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Chapter 12-2A

Acct 202

Select the best answer.

1. 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

2. Which of the following is not an example of a responsibility center? 
A) Cost center. 
B) Revenue center. 
C) Profit center. 
D) Investment center. 
E) Contribution center. 

Ans: E

3. 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

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. 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

6. Performance reports help managers: 
A) use management by exception and effectively control operations. 
B) decide whether a cost, profit, or investment center framework is appropriate. 
C) design their organizational hierarchy. 
D) make personnel changes. 
E) eliminate spending. 

Ans: A

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

Management of Wee Kare, an operator of day-care facilities, wants the firm's profit to be subdivided by center. The firm's accountant has provided the following data:


Actual Revenue

Budgeted Revenue

  Actual Direct Costs

Budgeted Direct Costs






SF Valley










West LA










8. If advertising expense were allocated to centers based on actual center profitability, how much advertising would be allocated to SF Valley? 

A) $13,500. 
B) $14,850. 
C) $15,300. 
D) $15,750. 
E) $30,407. 

Ans: E

9. Assume that management used the allocation base that is most influenced by advertising effort and consistent with sound managerial accounting practices. How much advertising would be allocated to SF Valley? 
A) $13,500. 
B) $14,850. 
C) $15,750. 
D) $22,500. 
E) None of the above. 

Ans: C

10. Harris Company is preparing a segmented income statement, subdivided into departments (billing, purchasing, and telemarketing). Which of the following choices correctly describes the accounting treatment of the firm's compensation cost for key executives (president and vice-presidents)? 
A) The cost is charged to the departments. 
B) The cost is not charged to the departments because, although easily traceable to the departments, it is not controllable at the departmental level. 
C) The cost is not charged to the departments because, although controllable at the departmental level, it is not easily traceable to the departments. 
D) The cost is not charged to the departments because it is both easily traceable to the departments and controllable by the departments. 
E) The cost is not charged to the departments because it is neither easily traceable to the departments nor controllable by the departments. 

Ans: E