
B 3,400 $ 300,000 8
C 3,600 $ 420,000 10
Totals 10,000 $ 1,000,000 24
What is the total expense allocated to Department B?
A) $29,375.
B) $30,462.
C) $30,500.
D) $30,775.
E) $32,160.
114) Pepper Department store allocates its service department expenses to its various operating
(sales) departments. The following data is available for its service departments:
Expense Basis for allocation Amount
Rent Square feet of floor space $ 24,000
Advertising Amount of dollar sales $ 30,000
Administrative Number of employees $ 45,000
The following information is available for its three operating (sales) departments:
Department Square Feet Dollar Sales
Number of employees
A 3,000 $ 280,000 6
B 3,400 $ 300,000 8
C 3,600 $ 420,000 10
Totals 10,000 $ 1,000,000 24
What is the total advertising expense allocated to Department B?
A) $30,000.
B) $ 9,000.
C) $12,500.
D) $10,800.
E) $7,500.
115) Super Grocery store allocates its service department expenses to its various operating
(sales) departments. The following data is available for its service departments:
Expense Basis for allocation Amount
Administrative Square feet of floor space $ 15,000
Advertising Amount of dollar sales $ 8,000
The following information is available for its three operating (sales) departments:
Department Square Feet Dollar Sales
Produce 1,000 $ 80,000
Bakery 800 $ 30,000
Meats 1,200 $ 42,000
Totals 3,000 $ 152,000
What is the total administrative expense allocated to the Meats department?
A) $6,000.
B) $9,000.
C) $4,145.
D) $1,200.
E) $3,000.
116) A college uses advisors who work with all students in all divisions of the college. The most
useful allocation basis for the salaries of these employees would likely be:
A) number of classes offered in each division.
B) student graduation rate.
C) square footage of each division.
D) number of students advised from each division.
E) relative salaries of division heads.
117) A firm produces and sells two products, Plus and Max. The following information is
available relating to setup costs (a part of factory overhead):
Plus Max
Units produced 200 16,000
Batch size (units) 10 400
Number of setups 20 40
Direct labor hours per unit 5 5
Total direct labor hours 1,000 80,000
Cost per setup $ 1,080
Total setup cost $ 64,800
Using direct labor hours as the allocation base, the setup cost portion of overhead that is
allocated to each unit of product for Plus and Max, respectively is:
A) $.80; $.80.
B) $3.20; $3.20.
C) $4.00; $4.00.
D) $160.00; $12,800.00.
E) $200.00; $16,000.00.
118) A firm produces and sells two products, Plus and Max. The following information is
available relating to setup costs (a part of factory overhead):
Plus Max
Units produced 200 16,000
Batch size (units) 10 400
Number of setups 20 40
Direct labor hours per unit 5 5
Total direct labor hours 1,000 80,000
Cost per setup $ 1,080
Total setup cost $ 64,800
Using number of setups as the activity base, the amount of setup cost allocated to each unit of
product for Plus and Max, respectively is:
A) $21.60; $.54.
B) $54.00; $27.00.
C) $60.00; $60.00.
D) $108.00; $2.70.
E) $200.00; $16,000.00
119) Rent and maintenance expenses would most likely be allocated based on:
A) Sales volume by department.
B) Square feet of floor space occupied.
C) Number of hours worked.
D) Number of invoices processed.
E) Number of employees in each department.
120) In the preparation of departmental income statements, the preparer completes the following
steps in the following order:
A) Identify direct expenses; allocate indirect expenses; allocate service department expenses.
B) Identify indirect expenses; allocate direct expenses; allocate service department expenses.
C) Identify service department expenses; allocate direct expenses; allocate indirect expenses.
D) Identify direct expenses; allocate service department expenses; allocate indirect expenses.
E) Allocate all expenses.
121) Marian Corporation has two separate divisions that operate as profit centers. The following
information is available for the most recent year:
Black Division Navy Division
Sales (net) $ 200,000 $ 400,000
Salary expense 28,000 48,000
Cost of goods sold 100,000 159,000
The Black Division occupies 20,000 square feet in the plant. The Navy 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. Compute gross profit for the Black and Navy Divisions, respectively.
A) $72,000; $193,000.
B) $172,000; $352,000.
C) $100,000; $241,000.
D) $52,000; $163,000.
E) $72,000; $163,000.
122) Marian Corporation has two separate divisions that operate as profit centers. The following
information is available for the most recent year:
Black Division Navy Division
Sales (net) $ 200,000 $ 400,000
Salary expense 28,000 48,000
Cost of goods sold 100,000 159,000
The Black Division occupies 20,000 square feet in the plant. The Navy 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. Compute departmental income for the Black and Navy Divisions,
respectively.
A) $52,000; $163,000.
B) $172,000; $352,000.
C) $72,000; $163,000.
D) $72,000; $193,000.
E) $100,000; $241,000.
