Question 1

A manager at a local home improvement store is considering the following costs.Which of the following is a cost controllable by the manager?
A) Salaries of public relations staff at corporate headquarters
B) Salaries of attorneys at corporate headquarters
C) Salary of treasurer of company
D) Salary of head cashier

Accepted Answer

The salary of the head cashier would be a cost controllable by the manager at the local home improvement store, as they would have direct control over the hiring and pay of this employee. The salaries of public relations staff, attorneys, and the treasurer would be determined by the corporate headquarters and would not be directly controlled by the store manager.

Question 2

The following information pertains to the Northern Division of Johnson Company:
$\begin{array} { l  }
 \text {Net Sales }&\$21,000\
\end{array}$

Variable Costs:
$\begin{array} { l  }
 \text { Cost of merchandise sold}&7,200\ \text {Operating expenses }&2,700\
\end{array}$

Fixed costs:
$\begin{array} { l  }
 \text {Controllable by segment manager }&2,400\ \text {Controllable by others }&1,000\ \text {Unallocated costs }&7,600\
\end{array}$

The contribution by segment is ________.
A) $7,100
B) $7,700
C) $8,700
D) $11,100

Accepted Answer

The contribution by segment is calculated as Net Sales - Variable Costs. Here, Net Sales = $21,000 and Variable Costs = Cost of merchandise sold ($7,200) + Operating expenses ($2,700) = $9,900. Therefore, the contribution by segment = $21,000 - $9,900 = $11,100. Fixed costs and unallocated costs are not subtracted in this calculation.

Question 3

The following information pertains to the Southern Division of Swenson Company:
$\begin{array} { l  }
 \text {Net Sales }&\$5,000\
\end{array}$

Variable Costs:
$\begin{array} { l  }
 \text { Cost of merchandise sold}&1200\ \text {Operating expenses }&450\
\end{array}$

Fixed costs:
$\begin{array} { l  }
 \text {Controllable by segment manager }&600\ \text {Controllable by others }&250\ \text {Unallocated costs }&750\
\end{array}$

The contribution by segment is ________.
A) $2,350
B) $2,500
C) $2,750
D) $3,350

Accepted Answer

The answer of The following information pertains to the Southern...

Question 4

Assume you are preparing an income statement with different segments.To calculate the contribution by segment,take contribution controllable by segment manager minus ________.
A) unallocated costs
B) variable operating expenses
C) fixed costs controllable by others(not segment manager)
D) fixed costs controllable by segment manager

Accepted Answer

Contribution by segment is calculated by taking the contribution controllable by the segment manager and subtracting fixed costs that are controllable by others, not the segment manager.

Question 5

A company manufactures household furniture at several different plants.When preparing segmented income statements for each plant,unallocated costs do NOT include ________.
A) Salaries of attorneys at corporate office
B) Salaries of human resources staff at corporate office
C) Advertising initiated at corporate office
D) Depreciation expense on testing equipment in plant

Accepted Answer

Unallocated costs refer to expenses that cannot be directly attributed to a specific plant or product line. Salaries of corporate office staff and advertising initiated at corporate office are examples of unallocated costs. However, depreciation expense on testing equipment in a plant is a direct cost of that specific plant and should be allocated to that plant.

Question 6

Financial performance of a manager is measured by ________.Financial performance of a segment is measured by ________.
A) contribution by segment; contribution margin
B) contribution margin; net income of segment
C) contribution controllable by segment manager; contribution by segment
D) contribution margin; contribution controllable by segment manager

Accepted Answer

The financial performance of a manager is measured by the contribution controllable by the segment manager, while the financial performance of a segment is measured by the contribution by segment.

Question 7

When preparing segmented income statements,fixed costs controllable by others,and not the segment manager,include ________.
A) depreciation on building used by a segment
B) local advertising costs for a segment
C) local promotion costs for a segment
D) salary of supervisor of sales staff for a segment

Accepted Answer

Fixed costs controllable by others, and not the segment manager, include depreciation on buildings used by a segment because these costs are typically decided upon by higher management or corporate-level decisions, not the segment manager.

Question 8

Wendell Company has the following information available for the past quarter:
$\begin{array}{llll}&\text { Division A }&\text { Division B }&\text { Division C }\
\text { Sales } & \$ 250,000 & \$ 400,000 & \$ 350,000 \
\text { Variable expenses } & 52 \% & 30 \% & 40 \% \
\text { Fixed expenses controllable by division manager } & \$ 60,000 & \$ 200,000 & \$ 175,000 \
\text { Fixed expenses controllable by others } & \$ 10,000 & \$ 5,000 & \$ 7,500
\end{array}$
Unallocated expenses for all three divisions are $25,000.What is the contribution by Division C?
A) $2,500
B) $27,500
C) $35,000
D) $210,000

Accepted Answer

For Division C, the contribution margin can be calculated as follows: Sales ($350,000) - Variable expenses (40% of $350,000 = $140,000) = $210,000. Then, subtract the fixed expenses controllable by the division manager ($175,000) to get the contribution by Division C, which is $35,000. However, the question asks for the contribution, which typically refers to the contribution margin before subtracting any fixed expenses. The provided calculation inadvertently subtracted fixed expenses, leading to an incorrect interpretation. The correct approach to find the contribution should focus on the contribution margin (Sales - Variable Expenses) without subtracting fixed expenses. Therefore, the correct answer should reflect the contribution margin before subtracting fixed expenses, which was miscalculated in the explanation.

