FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 11: Reporting for Control

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 101

Multiple Choice

Review LaterAdd Note

Review Later

All other things being equal,which of the following is a consequence of an increase in a division's traceable fixed expenses?

A) The division's contribution margin ratio will decrease.
B) The division's segment margin ratio will remain the same.
C) The division's segment margin will decrease.
D) The overall company operating income will remain the same.

E) All of the above
F) A) and B)

Correct Answer

verified

Show Answer

Question 102

Multiple Choice

Review LaterAdd Note

Review Later

Division X of Charter Corporation makes and sells a single product that is used by manufacturers of forklift trucks.Presently,it sells 12,000 units per year to outside customers at $24 per unit.The annual capacity is 20,000 units,and the variable cost to make each unit is $16.Division Y of Charter Corporation would like to buy 10,000 units a year from Division X to use in its products.There would be no cost savings from transferring the units within the company rather than selling them on the outside market.What should be the lowest acceptable transfer price from the perspective of Division X?

A) $16.00.
B) $17.60.
C) $21.40.
D) $24.00.

E) C) and D)
F) A) and B)

Correct Answer

verified

Show Answer

Question 103

Multiple Choice

Review LaterAdd Note

$\begin{array}{l}\text { Faast Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality engineering } & \$ 86,000 \\\hline \text { Quality circles } & \$ 53,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 92,000 \\\hline \text { Net cost of scrap } & \$ 96,000 \\\hline \text { Test and inspection of in-process goods } & \$ 16,000 \\\hline \text { Liability arising from defective products } & \$ 13,000 \\\hline \text { Warranty repairs and replacements } & \$ 62,000 \\\hline \text { Debugging software errors } & \$ 86,000 \\\hline \text { Rework labour and overhead } & \$ 29,000 \\\hline\end{array}\end{array}$ - What will be the total appraisal cost appearing on the quality cost report?

What allocation method recognizes that service departments often provide each other with interdepartmental services,and it is therefore considered to be the most accurate method for allocating service department costs to operating departments?

The Post Division of the M.T. Woodhead Company produces basic posts that can be sold t outside customers or sold to the Lamp Division of the M.T. Woodhead Company. Last year the Lamp Division bought all of its 25,000 posts from the Post Division at $\$ 1.50$ each. The following data are available for last year's activities of the Post Division: $\begin{array}{|l|r|}\hline \text { Capacity in Units } & 300,000 \text { posts } \\\hline \text { Selling Price per Post to Outside Customers } & \$ 1.75 \\\hline \text { Variable Costs per Post } & \$ 0.90 \\\hline \text { Fixed Costs, Total } & \$ 150,000 \\\hline\end{array}$ $\text { The total fixed costs would be the same for all the alternatives considered below. }$ - Suppose there is ample capacity so that transfers of the posts to the Lamp Division do not cut into sales to outside customers.What is the lowest transfer price that would not reduce the operating income of the Post Division?

The following data have been extracted from the year-end reports of two companies: Company X and Company Y: $\begin{array}{|l|r|r|}\hline & \text { Company X } & \text { Company Y } \\\hline \text { Sales } & \$ 2,700,00 & ? \\\hline \text { Operating Income } & \$ 256,000 & ? \\\hline \text { Average Operating Assets } & ? & \$ 1,725,000 \\\hline \text { Margin } & ? & 8.0 \% \\\hline \text { Turnover } & ? & 2.0 \\\hline \text { Return on Investment } & 16 \% & ? \\\hline\end{array}$ Required: Fill in the missing data on the above table.

When the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred,what is the lowest acceptable transfer price as far as the selling division is concerned?

An increase in appraisal costs will usually result in an increase in internal failure costs.

Only those costs that would disappear over time if a segment were eliminated should be considered traceable costs of the segment.

To minimize its total quality costs,a company should usually try to redistribute its quality costs more toward prevention and appraisal.

$\begin{array}{l}\text { Eagan Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality training } & \$ 75,000 \\\hline \text { Lost sales due to poor quality } & \$ 94,000 \\\hline \text { Test and inspection of in-process goods } & \$ 37,000 \\\hline \text { Test and inspection of incoming materials } & \$ 65,000 \\\hline \text { Disposal of defective products } & \$ 86,000 \\\hline \text { Quality data gathering, analysis, and reporting } & \$ 92,000 \\\hline \text { Net cost of spoilage } & \$ 27,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 10,000 \\\hline \text { Product recalls } & \$ 38,000 \\\hline\end{array}\end{array}$ - What will be the total external failure cost appearing on the quality cost report?

External failure costs result when a defective product is shipped to a customer.

