Deck 24: Departmental Accounting

Question 1

An example of a cost center is:

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

Answer 1

C

Question 2

The breakfast department experienced the following revenue and expenses during October: The breakfast departmental gross profit is:

A) $8,000.
B) $12,000.
C) $6,000.
D) $18,000.

Answer 2

B

Question 3

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) division center.

Answer 3

A

Question 4

Departmental reports are NOT useful for:

A) determining performance.
B) determining future revenue.
C) controlling.
D) calculating gross profit for each department.

Question 5

Sales minus cost of goods sold yields:

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

Question 6

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

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

Question 7

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.

Question 8

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

A) A profit center incurs costs.
B) A profit center does not generate revenues.
C) A profit center generates revenue.
D) Both A and C

Question 9

A company has four departments (A, B, C and

A) A
B) B
C) C
D) D
D) and the net sales are $30,000; $35,000; $60,000 and $20,000 respectively. The cost of goods sold per department is $25,000; $15,000; $10,000 and $15,000 respectively. What department has the highest dollar gross profit?

Question 10

A company has four departments (A, B, C and

A) A
B) B
C) C
D) and the net sales are $30,000; $50,000; $60,000 and $35,000 respectively. The cost of goods sold per department is $25,000; $15,000; $40,000 and $15,000 respectively. What department has the lowest dollar gross profit?
D) both A and D

Question 11

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

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

Question 12

Gross profit by department appears on the:

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

Question 13

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

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

Question 14

Calculate a department's gross profit given the following:

A) $770
B) $1,620
C) $1,070
D) $550

Question 15

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 16

The women's shoe department shows gross sales of $300,000 with the cost of the shoes $140,000. The men's shoe department shows gross sales of $150,000 with the cost of the shoes $120,000. What is the gross profit for each department respectively?

A) $440,000 and $270,000
B) $150,000 and $20,000
C) $160,000 and $30,000
D) $150,000 and $10,000

Question 17

A maintenance department would be an example of a:

A) cost center.
B) direct expense.
C) profit center.
D) petty cash.

Question 18

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

A) income statement.
B) balance sheet.
C) statement of owner's equity.
D) trial balance.

Question 19

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.

Question 20

The photography department in a department store experienced the following revenue and expenses during October: The photography departmental gross profit is:

A) $3,500.
B) $7,500.
C) $4,000.
D) $6,000.

Question 21

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

Question 22

A profit center and a cost center both generate revenue.

Question 23

A department with sales of $130,000; cost of goods sold of $75,000; and operating expenses of $20,000 has a gross profit of $25,000.

Question 24

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

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

Question 25

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

Question 26

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

Question 27

A human resource department would be a revenue center.

Question 28

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

Question 29

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

Question 30

A cost center only generates revenues.

Question 31

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

A) sales.
B) sales returns and allowances.
C) office supplies.
D) purchases.

Question 32

Most companies that prepare departmental income statements typically don't prepare departmental balance sheets.

Question 33

The PPC department of Ajax shows gross sales of $805,600 for computer supplies and $910,600 for office supplies. The cost of the computer supplies was $530,000 and the cost of the office supplies was $488,000. What is the gross profit for each category of the department respectively?

A) $317,600 and $380,600
B) $275,600 and $910,600
C) $275,600 and $422,600
D) $805,600 and $422,600

Question 34

To calculate gross profit, subtract sales expense from net sales.

Question 35

A company has three departments (A, B, and

A) A
B) B
C) C
C) and the net sales are $370,000; $400,000; and $285,000 respectively. The cost of goods sold per department is $291,000; $360,000; and $245,000 respectively. What department has the highest gross profit?
D) Both departments A and B

Question 36

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

Question 37

What is the total gross profit of the company if there are three departments (A, B, and

A) $124,000
B) $86,000
C) $275,000
C) and the net sales are $210,000, $178,000, and $289,000, respectively, and cost of goods sold is $135,000, $142,000, and $125,000, respectively?
D) $207,000

Question 38

The photography department in a department store experienced the following revenue and expenses during September:
The photography departmental gross profit is:

A) $12,700.
B) $22,800.
C) $13,700.
D) $10,700.

Question 39

A department with sales of $75,000 and cost of goods sold of $55,000 has a gross profit of $130,000.