Question 9

A grocery store manager is responsible for the operating performance of a grocery store.From the manager's point of view,which of the following is NOT a controllable cost?
A) temporary stocking staff hired to reorganize products in every aisle
B) supplies in break room that include coffee, cups, donuts, cookies and stirring sticks
C) fee charged by pest management company to apply pesticide
D) rent expense on store building

Accepted Answer

Rent expense on the store building is usually a fixed cost that cannot be directly controlled by the store manager. The other options are variable costs that can be controlled or reduced by the manager.

Question 10

Classifying costs as controllable or uncontrollable by a segment manager is ________ and ________.
A) objective; easily undertaken
B) objective; subject to controversy
C) subjective; easily undertaken
D) subjective; subject to controversy

Accepted Answer

Classifying costs as controllable or uncontrollable by a segment manager is subjective because it depends on the manager's perspective and control over the cost. This classification can also be subject to controversy as different managers may have different opinions on what costs they can control.

Question 11

The following information is available for Paperback Books Inc.and its two divisions,Books and Periodicals:
$$\begin{array} { l l l } 
\text { Whole } & \text { Eooks } & \text { Periodicals } \
\text { Company } & \text { Division } & \text { Division }
\end{array}$$
Division
$\begin{array} { l  }
 \text {net sales }&\$100,000&\$60,000&\$40,000 \
\end{array}$

Fixed Costs Controllable
$\begin{array} { l  }
 \text {By Division Manager }&26,50&22,500&4,000\
\end{array}$

Fixed Costs Not Controlled
$\begin{array} { l  }
 \text {By Division Manager }&18,000&15,000&3,000\
\end{array}$

Variable Costs:
$$\begin{array} { l l l l } 
\text { Cost of Merchandise Sold } & 24,500 & 17,500 & 7,000 \
\text { Operating Expenses } & 26,400 & 20,000 & 6,400 \
\text { Unallocated Costs } & 7,000 & &
\end{array}$$
What is the contribution margin for the Books Division?
A) $15,000
B) $22,500
C) $32,500
D) $42,500

Accepted Answer

The answer of The following information is available for Paperback...

Question 12

A grocery store manager is responsible for the operating performance of three grocery stores in a small city.From the manager's point of view,which of the following is NOT a controllable cost?
A) cost of advertising for grocery stores sent to residents in local area
B) cost of advertising for grocery stores included in local newspaper
C) cost of flyers with grocery store coupons sent to local residents
D) insurance premium on three store buildings

Accepted Answer

The cost of insurance premiums on the three store buildings is not directly controllable by the grocery store manager. The manager can shop around for better rates and take steps to reduce risks, but ultimately the cost is set by the insurance company. The costs of advertising and distributing coupons, on the other hand, can be managed and adjusted by the manager based on their effectiveness and the store's budget.

Question 13

The following information pertains to the Southern Division of Olson Company:
$\begin{array} { l  }
 \text {Net Sales }&\$5,250\
\end{array}$

Variable Costs:
$\begin{array} { l  }
 \text { Cost of merchandise sold}&1,200\ \text {Operating expenses }&450\
\end{array}$

Fixed costs:
$\begin{array} { l  }
 \text {Controllable by segment manager }&600\ \text {Controllable by others }&1,250\ \text {Unallocated costs }&1,150\
\end{array}$

The contribution controllable by a segment manager is ________.
A) $2,350
B) $2,500
C) $3,000
D) $3,350

Accepted Answer

The contribution controllable by a segment manager is calculated as Net Sales minus Variable Costs and Fixed Costs controllable by the segment manager: $5,250 - ($1,200 + $450 + $600) = $3,000.

Question 14

To calculate income before taxes for a segmented company as a whole,take contribution by segments and subtract ________.
A) allocated costs
B) unallocated costs
C) costs controllable by segment managers
D) costs controllable by third parties

Accepted Answer

Income before taxes for a segmented company as a whole is calculated by taking the contribution by segments and subtracting unallocated costs. Allocated costs are already accounted for in the contribution by segments, and costs controllable by segment managers and third parties may or may not be included in the contribution by segments. Therefore, subtracting unallocated costs will provide the most accurate calculation of the company's income before taxes.

Question 15

The following information pertains to the Midwest Division of Clearly Natural Company:
$\begin{array} { l  }
 \text {Net Sales }&125,000\
\end{array}$

Variable Costs:
$\begin{array} { l  }
 \text { Cost of merchandise sold}&7,200\ \text {Operating expenses }&2,700\
\end{array}$

Fixed costs:
$\begin{array} { l  }
 \text {Controllable by segment manager }&2,400\ \text {Controllable by others }&1,000\ \text {Unallocated costs }&600\
\end{array}$

The contribution controllable by a segment manager is ________.
A) $7,100
B) $7,700
C) $11,100
D) $12,700

Accepted Answer

The answer of The following information pertains to the Midwest...

