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Chapter 12-3A

Name_________________________
Acct 202

Select the best answer.

1. If the head of computer consulting services (CCS) within an organization is held accountable for revenues and costs, then CCS is considered a(n): 
A) cost center. 
B) revenue center. 
C) profit center. 
D) investment center. 
E) contribution center. 

Ans: C

2. A cost center manager: 
A) does not have the ability to produce revenue. 
B) may be involved with the sale of new marketing programs to clients. 
C) would normally be held accountable for producing an adequate return on invested capital. 
D) is often the manager who oversees divisional operations. 
E) may be the manager who oversees the operations of a retail store. 

Ans: A

3. Who is responsible to a firm's stockholders and held accountable for corporate profit (as well as other major performance measures)? 
A) The president. 
B) The controller. 
C) The cost accountant. 
D) The sales manager. 
E) The vice-president in charge of operations. 

Ans: A

4. A cost pool is: 
A) a collection of homogeneous costs to be assigned. 
B) the joint result of several subunit activities. 
C) the primary function of a responsibility accounting system. 
D) the amount of cost that has been allocated, say, 10%, to a user department. 
E) the tool used to allocate cost dollars to user departments. 

Ans: A

5. An allocation base for a cost pool should ideally be: 
A) machine hours. 
B) a cost object. 
C) a common cost. 
D) a cost driver. 
E) direct labor, either cost or hours. 

Ans: D

6. Cost pools should be charged to responsibility centers by using: 
A) budgeted amounts of allocation bases because the cost allocation to one responsibility center should influence the allocations to others. 
B) budgeted amounts of allocation bases because the cost allocation to one responsibility center should not influence the allocations to others. 
C) actual amounts of allocation bases because the cost allocation to one responsibility center should influence the allocations to others. 
D) actual amounts of allocation bases because the cost allocation to one responsibility center should not influence the allocations to others. 
E) some other approach. 

Ans: B

The following information was taken from the segmented income statement of Restin, Inc.:

 

Restin, Inc.

Los Angeles Division

 Bay Area Division

Central Valley Division

Revenues 

$750,000

 $200,000 

$225,000

 $325,000

Variable operating expenses 

410,000

110,000 

 120,000 

180,000

Controllable fixed expenses 

210,000

 65,000

 75,000 

70,000

Noncontrollable fixed expenses 

60,000

 15,000 

20,000

 25,000

In addition, the company incurred common fixed costs of $18,000.

7. The profit margin controllable by the Central Valley segment manager is: 
A) $32,000. 
B) $44,000. 
C) $50,000. 
D) $75,000. 
E) $145,000. 

Ans: D

8. Which of the following amounts should be used to evaluate the performance of the Los Angeles division manager? 
A) $4,000. 
B) $8,000. 
C) $10,000. 
D) $25,000. 
E) $90,000. 

Ans: D

9. If goods are inspected and found to be defective, any rework costs related to these units before the units are transferred to the finished-goods warehouse would be classified as a(n): 
A) external failure cost. 
B) internal failure cost. 
C) production inefficiency cost. 
D) prevention cost. 
E) appraisal cost. 

Ans: B

10. The cost of servicing a unit under a warranty agreement is known as a(n): 
A) external failure cost. 
B) internal failure cost. 
C) production inefficiency cost. 
D) prevention cost. 
E) appraisal cost. 

Ans: A