ACC 213 D, RA, TP PS Q PDF

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ACC 213 Practice Set Responsibility Accounting, Transfer Pricing Responsibility Accounting 1.The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called a. static reporting. b. flexible accounting. c. responsibility accounting. d. master budgeting. 2.A cost is considered controllable at a given level of managerial responsibility if a. the manager has the power to incur the cost within a given time period. b. the cost has not exceeded the budget amount in the master budget. c. it is a variable cost, but it is uncontrollable if it is a fixed cost. d. it changes in magnitude in a flexible budget. 3.As one moves up to each higher level of managerial responsibility, a. fewer costs are controllable. b. the responsibility for cost incurrence diminishes. c. a greater number of costs are controllable. d. performance evaluation becomes less important. 4.A responsibility report should a. be prepared in accordance with generally accepted accounting principles. b. show only those costs that a manager can control. c. only show variable costs. d. only be prepared at the highest level of managerial responsibility. 5.Top management can control a. only controllable costs. b. only noncontrollable costs. c. all costs. d. some noncontrollable costs and all controllable costs. 6.Not-for-profit entities a. do not use responsibility accounting. b. utilize responsibility accounting in trying to maximize net income. c. utilize responsibility accounting in trying to minimize the cost of providing services. d. have only noncontrollable costs. 7.Which of the following is not a true statement?

a. All costs are controllable at some level within a company. b. Responsibility accounting applies to both profit and not-for-profit entities. c. Fewer costs are controllable as one moves up to each higher level of managerial responsibility. d. The term segment is sometimes used to identify areas of responsibility in decentralized operations. 8.Costs incurred indirectly and allocated to a responsibility level are considered to be a. nonmaterial. b. mixed. c. controllable. d. noncontrollable. 9.Management by exception a. is most effective at top levels of management. b. can be implemented at each level of responsibility within an organization. c. can only be applied when comparing actual results with the master budget. d. is the opposite of goal congruence. 10.

Which responsibility centers generate both revenues and costs? a. Investment and profit centers b. Profit and cost centers c. Cost and investment centers d. Only profit centers

11.

The linens department of a large department store is a. not a responsibility center. b. a profit center. c. a cost center. d. an investment center.

12.

The foreign subsidiary of a large corporation is a. not a responsibility center. b. a profit center. c. a cost center. d. an investment center.

13.

The maintenance department of a manufacturing company is a(n) a. segment. b. profit center. c. cost center. d. investment center.

14.Which of the following is not a correct match?

1. Incurs costs 2. Generates revenue 3. Controls investment funds a. b. c. d.

Investment Center 1, 2, 3 Cost Center 1 Profit Center 1, 2, 3 All are correct matches.

15.

A cost center a. only incurs costs and does not directly generate revenues. b. incurs costs and generates revenues. c. is a responsibility center of a company which incurs losses. d. is a responsibility center which generates profits and evaluates the investment cost of earning the profit.

16.

A manager of a cost center is evaluated mainly on a. the profit that the center generates. b. his or her ability to control costs. c. the amount of investment it takes to support the cost center. d. the amount of revenue that can be generated.

17.

Performance reports for cost centers compare actual a. total costs with static budget data. b. total costs with flexible budget data. c. controllable costs with static budget data. d. controllable costs with flexible budget data.

18.In the performance report for cost centers, a. controllable and noncontrollable costs are reported. b. fixed costs are not reported. c. no distinction is made between fixed and variable costs. d. only materials and controllable costs are reported. 19.Of the following choices, which contain both a traceable fixed cost and a common fixed cost? a. Profit center manager's salary and timekeeping costs for a responsibility center's employees. b. Company president's salary and company personnel department costs. c. Company personnel department costs and timekeeping costs for a responsibility center's employees. d. Depreciation on a responsibility center's equipment and supervisory salaries for the center. 20.Which of the following is not an indirect fixed cost?

a. b. c. d.

Company president's salary Depreciation on the company building housing several profit centers Company personnel department costs Profit center supervisory salaries

21.A profit center is a. a responsibility center that always reports a profit. b. a responsibility center that incurs costs and generates revenues. c. evaluated by the rate of return earned on the investment allocated to the center. d. referred to as a loss center when operations do not meet the company's objectives. 22.The best measure of the performance of the manager of a profit center is the a. rate of return on investment. b. success in meeting budgeted goals for controllable costs. c. amount of controllable margin generated by the profit center. d. amount of contribution margin generated by the profit center. 23.Controllable margin is defined as a. sales minus variable costs. b. sales minus contribution margin. c. contribution margin less controllable fixed costs. d. contribution margin less noncontrollable fixed costs. 24.Controllable margin is most useful for a. external financial reporting. b. preparing the master budget. c. performance evaluation of profit centers. d. break-even analysis. 25.

Which of the following will not result in an unfavorable controllable margin difference? a. Sales exceeding budget; costs under budget b. Sales exceeding budget; costs over budget c. Sales under budget; costs under budget d. Sales under budget; costs over budget

26.Which of the following are financial measures of performance? 1. Controllable margin 2. Product quality 3. Labor productivity a. 1

b. 2 c. 3 d. 1 and 3 27.A responsibility report for a profit center will a. not show controllable fixed costs. b. not show indirect fixed costs. c. show noncontrollable fixed costs. d. not show cumulative year-to-date results. 28.

