Deck 24: Departmental Accounting

Question 1

A maintenance department would be an example of a:

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

Answer 1

A

Question 2

The financial statement(s)that can 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.

Answer 2

A

Question 3

Sales minus cost of goods sold yields:

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

Answer 3

B

Question 4

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 5

A unit or department that incurs costs and generates revenues is a(n):

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

Question 6

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

A)$3,100.
B)$5,200.
C)$6,000.
D)$8,100.

Question 7

Normally, the report prepared for a department is a(n):

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

Question 8

Gross profit by department appears on the:

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

Question 9

Calculate a department's gross profit on sales given the following:

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

Question 10

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

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

Question 11

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

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

Question 12

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 13

A profit center is a unit in which the manager:

A)has the responsibility for controlling costs, but not for directly generating revenue.
B)is not responsible for controlling costs, but is responsible for generating revenue.
C)is responsible for controlling costs and generating revenue.
D)None of these answers are correct.

Question 14

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 15

The women's shoe department shows gross sales of $245,000 with the cost of the shoes $147,000. The men's shoe department shows gross sales of $184,000 with the cost of the shoes $110,000. What is the gross profit for each department respectively?

A)$392,000 and $294,000
B)$245,000 and $184,000
C)$98,000 and $74,000
D)$429,000 and $257,000

Question 16

In a cost center, the manager:

A)has the responsibility for controlling costs, but not directly generating revenue.
B)is not responsible for controlling costs, but is responsible for generating revenue.
C)is responsible for controlling costs and generating revenue.
D)None of these answers are correct.

Question 17

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

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

Question 18

Departmental reports are useful for all of the following purposes except:

A)determining performance.
B)determining future revenue.
C)controlling.
D)planning.

Question 19

The espresso department experienced the following revenue and expenses during October: The espresso departmental gross profit on sales is:

A)$2,000.
B)$4,000.
C)$8,000.
D)$11,000.

Question 20

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

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

Question 21

A profit center and a cost center both generate revenue.

Question 22

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

Question 23

A human resource department would be a profit center.

Question 24

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

Question 25

In departmental accounting, it is necessary to break down revenue, but not expenses by departments.

Question 26

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

Question 27

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

A)$15,300.
B)$20,200.
C)$13,000.
D)$14,300.

Question 28

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

Question 29

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

Question 30

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

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

Question 31

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

Question 32

The PPC department of Ajax shows gross sales of $730,600 for computer supplies and $934,900 for office supplies. The cost of the computer supplies was $534,000 and the cost of the office supplies was $491,400. What is the gross profit for each category of the department respectively?

A)$730,600 and $934,900
B)$534,000 and $491,400
C)$239,200 and $400,900
D)$196,600 and $443,500

Question 33

A department with sales of $80,000 and cost of goods sold of $55,000 has a gross profit of $25,000.

Question 34

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

Question 35

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

Question 36

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

A)$390,000
B)$650,000
C)$400,000
C)and the net sales are $200,000, $164,000, and $286,000, respectively, and cost of goods sold is $86,000, $92,000, and $82,000, respectively?
D)$260,000

Question 37

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

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

Question 38

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 39

A company has three departments (A, B, and

A)A
B)B
C)C
C)and the net sales are $350,000; $410,000; and $285,000 respectively. The cost of goods sold per department are $295,000; $360,000; and $225,000 respectively. What department has the highest gross profit?
D)Both departments A and B

Question 40

A profit center and a cost center both generate costs.

Question 41

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 42

If the cosmetic department in the store measures 10,000 square feet and the total building cost is $30,000 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 43

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 square footage.
D)generally accepted accounting principles.

Question 44

If delivery expense is not 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 45

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 46

Indirect expenses are those expenses that:

A)may be incurred outside the control of a department manager.
B)cannot be identified with a specific department.
C)are incurred for the general benefit of a company.
D)All of these answers are correct.

Question 47

Which of the following would not be considered a direct expense?

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

Question 48

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 $40,000 will be allocated to music?

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

Question 49

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

A)Sales salaries
B)Office salaries
C)Advertising expense
D)Sales salaries and Advertising expense

Question 50

A cost center is evaluated on the volume of revenues generated.

Question 51

Which of the following statements is incorrect?

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 52

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 53

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

Question 54

Administrative expenses are:

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

Question 55

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

Question 56

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

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

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 are correct.

Question 59

Which of the following would be a direct expense?

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

Question 60

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

Question 61

Carla's building expenses, which are indirect, are based on each department's square footage. Department A occupies 35,000 square feet. Department B occupies 55,000 square feet, and Department C occupies 10,000 square feet. If the building expenses total $250,000, how much is allocated to Department B?

A)$83,333
B)$137,500
C)$87,500
D)$25,000

Question 62

Julia Company allocates its indirect advertising expenses based on each department's gross sales. If the men's apparel department has gross sales of $225,000 out of a total of $2,025,000 in gross sales, what fraction would Julia use to allocate its indirect advertising expenses?

A)1/9
B)1/10
C)1/11
D)1/8

Question 63

If gross sales for the tools department are $500,000 and gross sales for the appliances department are $300,000, what is the fraction used to apportion the indirect advertising for the appliances department if it is based on gross sales?

A)1/2
B)1/3
C)3/8
D)2/3

Question 64

If the gross sales for the computer department are $3,700 and the book department gross sales are $6,300, what is the allocation for advertising expense of $750 to these departments, based on gross sales?

A)Computer department $425; book department $325
B)Computer department $375; book department $375
C)Computer department $277.50; book department $472.50
D)Computer department $462.50; book department $287.50

Question 65

Compute net income for the housewares department, when gross profit is $550,000, direct expenses $235,000, indirect expenses are $110,000 and sales are $875,000.

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

Question 66

Advertising expense totaled $20,000. If indirect advertising costs are allocated based on gross sales per department, what amount would be allocated to the glassware 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 67

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 $558,000 and Department B has net sales of $186,000. How much of the print advertising should be allocated to Department A?

A)$13,000
B)$39,000
C)$63,000
D)$21,000

Question 68

Which allocation base is best used to allocate building depreciation?

A)Square feet of space used
B)Number of employees
C)Hours used
D)Building depreciation can be separately traced to each department

Question 69

If there is a total of 50,000 square feet of floor space, and the hardware department utilizes 12,500 square feet, what percent of the total square footage is in hardware?

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

Question 70

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

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

Question 71

The candy department experienced the following revenue and expenses during October: The candy departmental net income is:

A)$6,400.
B)$3,500.
C)$4,200.
D)$5,300.

Question 72

Calculate the costume jewelry department net income given the following:

A)$1,300
B)$1,000
C)$300
D)($250)

Question 73

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 74

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

A)$6,500.
B)$3,700.
C)$3,500.
D)$2,200.

Question 75

Which of the following expenses is the most difficult to allocate to departments?

A)Cost of goods sold
B)Use of general supplies by everyone
C)Salaries and wages
D)Merchandise purchases

Question 76

If the property, plant, and equipment can be traced to a specific department, depreciation expense is a(n):

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

Question 77

Which allocation base is best used to allocate advertising expense by selling department?

A)Square feet of spaced used
B)Gross sales of each department as a percent of total gross sales
C)An even split among all selling departments
D)Some other method not listed.

Question 78

Windermere Corporation has 25,000 square feet in department A; 20,000 square feet in department B; and 55,000 square feet in department C. Janitorial services as 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.

Question 79

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 80

Departmental accounting requires:

A)measuring departmental gross profit.
B)allocating direct costs to departments.
C)allocating indirect costs to departments.
D)None of these answers is correct.