123) Fallow Corporation has two separate profit centers. The following information is available
for the most recent year:
West Division East Division
Sales (net) $ 200,000 $ 350,000
Salary expense 26,000 40,000
Cost of goods sold 80,000 175,000
The West Division occupies 5,000 square feet in the plant. The East Division occupies 3,000
square feet. Rent, which was $40,000 for the year, is an indirect expense and is allocated based
on square footage. Compute operating income for the West Division.
A) $120,000.
B) $95,000.
C) $94,000.
D) $69,000.
E) $54,000.
124) The amount by which a department’s sales exceed its direct expenses is:
A) Net sales.
B) Gross profit.
C) Departmental profit.
D) Contribution margin.
E) Departmental contribution to overhead.
125) Departmental contribution to overhead is calculated as the amount of sales of the
department less:
A) Controllable costs.
B) Product and period costs.
C) Direct expenses.
D) Direct and indirect costs.
E) Joint costs.
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126) The Menswear Department of Major’s Department Store had sales of $188,000, cost of
goods sold of $132,500, indirect expenses of $13,250, and direct expenses of $27,500 for the
current period. The Menswear Department’s contribution to overhead as a percent of sales is:
A) 7.8%.
B) 14.9%.
C) 29.5%.
D) 66.7%.
E) 85.4%.
127) Ultimo Co. operates three production departments as profit centers. The following
information is available for its most recent year. Department 1’s contribution to overhead as a
percent of sales is:
Dept. Sales Cost of Goods Sold Direct Expenses Indirect Expenses
1 $ 1,000,000 $ 700,000 $ 100,000 $ 80,000
2 400,000 150,000 40,000 100,000
3 700,000 300,000 150,000 20,000
A) 52.5%
B) 20.0%
C) 35.7%
D) 30.0%
E) 57.1%
128) Ultimo Co. operates three production departments as profit centers. The following
information is available for its most recent year. Department 2’s contribution to overhead in
dollars is:
Dept. Sales Cost of Goods Sold Direct Expenses Indirect Expenses
1 $ 1,000,000 $ 700,000 $ 100,000 $ 80,000
2 400,000 150,000 40,000 100,000
3 700,000 300,000 150,000 20,000
A) $210,000.
B) $350,000.
C) $10,000.
D) $260,000.
E) $150,000.
129) Ultimo Co. operates three production departments as profit centers. The following
information is available for its most recent year. Which department has the greatest departmental
contribution to overhead (in dollars) and what is the amount contributed?
Dept. Sales Cost of Goods Sold Direct Expenses Indirect Expenses
1 $ 1,000,000 $ 700,000 $ 100,000 $ 80,000
2 400,000 150,000 40,000 100,000
3 700,000 300,000 150,000 20,000
A) Dept. 3; $400,000.
B) Dept. 1; $1,000,000.
C) Dept. 2; $100,000.
D) Dept. 3; $250,000.
E) Dept. 2; $150,000.
130) A system of performance measures, including nonfinancial measures, used to assess
company and division manager performance is:
A) Hurdle rate.
B) Return on investment.
C) Balanced scorecard.
D) Residual income.
E) Investment turnover.
131) Which of the following is not one of the perspectives used to analyze performance using the
balanced scorecard?
A) Customer
B) Financial/owners
C) Internal process
D) Number of employees
E) Innovation and learning
132) Return on investment can be split into which of the following two measures?
A) Investment center income and profit margin.
B) Profit margin and net income.
C) Investment center average assets and investment turnover.
D) Residual income and operating income.
E) Profit margin and investment turnover.
133) Profit margin for an investment center measures:
A) Investment center income earned per dollar of sales.
B) How efficiently an investment center generates sales from its invested assets.
C) Investment center income compared to target investment center income.
D) Departmental contribution to overhead.
E) Investment center income generated from its invested assets.
134) Carter Company reported the following financial numbers for one of its divisions for the
year; average total assets of $4,100,000; sales of $4,525,000; cost of goods sold of $2,550,000;
and operating expenses of $1,372,000. Compute the division’s return on investment:
A) 30.3%.
B) 23.6%.
C) 13.3%.
D) 10.4%.
E) 14.7%.
135) Carter Company reported the following financial numbers for one of its divisions for the
year; average total assets of $4,100,000; sales of $4,525,000; cost of goods sold of $2,550,000;
and operating expenses of $1,372,000. Assume a target income of 10% of average invested
assets. Compute residual income for the division:
A) $203,000.
B) $193,000.
C) $150,500.
D) $60,300.
E) $197,500.
136) Dartford Company reported the following financial data for one of its divisions for the year;
average investment center total assets of $3,500,000; investment center income $610,000; a
target income of 12% of average invested assets. The residual income for the division is:
A) $536,800.
B) $1,030,000.
C) $190,000.
D) $683,200.
E) $493,200.
137) Kragle Corporation reported the following financial data for one of its divisions for the
year; average invested assets of $470,000; sales of $930,000; and income of $105,000. The
investment center profit margin is:
A) 22.3%.
B) 50.5%.
C) 197.9%.
D) 447.6%.
E) 11.3%.