Deck 12: Responsibility Accounting, Quality Control, and Environmental Cost Management

Question 1

A responsibility center in which the manager is held accountable for the profitable use of assets and capital is commonly known as a(n):

A)cost center.
B)revenue center.
C)profit center.
D)investment center.
E)contribution center.

Answer 1

D

Question 2

A cost center manager does not have the ability to produce revenue.

Answer 2

True

Question 3

A company that strives to maximize the value of its pollution-related activities would follow a process improvement strategy.

Answer 3

False

Question 4

Which of the following would have a low likelihood of being organized as a profit center?

A)A movie theater of a company that operates a chain of theaters.
B)A maintenance department that charges users for its services.
C)The billing department of an Internet Services Provider (ISP).
D)The mayor's office in a large city.
E)Both "C" and "D" abovE.

Question 5

An allocation base for a cost pool should ideally be a cost object.

Question 6

When managers of subunits throughout an organization strive to achieve the goals set by top management,the result is:

A)goal congruence.
B)planning and control.
C)responsibility accounting.
D)delegation of decision making.
E)strategic control.

Question 7

Higgins Corporation is in the process of overhauling the performance evaluation system for its Los Angeles manufacturing division,which produces and sells parts that are popular in the aerospace industry.Which of the following is least likely to be chosen to evaluate the overall operations of the Los Angeles division?

A)Cost center.
B)Responsibility center.
C)Profit center.
D)Investment center.
E)The profit center and investment center are equally unlikely to be chosen.

Question 8

Performance reports help managers use management by exception and effectively control operations.

Question 9

The Telemarketing Department of a residential remodeling company would most likely be evaluated as a:

A)cost center.
B)revenue center.
C)profit center.
D)investment center.
E)contribution center.

Question 10

A revenue center manager:

A)does not have the ability to produce revenue.
B)may be involved with the sale of new marketing programs to clients.
C)would normally be held accountable for producing an adequate return on invested capital.
D)often oversees divisional operations.
E)may be the manager who oversees the operations of a retail storE.

Question 11

If the head of a hotel's food and beverage operation is held accountable for revenues and costs,the food and beverage operation would be considered a(n):

A)cost center.
B)revenue center.
C)profit center.
D)investment center.
E)contribution center.

Question 12

The concepts and tools used to measure the performance of people and departments are known as:

A)goal congruence.
B)planning and control.
C)responsibility accounting.
D)delegation of decision making.
E)strategic control.

Question 13

A cost center manager:

A)does not have the ability to produce revenue.
B)may be involved with the sale of new marketing programs to clients.
C)would normally be held accountable for producing an adequate return on invested capital.
D)often oversees divisional operations.
E)may be the manager who oversees the operations of a retail storE.

Question 14

Common costs are charged to a company's operating segments when preparing a segmented income statement.

Question 15

A profit center manager:

A)does not have the ability to produce revenue.
B)may be involved with the sale of new marketing programs to clients.
C)would normally be held accountable for producing an adequate return on invested capital.
D)often oversees divisional operations.
E)may be the manager who oversees the operations of a retail storE.

Question 16

A manufacturer's raw-material purchasing department would likely be classified as a:

A)cost center.
B)revenue center.
C)profit center.
D)investment center.
E)contribution center.

Question 17

Decentralized firms can delegate authority by structuring an organization into responsibility centers.Which of the following organizational segments is most like a totally independent,standalone business where managers are expected to "make it on their own"?

A)Cost center.
B)Revenue center.
C)Profit center.
D)Investment center.
E)Contribution center.

Question 18

Which of the following is not an example of a responsibility center?

A)Cost center.
B)Revenue center.
C)Profit center.
D)Investment center.
E)Contribution center.

Question 19

Caveman Software operates stores within five regions.Regional managers are held accountable for marketing,advertising,and sales decisions,and all costs incurred within their region.In addition,regional managers decide whether new stores will open,where the stores will be located,and whether the stores will lease or purchase the facilities.Store managers,in contrast,are accountable for marketing,advertising,sales decisions,and costs incurred within their stores.Ideally,on the basis of this information,what type of responsibility center should the software company use to evaluate its regions and stores?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 20

An investment center manager:

A)does not have the ability to produce revenue.
B)may be involved with the sale of new marketing programs to clients.
C)would normally be held accountable for producing an adequate return on invested capital.
D)often oversees divisional operations.
E)may be the manager who oversees the operations of a retail storE.

