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1
Indirect expenses generally are not subject to the control of the department manager.
A)True
B)False
2
A cost center incurs costs without directly generating revenues.
A)True
B)False
3
The salary of a supervisor who manages more than one department, may be allocated to departments on the basis of the number of employees in each department.
A)True
B)False
4
The salary of an employee who works in only one department is a direct expense of that one department.
A)True
B)False
5
When a department that has a positive departmental contribution margin is eliminated, the net income of the firm as a whole is reduced by the amount of the departmental margin.
A)True
B)False
6
A cost is controllable if a manager has the power to determine or at least significantly affect the amount incurred.
A)True
B)False
7
In an Income Statement showing departmental contribution to overhead, direct expenses for each department are shown separately under each department.
A)True
B)False
8
Indirect expenses are expenses incurred for the benefit of particular departments.
A)True
B)False
9
Rent expense for a building is reasonably allocated to a department on the basis of floor space it occupies.
A)True
B)False
10
Service departments make a product.
A)True
B)False
11
A profit center incurs costs without directly generating revenues.
A)True
B)False
12
A responsibility accounting system is set up to control costs and expenses and evaluate managers' performances by assigning costs and expenses to the managers responsible for controlling them.
A)True
B)False
13
Departmental contribution to overhead is the amount by which a department's expenses exceed its direct overhead.
A)True
B)False
14
An investment center's return on total assets is computed by taking the center's net income and dividing it by the center's average total assets.
A)True
B)False
15
An income statement showing departmental contribution to overhead subtracts indirect expenses from each department's revenues.
A)True
B)False
16
Which of the following bases is most appropriate for the allocation of rent expense on a building?
A)total general expense
B)floor space
C)number of direct labor hours
D)total operating expenses
E)none of these
17
ABC Co is considering eliminating Department B. Department B's gross profit on sales is $50,000. If Department B is discontinued, it is estimated that $35,000 of the $105,000 expenses allocated to it could be eliminated. If Department B is discontinued, the company's income before taxes would
A)decrease by $35,000.
B)decrease by $15,000.
C)increase by $85,000.
D)decrease by $50,000.
E)do none of these.
18
When direct departmental expenses are subtracted from gross profit, the result is called
A)net income.
B)departmental margin.
C)indirect expenses.
D)net income from operations.
E)none of these.
19
Dentz Company is considering eliminating Department B. Department B's gross profit on sales is $70,000. If Department B is discontinued, it is estimated that $60,000 of the $95,000 expenses allocated to it could be eliminated. If Department B is discontinued, the company's income before taxes would
A)decrease by $35,000.
B)decrease by $25,000.
C)increase by $85,000.
D)decrease by $10,000.
E)do none of these.
20
Which of the following expenses incurred by a department is (are) indirect expense(s)?
A)depreciation expense on the building
B)insurance expense on building
C)janitorial services expense
D)all of these
E)none of these
21
Which of the following expenses incurred by a department is (are) direct expense(s)?
A)sales salaries
B)insurance expense on building
C)rent expense on a building
D)all of these
E)none of these
22
Department B figures taken from a departmentalized work sheet are as follows:
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Assume that the operating expenses of Department B include $55,000 of direct expenses. Also assume that closing Department B would not affect the sales or the direct expenses of other departments. What is the amount of the departmental margin of Department B?
A)$5,000
B)$9,000
C)$(30,000)
D)$(5,000)
E)none of these
23
Which of the following bases is most appropriate for the allocation of heating expense?
A)total salaries
B)floor space occupied
C)volume of sales
D)cost of equipment
E)none of these
24
A profit center
A)does not generate any revenues
B)serves other departments
C)incurs costs only
D)incurs costs and generates revenues
E)none of these
25
Department B figures taken from a departmentalized work sheet are as follows:
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Assume that the operating expenses of Department B include $76,000 of direct expenses. Also assume that closing Department B would not affect the sales or the direct expenses of other departments. What is the amount of the departmental margin of Department B?
A)$5,000
B)$9,000
C)$10,000
D)$80,000
E)none of these
26
A responsibility accounting system controls costs and expenses and evaluates managers' performances by
A)assigning budgets by managers' seniority
B)ranking managers by the profit they generate
C)assigning costs and expenses to the managers responsible for controlling them
D)assigning responsibility by managers' percentage of total expenses controlled
E)none of these
27
Profit center managers are judged on
A)their abilities to generate costs in excess of their department's revenues
B)their abilities to generate costs
C)their abilities to generate revenues in excess of their department's costs.
D)their abilities to service other departments profitably
E)maximizing sales revenues.
28
Utilities expenses such as heating and lighting are usually allocated on the basis of
A)each department's proportion of total sales
B)number of employees in each department
C)number of hours that a department uses equipment and machinery.
D)floor space a department occupies
E)dollar amounts of purchases or number of purchase orders processed.
29
If a center with an average investment of $2 million yields a net income of $150,000, its return on total assets is
A)30%
B)7.5%
C)13.33%.
D)15%
E)none of these.
30
A retailer has three departments-A, B and C. It buys janitorial services that benefit all departments. Janitorial service expense is $50,000 for the year, and floor space for the departments follow: A=5,000 ft; B=2,000 ft; C=4,000 ft. How much janitorial expense is allocated to department A if allocation is based on floor space?
A)$41,667
B)$9,091
C)$25,000
D)$22,727
E)none of these





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