1-4 Quick Study

Please complete Quick Study as follows: 1) In each blank next to the following terms, place the identifying letter of its best description: 1) Cost center A. Engages directly in manufacturing or in making sales 2) Investment center directly to customers. 3) Departmental accounting system B. Does not directly manufacture products but contributes to 4) Operating department protability of the entire company. 5) Prot center C. Incurs costs and also generates revenues. 6) Responsibility accounting system D. Provides information used to evaluate the performance of 7} Service department a department. E. Incurs costs without directly yeilding revenues. F. Provides information used to evaluate the performance of a department manager. G. Holds manager responsible for revenues, costs, and investments. 2) For each of the following types of indirect expenses and service department expenses, identify one allocation basis that could be used to distribute it to the departments indicated. 1) Computer service expenses of production scheduling for operating departments. 2) General ofce department expenses of the operating departments. 3] Maintenance department expenses of the operating departments. 4] Electric utility expenses ofal] departments. 3) Use the information in the following table to compute each department's contribution to overhead (both in dollars and as a percent). Which department contributes the largest dollar amount to total overhead? Which contributes the highest percent (as a percent of sales)? Note: Pay close attention to this quick study. This formula is a skill I expect you to remember. - Sales 106,000 360,000 168,000 Cost ofgoods sold 68,320 201,400 99,120 Gross prot 37,630 152,600 68,880 Total direct expenses 6,890 74,120 15,120 Contribution to overhead Contribution percent 4) Compute return on assets for each ofthese Best Buy divisions (each is an investment center}. Comment on the relative performance of each investment center. _ r'kvcrage Assets Return on Assets Cameras and camcorders 4,500,000 20,000,000 1,500,000 12,500,000 800,000 10,000,000 Phones and communications Computers and accessories