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Exam 25: Departmentalized Profit and Cost Centers

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Question 51

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McKay Corporation has Sales of $174,500, Cost of Goods Sold of $72,000, Direct Expenses of $39,300, and Indirect Expenses of $29,000. What is McKay Corporation's Net Income from Operations?

A) $102,500
B) $63,200
C) $34,200
D) $72,000

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

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Question 52

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The departments of Cacophony Music Company are listed below. For each, determine whether it is a:

Premises

Responses

Instrument Rental Department

cost center

Instrument Repair Department

profit center

Accounting Department

Recording Studio

Maintenance Department

Sheet Music Department

Storeroom

Customer Service

CDs and Tapes Department

Purchasing & Receiving

Premises

Instrument Rental Department

Instrument Repair Department

Accounting Department

Recording Studio

Maintenance Department

Sheet Music Department

Storeroom

Customer Service

CDs and Tapes Department

Purchasing & Receiving

Responses

cost center

profit center

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Correct Answer

Premises

Responses

Instrument Rental Department

Instrument Repair Department

Accounting Department

Recording Studio

Maintenance Department

Sheet Music Department

Storeroom

Customer Service

CDs and Tapes Department

Purchasing & Receiving

Premises

Instrument Rental Department

Instrument Repair Department

Accounting Department

Recording Studio

Maintenance Department

Sheet Music Department

Storeroom

Customer Service

CDs and Tapes Department

Purchasing & Receiving

Responses

Question 53

Short Answer

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When total revenues equal total expenses, a business is said to----------- .

When a business is organized into separate departments, it is necessary to provide accounting information about each of the separate departments.

Departments that provide services to other departments of the firm are often organized as------------centers.

Floor space would be a reasonable basis for the allocation of:

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

City Shoe's loss from uncollectible accounts is estimated to be one-half of 1 percent of net credit sales. Using the financial data given below, compute the amount allocated to each department. Credit sales: (1.)Women's Shoes, $278,200 (2.)Men's Shoes, $185,800 (3.)Children's Shoes, $116,000 Sales returns and allowances (credit sales): (1.)Women's Shoes, $2,200 (2.)Men's Shoes, $1,800 (3.)Children's Shoes, $1,000

Departmental Unit A had collected $250,000 of rent in the third quarter whereas Departmental Unit B had collected $750,000 in the same period. The accounting office supports both offices but spent more time collecting receivables for Unit B. The company chose to use rent collections as its basis for allocating the $152,000 in salary and benefits of the accounting department to each Unit. Departmental Unit B will have to----------- absorb of cost related to accounting services for the third quarter.

The telephone expense is allocated to the departments based on floor space occupied. Department A occupies 1,875 square feet and Department B occupies 625 square feet. If the telephone expense is $880, the amount allocated to Department A is:

Which of the following is usually not departmentalized?

XYZ Company has four sales territories and is considering eliminating the Great Lakes Region which had sales of $110,000, direct expenses of $70,000 and indirect expenses of $60,000. If the Great Lakes Region is eliminated, 80% of the indirect expenses would still remain. If this region were to be eliminated, the company's overall net income would be:

City Shoe's custodial expense for the year totaled $14,600 and is to be allocated on the basis of the floor space occupied by each department. Using the financial data given below; compute the amount allocated to each department. Floor space occupied: (1.)Women's Shoes, ,13,455 sq. ft. (2.)Men's Shoes, 4,140 sq. ft. (3.)Children's Shoes, 3,105 sq. ft.

Cody Reese, manager of Cobra Sports, Inc., decided to eliminate its Division A. Division A had a contribution margin of $14,000 and a loss from operations of $2,500. What other information does Cody need to make the correct decision?

Indirect expenses of the human resource of a company might include:

When a company has departmentalized profit and cost centers, which of the following would not be reported separately?

Department B had net sales of $82,000, gross profit on sales of $41,600, total direct expenses of $12,500, and total indirect expenses of $7,300. Department B's net income is:

The transfer price is:

If an attempt is made to identify and accumulate the revenue and cost data for a specific segment of a company, that segment is called a(n)-------------center.

Eldercare One, Two and Three are managed as a profit centers by the parent company. Revenues were $1,200,000, $500,000 and $300,000, respectively, and patients numbered 270, 80 and 50, respectively. Insurance costs of $625,000 are allocated to each center based on number of patients. Eldercare One would be allocated insurance cost of: