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Chapter 12-1A

Acct 202

Select the best answer.

1. 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

2. When managers of subunits throughout an organization strive to achieve the goals set by top management, the result is: 
A) goal congruence. 
B) planning and control. 
C) responsibility accounting. 
D) delegation of decision making. 
E) strategic control. 

Ans: A

3. 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

4. Easy-to-Use Software operates stores within five regions. Regional managers are held accountable for marketing, advertising, and sales decisions, and all costs incurred within their region. In addition, regional managers decide whether new stores will open, where the stores will be located, and whether the stores will lease or purchase the facilities. If store managers are accountable for marketing, advertising, and sales decisions, and costs incurred within their stores, ideally, what type of responsibility center should be used?
Region Store
A) Profit center Profit center 
B) Profit center Cost center 
C) Profit center Revenue center 
D) Investment center Profit center 
E) Investment center Cost center 

Ans: D

5. Kelly Company, a firm with operations throughout the country, will soon allocate a portion of its corporate overhead to various company-wide responsibility centers. Which of the following is definitely not a cost object in this situation? 
A) The maintenance department. 
B) Product no. 675. 
C) Kelly Corporation. 
D) The Midwest division. 
E) The telemarketing center. 

Ans: C

6. Controllable costs, as used in a responsibility accounting system, consist of: 
A) only fixed costs. 
B) only direct materials and direct labor. 
C) those costs that a manager can influence in the time period under review. 
D) those costs about which a manager has some knowledge. 
E) those costs that are influenced by parties external to the organization. 

Ans: C

7. For a company that uses responsibility accounting, which of the following is least likely to appear on a performance report of an assembly-line supervisor? 
A) The cost of direct materials used. 
B) Departmental supplies cost. 
C) Assembly-line labor cost. 
D) Repairs and maintenance cost. 
E) Assembly-line facilities depreciation cost. 

Ans: E

8. A common cost is: 
A) not easily related to a segment's activities. 
B) easily related to a segment's activities. 
C) avoidable. 
D) unavoidable. 
E) applicable only to manufacturing organizations. 

Ans: A

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


Restin, Inc.

Los Angeles Division

 Bay Area Division

Central Valley Division






Variable operating expenses 





Controllable fixed expenses 





Noncontrollable fixed expenses 





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

9. Bay Area's traceable profit margin is: 
A) $4000. 
B) $8,000. 
C) $10,000. 
D) $30,000. 
E) $105,000. 

Ans: C

10. Assume that the Los Angeles division increases its promotion expense, a controllable fixed cost, by $10,000. As a result, revenues increase by $50,000. If variable expenses are tied directly to revenues, the new traceable Los Angeles profit margin is: 
A) $12,500. 
B) $22,500. 
C) $32,500. 
D) $50,000. 
E) $60,000. 

Ans: B