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Multiple Choice Quiz
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1
The responsibility center that generates both revenue and expense and has been given decision-making responsibility for making significant capital investments related to the center’s business activities is called which of the following?
A)Profit center
B)Cost center
C)Investment center
D)None of the above
2
Which of the following is not one of the basic steps in the operation of a responsibility accounting system?
A)Preparing budgets
B)Developing transfer prices
C)Measuring performance
D)Preparing timely performance reports
3
Consider the following:

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Traceable fixed costs are arbitrarily allocated at 60% of contribution margin. What is the division responsibility margin for the Wholesale Division?
A)$192,000
B)$120,000
C)$132,000
D)$184,000
4
Consider the following:

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The traceable fixed costs assigned to the two stores include an arbitrary allocation of company-wide common fixed costs of $50,000. These common fixed costs have been arbitrarily allocated to the Main Street and Elm Street stores at $20,000 and $30,000, respectively. If the arbitrarily assigned common fixed costs of $50,000 were to be allocated to the stores on the basis of sales, what would be the responsibility margin of the Main Street Store?
A)$2,000
B)$10,000
C)$38,000
D)$4,000
5
Which of the following is a common fixed cost for a department store with five departments, each of which is treated as a profit center, with no walls or partitions dividing them?
A)Advertising expenditures for Yellow Pages.
B)Costs of lighting the interior of the department store.
C)Salary of the department store manager.
D)All of the above.
6
Consider the following:

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If the Main Street Store is discontinued, what will be the responsibility margin for the Retail Division?
A)$132,000
B)$148,000
C)$20,000
D)$28,000
7
Consider the following:

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Thirty percent (30.0%) of the fixed costs charged to the Lumber Department are allocated common fixed costs. If the Lumber Department is eliminated, what will be the effects (ignore the complementary association of hardware and lumber sales)?
A)Net income will remain unchanged.
B)Eliminating the department will result in a net loss of $57,000.
C)Net income will decrease by $34,000.
D)Net income will increase by $91,000.
8
Consider the following for a profit center:

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What is the performance margin?
A)$220,000
B)$180,000
C)$140,000
D)$260,000
9
When the producing department is evaluated as a cost center, what should the transfer price be?
A)The product’s market value
B)The product’s negotiated price
C)The product’s cost
D)The product’s variable costs
10
Under which type of transfer pricing will the profit on the product being transferred wind up in the profit center that produced the product?
A)Market value
B)Negotiated price
C)Cost-plus price
D)Variable costs of the product





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