Question 1

Which of the following costs is traceable to an individual sales department in a department store such as Sears?
A) Salary of the store manager.
B) Depreciation on the store building.
C) Salaries of store security guards.
D) Salary of a sales associate.

Accepted Answer

The salary of a sales associate is directly traceable to the specific sales department they work in, as opposed to general costs like the store manager's salary or building depreciation.

Question 2

The Sports Arena location of Burger Heaven reports monthly sales of $140,000, variable costs of $63,000, and traceable fixed costs of $54,000. The contribution margin ratio of this business unit is:
A) 70%.
B) 45%.
C) 55%.
D) 16.4%.

Accepted Answer

The contribution margin ratio is calculated as (Sales - Variable Costs) / Sales. Here, it is ($140,000 - $63,000) / $140,000 = $77,000 / $140,000 = 0.55 or 55%.

Question 3

In deciding which responsibility centers can benefit most from short-term marketing efforts, such as advertising specific products, management should give greatest consideration to the relationship between a center's sales and:
A) Traceable fixed costs.
B) Income from operations.
C) Contribution margin.
D) Responsibility margin.

Accepted Answer

Contribution margin is the difference between sales and variable costs, and it indicates how much revenue is available to cover fixed costs and contribute to profit. It is a key metric for assessing the impact of short-term marketing efforts on profitability.

Question 4

From a long-term perspective, when evaluating the contribution of a particular profit center to the overall profitability of the company, management should be most interested in the center's:
A) Traceable fixed costs.
B) Income from operations.
C) Contribution margin.
D) Responsibility margin.

Accepted Answer

The answer of From a long-term perspective, when evaluating the...

Question 5

The Molding Department of Acadia Corporation is a cost center. The transfer price used to transfer goods from the Molding Department to the Assembly Department would most likely be based upon:
A) The cost of the units transferred.
B) The market value of the units transferred.
C) A negotiated amount set by the department managers.
D) The average fixed cost per unit transferred.

Accepted Answer

The answer of The Molding Department of Acadia Corporation is...

Question 6

The uptown branch of Kenny's Deli is organized as an investment center. The following information is available for the current year:
  If you select answer d for question 5, indicate the correct amount in the space provided.
-Refer to the above data. The contribution margin at Kenny's uptown branch during the current year is:
A) $9,000.
B) $84,000.
C) $120,000.
D) $56,000.

Accepted Answer

($220,000-$100,000 = $120,000)

Question 7

The uptown branch of Kenny's Deli is organized as an investment center. The following information is available for the current year:
  If you select answer d for question 5, indicate the correct amount in the space provided.
-Refer to the above data. The contribution margin ratio is:
A) 40%.
B) 50%.
C) 55%.
D) 25%.

Accepted Answer

($120,000/$220,000 = 55%)

Question 8

The uptown branch of Kenny's Deli is organized as an investment center. The following information is available for the current year:
  If you select answer d for question 5, indicate the correct amount in the space provided.
-Refer to the above data. The responsibility margin for the uptown branch during the year is:
A) $164,000.
B) $44,000.
C) $120,000.
D) $64,000.

Accepted Answer

($220,000 -$100,000- $56,000 = $64,000)

Question 9

The uptown branch of Kenny's Deli is organized as an investment center. The following information is available for the current year:
  If you select answer d for question 5, indicate the correct amount in the space provided.
-Refer to the above data. If sales volume decreased by 10% and traceable fixed costs decreased by 20% what would be the new contribution margin?
A) 75,600.
B) 108,000.
C) 79,200.
D) $80,000.

Accepted Answer

($120,000 × 90% = 108,000)

Question 10

The uptown branch of Kenny's Deli is organized as an investment center. The following information is available for the current year:
  If you select answer d for question 5, indicate the correct amount in the space provided.
-Refer to the above data. A 10% increase in the sales volume at the uptown store would be expected to increase the location's responsibility margin by:
A) $30,000.
B) $12,000.
C) $20,000.
D) Some other amount. $____________

Accepted Answer

($220,000 - $100,000) × 10% = $12,000

Question 11

The downtown branch of Emily's Bakery is organized as an investment center. The following information is available for the current year.
  Instructions:Compute the following measures for this investment center:
a) Contribution margin:$____________
b) Contribution margin ratio (round your answer to 1 decimal place):____________%
c) Responsibility margin:$____________
d) Return on assets:____________%
e) Increase in responsibility margin that would be expected to result from a 10% increase in sales volume.$____________

Accepted Answer

The answer of The downtown branch of Emily's Bakery is...

Quiz 22: Responsibility Accounting and Transfer Pricing

Which of the following costs is traceable to an individual sales department in a department store such as Sears?

The Sports Arena location of Burger Heaven reports monthly sales of $140,000, variable costs of $63,000, and traceable fixed costs of $54,000. The contribution margin ratio of this business unit is:

In deciding which responsibility centers can benefit most from short-term marketing efforts, such as advertising specific products, management should give greatest consideration to the relationship between a center's sales and:

From a long-term perspective, when evaluating the contribution of a particular profit center to the overall profitability of the company, management should be most interested in the center's:

The Molding Department of Acadia Corporation is a cost center. The transfer price used to transfer goods from the Molding Department to the Assembly Department would most likely be based upon:

The uptown branch of Kenny's Deli is organized as an investment center. The following information is available for the current year: If you select answer d for question 5, indicate the correct amount in the space provided. -Refer to the above data. The contribution margin ratio is: