Chapter 22 Question 1

A responsibility accounting system offers all of the following advantages to a business except:

Question options:

a)	Hold managers accountable for the performance of their responsibility centers.

b)	Evaluate managerial performance against expectations set forth in departmental.

c)	Reduce the number of accounts needed to record revenue and expense transactions.

d)	Identify profitable and unprofitable responsibility centers of the business.

Question 3

Which of the following is a common fixed cost from the viewpoint of the Service Department in a Toyota dealership?

Question options:

a)	The cost of parts used in repairing automobiles.

b)	Depreciation on tools and equipment used to repair automobiles.

c)	The monthly salary paid to the manager of the Sales department.

d)	Property taxes paid on the dealership's land and buildings.

Question 4

If an additional $5,000 expenditure for advertising will cause a $20,000 increase in sales, the greatest benefit for the entire company will result by spending the money on the profit center with the highest:

Question options:

a)	Responsibility margin.

b)	Contribution margin ratio.

c)	Performance margin.

d)	Rate of return on investment (responsibility margin divided by average identifiable assets.)

Question 5

In which of the following decisions is responsibility margin more relevant than contribution margin or performance margin?

Question options:

a)	In deciding whether to cut a responsibility center's selling prices by 10% if this action is expected to increase sales by 25%.

b)	In evaluating the performance of a responsibility center manager.

c)	In deciding whether to eliminate a particular profit center.

d)	In deciding which product line will benefit most from an advertising campaign.

Question 6

Which of the following would a profit center least likely support for the goods it sells to other responsibility centers within the business?

Question options:

a)	Transferring the goods as their market value plus 10%.

b)	Transferring the goods as their market value.

c)	Profit centers do not sell goods to other responsibility centers.

d)	Transferring the goods as their cost.