Question 1

_________________ emphasizes only effectiveness of implementation.

Accepted Answer

Single-loo

Question 2

Using Economic Value Added (EVA)to calculate residual income,the cost of capital employed is

Accepted Answer

A) the standard percentage cost of capital multiplied by the average capital employed. 
B) the actual percentage cost of capital multiplied by the average capital employed. 
C) the standard percentage cost of capital multiplied by the total capital employed. 
D) the actual percentage cost of capital multiplied by the total capital employed. 
A) the standard percentage cost of capital multiplied by the average capital employed. 
B) the actual percentage cost of capital multiplied by the average capital employed. 
C) the standard percentage cost of capital multiplied by the total capital employed. 
D) the actual percentage cost of capital multiplied by the total capital employed.

Question 3

Return on investment (ROI)can be calculated by multiplying margin times turnover.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is not a disadvantage of the ROI performance measure?

Accepted Answer

A) It encourages managers to focus on the long run rather than the short run. 
B) It discourages managers from investing in projects that would decrease divisional ROI but increase the profitability of the company as a whole. 
C) It encourages myopic behavior. 
D) All of these are disadvantages of the ROI measure. 
A) It encourages managers to focus on the long run rather than the short run. 
B) It discourages managers from investing in projects that would decrease divisional ROI but increase the profitability of the company as a whole. 
C) It encourages myopic behavior. 
D) All of these are disadvantages of the ROI measure.

Question 5

Figure 12-3. Grey Inc.has many divisions that are evaluated on the basis of ROI.One division,Centra,makes boxes.A second division,Mantra,makes chocolates and needs 80,000 boxes per year.Centra incurs the following costs for one box:
  Centra has capacity to make 700,000 boxes per year.Mantra currently buys its boxes from an outside supplier for $1.80 each (the same price that Centra receives).
Refer to Figure 12-3.Assume that Grey Inc.allows division managers to negotiate transfer price.Centra is producing 600,000 boxes.If Centra and Mantra agree to transfer boxes,what is the ceiling of the bargaining range and which division sets it?

Accepted Answer

A) $1.48; Centra 
B) $1.35; Centra 
C) $1.80; Mantra 
D) $1.35; Mantra 
E) $1.80; Centra 
A) $1.48; Centra 
B) $1.35; Centra 
C) $1.80; Mantra 
D) $1.35; Mantra 
E) $1.80; Centra

Question 6

If the National Division of American Products Company had a turnover ratio of 4.2 and a margin of 0.10,the return on investment would be

Accepted Answer

A) 23.8%. 
B) 420.0%. 
C) 42.0%. 
D) 238.0%. 
A) 23.8%. 
B) 420.0%. 
C) 42.0%. 
D) 238.0%.

Question 7

Figure 12-4. Quinn Inc.has a number of divisions.One division,Style,makes zippers that are used in the manufacture of boots.Another division,LeatherStuff,makes boots that use the zippers and needs 90,000 zippers per year.Style incurs the following costs for one zipper:
  Quinn has capacity to make 950,000 zippers per year,but due to a soft market,only plans to produce and sell 620,000 zippers next year.LeatherStuff currently buys zippers from an outside supplier for $3.50 each (the same price that Style receives).
Refer to Figure 12-4.Assume that Quinn allows negotiated transfer pricing.What is the floor of the bargaining range and which division sets it?

Accepted Answer

A) $3.50; Style 
B) $2.70; LeatherStuff 
C) $2.70; Style 
D) $1.38; LeatherStuff 
E) $1.38; Style 
A) $3.50; Style 
B) $2.70; LeatherStuff 
C) $2.70; Style 
D) $1.38; LeatherStuff 
E) $1.38; Style

Question 8

Paige Inc.has a division that makes paint and another division that constructs subdivisions.The paint division incurs the following costs for one gallon of paint:
   The Paint Division can make 1,000,000 gallons per year,and expects to produce 1,000,000 gallons next year.The construction division currently buys 200,000 gallons of paint from an outside supplier for $5.20 per gallon (the same price that the Paint Division receives).

Accepted Answer

The answer of Paige Inc.has a division that makes paint...

Question 9

Last night,Shirley worked on her accounting homework for one and one half hours.During that time,she completed 6 problems.What is the cycle time for one problem?

Accepted Answer

A) 4 minutes 
B) 90 minutes 
C) 15 minutes 
D) 10 minutes 
E) 6 minutes 
A) 4 minutes 
B) 90 minutes 
C) 15 minutes 
D) 10 minutes 
E) 6 minutes

Question 10

Decreasing inventories leads to a reduction in return on investment (ROI).

Accepted Answer

A) True 
 B)False

Question 11

Residual income is calculated as

Accepted Answer

A) operating income - (ROI ´ average operating assets). 
B) operating income/(ROI ´ average operating assets). 
C) operating income/(minimum rate of return ´ average operating assets). 
D) operating income - (minimum rate of return ´ average operating assets). 
E) (minimum rate of return ´ average operating assets)/operating income. 
A) operating income - (ROI ´ average operating assets). 
B) operating income/(ROI ´ average operating assets). 
C) operating income/(minimum rate of return ´ average operating assets). 
D) operating income - (minimum rate of return ´ average operating assets). 
E) (minimum rate of return ´ average operating assets)/operating income.

Question 12

The Balanced Scorecard perspective that defines the customer and market segments in which the business unit will compete is the ____ perspective.

Accepted Answer

A) customer 
B) internal business process 
C) learning and growth 
D) financial 
E) none of these 
A) customer 
B) internal business process 
C) learning and growth 
D) financial 
E) none of these

Question 13

Economic Value Added is residual income with the cost of capital equal to the firm's

Accepted Answer

A) budgeted cost of capital. 
B) average cost of capital. 
C) standard cost of capital. 
D) actual cost of capital. 
A) budgeted cost of capital. 
B) average cost of capital. 
C) standard cost of capital. 
D) actual cost of capital.