The dollar amount of the controllable margin a. is usually higher than the contribution margin. b. is usually lower than the contribution margin. c. is always equal to the contribution margin. d. cannot be a negative figure.

Responsibility Report. In April, the vice president of sales of Petro Products asks the controller to prepare a responsibility report for the performance evaluation of the manager of its Division Y, which is organized into Sections A and B. The following cost items related to the operation of Division Y for the month of May, 19-are presented by the controller:

Item Division Y costs: Staff wages....................................................................................... 18,500 Supplies............................................................................................ 4,800 Manager's salary.............................................................................. 6,400 Other expenses................................................................................ 13,400 Total Division Y cost.................................................................... 43,100 Administration cost allocable to Division Y............................................ 14,500 Unit outputC Division Y.......................................................................... 10,000 Section A costs:

Actual Budgeted Cost Cost $20,000

$

6,000 8,000 15,000 $ 49,000

$

$17,000

$

10,000

Supervisor's salaryCSection A........................................................... 9,500 Employees' wages CSection A: Juracek........................................................................................ 1,900 Molloy......................................................................................... 3,600 Nienaber..................................................................................... 3,250 Oats............................................................................................. 4,050 Peterson...................................................................................... 5,650 Washington................................................................................. 5,000 Materials costCSection A.................................................................. 5,200 Indirect laborCSection A................................................................... 7,300 Other overhead costsCSection A...................................................... 19,600 Total Section A costs................................................................... 65,050 Section B costs: Supervisor's salaryCSection B........................................................... 7,500 Employees' wages CSection B: Laurie.......................................................................................... 4,350 Potash......................................................................................... 3,800 Tillman........................................................................................ 2,050 Other overhead costsCSection B...................................................... 14,500 Total Section B costs................................................................... 32,200

8,000

2,000 3,500 3,300 4,100 5,800 5,000 4,500 7,800 18,000 $ 62,000

$

$ 7,000

$

4,400 3,600 2,100 15,000 $ 32,100

$

Required: Prepare a responsibility report for the month of May in a format suitable for evaluating the performance of Division Y's manager. Transfer Pricing

Office Products Inc. manufactures and sells various high-tech office automation products. Two divisions of Office Products Inc. are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a "super chip," that can be used by both the Computer Division and other external customers. The following information is available on this month's operations in the Computer Chip Division: Selling price per chip Variable costs per chip Fixed production costs Fixed SG&A costs Monthly capacity External sales Internal sales

P50 P20 P60,000 P90,000 10,000 chips 6,000 chips 0 chips

Presently, the Computer Division purchases no chips from the Computer Chips Division, but instead pays P45 to an external supplier for the 4,000 chips it needs each month. 1. Assume that next month's costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month. What is the minimum of the transfer price range for a possible transfer of the super chip from one division to the other? ______ 2. Assume that next month's costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month. What is the maximum of the transfer price range for a possible transfer of the chip from one division to the other? ______ 3. Two possible transfer prices (for 4,000 units) are under consideration by the two divisions: P35 and P40. Corporate profits would be ___________ if P35 is selected as the transfer price rather than P40. a. P20,000 larger b. P40,000 larger c. P20,000 smaller d. the same 4. If a transfer between the two divisions is arranged next period at a price (on 4,000 units of super chips) of P40, total profits in the Computer Chip division will a. rise by P20,000 compared to the prior period. b. drop by P40,000 compared to the prior period. c. drop by P20,000 compared to the prior period. d. rise by P80,000 compared to the prior period. 5. Assume, for this question only, that the Computer Chip Division is selling all that it can produce to external buyers for P50 per unit. How would overall corporate profits be affected if it sells 4,000 units to the Computer Division at P45? (Assume that the Computer Division can purchase the super chip from an outside supplier for P45.)

a. b. c. d.

no effect P20,000 increase P20,000 decrease P90,000 increase

6. Assume, for this question only, that the Computer Chip Division is selling all that it can produce to external buyers for P50 per unit. How would overall corporate profits be affected if it sells 4,000 units to the Computer Division at P45? (Assume that the Computer Division can purchase the super chip from an outside supplier for P45.) a. b. c. d.

no effect P20,000 increase P20,000 decrease P90,000 increase

7. Transfer prices should be judged by whether they promote: a. goal congruence. b. the balanced scorecard method. c. a high level of subunit autonomy in decision making. d. Both A and C are correct. 8. A transfer-pricing method leads to goal congruence when managers: a. always act in their own best interest b. act in their own best interest and the decision is in the long-term best interest of the manager's subunit c. act in their own best interest and the decision is in the long-term best interest of the company d. act in their own best interest and the decision is in the short-term best interest of the company 9. Negotiated transfer prices are often employed when: a. market prices are stable b. market prices are volatile c. market prices change by a regular percentage each year d. goal congruence is not a major objective 10. Assume 200 barrels are transferred from the Production Division to the Refining Division for a transfer price of P18 per barrel. The Refining Division sells the 200 barrels at a price of P120 each to customers. What is the operating income of both divisions together? a. P7,200 b. P7,800 c. P10,800 d. P20,400...