1) What are responsibility centers? What are the three levels of responsibility centers
commonly found in organizations?
2) A business should minimize the amount of cash that it keeps on hand
3) How do short-term plans differ from long-term plans?
4) What is the effect of the recognition of warranty expense on the statement of cash
flows?
5) Indicate whether each of the following statements is true or false.
1>Companies group several individual overhead costs into cost pools to simplify the
allocation process
2>When a cost pool is used, costs are allocated individually to the cost object
3>A cost pool should include costs for which a common cost driver is appropriate
4>Using cost pools to group costs generally reduces the usefulness of the resulting
product costs
6) When cash is paid in advance for an insurance policy that covers the next year, how
is the accounting equation affected by the cash payment for the insurance?
7) List four elements of a business’s financial statements.
8) Wahl Company manufactures fine furniture and grandfather clocks. Wahl has an
excellent reputation, and each grandfather clock sells for several thousand dollars. The
company incurs costs for the following items:
Salary of manufacturing supervisor, who is responsible for all operations in the factory
Hardware: small nails
Glue
The timing mechanism for each clock
Wood
The face for each clock, which is purchased
Property taxes on the factory
Depreciation on manufacturing equipment used in the Clock Department
Polyurethane coating and wood stain
Utilities – cost for heating and lighting the factory
Salary of supervisor who oversees clock manufacture
Direct labor
Insurance on the factory
Human resources department at the factory
Depreciation on the factory building
Required:
1) Which of these costs should be treated as direct costs, assuming the cost object is
individual clocks?
2) Which of these costs should be treated as direct costs, assuming the cost object is the
Clock Department?