Question 1

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

Accepted Answer

Semidirect and indirect expenses are allocated to various departments (including the sales department) based on an appropriate allocation base, not necessarily at the time the expenses are incurred. The allocation is often done periodically (e.g., monthly, quarterly) and is based on predetermined rates or bases that reflect the relationship between the expense and the departments.

Question 2

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...

Question 3

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 4

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

Accepted Answer

Departmental financial statements are prepared for internal management use and provide information on the financial performance of a particular department or division within an organization. The statements help managers to assign responsibility for profits or losses to the specific departments or individuals responsible for generating them.

Question 5

A department's------------- is usually more heavily relied on than its net income or net loss when management is considering whether to eliminate the department.

Accepted Answer

The answer of A department's------------- is usually more heavily relied...

Question 6

Office expenses, such as postage and stationery, should be allocated to the departments based on the contribution margin of each department.

Accepted Answer

Office expenses are considered indirect expenses and typically allocated based on some form of allocation base, such as square footage or headcount, rather than contribution margin.

Question 7

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 8

Nonoperating income, such as interest income, should be allocated to departments based on the total sales in each department.

Accepted Answer

Nonoperating income, such as interest income, should be allocated based on factors such as the source of the income or the intended use of the funds, not based on total sales in each department.

Question 9

A systematic and logical way to allocate the---------- for a building to various sales departments would be on the basis of floor space.

Accepted Answer

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

Question 10

In departmental accounting, expenses that can be closely identified to an individual department are--------expenses.

Accepted Answer

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

Question 11

When total revenues equal total expenses, a business is said to----------- .

Accepted Answer

The answer of When total revenues equal total expenses, a...

Question 12

Expenses that are allocated to the departments can be rounded to the nearest whole dollar on the departmental income statements.

Accepted Answer

Expenses can be rounded to the nearest whole dollar for simplicity in departmental income statements.

Question 13

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

Accepted Answer

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

Question 14

The breakeven point is when the---------- equals the fixed expenses of the business.

Accepted Answer

The answer of The breakeven point is when the---------- equals...

Question 15

The fixed expenses of a business total $41,800. The company sells only one product for $46 per unit. The corresponding variable cost of the item sold is $24 per unit. To breakeven, the company must sell---------- units.

Accepted Answer

The answer of The fixed expenses of a business total...

Question 16

Office salaries expense is most commonly allocated to departments based on the total sales in each department.

Accepted Answer

The answer of Office salaries expense is most commonly allocated...

Question 17

Expenses of a business that do not change in total with fluctuations in sales are----------expenses.

Accepted Answer

The answer of Expenses of a business that do not...

Question 18

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

Accepted Answer

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

Question 19

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

Accepted Answer

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

Question 20

Contribution margin is another name for gross profit.

Accepted Answer

Contribution margin is the difference between revenue and variable costs, while gross profit is the difference between revenue and cost of goods sold (which includes both variable and fixed costs). They are related but not interchangeable terms.

Quiz 25: Departmentalized Profit and Cost Centers