Question 1

Department A had total sales of $84,000 and Department B had total sales of $36,000.Other Office Expenses,totaling $2,500,are allocated on the basis of total sales.The amount allocated to Department A is

Accepted Answer

The allocation is based on the proportion of sales. Department A's sales are $84,000 out of a total of $120,000 ($84,000 + $36,000). The allocation for Department A is ($84,000 / $120,000) * $2,500 = $1,750.

Question 2

In a store with several sales departments,departmentalized accounts would be used for

Accepted Answer

In a store with several sales departments, departmentalized accounts would need to track sales, purchases, and merchandise inventory for each department separately. Therefore, option B is the correct choice. Option A is too narrow as it only includes sales, while option C is too broad as it includes all income items. Option D is incorrect as expense accounts are not the primary concern in departmentalized accounting for a retail store.

Question 3

One department in a company had a contribution margin of $15,000 and a net loss from operations of $2,000.The indirect expenses allocated to this department would have been incurred whether or not the department existed.If this department had been eliminated,the company's reported net income would have been

Accepted Answer

The answer of One department in a company had a...

Question 4

Taylor and King,CPAs installed a new computer system.When the needs of the various divisions were analyzed,it was determined that the Audit Division would require 40% of the capacity,the Tax Division would require 25% of the capacity,and the Business Consulting Division would require 35% of the capacity.The computer system will cost $240,000. How much of the computer system's cost will be allocated to the Business Consulting Division?

Accepted Answer

We can calculate the amount allocated to the Business Consulting Division as follows:
35% of the capacity = 0.35
$240,000 (total cost) * 0.35 = $84,000

Therefore, the answer is choice C, $84,000.

Question 5

Indirect expenses of the human resource department within a company might include:

Accepted Answer

Indirect expenses are expenses that are not directly related to the production of goods or services. Rent expense falls under this category as it is a cost that supports the operations of the human resource department but is not directly related to the HR processes themselves. The wages of the HR manager and the benefits of the department secretary would be considered direct expenses as they are salaries and benefits related to the HR staff specifically. The supplies ordered and used by the department could be considered direct or indirect expenses depending on the nature of the supplies and how they are used.

Question 6

Taylor and King,CPAs installed a new computer system.When the needs of the various divisions were analyzed,it was determined that the Audit Division would require 40% of the capacity,the Tax Division would require 25% of the capacity,and the Business Consulting Division would require 35% of the capacity.The computer system will cost $240,000. How much of the computer system's cost will be allocated to the Tax Division?

Accepted Answer

To find the amount of the computer system's cost that will be allocated to the Tax Division, we need to first calculate how much of the capacity of the system the Tax Division will use.

Tax Division's capacity requirements = 25% of total capacity 
= 25/100 x $240,000 
= $60,000

Therefore, $60,000 of the computer system's cost will be allocated to the Tax Division.

Question 7

A department probably would be considered for elimination if it had

Accepted Answer

A department with a negative contribution margin is not generating enough revenue to cover its variable costs, resulting in a loss from operations. This makes it a likely candidate for elimination as it is not contributing to overall profitability. Departments with positive contribution margins may still be eliminated if their fixed costs are deemed too high and are negatively impacting the company's bottom line.

Question 8

If a segment of business is considered a profit center

Accepted Answer

A profit center is a segment of a business that generates revenue and incurs costs. Therefore, both revenue and cost data must be accumulated for the segment in order to determine its profitability. A profit center may sell products or services to customers outside the business, but it can also serve internal customers within the same company. Indirect expenses can be allocated to the segment as long as they are directly related to the segment's operations.

Question 9

Department B had net sales of $70,000,gross profit on sales of $35,000,total direct expenses of $9,000,and total indirect expenses of $6,000.Department B's contribution margin is

Accepted Answer

The answer of Department B had net sales of $70,000,gross...

Question 10

Which of the following measurements provides a better basis for eliminating a department?

Accepted Answer

If fixed expenses exceed contribution margin, then the department is operating at a loss and eliminating it would result in a positive impact on the overall profitability of the company. Options A, B, and D all suggest that the department is contributing positively to the company and should not be eliminated.

Question 11

The telephone expense is allocated on the basis of floor space.Department A occupies 1,875 square feet and Department B occupies 625 square feet.If the telephone expense is $600,the amount allocated to Department A is

Accepted Answer

Department A occupies 1,875 out of a total of 2,500 square feet (1,875 + 625). The allocation is based on the proportion of space occupied, so Department A's share is (1,875/2,500) * $600 = $450.

Question 12

TBS Toys purchases a product from overseas including insurance and shipping costs for $65 per unit.TBS marks the toy up 30% to $84.50.Other traceable direct costs amount to $4.50 per unit.The indirect costs associated with this product amount to $45,000.How many toys must TBS sell in order to break even?

