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An operating unit that is responsible

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1. An operating unit that is responsible for revenues and costs is commonly referred to as a(n) (Points : 1)
expense center.
revenue center.
profit center.
asset center.

2. Which of the following statements is false? (Points : 1)

The military is a good example of an organization that is highly decentralized.
The degree of decentralization depends on how many decisions principals delegate to agents.
Management control systems are used to measure the performance of an agent's decisions.
Most organizations have some operating units that are centralized and some that are decentralized.

3. Which of the following is not a characteristic of a decentralized organization? (Points : 1)

better use of local knowledge
better use of top management's time
reduced response time to environmental changes
more decisions made by relatively few individuals

4. Which of the following items would be classified as a volume-level cost in an activity-based cost management (ABM) system? (Points : 1)

indirect materials
production supervisor's salary
depreciation on factory building
research and development

5. If two service departments service the same number of departments, which service department's costs are allocated first when using the step method? (Points : 1)

The service department that provides the most service to other service departments.
The service department that provides the most service to the user departments.
The service department with the least cost.
The service department that provides the least service to other service departments.
The service department that provides the least service to the user departments.

6. Which of the following activities is most likely to be classified as value-added for a manufacturing company? (Points : 1)


7. Which of the following is a weakness of the step method of service cost allocations? (Points : 1)

Some user departments are ignored.
All interdepartmental services are ignored.
All intradepartmental services are ignored.
The order of service department allocation has to be determined.
Computations are more complex than the reciprocal method.

8. Gundy Press reports the following information about resources. At the beginning of the year, Gundy estimated it would spend $42,000 for setups and $21,000 for clerical.

Cost Driver Rate Cost Driver Volume

Resources used

Setups $250 175 runs

Clerical 30 500 pages typed

Resources supplied

Setups $45,000

Clerical 20,000

Compute unused resource capacity for setups for Gundy Press. (Points : 1)


9. Beta Company is preparing its annual profit plan. As part of its analysis of the profitability of its customers, management estimates that the $12,000 for sales support should be assigned to the individual customers from the information given as follows:

Customer A Customer B

Units purchased 100,000 200,000

Purchase orders (annual) 5 20

What is the amount of the sales support costs that should be allocated to Customer A assuming Beta uses Unit activity-based costing (ABC)? (Points : 1)


10. Which of the following budgets is not required in a wholesale organization? (Points : 1)

cost of goods sold
marketing and administrative expenses

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