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Title: Question 1
QA_Ori:
Many companies are divided into departments when they become too large to be
Title: Question 2
QA_Ori:
Operating departments are directly involved in manufacturing or selling the products or
Title: Question 3
QA_Ori:
Controllable costs of a department are those that the department’s manager has the
top management).
Title: Question 4
QA_Ori:
Title: Question 5
QA_Ori:
Title: Question 6
QA_Ori:
Title: Question 7
QA_Ori:
Not usually; a cost center cannot usually be evaluated in terms of its profitability
Title: Question 8
QA_Ori:
Direct expenses of a department are expenses that are incurred for the sole benefit of
Title: Question 9
QA_Ori:
a) Sales of the departments or the number of employees in each department.
b) Square feet of floor space, perhaps adjusted for its value.
Title: Question 10
QA_Ori:
Title: Question 11
QA_Ori:
The individual responsible for controlling the cost needs timely reports with specific cost
Title: Question 12
QA_Ori:
A transfer price is an amount used to record transactions made between divisions
Title: Question 13
QA_Ori:
A joint cost is incurred to produce or purchase two or more different products at the
Title: Question 14
QA_Ori:
Two examples of products with joint costs are: (1) Steel – used for home appliances,
Title: Question 15
QA_Ori:
a) It is useful to know the amount of sales for each department as well as
b) Treating a department of a store as a profit center allows management to
Title: Question 16
QA_Ori:
Controllable cost examples - labor of department, packaging supplies, office equipment.
Title: Question 17
QA_Ori:
Title: Question 18
QA_Ori:
Value-added time provides value to a product or service from a customer’s perspective.
Title: Question 19
QA_Ori:
Cycle efficiency is the ratio of value-added time divided by total cycle time. The closer
Title: Question 20
QA_Ori:
Yes. Arctic Cat can use cycle time and cycle efficiency to measure operating
Title: Quick Study 24-1
QA_Ori:
1. A 5. F
Title: Quick Study 24-2
QA_Ori:
Possible allocation bases for these indirect expenses and service department expenses
include:
1. Proportion of total processing time for each factory department; or number of
production run schedules prepared for each department as a percent of the total.
Title: Quick Study 24-3
QA_Ori:
Title: Quick Study 24-4
QA_Ori:
Departmental contribution to overhead
Dept. A: $18,815 - $ 3,660 = $15,155
Departmental contribution to overhead (as a percent of sales)*
Dept. A: $15,155 / $ 53,000 = 28.6%
*Rounded to one decimal place
Title: Quick Study 24-5
QA_Ori:
Return on
Investment Center Net Income Average Assets Investment (Assets)
Cameras and
Comments: The Cameras and Camcorders division is the superior investment center on
Title: Quick Study 24-6
QA_Ori:
Cameras &
Camcorders
Phones &
Communication
Computers &
Accessories
Net income $4,500,000 $1,500,000 $ 800,000
Less: Target net income
Title: Quick Study 24-7
QA_Ori:
Title: Quick Study 24-8
QA_Ori:
Investment center A:
Return on investment = Net income / Average invested assets
Investment turnover = Sales / Average invested assets
Investment center B:
Return on investment = Profit margin x Investment turnover
0.12 = Profit margin x 1.5
Thus,
Profit margin = Net income / Sales
0.08 = Net income / $10,400,000
Thus,
Investment turnover = Sales / Average invested assets
Thus,
Title: Quick Study 24-9
QA_Ori:
1. C
5. F
Title: Quick Study 24-10
QA_Ori:
Note: The East Coast goal (upward) arrow should be red (shown black here) and the
West Coast goal (downward) arrow should be green (shown gray here).
Title: Quick Study 24-11
QA_Ori:
Without excess capacity, a market-based transfer price of $450 per windshield should
Title: Quick Study 24-12
QA_Ori:
If the Windshield division has excess capacity, a range of acceptable transfer prices
Title: Quick Study 24-13
QA_Ori:
Total joint cost = $325,000 + $50,000 = $375,000
Title: Quick Study 24-14
QA_Ori:
The first step is to allocate total rent expense between the two floors.
Amount Allocated
% of Total Cost
The second step is to allocate these portions of total rent expense across the
departments occupying the two floors
First Floor Sq. Feet % of Total Cost
Second Floor Sq. Feet % of Total Cost