The James Company has four departments with data as follows: $\begin{array} { | l | r | r | r | r | } \hline & { \text { Service Departments } } && \text { Operating Departments } \\\hline & \text { Cafeteria } & \text { Maintenance } & \text { Milling } & \text { Finishing } \\\hline \text { Budgeted Costs } & \$ 12,000 & \$ 10,000 & \$ 42,000 & \$ 38,000 \\\hline \text { Number of Employees } & 12 & 10 & 84 & 66 \\\hline \text { Labour Hours } & 1,500 & 1,250 & 5,250 & 4,750 \\\hline\end{array}$ - Suppose Cafeteria Department costs are allocated on the basis of number of employees and that the step-down method is used with costs of the Cafeteria Department allocated first.What would be the amount of cost allocated from the Cafeteria Department to Maintenance Department?

Consider the following three statements: I.A profit centre has control over both cost and revenue. II.An investment centre has control over invested funds,but not over costs and revenue. III.A cost centre has no control over sales. Which statement(s) is/are correct?

$\text { Estes Company has assembled the following data for its divisions for the past year: }$ $\begin{array}{l|r|r|}\hline & \text { Division A } & \text { Division B } \\\hline \text { Average Operating Assets } & \$ 500,000 & ? \\\hline \text { Sales } & ? & \$ 520,000 \\\hline \text { Operating Income } & \$ 100,000 & \$ 20,300 \\\hline \text { Turnover } & 1.25 & 4 \\\hline \text { Margin } & ? & 3.9 \% \\\hline \text { Minimum Required Rate of Return } & 14 \% & ? \\\hline \text { Residual Income } & ? & \$ 6,000 \\\hline\end{array}$ -What was Division A's residual income?

The Millard Division's operating data for the past two years are provided below: $\begin{array}{l}\begin{array} { | l | r | r | } \hline & \text { Year 1 } & \text { Year 2 } \\\hline \text { Return on Investment } & 12 \% & 36 \% \\\hline \text { Shareholders' Equity } & \$ 800,000 & \$ 500,000 \\\hline \text { Operating Income } & ? & \$ 360,000 \\\hline \text { Turnover } & ? & 3 \\\hline \text { Margin } & ? & ? \\\hline \text { Sales } & \$ 3,200,000 & ? \\\hline\end{array}\\\text { Millard Division's margin in Year } 2 \text { was } 150 \% \text { of the margin in Year } 1 .\end{array}$ -What was the turnover for Year 1?

$\text { Eacker Company's quality cost report is to be based on the following data: }$ $\begin{array}{|l|r|}\hline \text { Quality engineering } & \$ 72,000 \\\hline \text { Net cost of spoilage } & \$ 70,000 \\\hline \text { Re-entering data because of keying errors } & \$ 88,000 \\\hline \text { Test and inspection of incoming materials } & \$ 68,000 \\\hline \text { Test and inspection of in-process goods } & \$ 97,000 \\\hline \text { Technical support provided to suppliers } & \$ 83,000 \\\hline \text { Maintenance of test equipment } & \$ 31,000 \\\hline \text { Product recalls } & \$ 73,000 \\\hline \text { Warranty repairs and replacements } & \$ 46,000 \\\hline\end{array}$ - What will be the total appraisal cost appearing on the quality cost report?

$\begin{array}{l}\text { Fabri Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Liability arising from defective products } & \$ 56,000 \\\hline \text { Lost sales due to poor quality } & \$ 51,000 \\\hline \text { Test and inspection of in-process goods } & \$ 47,000 \\\hline \text { Quality circles } & \$ 17,000 \\\hline \text { Net cost of spoilage } & \$ 93,000 \\\hline \text { Debugging software errors } & \$ 29,000 \\\hline \text { Rework labour and overhead } & \$ 95,000 \\\hline \text { Final product testing and inspection } & \$ 32,000 \\\hline \text { Statistical process control activities } & \$ 61,000 \\\hline\end{array}\end{array}$ - What will be the total external failure cost appearing on the quality cost report?

Division A makes a part with the following characteristics: $\begin{array}{|l|r|}\hline \text { Production Capacity in Units } & 15,000 \text { units } \\\hline \text { Selling Price to Outside Customers } & \$ 25 \\\hline \text { Variable Cost per Unit } & \$ 18 \\\hline \text { Total Fixed Costs } & \$ 60,000 \\\hline\end{array}$ Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of \$24 each. - Suppose that Division A is operating at capacity and can sell all of its output to outside customers at its usual selling price.If Division A sells the parts to Division B at $24 per unit (Division B's outside price) ,what will be the effect on the operating income of company as a whole?

Which of the following statements about reciprocal service department costs is correct?