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Exam 11: Responsibility Accounting Systems

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Question 101

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Division S of Kracker Company makes a part that it sells to other companies. Data on that part appear below: Division B, another division of Kracker Company, presently is purchasing 10,000 units of a similar product each period from an outside supplier for $28 per unit, but would like to begin purchasing from Division S.Suppose that Division S can sell all that it can produce to outside customers. If Division S sells to Division B at a price of $28 per unit, the company as a whole will be:

A) worse off by $80,000 each period.
B) worse off by $70,000 each period.
C) better off by $20,000 each period.
D) worse off by $20,000 each period.

E) C) and D)
F) A) and B)

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Question 102

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Cannata Corporation has two operating divisions--a North Division and a South Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $32 per shipment. The Logistics Department's fixed costs are budgeted at $372,300 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year, actual Logistics Department variable costs totaled $335,000 and fixed costs totaled $382,850. The North Division had a total of 4,700 shipments and the South Division had a total of 5,300 shipments for the year.Required:a. Prepare a report showing how much of the Logistics Department's costs should be charged to each of the operating divisions at the end of the year.b. How much of the actual Logistics Department costs should not be charged to the operating divisions at the end of the year? Who should be held responsible for these uncharged costs?

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a.The operating divisions would be charg...

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Question 103

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Germano Products, Incorporated, has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: The Pool Products Division is currently purchasing 10,000 of these pumps per year from an overseas supplier at a cost of $94 per pump.Assume that the Pump Division has enough idle capacity to handle all of the Pool Products Division's needs. Does there exist a transfer price that would make both the Pump and Pool Products Division financially better off than if the Pool Products Division were to continue buying its pumps from the outside supplier?

Which of the following would be considered an operating asset in return on investment computations?

Babak Industries is a division of a major corporation. Last year the division had total sales of $19,560,000, net operating income of $1,877,760, and average operating assets of $6,000,000.The division's margin is closest to:

Lumsden Incorporated has a $1,200,000 investment opportunity with the following characteristics: The company's minimum required rate of return is 7%. The residual income for this year's investment opportunity is closest to:

The following data pertain to Turk Company's operations last year: If the residual income for the year was $9,000, the minimum required rate of return must have been:

Robichau Incorporated reported the following results from last year's operations: At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics: The company's minimum required rate of return is 20%.The residual income for this year's investment opportunity when considered alone is closest to:

Erholm Corporation has two operating divisions-an Atlantic Division and a Pacific Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $31 per shipment. The Logistics Department's fixed costs are budgeted at $411,800 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand. At the end of the year, actual Logistics Department variable costs totaled $290,700 and fixed costs totaled $431,950. The Atlantic Division had a total of 3,900 shipments and the Pacific Division had a total of 5,100 shipments for the year. How much Logistics Department cost should be charged to the Pacific Division at the end of the year for performance evaluation purposes?

Residual income is the difference between net operating income and the product of average operating assets and the minimum rate of return.

Agustin Industries is a division of a major corporation. Data concerning the most recent year appears below: The division's margin is closest to:

Gabbe Industries is a division of a major corporation. Last year the division had total sales of $8,910,000, net operating income of $962,280, and average operating assets of $3,000,000. The company's minimum required rate of return is 10%.Required:a. What is the division's margin?b. What is the division's turnover?c. What is the division's return on investment (ROI)?

Robichau Incorporated reported the following results from last year's operations: At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics: The company's minimum required rate of return is 20%.If the company pursues the investment opportunity, this year's combined residual income for the entire company will be closest to:

Macumber Corporation has two operating divisions-an Atlantic Division and a Pacific Division. The company's Logistics Department services both divisions. The variable costs of the Logistics Department are budgeted at $48 per shipment. The Logistics Department's fixed costs are budgeted at $396,000 for the year. The fixed costs of the Logistics Department are determined based on peak-period demand. How much Logistics Department cost should be charged to the Atlantic Division at the end of the year for performance evaluation purposes?

Wamsley Products, Incorporated, has a Transmitter Division that manufactures and sells a number of products, including a standard transmitter that could be used by another division in the company, the Remote Devices Division, in one of its products. Data concerning that transmitter appear below: The Remote Devices Division is currently purchasing 8,000 of these transmitters per year from an overseas supplier at a cost of $61 per transmitter. Assume that the Transmitter Division is selling all of the transmitters it can produce to outside customers. What should be the minimum acceptable transfer price for the transmitters from the standpoint of the Transmitter Division?

All other things the same, an increase in unit sales will normally result in an increase in the return on investment.

Dacker Products is a division of a major corporation. The following data are for the most recent year of operations: The division's residual income is closest to:

Division P of the Nyers Company makes a part that can either be sold to outside customers or transferred internally to Division Q for further processing. Annual data relating to this part are as follows: Division Q of the Nyers Company requires 15,000 units per year and is currently paying an outside supplier $33 per unit. Consider each part below independently.If outside customers demand 80,000 units, then according to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?

The following data are for the Akron Division of Consolidated Rubber, Incorporated: For the past year, the minimum required rate of return was:

Tennill Incorporated has a $1,400,000 investment opportunity with the following characteristics: The return on investment (ROI) for this year's investment opportunity considered alone is closest to: