Deck 24: Departmental Accounting

Question 1

In a department store,the men's clothing section would be a(n):

A)profit center.
B)direct expense.
C)cost center.
D)indirect expense.

Answer 1

A

Question 2

When a company tracks gross profit by department,the sales journal will:

A)not differ from a company that does not track gross profit by department.
B)have a separate column for accounts receivable for each department.
C)have a separate column for sales for each department.
D)have a column for purchases for each department.

Answer 2

C

Question 3

A company has four departments (A,B,C and D)and the net sales are $35,000;$40,000;$60,000 and $25,000 respectively.The cost of goods sold per department is $25,000;$15,000;$30,000 and $15,000 respectively.What department has the highest gross profit?

A)A
B)B
C)C
D)D

Answer 3

C

Question 4

The women's shoe department shows gross sales of $260,000 with the cost of the shoes $140,000.The men's shoe department shows gross sales of $170,000 with the cost of the shoes $110,000.What is the gross profit for each department respectively?

A)$430,000 and $250,000
B)$90,000 and $30,000
C)$120,000 and $60,000
D)$390,000 and $310,000

Question 5

The espresso department experienced the following revenue and expenses during October:
$$\begin{array} { | l | r | } \hline \text { Sales } & \$ 15,000 \\\hline \text { Cost of Goods Sold } & 11,000 \\\hline \text { Direct Operating Expenses } & 2,000 \\\hline \text { Indirect Operating Expenses } & 1,000 \\\hline\end{array}$$
The espresso departmental gross profit is:

A)$1,000.
B)$4,000.
C)$8,000.
D)$2,000.

Question 6

An example of a cost center is:

A)a Holiday Inn.
B)the restaurant in a motel.
C)the administrative department in a motel.
D)the catering department in a motel.

Question 7

A maintenance department would be an example of a:

A)cost center.
B)direct expense.
C)profit center.
D)None of these answers is correct.

Question 8

The photography department in a department store experienced the following revenue and expenses during October:
$$\begin{array} { | l | r | } \hline \text { Sales } & \$ 13,000 \\\hline \text { Cost of Goods Sold } & 4,900 \\\hline \text { Direct Operating Expenses } & 1,000 \\\hline \text { Indirect Operating Expenses } & 2,000 \\\hline\end{array}$$
The photography departmental gross profit is:

A)$7,100.
B)$5,100.
C)$6,100.
D)$8,100.

Question 9

A unit or department that incurs costs and generates revenues is known as a:

A)cost center
B)profit center
C)revenue center
D)None of these answers is correct.

Question 10

Calculate a department's gross profit given the following:
$$\begin{array} {| l | r| } \hline\text { Sales } & \$ 1,950 \\\hline \text { Operating expenses } & 400 \\\hline \text { Cost of goods sold } & 900 \\\hline\end{array}$$

A)$350
B)$700
C)$1,050
D)$1,250

Question 11

Sales minus cost of goods sold yields:

A)operating expenses.
B)gross profit.
C)income before taxes.
D)net income.

Question 12

A unit or department that incurs costs but does not generate revenues is known as a:

A)cost center
B)profit center
C)revenue center
D)None of these answers is correct.

Question 13

A company has four departments (A,B,C and D)and the net sales are $30,000;$40,000;$60,000 and $25,000 respectively.The cost of goods sold per department is $25,000;$15,000;$40,000 and $15,000 respectively.What department has the lowest gross profit?

A)A
B)B
C)C
D)both A and D

Question 14

Which of the following is normally the report prepared for a department?

A)cash flow statement.
B)statement of equity.
C)income statement.
D)balance sheet.

Question 15

The financial statement(s)that cannot be broken down by departments would be:

A)income statement.
B)balance sheet.
C)statement of owner's equity.
D)All of these answers are correct.

Question 16

Departmental reports are not useful for:

A)determining performance.
B)determining future revenue.
C)controlling.
D)All of the above are correct.

Question 17

The administrative department of a mall is a(n):

A)cost center.
B)profit center.
C)investment center.
D)revenue center.

Question 18

Gross profit by department appears on the:

A)balance sheet.
B)statement of retained earnings.
C)statement of cash flows.
D)income statement.

Question 19

The catering department of a construction firm is a(n):

A)profit center.
B)cost center.
C)investment center.
D)allocation center.

Question 20

Which of the following statements is true in regards to a profit center?

