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Exam 25: Departmentalized Profit and Cost Centers

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Question 31

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Bamboozle Solutions has two departments, A and B. The total indirect expenses by category are given as are the Value of the Assets, Square Feet, and Sales for each department. $\begin{array}{|l|r|r|}\hline \text { Indirect Expense } & & {\text { Total }} \\\hline \text { Insurance Expense } & & \$ 32,000 \\\hline \text { Rent Expense } & & 36,000 \\\hline \text { Utilities Expense } & & 15,000 \\\hline \text { Office Salaries Expense } && 78,000 \\\hline \text { Other Office Expense } && 4,000 \\\hline \text { Uncollectible Accounts Expense } && 21,000 \\\hline\end{array}$ $\begin{array} { | l | r | r | } \hline & \text { Department A } & \text { Department B } \\\hline \text { Asset Item } & & \\\hline \text { Equipment } & 50,000 & 65,000 \\\hline \text { Inventory } & 170,000 & 215,000 \\\hline \text { Square Feet } & 14,000 & 18,000 \\\hline \text { Sales } & 420,000 & 500,000 \\\hline\end{array}$ -Based on the information given, determine the basis for the allocation (value of the assets Equipment and Inventory; square feet of space; or sales) of each expense that will be allocated to the departments.

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Question 32

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An example of a direct expense in a department store is

A) interest expense.
B) sales salaries expense.
C) rent expense for the building where the store is located.
D) utilities expense.

E) All of the above
F) C) and D)

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Question 33

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Shigley and Lothian, CPAs, allocate the expenses of the duplicating center to the Audit Department and the Tax Department, based on the number of copies that each department requests. During 2014, the Audit Department requested 80,000 copies and the Tax Department requested 120,000 copies. Total expenses of the duplicating center were $640,000 in 2014. How much of the duplicating center's expenses will be allocated to the Audit Department and the Tax Department?

Examine the following partial Income Statement for Gemology Products and determine whether or not to close the Jewelry Department. If the Jewelry Department is closed, the Insurance Expense will be reduced by $500 and one office employee part time position will be eliminated. That position pays $6,500 a year. The other expenses will remain.

Data related to the income and expenses of Moffet Company for the year ended December 31, 2013, are shown below. Use this information to prepare a departmental income statement showing contribution margin and net income of each department.

McKay Corporation has Sales of $147,500, Cost of Goods Sold of $70,200, Direct Expenses of $35,300, and Indirect Expenses of $30,000. What is McKay Corporation's Contribution Margin?

A systematic and logical way to allocate the rent expense for a building to various sales departments would be on the basis of ___________________.

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

A department probably would be considered for elimination if it had

Complete the table of Uncollectible Accounts given below.

Eliminating a department should eliminate all ____________________ expenses of the department.

Cost centers do not directly earn revenue.

Semidirect and indirect expenses are allocated to the sales department at the time the expenses are incurred.

The difference between a department's gross profit on sales and its direct expenses is called ___________________.

Department A had total sales of $40,000 and Department B had total sales of $10,000. If office salaries expense is allocated on the basis of total sales, ____________________ percent would be used to determine the allocation for Department B.

Expenses that are closely related to the activities in each department, but cannot be allocated to any specific department are called ____________________ expenses.

Floor space would be a reasonable basis for the allocation of

Which of the following is usually not departmentalized?

Responsibility accounting provides detailed data for each cost center and profit center so that management can determine how efficiently the individual segments are functioning.

For accounting purposes, both revenue and cost data are accumulated for a profit center.