Accepted Answer

To calculate the break-even point, we need to determine the total cost per unit and the contribution margin per unit.

Total cost per unit:
- Purchase cost including insurance and shipping = $65
- Other traceable direct costs = $4.50
- Total = $69.50

Contribution margin per unit:
- Selling price = $84.50
- Total cost per unit = $69.50
- Contribution margin per unit = $15

Now we can calculate the break-even point:
- Fixed costs = $45,000
- Break-even point = Fixed costs / Contribution margin per unit
- Break-even point = $45,000 / $15 = 3,000 units

Therefore, TBS must sell 3,000 toys to break even. The correct choice is C.

Question 13

XYZ Company has four sales territories and is considering eliminating the Great Lakes Region which had sales of $100,000,direct expenses of $70,000 and indirect expenses of $50,000.If the Great Lakes Region is eliminated,80% of the indirect expenses would still remain.If this region were to be eliminated,the company's overall net income would be:

Accepted Answer

If the Great Lakes Region is eliminated, the company would save $70,000 in direct expenses and $40,000 in indirect expenses (which is 80% of the current $50,000). Therefore, the total savings would be $110,000 ($70,000 + $40,000). However, the company would also lose $100,000 in sales, resulting in a net income decrease of $10,000 ($110,000 - $100,000). Therefore, the overall net income would be $20,000 lower if the Great Lakes Region is eliminated.

Question 14

Department XYZ had sales of $90,000,direct expenses of $60,000 and indirect expenses of $50,000.The indirect expenses allocated to this department would have been incurred whether or not the department existed.If this department had been eliminated,the company's reported net income would have been

Accepted Answer

The answer of Department XYZ had sales of $90,000,direct expenses...

Question 15

A transfer price is

Accepted Answer

A transfer price is the price at which goods are moved from one department of a company to another department of the same company. It is used to determine the cost and profitability of each department, and to ensure that the company's financial statements reflect the true cost of each product or service. It is not related to the price at which a company sells its products to customers or the price at which it purchases products from a supplier. Indirect expenses are allocated based on other methods, such as cost drivers or activity-based costing.

Question 16

Department A had total sales of $84,000 and Department B had total sales of $36,000.Other Office Expenses,totaling $2,500,are allocated on the basis of total sales.The amount allocated to Department B is

Accepted Answer

The allocation to Department B is calculated by finding the proportion of Department B's sales to the total sales and then applying that proportion to the total expenses. Department B's sales are $36,000 out of a total of $120,000 ($84,000 + $36,000), which is 30%. Therefore, 30% of $2,500 is $750.

Question 17

Department B had net sales of $70,000,gross profit on sales of $35,000,total direct expenses of $9,000,and total indirect expenses of $6,000.Department B's net income is

Accepted Answer

Net income is calculated as gross profit minus total expenses (both direct and indirect). Gross profit is $35,000, direct expenses are $9,000, and indirect expenses are $6,000. Therefore, net income is $35,000 - $9,000 - $6,000 = $20,000.

Question 18

Department X began the current year with $20,000 in inventory.During the year,Department X net purchases amounted to $65,000 and its ending inventory was $12,000.Sales during the year totaled $170,000,other direct expenses were $37,000,and total indirect expenses of $25,000.Department B's contribution margin is

Accepted Answer

Contribution margin is calculated as Sales minus Variable Costs (Cost of Goods Sold and other direct expenses). Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory = $20,000 + $65,000 - $12,000 = $73,000. Contribution Margin = Sales - (Cost of Goods Sold + Other Direct Expenses) = $170,000 - ($73,000 + $37,000) = $60,000.

Question 19

The procedure for assigning indirect expenses to departments at the end of an accounting period is called

Accepted Answer

The procedure of assigning indirect expenses to departments at the end of an accounting period is called allocation. It involves distributing indirect expenses among various departments based on a pre-determined allocation key or formula. This is an important step in accurately determining the costs associated with each department, which helps in making informed business decisions. Therefore, choice C is the correct answer.

Question 20

The contribution margin of a department is the difference between

Accepted Answer

The contribution margin is calculated by subtracting the variable costs (i.e. direct expenses) from the revenue generated by the department. Therefore, option D is the correct answer as it subtracts the direct expenses from the gross profit on sales. Option A is incorrect as it subtracts total expenses which include fixed expenses as well. Option B is incorrect as it subtracts the cost of goods sold instead of direct expenses. Option C is incorrect as it includes indirect expenses instead of direct expenses.

Quiz 25: Departmentalized Profit and Cost Centers