Question 1

Office expenses such as postage and stationery should be allocated on the basis of contribution margin of each department.

Accepted Answer

Office expenses such as postage and stationery are usually considered indirect expenses and are typically allocated based on an appropriate allocation method, such as headcount or square footage. They are not typically allocated based on contribution margin, which is a measure of how much revenue is left after deducting variable costs from sales.

Question 2

Allocated expenses can be rounded to the nearest whole dollar on departmental income statements.

Accepted Answer

It is common practice to round allocated expenses to the nearest whole dollar on departmental income statements for simplicity and ease of reading.

Question 3

Expenses that do not change in total with a fluctuation in volume of unit sales of a business are ____________________ expenses.

Accepted Answer

The answer of Expenses that do not change in total...

Question 4

Operating expenses that cannot be easily assigned to particular departments at the time transactions occur and are recorded are called ____________________ expenses.

Accepted Answer

The answer of Operating expenses that cannot be easily assigned...

Question 5

A systematic and logical way to allocate the rent expense for a building to various sales departments would be on the basis of ___________________.

Accepted Answer

The answer of A systematic and logical way to allocate...

Question 6

Semidirect and indirect expenses are allocated to the sales department at the time the expenses are incurred.

Accepted Answer

Semidirect and indirect expenses are usually allocated to the sales department based on some predetermined allocation basis, such as revenue or headcount, at the end of the accounting period. They are not allocated at the time the expenses are incurred.

Question 7

Contribution margin is another name for gross profit.

Accepted Answer

Contribution margin is the amount by which sales exceeds variable costs, while gross profit is the amount by which sales exceeds cost of goods sold. While they may be similar in some cases, they are not the same thing.

Question 8

Departmental financial statements are internal assessment tools used to assign responsibility for profits or losses.

Accepted Answer

Departmental financial statements are used to evaluate the performance of each department separately and assign responsibility for profits or losses. They are not intended for external reporting purposes.

Question 9

A department's ____________________ is usually more important than its net income or net loss when management is considering whether to close the department.

Accepted Answer

The answer of A department's ____________________ is usually more important...

Question 10

Operating expenses that cannot be readily traced to and are not closely related to activity within a department are referred to as ____________________ expenses.

Accepted Answer

The answer of Operating expenses that cannot be readily traced...

Question 11

A business is said to ________________ when total revenues equal total expenses.

Accepted Answer

The answer of A business is said to ________________ when...

Question 12

The difference between a department's gross profit on sales and its direct expenses is called ___________________.

Accepted Answer

The answer of The difference between a department's gross profit...

Question 13

Eliminating a department that has a negative contribution margin would result in ____________________ net income for the company than if the department were not eliminated.

Accepted Answer

The answer of Eliminating a department that has a negative...

Question 14

Nonoperating income,such as interest income,should be allocated on the basis of total sales in each department.

Accepted Answer

Nonoperating income should not be allocated on the basis of sales in each department as it is not directly related to the department's operations. A more appropriate allocation method would be based on the overall financial performance of the company.

Question 15

The breakeven point occurs when the ____________________ equals the fixed expenses of the business.

Accepted Answer

The answer of The breakeven point occurs when the ____________________...

Question 16

In departmental accounting,expenses that can be closely identified with an individual department are referred to as ____________________ expenses.

Accepted Answer

The answer of In departmental accounting,expenses that can be closely...

Question 17

The difficulty of fairly allocating direct expenses is one limitation of departmental income statements.

Accepted Answer

Direct expenses are typically straightforward to allocate to specific departments because they are directly associated with those departments. The difficulty arises in allocating indirect expenses, which cannot be directly linked to a specific department.

Question 18

Office salaries expense should be allocated on the basis of total sales in each department.

Accepted Answer

Office salaries expense is an indirect cost that should be allocated to departments based on a reasonable allocation base. Total sales is a common allocation base for indirect costs because it is a measure of the activity that drives the incurrence of the cost.

Question 19

The fixed expense of a business totals $35,000.The company sells only one product for $45 per unit.The corresponding variable cost of the item sold is $25 per unit.To breakeven,the company must sell ___________ units.

Accepted Answer

The answer of The fixed expense of a business totals...

Question 20

Departments that provide services to other departments of the firm are often organized as ____________________ centers.

Accepted Answer

The answer of Departments that provide services to other departments...

Quiz 25: Departmentalized Profit and Cost Centers