Question 21

Cost pools should be charged to responsibility centers by using:

A)budgeted amounts of allocation bases because the cost allocation to one responsibility center should influence the allocations to others.
B)budgeted amounts of allocation bases because the cost allocation to one responsibility center should not influence the allocations to others.
C)actual amounts of allocation bases because the cost allocation to one responsibility center should influence the allocations to others.
D)actual amounts of allocation bases because the cost allocation to one responsibility center should not influence the allocations to others.
E)some other approach.

Question 22

Assume that management used the allocation base that is most influenced by advertising effort and consistent with sound managerial accounting practices.How much advertising would be allocated to the Irvine center?

A)$17,838.
B)$19,800.
C)$20,000.
D)$20,400.
E)$21,000.

Question 23

A cost pool is:

A)a collection of homogeneous costs to be assigned.
B)almost always the combined result of decisions made by different responsibility center managers.
C)the primary function of a responsibility accounting system.
D)the amount of cost that has been allocated,say,10%,to a user department.
E)the tool used to allocate cost dollars to user departments.

Question 24

Consider the following statements about performance reports:
I)Performance reports provide feedback to managers and allow them to better control operations.
II)Many performance reports have budget,actual,and variance data.
III)Performance reports are often structured around a firm's organizational hierarchy-that is,data relating to lower-level units (e.g. ,departments)are combined and flow into higher-level units (e.g. ,stores).
Which of the above statements is (are)true?

A)I only.
B)I and II.
C)I and III.
D)II and III.
E)I,II,and III.

Question 25

Common costs:

A)are not easily related to a segment's activities.
B)are easily related to a segment's activities.
C)are charged to a company's operating segments when preparing a segmented income statement.
D)are not charged to a company's operating segments when preparing a segmented income statement.
E)are best described by characteristics "A" and "D" abovE.

Question 26

Davis Corporation is in the process of evaluating allocation bases so that selected costs can be charged to responsibility centers.Would the number of employees likely be a good base to use to allocate the costs of Human Resources,Building and Grounds,and Repairs and Maintenance to user centers?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 27

Controllable costs,as used in a responsibility accounting system,consist of:

A)only fixed costs.
B)only direct materials and direct labor.
C)those costs that a manager can influence in the time period under review.
D)those costs about which a manager has some knowledge.
E)those costs that are influenced by parties external to the organization.

Question 28

Distinguishing between controllable and noncontrollable costs on a performance report may result in:

A)an increase in the effectiveness of a cost management system.
B)a decrease in goal congruent behavior by managers.
C)an increase in the quality of performance information.
D)an increase in feelings of blame by managers.
E)both A and C may result.

Question 29

Which of the following is an appropriate base to distribute the cost of building depreciation to responsibility centers?

A)Number of employees in the responsibility centers.
B)Budgeted sales dollars of the responsibility centers.
C)Square feet occupied by the responsibility centers.
D)Budgeted net income of the responsibility centers.
E)Total budgeted direct operating costs of the responsibility centers.

Question 30

A cost object is:

A)a collection of costs to be assigned.
B)a responsibility center,product,or service to which cost is to be assigned.
C)the tool used to charge cost dollars to user departments.
D)the primary function of a responsibility accounting system.
E)a common cost.

Question 31

Performance reports help managers:

A)use management by exception and effectively control operations.
B)decide whether a cost,profit,or investment center framework is appropriate.
C)design their organizational hierarchy.
D)pinpoint trouble spots.
E)by assisting with functions "A" and "D."

Question 32

The Asian Division of a multinational manufacturing organization would likely be classified as a:

A)cost center.
B)revenue center.
C)profit center.
D)investment center.
E)contribution center.

Question 33

If advertising expense were allocated to centers based on actual center profitability,the amount of advertising expense allocated to the Irvine center would be closest to:

A)$19,800.
B)$21,000.
C)$30,000.
D)$40,543.
E)Some other amount.

