Chapter 24 & 25

A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called a(n) a. investment center b. volume center c. profit center d. cost center

c. profit center

All of the following are advantages of decentralization except a. each decentralized operation purchases its own assets and pays for operating costs b. managers make better decisions when closer to the operations of the company c. expertise in all areas of the business is difficult; decentralization makes it better to delegate certain responsibilities d. decentralized managers can respond quickly to customer needs

a. each decentralized operation purchases its own assets and pays for operating costs

Which of the following is a measure of a cost center manager's performance? a. divisional income statements b. budget performance report c. balance sheet d. return and residual income measures

b. budget performance report

Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be a. consolidated b. decentralized c. centralized d. diversified

b. decentralized

Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $30 per pound and costs $28 per pound to produce. Product C would sell for $55 per pound and would require an additional cost of $31 per pound to produce. What is the differential cost of producing Product C? a. $30 per pound b. $28 per pound c. $31 per pound d. $55 per pound

c. $31 per pound

A manager is responsible for costs but not revenues in a(n) a. volume center b. profit center c. cost center d. investment center

c. cost center

Most manufacturing plants are considered cost centers because they have control over a. fixed assets and sales b. sales and costs c. costs only d. fixed assets and costs

c. costs only

The amount of revenue that is foregone from an alternative use of cash is called a. differential revenue b. sunk cost c. opportunity cost d. differential profit

c. opportunity cost

In a cost center, the manager has responsibility and authority for making decisions that affect a. revenues b. invested assets c. both costs and revenues d. costs

d. costs

A cost that will not be affected by later decisions is termed a a. period cost b. replacement cost c. differential cost d. sunk cost

d. sunk cost

Which of the following is the best example of a decentralized operation? a. Each unit is responsible for its own operations and decision making. b. In a major company, operating decisions are made by top management. c. One owner who prepares, plans, and makes decisions for the entire company. d. None of these choices

a. Each unit is responsible for its own operations and decision making.

The amount of increase or decrease in cost that is expected from a particular course of action as compared with an alternative is a. differential cost b. product cost c. discretionary cost d. period cost

a. differential cost

The amount of increase or decrease in revenue that is expected from a particular course of action as compared with an alternative is a. differential cost b. manufacturing margin c. differential revenue d. contribution margin

c. differential revenue

Which of the following would be most effective in a small owner-manager operated business? a. investment centers b. profit centers c. centralization d. cost centers

c. centralization

Piper Corp. is operating at 70% of capacity and is currently purchasing a part used in its manufacturing operations for $24 per unit. The unit cost for the business to make the part is $36 including fixed costs and $26 excluding fixed costs. If 15,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it? a. $180,000 cost increase b. $30,000 cost decrease c. $180,000 cost decrease d. $30,000 cost increase

d. $30,000 cost increase

For higher levels of management, responsibility accounting reports a. are rarely provided or reviewed b. are more detailed than for lower levels of management c. contain about the same level of detail as reports for lower levels of management d. are more summarized than for lower levels of management

d. are more summarized than for lower levels of management