Question 1

The transfer pricing method that uses the price the company would charge external customers is the:

Accepted Answer

A) market-price method. 
B) cost-based method. 
C) negotiation method. 
D) balanced scorecard method. 
A) market-price method. 
B) cost-based method. 
C) negotiation method. 
D) balanced scorecard method.

Question 2

Crawford Corp.has an ROI of 15% and a residual income of $10,000.If operating income equals $30,000,what is the amount of average invested assets?

Accepted Answer

A) $200,000 
B) $66,667 
C) $450,000 
D) $150,000 
A) $200,000 
B) $66,667 
C) $450,000 
D) $150,000

Question 3

Investment turnover is defined as:

Accepted Answer

A) the ratio of sales revenue to average invested assets. 
B) the ratio of net operating income to average invested assets. 
C) the ratio of net operating income to sales revenue. 
D) the ratio of profit margin to return on investment. 
A) the ratio of sales revenue to average invested assets. 
B) the ratio of net operating income to average invested assets. 
C) the ratio of net operating income to sales revenue. 
D) the ratio of profit margin to return on investment.

Question 4

The DuPont method breaks residual income into profit margin and investment turnover.

Accepted Answer

A) True 
 B)False

Question 5

Avocado Company has an operating income of $80,000 on revenues of $1,000,000.Average invested assets are $500,000,and Avocado Company has an 8% cost of capital.What is the return on investment?

Accepted Answer

A) 8% 
B) 10% 
C) 16% 
D) 20% 
A) 8% 
B) 10% 
C) 16% 
D) 20%

Question 6

Tint Company has two divisions,Blue and Green.Blue produces an item that Green could use in its production.Green currently is purchasing 150,000 units from an outside supplier for $23 per unit.Blue is currently operating at full capacity of 1,600,000 units and has variable costs of $14 per unit.The full cost to manufacture the unit is $18.Blue currently sells 1,600,000 units at a selling price of $25 per unit.
a.What will be the effect on Tint Company's operating profit if the transfer is made internally?
b.What is the minimum transfer price from Blue's perspective?
c.What is the maximum transfer price from Green's perspective?

Accepted Answer

a.$300,000 less profits = 150,000 × ($25

Question 7

The transfer pricing method that uses either the variable cost or the full cost as the basis for setting the transfer price is the:

Accepted Answer

A) market-price method. 
B) cost-based method. 
C) negotiation. 
D) balanced scorecard method. 
A) market-price method. 
B) cost-based method. 
C) negotiation. 
D) balanced scorecard method.

Question 8

Eureka Corp.has a hurdle rate of 8%.Calculate the missing values on each line.(Each line is independent of the others).

Accepted Answer

a.15% = $105,000/$700,000
b.$49,000 = $1

Question 9

Colonial has an ROI of 18% based on revenues of $300,000.The investment turnover is 1.5 and residual income is $20,000.What is the hurdle rate?

Accepted Answer

A) 18% 
B) 12% 
C) 8% 
D) 15% 
A) 18% 
B) 12% 
C) 8% 
D) 15%

Question 10

Palm Inc.has a profit margin of 15% and an investment turnover of 2.Sales revenue is $800,000.What is the operating income?

Accepted Answer

A) $240,000 
B) $60,000 
C) $120,000 
D) $400,000 
A) $240,000 
B) $60,000 
C) $120,000 
D) $400,000

Question 11

Swan Company has two divisions,Hill and Paradise.Hill produces a unit that Paradise could use in its production.Paradise currently is purchasing 5,000 units from an outside supplier for $56.Hill is operating at less than full capacity and has variable costs of $30.80 per unit.The full cost to manufacture the unit is $43.40.Hill currently sells 450,000 units at a selling price of $61.60.How much will Paradise save by not purchasing from outside if a transfer price of $42 is agreed upon?

Accepted Answer

A) $70,000 
B) $56,000 
C) $7,000 more cost 
D) $28,000 
A) $70,000 
B) $56,000 
C) $7,000 more cost 
D) $28,000

Question 12

Residual income is a leading indicator of financial performance.

Accepted Answer

A) True 
 B)False

Question 13

Almond,Inc.uses a balanced scorecard.One of the measures on the scorecard is the change in stock price.Which balanced scorecard perspective would this measure most likely fit into?

Accepted Answer

A) Customer perspective 
B) Learning and growth perspective 
C) Internal business perspective 
D) Financial perspective 
A) Customer perspective 
B) Learning and growth perspective 
C) Internal business perspective 
D) Financial perspective

Question 14

Rapid Industries has multiple divisions.One division,Iron Products,makes a component that another division,Austin,is currently purchasing on the open market.Iron Products currently has a capacity to produce 500,000 components at a variable cost of $7.50 and a full cost of $10.00.Iron Products has outside sales of 460,000 components at a price of $12.50 per unit.Austin currently purchases 50,000 units from an outside supplier at a price of $12.00 per unit.Assume that Austin desires to use a single supplier for its component.
a.What will be the effect on Rapid Industries' operating profit if the transfer is made internally? Assume the 50,000 units Austin needs are either purchased 100% internally or 100% externally.
b.What is the minimum transfer price?
c.What is the maximum transfer price?