Question 34

Aloha Hotels owns numerous hotels on each of the Hawaiian Islands.The company's performance reporting system is structured around the firm's organizational structure,with information flowing from operating departments at a particular property and later respectively grouped by individual hotel,island operation (i.e. ,division),and the company as a whole.Which of the following best depicts the detail level of the information given to a department manager versus that reported to a company vice-president?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 35

For a company that uses responsibility accounting,which of the following costs is least likely to appear on a performance report of an assembly-line supervisor?

A)Direct materials used.
B)Departmental supplies.
C)Assembly-line labor.
D)Repairs and maintenance.
E)Assembly-line facilities depreciation.

Question 36

Kel-Leigh Corporation,with operations throughout the country,will soon allocate corporate overhead to the firm's various responsibility centers.Which of the following is definitely not a cost object in this situation?

A)The maintenance department.
B)Product no.675.
C)Kelly Corporation.
D)The Midwest division.
E)The telemarketing center.

Question 37

An allocation base for a cost pool should ideally be:

A)machine hours.
B)a cost object.
C)a common cost.
D)a cost driver.
E)direct labor,either cost or hours.

Question 38

Henry Company is preparing a segmented income statement,subdivided into departments (billing,purchasing,and telemarketing).Which of the following choices correctly describes the accounting treatment of the firm's compensation cost for key executives (president and vice-presidents)?

A)The cost is charged to the departments.
B)The cost is not charged to the departments because,although easily traceable to the departments,it is not controllable at the departmental level.
C)The cost is not charged to the departments because,although controllable at the departmental level,it is not easily traceable to the departments.
D)The cost is not charged to the departments because it is both easily traceable to the departments and controllable by the departments.
E)The cost is not charged to the departments because it is neither easily traceable to the departments nor controllable by the departments.

Question 39

Responsibility accounting systems strive to:

A)place blame on guilty individuals.
B)provide information to managers.
C)hold managers accountable for both controllable and noncontrollable costs.
D)identify unfavorable variances.
E)provide information so that managers can make decisions that are in the best interest of their individual centers rather than in the best interests of the firm as a wholE.

Question 40

Leisure Time owns six hotels in Hawaii,collectively known as the Hawaiian Division.The various hotels,including the Surf & Sun,have operating departments (such as Maintenance,Housekeeping,and Food and Beverage)that are evaluated as either cost centers or profit centers.The Food and Beverage Department,for example,is a profit center,with activities divided into three segments: Banquets and Catering,Restaurants,and Kitchen.If Leisure Time uses a performance-reporting system that is based on responsibility accounting,which of the following disclosures is likely to occur?

A)The detailed operating costs of the Surf & Sun's Kitchen Department will appear on the Hawaiian Division's performance report.
B)The Food and Beverage Department's profit will appear on Kitchen's performance report.
C)The profit of the Surf & Sun hotel will appear on the Hawaiian Division's performance report.
D)The Food and Beverage profit at the Surf & Sun will appear on Leisure Time's performance report.
E)The profit of the Surf & Sun hotel will appear on Food and Beverage's performance report.

Question 41

Which of the following would be the best measure on which to base a segment manager's performance evaluation for purposes of granting a bonus?

A)Segment sales revenue.
B)Segment contribution margin.
C)Profit margin controllable by the segment manager.
D)Segment profit margin.
E)Segment net incomE.

Question 42

Quality of grade refers to:

A)the extent to which a product meets the specifications of its design.
B)the extent to which a product adds value to a firm's product line.
C)the extent to which a product is capable to perform its intended use.
D)the extent to which a product maximizes non-value-added activities in the production process.
E)a cost control that is achievablE.

Question 43

Quality of conformance refers to:

A)the extent to which a product meets the specifications of its design.
B)the extent to which a product adds value to a firm's product line.
C)the extent to which a product is designed for its intended use.
D)the extent to which a product maximizes non-value-added activities in the production process.
E)a cost control that is achievablE.

Question 44

A segment contribution margin would reflect the impact of:

A)variable operating expenses.
B)fixed expenses controllable by the segment manager.
C)fixed expenses traceable to the segment but controllable by others.
D)common fixed expenses.
E)items "A," "B," and "C" abovE.

