CASCADIA COMMUNITY COLLEGE ACC203 1. For an investment center, the hurdle rate isThe desired return on investments.Not important to management.The cost of obtai


1. For an investment center, the hurdle rate is:

The desired return on investments.

Not important to management.

The cost of obtaining financing.

The difference between the projected rate and the earned rate.

Not evaluated in determining the performance of an investment center.


2. Costs that the manager does not have the power to determine or at least strongly influence are:

Uncontrollable costs.

Indirect costs.

Joint costs.

Direct costs.

Variable costs.


3. Expenses that are not easily associated with a specific department, and which are incurred for the benefit of more than one department, are:

Direct expenses.

Fixed expenses.

Uncontrollable expenses.

Variable expenses.

Indirect expenses.


4. An accounting system that provides information that management can use to evaluate the profitability and/or cost effectiveness of a department's activities is a:

Cost accounting system.

Standard accounting system.

Departmental accounting system.

Service accounting system.

Revenue accounting system.


5. In a responsibility accounting system:

Controllable costs are assigned to managers who are responsible for them.

All managers at a given level have equal authority and responsibility.

Organized and clear lines of authority and responsibility are only incidental.

Each accounting report contains all items allocated to a responsibility center.

All of the choices are correct.


6. Abbe Company reported the following financial numbers for one of its divisions for the year; average total assets of $4,100,000; sales of $4,525,000; cost of goods sold of $2,550,000; and operating expenses of $1,372,000. Assume a target income of 10% of average invested assets. Compute residual income for the division:







7. The difference between a profit center and an investment center is

There is no difference; investment center and profit center are synonymous.

an investment center is responsible for effectively using center assets.

an investment center incurs costs, but does not directly generate revenues.

an investment center provides services to profit centers.

an investment center incurs no costs but does generate revenues.


8. An expense that does not require allocation between departments is a(n):

Indirect expense.

All of the options are correct.

Administrative expense.

Direct expense.

Common expense.


9. Rent and maintenance expenses would most likely be allocated based on:

Square feet of floor space occupied.

Number of hours worked.

Number of employees in each department.

Number of invoices processed.

Sales volume by department.


10. A report that accumulates the actual costs that a manager is responsible for and their budgeted amounts is a:

Departmental accounting report.

Controllable expense report.

Managerial cost report.

Segmental accounting report.

Responsibility accounting performance report.


11. A system of performance measures, including nonfinancial measures, used to assess company and division manager performance is:

Hurdle rate.

Return on investment.

Residual income.

Balanced scorecard.

Investment turnover.


12. A difficult problem in calculating the total costs and expenses of a department is:

Assigning indirect expenses to the department.

Determining the gross profit ratio.

Determining the amount of sales of the department.

Determining the direct expenses of the department.

Assigning direct costs to the department.


13. Regardless of the system used in departmental cost analysis:

Neither direct nor indirect costs are allocated.

Indirect costs are allocated, direct costs are not.

Direct costs are allocated, indirect costs are not.

Total departmental costs will always be the same.

Both direct and indirect costs are allocated.


14. Within an organizational structure, the person most likely to be evaluated in terms of controllable costs would be:

A payroll clerk.

A maintenance worker.

All of the individuals would be evaluated in terms of controllable costs.

A production line worker.

A cost center manager.


15. Plans that identify costs and expenses under each manager's control prior to the reporting period are called:

Responsibility accounting budgets.

Activity-based accounting systems.

Cost accounting systems.

Managerial accounting systems.

Responsibility accounting systems.


16. The amount by which a department's revenues exceed its direct expenses is:

Gross profit.

Departmental contribution to overhead.

Contribution margin.

Net sales.

Departmental profit.


17. The most useful evaluation of a manager's cost performance is based on:

Controllable costs.

Direct costs.

Contribution percentages.

Uncontrollable expenses.

Departmental contributions to overhead.


18. Departmental contribution to overhead is calculated as revenues of the department less:

Joint costs.

Direct and indirect costs.

Product and period costs.

Controllable costs.

Direct expenses.


19. The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be:

Number of customers to enter each department.

Floor space of each department.

Proportion of sales of each department.

Relative number of items each department had on sale.

An equal amount of cost for each department.


20. The allocation bases for assigning indirect costs include:

Any appropriate and reasonable bases.

Only value bases.

Only unit bases.

Only cost bases.

Only physical bases.

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