Responsibility Accounting1.The accumulation of accounting data on the basis of the individual manager who hasthe 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.

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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.

Which responsibility centers generate both revenues and costs?a. Investment and profit centersb. Profit and cost centersc. Cost and investment centersd. Only profit centers

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

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

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?

a. Company president"s salaryb. Depreciation on the company building housing several profit centersc. Company personnel department costsd. 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.

Which of the following will not result in an unfavorable controllable margindifference?a. Sales exceeding budget; costs under budgetb. Sales exceeding budget; costs over budgetc. Sales under budget; costs under budgetd. Sales under budget; costs over budget

26.Which of the following are financial measures of performance?

Controllable marginProduct qualityLabor productivitya. 1

b. 2c. 3d. 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.

The dollar amount of the controllable margina. 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 thecontroller to prepare a responsibility report for the performance evaluation of themanager 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:

Actual BudgetedItem Cost CostDivision Y costs:Staff wages....................................................................................... $20,000 $18,Supplies............................................................................................ 6,000 4,80 0Manager"s salary.............................................................................. 8,000 6,Other expenses................................................................................ 15,000 13,Total Division Y cost.................................................................... $ 49,000 $43,

Administration cost allocable to Division Y........................................... $17,000 $14,Unit outputCDivision Y.......................................................................... 10,000 10,

Section A costs: Supervisor"s salaryCSection A.......................................................... 8,000 9, Employees" wagesCSection A: Juracek........................................................................................ 2,000 1, Molloy......................................................................................... 3,500 3, Nienaber..................................................................................... 3,300 3, Oats............................................................................................. 4,100 4,05 0 Peterson...................................................................................... 5,800 5,

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.

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a. P20,000 largerb. P40,000 largerc. P20,000 smallerd. the sameIf 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.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. no effectb. P20,000 increasec. P20,000 decreased. P90,000 increaseAssume, for this question only, that the Computer Chip Division is selling all that it canproduce to external buyers for P50 per unit. How would overall corporate profits beaffected if it sells 4,000 units to the Computer Division at P45? (Assume that theComputer Division can purchase the super chip from an outside supplier for P45.)

a. no effectb. P20,000 increasec. P20,000 decreased. P90,000 increase

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.

A transfer-pricing method leads to goal congruence when managers:a. always act in their own best interestb. act in their own best interest and the decision is in the long-term best interest of themanager"s subunit

c. act in their own best interest and the decision is in the long-term best interest of thecompanyd. act in their own best interest and the decision is in the short-term best interest of thecompany

Negotiated transfer prices are often employed when:a. market prices are stableb. market prices are volatilec. market prices change by a regular percentage each yeard. goal congruence is not a major objective

Assume 200 barrels are transferred from the Production Division to the RefiningDivision for a transfer price of P18 per barrel. The Refining Division sells the 200 barrelsat a price of P120 each to customers. What is the operating income of both divisionstogether?a. P7,b. P7,c. P10,d. P20,