Question 40

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

Question 41

Below is a list of departments; you are to identify each as either [1] a profit center or [2] a cost center.
The snack shop for a ski resort. ________

Question 42

Indirect expenses are allocated to departments based on:

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

Question 43

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

Question 44

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

Question 45

Below is a list of departments; you are to identify each as either [1] a profit center or [2] a cost center.
The human resource office for a department store. ________

Question 46

Below is a list of departments; you are to identify each as either [1] a profit center or [2] a cost center.
The meat department for a food store. ________

Question 47

Below is a list of departments; you are to identify each as either [1] a profit center or [2] a cost center.
The warehouse area for a wholesale club. ________

Question 48

The accountant must always consider cost of goods sold when determining gross profit for a department.

Question 49

Below is a list of departments; you are to identify each as either [1] a profit center or [2] a cost center.
The jewelry department of a major retailer. ________

Question 50

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 51

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 a general or specific common area.
D) None of these answers is correct.

Question 52

Below is a list of departments; you are to identify each as either [1] a profit center or [2] a cost center.
The maintenance office of a mall. ________

Question 53

When a company tracks gross profit by department, the sales journal does not have separate columns for Accounts Receivable for each department.

Question 54

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

A) current forecast.
B) indirect expenses.
C) gross profit for each profit center.
D) other expenses.

Question 55

Below is a list of departments; you are to identify each as either [1] a profit center or [2] a cost center.
The tax offices of a CPA firm. ________

Question 56

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

Question 57

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 58

Below is a list of departments; you are to identify each as either [1] a profit center or [2] a cost center.
The repair center of a car dealership. ________

Question 59

Below is a list of departments; you are to identify each as either [1] a profit center or [2] a cost center.
The housekeeping department for a hotel chain. ________

Question 60

Below is a list of departments; you are to identify each as either [1] a profit center or [2] a cost center.
The data center department of a manufacturer. ________

Question 61

General expenses are:

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

Question 62

Advertising totaled $20,000; $1,000 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 63

Advertising expense totaled $70,000. 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? (Round any percentages two decimal places, X.XX%, and round your final answer to the nearest dollar.) Gross Sales: Jewelry, $50,000; Glassware, $40,000; Watches, $10,000.

A) $3,333
B) $5,000
C) $35,000
D) $16,667

Question 64

If the music department in a department store is 10,000 square feet and the total square feet is 80,000, how much of the total building cost of $50,000 will be allocated to music?

A) $25,000
B) $400,000
C) $50,000
D) $6,250

Question 65

Joyful Praises Corporation has total advertising expenses of $83,000: $31,000 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 $462,000 and Department B has net sales of $308,000. How much of the print advertising should be allocated to Department A?

A) $12,400
B) $32,578
C) $52,000
D) $31,200

Question 66

Indirect expenses are those expenses that:

A) can be controlled by a 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 67

If there is a total of 100,000 square feet of floor space, and the hardware department utilizes 30,000 square feet, what percent of the total square footage is in hardware?

A) 15%
B) 7.5%
C) 30%
D) 60%

Question 68

Advertising expense totaled $60,000. 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, $20,000. (Round any percentages two decimal places, X.XX%, and round your final answer to the nearest dollar.)

A) $5,000
B) $769
C) $9,231
D) $6,667

Question 69

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 70

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 $30,000 of janitorial services be allocated? (Round your answer to the nearest dollar.)

A) $16,500 to C; $6,000 to B; and $7,500 to A.
B) $16,500 to A; $6,000 to B; and $7,500 to C.
C) Split evenly ($10,000.00) to each department.
D) Cannot be determined by given information.

Question 71

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 72

Compute net income for the housewares department, when gross profit is $680,000, direct expenses are $237,000, indirect expenses are $90,000 and sales are $890,000.

A) -$210,000
B) $443,000
C) $590,000
D) $353,000

Question 73

If the cosmetic department in the store measures 20,000 square feet and the total building cost is $90,000 for a 40,000 square foot building, the cost that would be allocated to the cosmetic department would be:

A) $45,000.
B) $8,889.
C) $180,000.
D) $90,000.

Question 74

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 75

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) advertising expense.

Question 76

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 77

If the gross sales for the computer department are $60,000 and the book department gross sales are $40,000, what is the allocation for advertising expense of $16,000 to these departments, based on gross sales?

A) Computer department $9,600; book department $6,400
B) Computer department $8,000; book department $8,000
C) Computer department $6,400; book department $9,600
D) Computer department $60,000; book department $40,000

Question 78

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

A) Salaries of Sales personnel
B) Delivery expense for unrelated items
C) Advertising for the sales department
D) Cost of promotional items

Question 79

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

A) Depreciation expense
B) Salary expense of shoe department sales staff
C) Building expense
D) Administrative expense

Question 80

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