Question 45

Sand Fly Corporation operates two stores: J and K.The following information relates to J:
J's segment contribution margin is:

A)$345,000.
B)$425,000.
C)$620,000.
D)$700,000.
E)$745,000.

Question 46

The following data relate to Department no.2 of Eva Corporation:
On the basis of this information,fixed costs traceable to Department no.2 but controllable by others are:

A)$160,000.
B)$220,000.
C)$260,000.
D)$480,000.
E)not determinablE.

Question 47

The profit margin controllable by the Central Valley segment manager is:

A)$32,000.
B)$44,000.
C)$50,000.
D)$75,000.
E)$145,000.

Question 48

West Coast Electronics (WCE)operates 87 stores and has three divisions: California,Oregon,and Washington.Which of the following costs would not appear on Oregon's portion of WCE's segmented income statement?

A)Costs related to statewide advertising contracts,negotiated by Oregon's divisional manager.
B)Variable sales commissions paid to Oregon's salespeople.
C)Compensation paid to Oregon's chief operating officer,as determined by WCE's management.
D)Oregon's allocated share of general WCE corporate overheaD.
E)Items "C" and "D" abovE.

Question 49

Which of the following measures would reflect the variable costs incurred by a business segment?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 50

The profit margin controllable by the segment manager would not include:

A)variable operating expenses.
B)fixed expenses controllable by the segment manager.
C)a share of the company's common fixed expenses.
D)income tax expense.
E)items "C" and "D" abovE.

Question 51

Which of the following amounts should be used to evaluate whether Restin,Inc. ,should continue to invest company resources in the Los Angeles division?

A)$4,000.
B)$8,000.
C)$10,000.
D)$25,000.
E)$90,000.

Question 52

Quality of design refers to:

A)the extent to which a product meets the specifications of its design.
B)the extent to which a product adds value to a firm's product line.
C)the extent to which a product is designed for its intended use.
D)the extent to which a product maximizes non-value-added activities in the production process.
E)a cost control that is achievablE.

Question 53

Bay Area's segment profit margin is:

A)$14,000.
B)$18,000.
C)$20,000.
D)$40,000.
E)$115,000.

Question 54

Assume that the Los Angeles division increases its promotion expense,a controllable fixed cost,by $10,000.As a result,revenues increase by $50,000.If variable expenses are tied directly to revenues,the new Los Angeles segment profit margin is:

A)$12,500.
B)$22,500.
C)$32,500.
D)$50,000.
E)$60,00

Question 55

On a segmented income statement,common fixed expenses will have an effect on a company's:

A)segment contribution margin.
B)profit margin controllable by the segment manager.
C)segment profit margin.
D)both "A" and "B" above.
E)none of thesE.

Question 56

Guernsey Retail has three stores in Wisconsin.Which of the following costs would likely be excluded when computing the profit margin controllable by store no.3's manager?

A)Hourly labor costs incurred by personnel at store no.3.
B)Property taxes attributable to store no.3.
C)The salary of Guernsey's president.
D)The salary of store no.3's manager.
E)Items "B," "C," and "D" abovE.

Question 57

Assuming use of a responsibility accounting system,which of the following amounts should be used to evaluate the performance of the Los Angeles division manager?

A)$4,000.
B)$8,000.
C)$10,000.
D)$25,000.
E)$90,000.

Question 58

Which of the following measures would reflect the fixed costs controllable by a segment manager?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 59

The difference between the profit margin controllable by a segment manager and the segment profit margin is caused by:

A)variable operating expenses.
B)allocated common expenses.
C)fixed expenses controllable by the segment manager.
D)fixed expenses traceable to the segment but controllable by others.
E)sales revenuE.

Question 60

The following data relate to Department no.3 of Tsing Corporation:
On the basis of this information,Department no.3's variable operating expenses are:

A)$80,000.
B)$160,000.
C)$230,000.
D)$390,000.
E)not determinablE.

Question 61

Under the contemporary view of product quality,companies should strive to:

A)balance failure costs with the sum of prevention and appraisal costs.
B)increase total quality costs.
Achieve zero defects in manufacturing.
D)inspect after-the-fact rather than install a series of preventative manufacturing controls.
E)operate at the top of the total quality cost curve.