Question 14

A segment of Mega Inc.,manufactures and sells blankets.The various models of blankets are produced in a single factory using stable technology.They are sold by the sales department,also located in the factory.The segment is most probably accounted for as a(n)

Accepted Answer

A) cost center. 
B) revenue center. 
C) profit center. 
D) investment center. 
E) none of these. 
A) cost center. 
B) revenue center. 
C) profit center. 
D) investment center. 
E) none of these.

Question 15

In calculating residual income,the variable set by top management is called the

Accepted Answer

A) average operating assets. 
B) operating income. 
C) hurdle rate. 
D) actual operating assets. 
A) average operating assets. 
B) operating income. 
C) hurdle rate. 
D) actual operating assets.

Question 16

Figure 12-1. Dempsey Company provided the following information for last year:
  Refer to Figure 12-1.Calculate Dempsey's margin for last year,rounding to two decimal places.

Accepted Answer

A) 2.0 
B) 0.26 
C) 0.38 
D) 0.50 
E) 0.35 
A) 2.0 
B) 0.26 
C) 0.38 
D) 0.50 
E) 0.35

Question 17

Several transfer pricing policies are used in practice.These transfer pricing policies include market price,cost-based transfer prices,and negotiated transfer prices.

Accepted Answer

A) True 
 B)False

Question 18

Return on investment (ROI)is calculated as

Accepted Answer

A) operating income/average operating assets. 
B) average operating assets/operating income. 
C) (beginning operating assets + ending operating assets)/2. 
D) sales/average operating assets. 
E) operating income/sales. 
A) operating income/average operating assets. 
B) average operating assets/operating income. 
C) (beginning operating assets + ending operating assets)/2. 
D) sales/average operating assets. 
E) operating income/sales.

Question 19

Divisions in a decentralized company can be created along which of the following lines?

Accepted Answer

A) Geographical 
B) Types of goods or services produced 
C) Type of responsibility given to divisional manager 
D) Two or more of the other answers are correct 
E) None of these 
A) Geographical 
B) Types of goods or services produced 
C) Type of responsibility given to divisional manager 
D) Two or more of the other answers are correct 
E) None of these

Question 20

A responsibility center in which a manager is responsible for revenues,cost,and investment is a(n)

Accepted Answer

A) cost center. 
B) revenue center. 
C) profit center. 
D) investment center. 
E) none of these. 
A) cost center. 
B) revenue center. 
C) profit center. 
D) investment center. 
E) none of these.

_________________ emphasizes only effectiveness of implementation.

Using Economic Value Added (EVA)to calculate residual income,the cost of capital employed is

Return on investment (ROI)can be calculated by multiplying margin times turnover.

Which of the following is not a disadvantage of the ROI performance measure?

If the National Division of American Products Company had a turnover ratio of 4.2 and a margin of 0.10,the return on investment would be

Last night,Shirley worked on her accounting homework for one and one half hours.During that time,she completed 6 problems.What is the cycle time for one problem?

Decreasing inventories leads to a reduction in return on investment (ROI).

Residual income is calculated as

The Balanced Scorecard perspective that defines the customer and market segments in which the business unit will compete is the ____ perspective.

Economic Value Added is residual income with the cost of capital equal to the firm's

A segment of Mega Inc.,manufactures and sells blankets.The various models of blankets are produced in a single factory using stable technology.They are sold by the sales department,also located in the factory.The segment is most probably accounted for as a(n)

In calculating residual income,the variable set by top management is called the

Figure 12-1. Dempsey Company provided the following information for last year: Refer to Figure 12-1.Calculate Dempsey's margin for last year,rounding to two decimal places.

Several transfer pricing policies are used in practice.These transfer pricing policies include market price,cost-based transfer prices,and negotiated transfer prices.

Return on investment (ROI)is calculated as

Divisions in a decentralized company can be created along which of the following lines?

A responsibility center in which a manager is responsible for revenues,cost,and investment is a(n)

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing,and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Statement of Cash Flows

Financial Statement Analysis

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Exam 12: Performance Evaluation and Decentralization

_________________ emphasizes only effectiveness of implementation.

Using Economic Value Added (EVA)to calculate residual income,the cost of capital employed is

Return on investment (ROI)can be calculated by multiplying margin times turnover.

Which of the following is not a disadvantage of the ROI performance measure?

If the National Division of American Products Company had a turnover ratio of 4.2 and a margin of 0.10,the return on investment would be

Last night,Shirley worked on her accounting homework for one and one half hours.During that time,she completed 6 problems.What is the cycle time for one problem?

Decreasing inventories leads to a reduction in return on investment (ROI).

Residual income is calculated as

The Balanced Scorecard perspective that defines the customer and market segments in which the business unit will compete is the ____ perspective.

Economic Value Added is residual income with the cost of capital equal to the firm's

A segment of Mega Inc.,manufactures and sells blankets.The various models of blankets are produced in a single factory using stable technology.They are sold by the sales department,also located in the factory.The segment is most probably accounted for as a(n)

In calculating residual income,the variable set by top management is called the

Figure 12-1. Dempsey Company provided the following information for last year: Refer to Figure 12-1.Calculate Dempsey's margin for last year,rounding to two decimal places.

Several transfer pricing policies are used in practice.These transfer pricing policies include market price,cost-based transfer prices,and negotiated transfer prices.

Return on investment (ROI)is calculated as

Divisions in a decentralized company can be created along which of the following lines?

A responsibility center in which a manager is responsible for revenues,cost,and investment is a(n)

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing,and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Statement of Cash Flows

Financial Statement Analysis

Filters