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Exam 24: Performance Measurement and Responsibility Accounting

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Question 111

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A company rents a building with a total of 50,000 square feet, which are evenly divided between two floors. The company allocates the rent for space on the first floor at twice the rate of space on the second floor. The total monthly rent for the building is $30,000. -How much of the monthly rental expense should be allocated to a department that occupies 10,000 square feet on the second floor?

A) $4,000.
B) $3,000.
C) $5,000.
D) $2,000.
E) $8,000.

F) A) and B)
G) A) and C)

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Question 112

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Jarrett Department Store operates three departments (A, B and C). If total costs of $4,500 are to be allocated on the basis of square feet of space (Dept. A = 1,500 Sq. Ft.; Dept. B = 900 Sq. Ft.; Dept. C = 600 Sq. Ft.) then Dept. A's share (in percent) of the $4,500 cost would be ________%; Dept. B would be ________%, and Dept. C would be ________%. The amount of cost allocated to Dept. C would be $________.

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1,500 sq. ft./3,000 sq. ft. = ...

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Question 113

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Canfield Technical School allocates administrative costs to its respective departments based on the number of students enrolled, while maintenance and utilities are allocated per square feet of the classrooms. Based on the information below, what is the total amount allocated to the Welding Department (rounded to the nearest dollar) if administrative costs for the school were $50,000, maintenance fees were $12,000, and utilities were $6,000? $\begin{array} { l r r l } \text { Department } & \text { Students } & & \text { Classrooms } \\\text { Electrical } & 120 & 10,000 & \text { sq. ft. } \\\text { Welding } & 70 & 12,000 & \text { sq. ft. } \\\text { Accounting } & 50 & 8,000 & \text { sq. ft. } \\\text { Carpentry } & 40 & 6,000 & \text { sq. ft. } \\\hline \text { Total } & 280 & 36,000 & \text { sq. ft. }\end{array}$

In a responsibility accounting system:

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: $\begin{array}{lll}\text { Ottice Expenses } & \text { Total } & \text { Allocation Basis } \\\text { Salaries } & \$ 30,000 & \text { Number of employees } \\\text { Depreciation } & 20,000 & \text { Cost of goods sold } \\\text { Advertising } & 40,000 & \text { Net sales }\end{array}$ $\begin{array}{lrrrr}\text {Item}&\text {Drilling}&\text {Grinding}&\text {Total}\\\text { Number of emplovees } & 1,000 & 1,500 & 2,500 \\\text { Net sales } & \$ 325,000 & \$ 475,000 & \$ 800,000 \\\text { Cost of goods sold } & \$ 75,000 & \$ 125,000 & \$ 200,000\end{array}$ -The amount of the total office expenses that should be allocated to Grinding for the current period is:

Which of the following statements is correct concerning the elements of cycle time?

Ultimo Co. operates three production departments as profit centers. The following information is available for its most recent year. Which department has the greatest departmental contribution to overhead (in dollars) and what is the amount contributed? $\begin{array}{ccccc}\text{Dept.}&\text {Sales}&\text {Cost of Goods Sold}&\text {Direct Expenses}&\text {Indirect Expenses}\\1&\$ 1,000,000 &\$ 700,000 & \$ 100,000 &\$80,000 \\2 & 400,000 & 150,000 & 40,000 & 100,000 \\ 3 & 700,000 & 300,000 & 150,000 & 20,000 \\\end{array}$

Arkansas Toys, a retail store, has three sales departments supported by two service departments. Cost and operational data for each department follow: Purch. $\begin{array} { l l l l l } \text { Sales } & & \text { Cost of } & \text { Square } & \text { Orders } \\\text { Department } & \text { Sales } & \text { Goods Sold } & \text { Footage } & \text { Issued } \\\hline\end{array}$ $\begin{array} { l l l l l } \text { Sales } & & \text { Cost of } & \text { Square } & \text { Orders } \\\text { Department } & \text { Sales } & \text { Goods Sold } & \text { Footage } & \text { Issued }\end{array}$ $\begin{array}{l|l|l|l|l}1 & \$ 92,160 & \$ 36,864 & 1,728 & 1,260 \\\hline 2 & 69,120 & 32,832 & 3,024 & 1,680 \\\hline 3 & 80,640 & 32,256 & 1,296 & 2,310 \\\hline\end{array}$ $\begin{array}{l|l|r}\text { Service }\\\hline \text { Departments } & \text { Allocation Basis } & \text { Cost } \\ \hline \text { Advertising ............... } & \text { Sales } & \$ 10,000 \\\hline \text { Purchasing ........... } & \text { No. of purchase orders issued } & 12,000\end{array}$ Determine the service department expenses to be allocated to Sales Department 1 for (round answers to whole dollars): Advertising ________ Purchasing ________