Question 62

If goods are inspected and found to be defective,any rework costs related to these units before the units are transferred to the finished-goods warehouse would be classified as a(n):

A)external failure cost.
B)internal failure cost.
C)production inefficiency cost.
D)prevention cost.
E)appraisal cost.

Question 63

The costs that follow appeared on Shawnah's quality cost report:
The sum of Shawnah's prevention and external failure costs is:

A)$71,000.
B)$77,200.
C)$82,000.
D)$88,200.
E)some other amount.

Question 64

Which of the following is not a typical quality-cost classification?

A)External failure cost.
B)Internal failure cost.
C)Production inefficiency cost.
D)Prevention cost.
E)Appraisal cost.

Question 65

The cost of servicing a unit under a warranty agreement is known as a(n):

A)external failure cost.
B)internal failure cost.
C)production inefficiency cost.
D)prevention cost.
E)appraisal cost.

Question 66

Which of the following is a helpful tool in identifying the frequency of quality-control problems?

A)Decision trees.
B)Scatter diagrams.
C)Pareto diagrams.
D)Flowcharts.
E)Decision tables.

Question 67

Which of the following costs would be classified as an appraisal cost on a quality report?

A)Reliability engineering.
B)Materials inspection.
C)Rework.
D)Warranty repairs.
E)Out-of-court liability settlements.

Question 68

Eliza,Inc.was having significant quality problems in its manufacturing plant.To remedy the situation,management implemented various up-front procedures and programs that were expected to reduce the production of bad units to acceptable (normal)levels and benefit the firm financially.If the procedures and programs functioned as intended,what is likely true about the amounts the company incurred for prevention cost,internal failure cost,and external failure cost?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 69

Costs incurred to reduce or eliminate pollution are commonly known as:

A)monitoring costs.
B)abatement costs.
C)on-site remediation costs.
D)off-site remediation costs.
E)hidden costs.

Question 70

Which of the following fail to be captured and reported by a company's accounting system as an environmental cost?

A)Monitoring costs.
B)Abatement costs.
C)Hidden costs.
D)On-site remediation costs.
E)Off-site remediation costs.

Question 71

Which of the following costs would be classified as a prevention cost on a quality report?

A)Reliability engineering.
B)Materials inspection.
C)Rework.
D)Warranty repairs.
E)Out-of-court liability settlements.

Question 72

Which of the following costs would be classified as an internal failure cost on a quality report?

A)Reliability engineering.
B)Materials inspection.
C)Rework.
D)Warranty repairs.
E)Out-of-court liability settlements.

Question 73

Which of the following choices correctly depicts a prevention cost and an external failure cost?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice

Question 74

The costs that follow appeared on Omar's quality cost report:
The sum of Omar's appraisal and internal failure costs is:

A)$10,000.
B)$12,800.
C)$22,800.
D)$68,800.
E)some other amount.

Question 75

Which of the following choices best describes warranty costs and the cost of lost customer sales?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 76

Which of the following costs would be classified as an external failure cost on a quality report?

A)Reliability engineering.
B)Materials inspection.
C)Rework.
D)Warranty repairs.
E)Pilot studies/focus-group sessions.

Question 77

Clean-up costs are commonly classified as:

A)monitoring costs.
B)abatement costs.
C)remediation costs.
D)internal failure costs.
E)external failure costs.

Question 78

Which of the following costs is often considered the hardest to measure?

A)Prevention costs.
B)Appraisal costs.
C)Internal failure costs.
D)External failure costs.
E)The cost of lost sales.

Question 79

Many companies now require their suppliers to meet specified quality guidelines issued by the:

A)International Standards Organization (ISO).
B)Quality Assurance Institute (QAI).
C)Taguchi Standards Association (TSA).
D)Pareto Standards Institute (PSI).
E)an organization other than those mentioned abovE.

Question 80

All of the following concepts are related to environmental management (cost and otherwise)except:

A)dynamic programming efforts.
B)sustainable development.
C)monitoring costs.
D)abatement costs.
E)remediation costs.