Extra Credit Problems

Chapter 22 – Responsibility Accounting and Transfer Pricing

CHAPTER 22

NAME

10-MINUTE QUIZ A

#

SECTION

Indicate the best answer for each question in the space provided.
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 The corporate plane.
2 The Sports Arena location of Burgerheaven 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 30%.
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.
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.
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.

22-10

Chapter 23 – Operational Budgeting

CHAPTER 23

NAME

10-MINUTE QUIZ C

#

SECTION

The cost accountant for Sherman’s Co. prepared the following monthly performance report
relating to the Production Department.
Budgeted
Production
(10,000 Units)
Direct materials used …………………………………………………
Direct labor ……………………………………………………………
Variable manufacturing overhead ……………………………….
Fixed manufacturing overhead ……………………………………
1

Actual
Production
(11,000 Units)

$240,000
$100,000
$60,000
$160,000

$260,000
$101,000
$65,000
$164,000

Refer to the above data. Compute the amounts that should be included for each of the
following in a flexible budget prepared at an 11,000-unit level of production:
a Direct materials: $____________
b Direct labor: $____________
c Fixed manufacturing overhead: $____________

2
Refer to the above data. Assume that a revised performance report is prepared for the
11,000-unit level of production using a flexible budget approach. Compute the cost variances for
each of the following. Indicate whether each variance is favorable (F) or unfavorable (U).
a Direct materials variance from flexible budget: $____________
b Direct labor variance from flexible budget: $____________
c Total manufacturing overhead variance from flexible budget: $____________

23-14

Chapter 25 – Rewarding Business Performance

CHAPTER 25

NAME

10-MINUTE QUIZ B

#

SECTION

The following information regarding Baron Company is available:
Sales ………………………………………………………………………………………………………….
Cost of sales ……………………………………………………………………………………………….
Operating expense ……………………………………………………………………………………….
Operating earnings ………………………………………………………………………………………
Average invested capital ………………………………………………………………………………
ROI ……………………………………………………………………………………………………………
Return on sales ……………………………………………………………………………………………
Capital turnover …………………………………………………………………………………………..
Compute the answers for items A–D.
A

B

C

D

25-10

$264,000
$99,000
A
$66,000
$660,000
B
C
D

Chapter 26 – Capital Budgeting

CHAPTER 26

NAME

10-MINUTE QUIZ C

# _________________________
SECTION

Port Pharmacy is considering the purchase of a copying machine, which it will make available to
customers at a per-copy charge. The copying machine has an initial cost of $8,500, an estimated
useful life of five years, and an estimated salvage value of $2,500. The estimated annual revenue
and expenses relating to operation of the machine are as follows:
Revenue ……………………………………………………………………………………………………………………..
Expenses other than depreciation ………………………………………………………………………………….

$9,000
$5,500

All revenue will be received in cash; expenses other than depreciation will be paid in cash.
Depreciation will be computed by the straight-line method.
Compute for this proposal the expected:
a Annual increase in Port’s net income: $____________
b Annual net cash flow: $____________
c Payback period: ____________ years
d Return on average investment: ___________ %
e Net present value (round to the nearest dollar) of the proposed investment, discounted at an
annual rate of 15% (Tables show that the present value of $1 to be received in five periods,
discounted at 15%, is 0.497 and that the present value of a five-year annuity of $1, discounted
at 15%, is 3.352): $____________

26-11