2. A responsibility accounting system measures the performance of each of the fo
ID: 2555344 • Letter: 2
Question
2. A responsibility accounting system measures the performance of each of the following centers except A) Profit center B) Investment center C) Control center D) Cost center 3. The dollar amount used by one division which supplies a good or a service to another division within a company is called a A) Market price B) Transfer price (of course this is the answer, it's part of the chapter title) C) Fair price D) Agreed-upon price 4. The part of a business a particular manager is held responsible for is called a A) Cost center B) Profit center C) Investment center D) Responsibility center 5. An example of a Profit center is A) The accounting department in a manufacturing company B) The maintenance department of a university C) The furniture department of a retail department store D) The human resources department in a hospital 6. Cost centers are evaluated primarily on the basis of their ability to control costs and A) Their return on assets. B) Residual income. C) The quantity and quality of the services they provide D) Their contribution margin ratic 7. 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 None of the above.Explanation / Answer
Answer to First Page of the document
2. Answer is (C) Control Center
3. Answer is (B) Transfer Price
4. Answer is (D) Responsibility Center
5. Answer is (C) The furniture department of a retail department store
6. Answer is (C) The quantity and quality of the services they provide.
7. Answer is (D) None of the above
Answer to second page of the document
1. Answer is (e) some other amount i.e. $240,000 as shown below.
Sales = $500,000
Variable Expenses = $260,000
Therefore, Contribution margin = Sales - Variable Expense = $500,000 - $260,000 = $240,000
2. Answer is (d) 48% as shown below.
Contrbution margin ration = (Contrubtion/Sales)*100
= ($240,000/$500,000)*100
= 48%
3. Answer is (a) $168,000 as shown below.
Responsibility Margin = Contribution margin - Traceable Fixed Costs
= $240,000 - $72,000
= $168,000
4. Answer is (b) $216,000 as shown below.
Sales volume decreased by 10% means new sales will be 10% less from $500,000 i.e. $450,000
New Variable Cost will also be 10% lower than existing cost means 10% less from $260,000 i.e. $234,000
Therefore, New Contribution Margin = New Sales - New Variable Cost
= $450,000 - $234,000
= $216,000
Note: Decrease in fixed cost by 20% will not have any impact in calculating contribution margin. For calculating contribution margin, only variable expense to get deduct from the sales.
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