Question 16

Segment contribution margin less ________ describes the segment contribution that is controllable by segment managers.
A) fixed costs controllable by segment managers
B) fixed costs controlled by others(not segment managers)
C) unallocated costs
D) uncontrollable costs

Accepted Answer

The segment contribution margin less fixed costs controllable by segment managers describes the portion of the segment's contribution that is directly influenced by the segment managers' decisions.

Question 17

The following information pertains to the East Division of Saturn Company:
$\begin{array} { l  }
 \text { NET SALES}&\$21,000 \
\end{array}$

Variable costs:
$\begin{array} { l  }
 \text { Cost of merchandise sold}& 10,300\ \text {Operating expenses }&3,700 \
\end{array}$

Fixed costs:
$\begin{array} { l  }
 \text {Controllable by segment manager }& 2,400\
 \text { Controllable by others}&1,000 \
 \text { unallocated costs}&600 \
\end{array}$

The contribution margin of the East Division is ________.
A) $7,000
B) $7,700
C) $8,000
D) $10,700

Accepted Answer

Contribution margin = Net sales - Variable costs= $21,000 - ($10,300 + $3,700)= $21,000 - $14,000= $7,000

Question 18

The following information is available for Half Price Books Inc.and its two divisions,Books and Periodicals:
$\begin{array}{lll}
&\text { Whole } & \text { Books } & \text { Periodicals } \
&\text { Company } & \text { Division } & \text { Division }\
\text { Net Sales }&\$00,000&\$50,000&\$50,000
\end{array}$
Fixed Costs Controllable
$\begin{array} { l  }
 \text {By Division Manager }&26,500&22,500&4,000\
\end{array}$

Fixed Costs Not Controlled
$\begin{array} { l  }
 \text {By Division Manager }&18,000&15,000&3,000\
\end{array}$

Variable Costs:
$$\begin{array} { l l l l } 
\text { Cost of Merchandise Sold } & 24,500 & 17,500 & 7,000 \
\text { Operating Expenses } & 17,400 & 10,000 & 7,400 \
\text { Unallocated Costs } & 4,000 & &
\end{array}$$
What is the contribution margin for the Periodicals Division?
A) $29,600
B) $32,600
C) $35,600
D) $43,000

Accepted Answer

The contribution margin for the Periodicals Division is calculated as follows: Net Sales - Variable Costs = Contribution Margin. For the Periodicals Division, Net Sales = $50,000, Cost of Merchandise Sold = $7,000, and Operating Expenses = $7,400. Therefore, Contribution Margin = $50,000 - ($7,000 + $7,400) = $50,000 - $14,400 = $35,600.

Question 19

The following information pertains to the West Division of Burger Company:
$\begin{array} { l  }
 \text {net sales }& \$6,000\
\end{array}$

Variable costs:
$\begin{array} { l  }
 \text { Cost of merchandise sold}&1,000 \
 \text {Operating expenses }&450 \
\end{array}$

Fixed costs:
$\begin{array} { l  }
 \text { Controllable by segment mananger}&1,600 \
 \text {Controllable by others }&1,250 \
 \text {unallocated costs }&750 \
\end{array}$

The contribution margin of the West Division is ________.
A) $2,750
B) $3,650
C) $4,350
D) $4,550

Accepted Answer

The contribution margin is calculated as net sales minus variable costs. Here, it is $6,000 - ($1,000 + $450) = $4,550.

Question 20

Assume you are preparing income statements for different segments.Which of the following is NOT a fixed cost controllable by a segment manager?
A) salespersons' salaries for segment
B) advertising costs in local paper to promote segment
C) training costs for new employees at segment
D) segment manager's salary

Accepted Answer

The segment manager's salary is not a fixed cost controllable by a segment manager because it is determined by the overall company's compensation policy and decisions made by executive management. The other options, salespersons' salaries, advertising costs, and training costs, are fixed costs that can be controlled by the segment manager.

Quiz 9: Management Control Systems and Responsibility Accounting

A manager at a local home improvement store is considering the following costs.Which of the following is a cost controllable by the manager?

Assume you are preparing an income statement with different segments.To calculate the contribution by segment,take contribution controllable by segment manager minus ________.

A company manufactures household furniture at several different plants.When preparing segmented income statements for each plant,unallocated costs do NOT include ________.

Financial performance of a manager is measured by .Financial performance of a segment is measured by .

When preparing segmented income statements,fixed costs controllable by others,and not the segment manager,include ________.

A grocery store manager is responsible for the operating performance of a grocery store.From the manager's point of view,which of the following is NOT a controllable cost?

Classifying costs as controllable or uncontrollable by a segment manager is and .

A grocery store manager is responsible for the operating performance of three grocery stores in a small city.From the manager's point of view,which of the following is NOT a controllable cost?

To calculate income before taxes for a segmented company as a whole,take contribution by segments and subtract ________.

Segment contribution margin less ________ describes the segment contribution that is controllable by segment managers.

Assume you are preparing income statements for different segments.Which of the following is NOT a fixed cost controllable by a segment manager?