Question 1

The telephone expense is allocated on the basis of floor space. Department A occupies 1,875 square feet and Department B occupies 625 square feet. If the telephone expense is $600, the amount allocated to Department A is

Accepted Answer

The answer of The telephone expense is allocated on the...

Question 2

Department XYZ had sales of $90,000, direct expenses of $60,000 and indirect expenses of $50,000. The indirect expenses allocated to this department would have been incurred whether or not the department existed. If this department had been eliminated, the company's reported net income would have been

Accepted Answer

The answer of Department XYZ had sales of $90,000, direct...

Question 3

Department A had total sales of $84,000 and Department B had total sales of $36,000. Other Office Expenses, totaling $2,500, are allocated on the basis of total sales. The amount allocated to Department B is

Accepted Answer

The answer of Department A had total sales of $84,000...

Question 4

The procedure for assigning indirect expenses to departments at the end of an accounting period is called

Accepted Answer

The procedure for assigning indirect expenses to departments at the end of an accounting period is known as allocation. This includes distributing expenses that cannot be directly traced to a particular department, such as utility bills or maintenance costs, among the different departments based on some predetermined criteria like number of employees or square footage used.

Question 5

A department probably would be considered for elimination if it had

Accepted Answer

A department with a negative contribution margin is not generating enough revenue to cover its variable costs, resulting in a loss from operations. This makes it a likely candidate for elimination as it is not contributing to overall profitability. Departments with positive contribution margins may still be eliminated if their fixed costs are deemed too high and are negatively impacting the company's bottom line.

Question 6

An example of a direct expense in a department store is

Accepted Answer

Sales salaries expense is a direct expense in a department store because it directly relates to the cost of selling goods. This expense is directly tied to the revenue generated by the store's sales. Interest expense, rent expense, and utilities expense are indirect expenses, as they do not have a direct correlation with sales revenue.

Question 7

Department A had gross profit on sales of $20,000, contribution margin of $12,000, total direct expenses of $8,000, and total indirect expenses of $7,000. Department A has

Accepted Answer

The answer of Department A had gross profit on sales...

Question 8

The contribution margin of a department is the difference between

Accepted Answer

The contribution margin is calculated by subtracting the department's variable costs from its net sales. Direct expenses are a type of variable cost, which means that they will be included in the calculation of the contribution margin. Therefore, the correct answer is D, which states that the contribution margin is the difference between the department's gross profit on sales and its direct expenses. Choices A, B, and C are incorrect because they either include expenses that are not variable costs or they subtract expenses from net sales instead of from gross profit.

Question 9

In a store with several sales departments, departmentalized accounts would be used for

Accepted Answer

Departmentalized accounts would be used for sales, purchases, and merchandise inventory as this allows for tracking of sales and inventory by department, as well as the associated expenses and purchases for each department. This provides valuable information for management to make decisions on how to allocate resources and which departments may need additional attention or adjustments.

Question 10

Department A had total sales of $84,000 and Department B had total sales of $36,000. Other Office Expenses, totaling $2,500, are allocated on the basis of total sales. The amount allocated to Department A is

Accepted Answer

The answer of Department A had total sales of $84,000...

Question 11

A transfer price is

Accepted Answer

A transfer price is the price at which goods or services are transferred from one department of a company to another department of the same company. It is used to determine the cost of goods sold and the profitability of each division within the company. Transfer prices are set by management and should be based on market prices or other relevant factors to ensure fair value.

Question 12

Expenses that are closely related to a particular department and can easily be assigned to it during an accounting period are called

Accepted Answer

Direct expenses are those that are closely related and easily assigned to a particular department during an accounting period. Examples of direct expenses include wages and salaries of departmental employees, materials used by the department, and maintenance costs for equipment used by the department.

Question 13

If a segment of business is considered a profit center

Accepted Answer

For a segment to be considered a profit center, both revenue and cost data must be accumulated for the segment. This is necessary to determine the profitability of the segment and make decisions regarding investment, expansion, or discontinuation of the segment.

Question 14

Floor space would be a reasonable basis for the allocation of

Accepted Answer

Floor space is typically used to allocate rent expense for a building, as it is a direct measure of the amount of space used by each department or tenant. It is not typically used to allocate sales revenue, payroll taxes, or advertising expense.

Question 15

How much of the computer system's cost will be allocated to the Tax Division?

Accepted Answer

The answer of How much of the computer system's cost...

Question 16

Costs that cannot be directly assigned to a department, but are closely related to departmental activities are categorized as

Accepted Answer

Semidirect expenses are costs that are not fully direct, but are closely related to department activities. This makes them different from indirect expenses which have no direct link to any specific department. Direct expenses are costs that can be directly tied to a specific department or product, while general expenses are those that are not specific to any one department or product.

Question 17

Department B had net sales of $70,000, gross profit on sales of $35,000, total direct expenses of $9,000, and total indirect expenses of $6,000. Department B's contribution margin is

Accepted Answer

The answer of Department B had net sales of $70,000,...

Question 18

How much of the computer system's cost will be allocated to the Business Consulting Division?

Accepted Answer

The allocation of the cost of the computer system to each division will be based on their corresponding percentages of the total company revenue. The revenue of the Business Consulting Division is $350,000/$1,000,000, which is 0.35 or 35%. Therefore, the Business Consulting Division's share of the computer system cost is 35% of $240,000, which is $84,000. Hence, the answer is option C.

Question 19

Department B had net sales of $70,000, gross profit on sales of $35,000, total direct expenses of $9,000, and total indirect expenses of $6,000. Department B's net income is

Accepted Answer