31. Contribution to overhead generated by a department is the same as gross profit generated by that department.
32. Cycle time is a financial measure commonly used to evaluate a company’s production processes.
33. Cycle efficiency is the ratio of value-added time to total cycle time.
34. Return on investment for a given investment center can be split into two components: profit margin and investment turnover.
35. Profit margin measures how efficiently an investment center generates sales from its invested assets.
Multiple Choice Questions
36. Which of the following would not be considered a cost center?
A. Accounting department.
B. Purchasing department.
C. Research department.
D. Advertising department.
E. Pharmacy in a grocery store.
37. Which of the following is most likely to be considered a profit center?
A. An individual retail store in a large chain.
B. The grocery department of a Walmart Supercenter or Target Superstore.
C. The maintenance department of a large retail operation.
D. The personnel office of a business.
E. A stand-alone eye clinic.
38. A unit of a business that not only incurs costs but also generates revenues is called a:
A. Performance center.
B. Profit center.
C. Cost center.
D. Responsibility center.
E. Expense center.
39. A profit center:
A. Incurs costs but does not directly generate revenues.
B. Incurs costs and directly generates revenues.
C. Has a manager who is evaluated solely on efficiency in controlling costs.
D. Incurs only indirect costs and directly generates revenues.
E. Incurs only indirect costs and generates revenues.
40. An accounting system that provides information that management can use to evaluate the profitability and/or cost effectiveness of a department's activities is a:
A. Departmental accounting system.
B. Cost accounting system.
C. Service accounting system.
D. Revenue accounting system.
E. Standard accounting system.