Ch9

1)In a firm that manufactures clothing, the department that is responsible for actually assembling the garments could best be described as a(n):

Service department.

Operating or production department.

Cost center.

Department in which all of the costs incurred are direct expenses.

Department in which all of the costs incurred are indirect expenses.

2) A company has two departments, Y and Z that incur wage expenses. An analysis of the total wage expense of $19,000 indicates that Dept. Y had a direct wage expense of $2,000 and Dept. Z had a direct wage expense of $3,500. The remaining expenses are indirect and analysis indicates they should be allocated evenly between the two departments. Departmental wage expenses for Dept. Y and Dept. Z, respectively, are:

$8,750; $10,250.

$10,250; $8,750.

$9,500; $9,500.

$2,000; $3,500.

$6,750; $6,750.

3) Riemer, Inc. has four departments. Information about these departments is listed below. Maintenance is a service department. If allocated maintenance cost is based on floor space occupied by each of the other departments, compute the amount of maintenance cost allocated to the Cutting Department.

	Maintenance	Cutting	Assembly	Packaging
Direct costs	$18,000	$30,000	$70,000	$45,000
Sq. ft. of space	500	1,500	2,000	2,500
No. of employees	2	3	16	4

$500.

$4,500.

$3,724.

$6,000.

$4,153.

4) Calculating return on investment for an investment center is defined by the following formula:

Contribution margin/Ending assets.

Gross profit/Ending assets.

Net income/Ending assets.

Income/Average invested assets.

Contribution margin/Average invested assets.

5) The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be:

Floor space of each department.

Relative number of items each department had on sale.

Number of customers to enter each department.

An equal amount of cost for each department.

Proportion of sales of each department.