ACC 305: Chapter 12 Homework

Which of the following statements is false regarding managerial decisions?

Rational managers will always make decisions that are in the best interest of the organization employing them.

Mesa Telcom has three divisions, commercial, retail, and consumer, that share the common costs of the company's computer server network. The annual common costs are $2,400,000. You have been provided with the following information for the upcoming year: ConnectionsTime on Network (hours)Commercial60,000120,000Retail80,000150,000Consumer100,000330,000 What is the allocation rate for the upcoming year, assuming Mesa Telcom uses the single-rate method and allocates common costs based on the number of connections?

$0.10

What is the purpose of a management control system?

To align more closely the interests of the manager and the interests of the organization

Which of the following statements is false regarding the effective use of management control systems?

Under a dual-rate method, fixed and variable costs are allocated using the same allocation bases to ensure comparability.

Kentfield Advisory Services (KAS) is a large management consulting firm organized into two groups: Governmental Services (GS) and Commercial Support (CS). Corporate information technology (IT) services support both groups. The cost of computer support is $33 million. The following information is given: UtilizationRevenues ($000)Governmental Services57%$ 221,520Commercial Support43402,480 Required: a. What is the cost charged to each group if the allocation is based on the utilization? b. What is the cost charged to each group if revenue is the allocation basis? c. Most of the business in Commercial Support is priced on a fixed fee basis, and most of the work in the Governmental Services Department is priced on a cost-plus fixed fee basis. Will the allocation base selected affect the amount of revenue?

a. 18,810,000; $14,190,000 b. $11,715,000; $21,285,000 c. yes

Which of the following items would not be classified as a contingent compensation item?

administrative salaries

The controllability concept states that managers should be held responsible for:

all items over which they have decision-making authority.

The following is a summarized income statement for McClaron Manor Company's profit center 12608 for April: Contribution Margin $ 175,000Period Expenses$ 11,000 Manager' s Salary$ 2,000 Corporate Expense Allocation$ 8,000$ (21,000)Net Income $ 154,000 Which of the following amounts is most likely subject to the control of the profit center's manager?

contribution margin $175,000

The purpose of the Data Processing Department of Haslam Corporation is to assist the various departments of the corporation with their information needs free of charge. The Data Processing Department would best be evaluated as a(n):

cost center.

When managers are held responsible for costs but the input-output relationship is not well specified, a(n) _________

discretionary cost center

A manager makes a decision that is beneficial for a specific investment center and for the entire organization. From the organization's perspective, this decision results in:

goal congruence

An operating unit of an organization is called a cost center if it is responsible:

only for costs.

Examples of pressures that can lead to financial fraud do not include:

overemphasis on long-term results.

The Sarbanes-Oxley Act of 2002 requires that management of publicly traded companies:

report on the adequacy of the company's internal controls over financial reporting.

Decentralization refers to the delegation of decision-making authority to:

subordinates.

The design and use of management control systems affect how an individual makes and implements decisions.

true

The Document Creation Center (DCC) for Arlington Corporation provides photocopying and document services for three departments in the Minneapolis office. The following budget has been prepared for the year. Available capacity8,000,000pagesBudgeted usage: Software Development1,600,000pagesTraining3,000,000pagesManagement2,400,000pagesCost equation$280,000 + $0.03per page If DCC uses a dual-rate for allocating its costs based on usage, how much cost will be allocated to the Software Development Department?

$112,000

The Copy Department in the College of Business at State University provides photocopying services for both the Marketing and Economics Departments. The following budget has been prepared for the year. Available capacity6,000,000pagesBudgeted usage: Marketing3,600,000pagesEconomics1,800,000pagesCost equation$ 120,000 + $ 0.025per page If the Copy Department uses a dual-rate for allocating its costs based on usage, how much cost will be allocated to the Marketing Department?

$170,000

Mesa Telcom has three divisions, commercial, retail, and consumer, that share the common costs of the company's computer server network. The annual common costs are $2,400,000. You have been provided with the following information for the upcoming year: ConnectionsTime on Network (hours)Commercial60,000120,000Retail80,000150,000Consumer100,000330,000 Mesa Telcom uses the single rate method and allocates common costs based on the number of connections. What is the total computer server network cost allocated to the Commercial Division?

$600,000

Waterford Company maintains a cafeteria for its employees. For June, variable food costs were budgeted at $45 per employee based on a budgeted level of 200 employees in other departments. During the month, an average of 190 employees worked in other departments and actual food costs totaled $9,250. How much food cost should be charged to the other departments at the end of the month for performance evaluation purposes?

$8,550

The Copy Department in the College of Business at State University provides photocopying services for both the Marketing and Economics Departments. The following budget has been prepared for the year. Available capacity6,000,000pagesBudgeted usage: Marketing3,600,000pagesEconomics1,800,000pagesCost equation$ 120,000 + $ 0.025per page If the Copy Department uses a dual-rate for allocating its costs based on usage, how much cost will be allocated to the Economics Department?

$85,000

What is the primary managerial responsibility in an organization?

Decision making

Banglor Manufacturing Corporation uses a responsibility accounting system in its operations. Which one of the following items is least likely to appear in a performance report for a manager of one of Banglor's assembly lines? (CMA adapted)

Depreciation on the manufacturing facility

Mackenzie Mining has two operating divisions, Northern and Southern, that share the common costs of the company's human resources (HR) department. The annual costs of the HR department total $14,000,000 a year. You have the following selected information about the two divisions: Number of EmployeesWage and Salary Expense ($000)Northern2,310$ 173,600Southern1,890106,400 Required: Determine the cost allocation if $9.5 million of the HR costs are fixed and allocated on the basis of employees, and the remaining costs, which are variable, are allocated on the basis of the wage and salary expense total.

Fixed: $5,225,000; $4,275,000 Variable: $2,790,000; $1,710,000

Which of the following is not a characteristic of a decentralized organization?

More decisions made by relatively few individuals