FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 13: Responsibility Accounting, support Department Allocations, and Transfer Pricing

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 61

Essay

Review LaterAdd Note

Review Later

Motor Products Corporation The Electric Division of Motor Products Co.has developed a wind generator that requires a special "S" ball bearing.The Ball Bearing Division of Motor Products Co.has the capability to produce such a ball bearing. Unfortunately,the Ball Bearing Division is operating at capacity and will need to reduce production of another existing product,the "T" bearing,by 1,000 units per month to provide the 600 "S" bearings needed each month by the Electric Division.The "T" bearing currently sells for $50 per unit.Variable costs incurred to produce the "T" bearing are $30 per unit; variable costs to produce the new "S" bearing would be $60 per unit. The Electric Division has found an external supplier that would furnish the needed "S" bearings at $100 per unit.Assume that both the Electric Division and Ball Bearing Division are independent,autonomous investment centers. Refer to Motor Products Co.What is the minimum price that Ball Bearing Division would consider to produce the "S" bearing if the Ball Bearing Division did not need to forfeit any of its existing sales to produce the "S" bearing?

Correct Answer

verified

The minimum price wo...

View Answer

Show Answer

Question 62

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following is a reason for allocating service department costs and thereby motivating management?

A) provides for cost recovery
B) provides relevant information in determining corporate-wide profits generated by alternative actions
C) meets regulations in some pricing instances
D) reflects usage of services on a fair and equitable basis

E) None of the above
F) A) and B)

Correct Answer

verified

Show Answer

Question 63

True/False

Review LaterAdd Note

When management by exception is employed,both favorable and unfavorable variances should be investigated.

Why is "standard cost" a better measure for a transfer price than "actual cost"?

Walton Corporation Walton Corporation has two service departments: Data Processing and Administration/Personnel.The company also has three divisions: X,Y,and Z.Data Processing costs are allocated based on hours of use and Administration/Personnel costs are allocated based on number of employees. Assume that Data Processing provides more service than Administration/Personnel. Refer to Walton Corporation.Using the direct method,what amount of Data Processing costs is allocated to X (round to the nearest dollar) ?

In an internal transfer,the selling division records the event by crediting

An organizational unit whose manager is solely responsible for generating revenues is referred to as a ______________________________.

When one responsibility center uses a transfer price to transfer goods or services to another responsibility center a ___________________________________ is created.

Guthrie Wire Corporation The Wire Products Division of Guthrie Wire Corporation produces "bales" of steel wire that are used in various commercial applications.The bales sell for an average of $20 each and The Wire Products Division has the capacity to produce 10,000 bales per month.The Consumer Products Division of Guthrie Wire Corporation uses approximately 2,000 bales of steel wire each month in its production of various appliances.The operating information for the Wire Products Division at its present level of operations (8,000 bales per month)follows: The Consumer Products Division currently pays $15 per bale for wire obtained from its external supplier. Refer to Guthrie Wire Corporation.If the Consumer Products Division agrees to pay the Wire Products Division $16 per bale for 2,000 bales this month,what would be Consumer's change in total profits?

Performance evaluation measures in an organization

When management by exception is employed,favorable variances should not be investigated.

A profit center is typically an independent organizational unit.

Which service department cost allocation method provides for reciprocal allocation of service costs among the service department as well as to the revenue producing departments?

An internal reconciliation account is not required for internal transfers based on

Suboptimization occurs when a manager of a cost center focuses on the goals of the cost center rather than on the goals of the organization as a whole.

Dynamic Engine Corporation The Motor Division of Dynamic Engine Corporation uses 5,000 carburetors per month in its production of automotive engines.It presently buys all of the carburetors it needs from two outside suppliers at an average cost of $100.The Carburetor Division of Dynamic Engine Corporation manufactures the exact type of carburetor that the Motor Division requires.The Carburetor Division is presently operating at its capacity of 15,000 units per month and sells all of its output to a foreign car manufacturer at $106 per unit.Its cost structure (on 15,000 units) is: Assume that the Carburetor Division would not incur any variable selling costs on units that are transferred internally. Refer to Dynamic Engine Corporation.What is the minimum of the transfer price range for a transfer between the two divisions?

With two autonomous division managers,the price of goods transferred between the divisions needs to be approved by

A responsibility center in which a manger has only the authority to control cost is referred to as a(n)_________________________.

Which service department cost allocation method considers all interrelationships of the departments and reflects these relationships in equations?

Decentralization is a transfer of authority from the bottom to the top of an organization.