A)A profit center incurs costs.
B)A profit center does generate revenues
C)A profit center generates revenue
D)Both A and C

Question 21

The photography department in a department store experienced the following revenue and expenses during October:
$$\begin{array} { | l | r | } \hline \text { Sales } & \$ 23,200 \\\hline \text { Cost of Goods Sold } & 10,200 \\\hline \text { Direct Operating Expenses } & 1,000 \\\hline \text { Indirect Operating Expenses } & 2,300 \\\hline\end{array}$$
The photography departmental gross profit is:

A)$12,000.
B)$20,200.
C)$13,000.
D)$9,700.

Question 22

A department with sales of $75,000 and cost of goods sold of $55,000 has a gross profit of $20,000.

Question 23

To calculate gross profit,subtract cost of goods sold from net sales.

Question 24

The toy department of a department store would be a profit center.

Question 25

All of the following are used to compute gross profit except:

A)sales.
B)sales returns and allowances.
C)accounts receivable.
D)purchases.

Question 26

A department income statement showing gross profit by department is a useful tool in analyzing performance of individual departments.

Question 27

To calculate gross profit,subtract operating expenses from net sales.

Question 28

A profit center and a cost center both generate revenue.

Question 29

To calculate departmental gross profit,separate accounts should be set up for Sales,Purchases,etc. ,for each department.

Question 30

In departmental accounting,it is necessary to break down revenue and expenses by departments.

Question 31

Most companies that prepare departmental income statements also prepare departmental balance sheets.

Question 32

The PPC department of Ajax shows gross sales of $805,500 for computer supplies and $910,500 for office supplies.The cost of the computer supplies was $525,000 and the cost of the office supplies was $485,000.What is the gross profit for each category of the department respectively?

A)$805,500 and $910,500
B)$525,000 and $485,000
C)$280,500 and $425,500
D)$320,500 and $385,500

Question 33

All of the following are used to compute gross profit except:

A)sales.
B)purchase returns and allowances.
C)rent expense.
D)purchases.

Question 34

A company has three departments (A,B,and C)and the net sales are $350,000;$410,000;and $285,000 respectively.The cost of goods sold per department is $295,000;$360,000;and $245,000 respectively.What department has the highest gross profit?

A)A
B)B
C)C
D)Both departments A and B

Question 35

A department with sales of $120,000;cost of goods sold of $75,000;and operating expenses of $20,000 has a gross profit of $25,000.

Question 36

A human resource department would be a cost center.

Question 37

What is the total gross profit of the company if there are three departments (A,B,and C)and the net sales are $200,000,$174,000,and $286,000,respectively,and cost of goods sold is $86,000,$92,000,and $82,000,respectively?

A)$390,000
B)$650,000
C)$400,000
D)$260,000

Question 38

The data processing department of a tax firm would be a cost center.

Question 39

A profit center and a cost center both generate costs.

Question 40

Departmental income statements are prepared to indicate how well each department is performing.

Question 41

The accountant must always consider operating expenses,such as rent and advertising,when determining gross profit for a department.

Question 42

The housekeeping department for a hotel chain.________

Question 43

The difference between a department's gross profit and its operating expenses is known as the:

A)departmental operating margin.
B)departmental operating cost.
C)departmental operating income.
D)departmental gross profit.

Question 44

The snack shop for a ski resort.________

Question 45

The jewelry department of a major retailer.________

Question 46

The payroll department of a manufacturer.________

Question 47

Explain the difference between a "cost center" and a "profit center."

Question 48

The repair center of a car dealership.________

Question 49

The maintenance office of a mall.________

Question 50

To determine how each profit center is performing,management would analyze the:

A)income tax rate.
B)indirect expenses.
C)gross profit for each profit center.
D)other expenses.

Question 51

The tax offices of a CPA firm.________

Question 52

The meat department for a food store.________

Question 53

The warehouse area for a wholesale club.________

Question 54

A cost center is evaluated on the amount of costs it incurs.

Question 55

Indirect expenses are allocated to departments based on:

A)decisions of the stockholders.
B)directives from the board of directors.
C)some reasonable basis,such as percent of sales.
D)generally accepted accounting principles.

Question 56

A department with sales of $120,000;cost of goods sold of $75,000;and operating expenses of $20,000 has a gross profit of $45,000.

Question 57

Direct expenses are those expenses that:

A)can be identified with a specific department.
B)cannot be identified with a specific department.
C)can be identified with more than one department.
D)None of these answers is correct.

Question 58

When a company tracks gross profit by department,the sales journal has separate columns for Accounts Receivable for each department.

Question 59

When a company tracks gross profit by department,the sales journal has one column for Sales for each department.

Question 60

The human resource office for a department store.________

Question 61

Advertising totaled $10,000;$3,000 was indirect.What would be the best choice to use to allocate the indirect cost?

A)Allocate the indirect expense based on square feet.
B)Allocate the indirect expense based on gross sales.
C)Charge indirect expense to administrative expense.
D)Allocate the indirect expense based on goods shipped.

Question 62

If the music department in a department store is 8,000 square feet and the total square feet is 40,000,how much of the total building cost of $50,000 will be allocated to music?

A)$8,000
B)$1,000
C)$32,000
D)$10,000

Question 63

General expenses are:

A)indirect expenses.
B)direct expenses.
C)not broken down by department.
D)All of these answers are correct.

Question 64

Advertising expense totaled $40,000.If indirect advertising costs are allocated based on gross sales per department,what amount would be allocated to the Jewelry department if $10,000 of advertising is indirect?
Gross Sales: Jewelry,$60,000;Glassware,$50,000;Watches,$40,000.

A)$16,000
B)$4,000
C)$20,000
D)$3,333

Question 65

If the property,plant,and equipment cannot be traced to a specific department,depreciation expense is a(n):

A)direct expense.
B)indirect expense.
C)cash expense.
D)sales expense.

Question 66

If there is a total of 50,000 square feet of floor space,and the hardware department utilizes 20,000 square feet,what percent of the total square footage is in hardware?

A)20%
B)25%
C)40%
D)80%

Question 67

If the cosmetic department in the store measures 20,000 square feet and the total building cost is $60,000 for a 40,000 square foot building,the cost that would be allocated to the cosmetic department would be:

A)$30,000.
B)$10,000.
C)$22,500.
D)$7,500.

Question 68

If the gross sales for the computer department are $4,000 and the book department gross sales are $16,000,what is the allocation for advertising expense of $1,000 to these departments,based on gross sales?

A)Computer department $200;book department $800
B)Computer department $500;book department $500
C)Computer department $800;book department $200
D)Computer department $250;book department $750

Question 69

Which of the following would not be considered a direct expense for a shoe department in a department store?

A)Building expenses
B)Advertising expense
C)Administrative expense
D)All of the above

Question 70

Which of the following would be a direct expense for a shoe department in a department store?

A)Depreciation expense
B)Sales salaries
C)Building expense
D)Administrative expense

Question 71

Advertising expense totaled $20,000.If indirect advertising costs are allocated based on gross sales per department,what amount would be allocated to the Watches department if $5,000 of advertising is indirect?
Gross Sales: Jewelry,$80,000;Glassware,$30,000;Watches,$40,000.

A)$1,000
B)$1,333
C)$2,500
D)$2,667

Question 72

Joyful Praises Corporation has total advertising expenses of $84,000: $32,000 for radio advertising and $52,000 for print advertising.The print advertising is allocated to Departments A and B based on net sales generated in each department.Department A has net sales of $446,400 and Department B has net sales of $297,600.How much of the print advertising should be allocated to Department A?

A)$13,000
B)$39,000
C)$52,000
D)$31,200

Question 73

If an expense is traceable to a department,it would be considered a(n):

A)direct expense.
B)indirect expense.
C)profit center issue.
D)cost center issue.

Question 74

Compute net income for the housewares department,when gross profit is $650,000,direct expenses $235,000,indirect expenses are $90,000 and sales are $875,000.

A)($20,000)
B)$530,000
C)$205,000
D)$325,000

Question 75

Which of the following would be a direct expense of a sales department?

A)Sales salaries
B)Administrative expense
C)Advertising expense
D)Both A and C

Question 76

Which of the following indirect expenses would most likely be allocated on the basis of gross sales?

A)Rent expense
B)Utilities expense
C)Miscellaneous expense
D)None of the above

Question 77

Which of the following is NOT a direct departmental expense in a sales department?

A)Sales salaries
B)Delivery expense for unrelated items
C)Advertising for the sales department
D)All are direct departmental expenses.

Question 78

Which of the following statements is false as it relates to direct and indirect expenses?

A)Building expense is an indirect expense.
B)Indirect expenses cannot be assigned to different departments based on an allocation such as square feet.
C)If an expense is traceable to a particular department,it is a direct expense.
D)Advertising expense can be both a direct and an indirect expense.

Question 79

Indirect expenses are those expenses that:

A)can be controlled by the department manager.
B)can be identified with a specific department.
C)are incurred for the general benefit of a company.
D)All of these answers are correct.

Question 80

Windermere Corporation has 55,000 square feet in department A;20,000 square feet in department B;and 25,000 square feet in department C.Janitorial services are based on square footages in each department.How will the $35,000 of janitorial services be allocated?

A)$19,250 to C;$7,000 to B;and $8,750 to A.
B)$19,250 to A;$7,000 to B;and $8,750 to C.
C)Split evenly ($11,666.67)to each department.
D)Cannot be determined by given information.