RESPONSIBILITY ACCOUNTING

MANAGERIAL ACOUNTING 001

1. What is the basic purpose of a responsibility accounting system?

a. Budgeting c. Authority

b. Motivation d. Variance analysis

2. A successful responsibility accounting reporting system is dependent upon

a. The correct allocation of controllable variable costs

b. Identification of the management level at which all costs are controllable

c. The proper delegation of responsibility and authority

d. A responsible separation of costs into their fixed and variable components since fixed costs are not

controllable and must be eliminated from the performance report

3. What is the LEAST complex segment or area of responsibility for which costs are allocated?

a. Profit center c. Contribution center

b. Investment center d. Cost center

4. The manager of a revenue center is responsible for all of the following, except:

a. Product mix and pricing c. Service quality and units sold

b. Sales and promotional activities d. Acquisition cost of products sold

5. Comparing budgeted and actual amounts is important in evaluating the performance of

a. The manager of a cost center c. The manager of an investment center

b. The manager of a profit center d. Any manager

6. Decentralized firms can delegate authority, retain control and monitor manager's performance by structuring the

organization into responsibility centers. Which center is almost like an independent business?

a. Revenue center c. Cost center

b. Profit center d. Investment center

7. A management decision may be beneficial for a given profit center but not for the entire company. From the over-all

company viewpoint, this decision leads to

a. Sub-optimization c. Goal congruence

b. Centralization d. Maximization

8. In responsibility accounting, a center's performance is measured by controllable costs. Controllable costs are best

describe as including

a. Direct material and direct labor only

b. Only those costs that the manager can influence in the current time period

c. Only discretionary costs

d. Those costs about which the manager is knowledge and informed

9. The following is the summarized income statement of Ruby Co.'s profit center for October:

Contribution Margin P 70,000

Period Expenses:

Manager's salary P 20,000

Facility depreciation 8,000

Corporate expense allocated 5,000 (33,000)

Profit center income P 37,000

Which of the following amounts is most likely subject to the control of the profit center's manager?

a. P 70,000 c. P 37,000

b. P 50,000 d. P 33,000

10. If a manufacturing company uses responsibility accounting, which one of the following items is least likely to appear

in a performance report for a manager of an assembly line?

a. Labor payroll c. Repairs and maintenance

b. Materials d. Depreciation on equipment