Accepted Answer

a.$175,000 increase in profits = $425,00

Question 15

The responsibility center in which the manager does not have responsibility and authority over revenues is:

Accepted Answer

A) a cost center. 
B) an investment center. 
C) a profit center. 
D) a revenue center. 
A) a cost center. 
B) an investment center. 
C) a profit center. 
D) a revenue center.

Question 16

Which of the following statements is not correct about using the balanced scorecard for sustainability accounting?

Accepted Answer

A) The company could add an additional category to the existing balanced scorecard to capture sustainability objectives and metrics. 
B) The company could create a separate balanced scorecard that focuses exclusively on sustainability objectives and metrics within the existing categories. 
C) The company could focus exclusively on short-term metrics,creating sustainability in its operations. 
D) The company could incorporate sustainability metrics within the existing balanced scorecard. 
A) The company could add an additional category to the existing balanced scorecard to capture sustainability objectives and metrics. 
B) The company could create a separate balanced scorecard that focuses exclusively on sustainability objectives and metrics within the existing categories. 
C) The company could focus exclusively on short-term metrics,creating sustainability in its operations. 
D) The company could incorporate sustainability metrics within the existing balanced scorecard.

Question 17

Return on investment can be calculated as:

Accepted Answer

A) sales revenue/average invested assets. 
B) operating income/sales revenue. 
C) operating income/average invested assets. 
D) average invested assets/sales revenue. 
A) sales revenue/average invested assets. 
B) operating income/sales revenue. 
C) operating income/average invested assets. 
D) average invested assets/sales revenue.

Question 18

National Company has two divisions,Walton and Iowa.Walton produces an item that Iowa could use in its production.Iowa currently is purchasing 50,000 units from an outside supplier for $9.10 per unit.Walton has sufficient capacity and has variable costs of $5.25 per unit.The full cost to manufacture the unit is $7.70.Walton currently sells 450,000 units at a selling price of $9.80 per unit.
a.What will be the effect on National Company's operating profit if the transfer is made internally?
b.What will be the change in profits for Walton if the transfer price is $7 per unit?
c.What will be the change in profits for Iowa if the transfer price is $7 per unit?

Accepted Answer

a.$192,500 more profit = 50,000 × ($9.10

Question 19

The responsibility center in which the manager does not have responsibility and authority over costs is the:

Accepted Answer

A) cost center. 
B) investment center. 
C) profit center. 
D) revenue center. 
A) cost center. 
B) investment center. 
C) profit center. 
D) revenue center.

Question 20

When negotiating a transfer price,the highest price the buyer will be willing to pay is the ________,while the lowest price the seller will be willing to accept is the ________.

Accepted Answer

A) market price;full cost 
B) full cost;variable cost 
C) market price;variable cost 
D) variable cost;market price 
A) market price;full cost 
B) full cost;variable cost 
C) market price;variable cost 
D) variable cost;market price

The transfer pricing method that uses the price the company would charge external customers is the:

Crawford Corp.has an ROI of 15% and a residual income of $10,000.If operating income equals $30,000,what is the amount of average invested assets?

Investment turnover is defined as:

The DuPont method breaks residual income into profit margin and investment turnover.

Avocado Company has an operating income of $80,000 on revenues of $1,000,000.Average invested assets are $500,000,and Avocado Company has an 8% cost of capital.What is the return on investment?

The transfer pricing method that uses either the variable cost or the full cost as the basis for setting the transfer price is the:

Eureka Corp.has a hurdle rate of 8%.Calculate the missing values on each line.(Each line is independent of the others).

Colonial has an ROI of 18% based on revenues of $300,000.The investment turnover is 1.5 and residual income is $20,000.What is the hurdle rate?

Palm Inc.has a profit margin of 15% and an investment turnover of 2.Sales revenue is $800,000.What is the operating income?

Residual income is a leading indicator of financial performance.

Almond,Inc.uses a balanced scorecard.One of the measures on the scorecard is the change in stock price.Which balanced scorecard perspective would this measure most likely fit into?

The responsibility center in which the manager does not have responsibility and authority over revenues is:

Which of the following statements is not correct about using the balanced scorecard for sustainability accounting?

Return on investment can be calculated as:

The responsibility center in which the manager does not have responsibility and authority over costs is the:

When negotiating a transfer price,the highest price the buyer will be willing to pay is the ,while the lowest price the seller will be willing to accept is the .

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing and Cost Management

Cost Behavior

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgetary Planning

Standard Costing and Variance Analysis

Capital Budgeting

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 10: Decentralized Performance Evaluation

The transfer pricing method that uses the price the company would charge external customers is the:

Crawford Corp.has an ROI of 15% and a residual income of $10,000.If operating income equals $30,000,what is the amount of average invested assets?

Investment turnover is defined as:

The DuPont method breaks residual income into profit margin and investment turnover.

Avocado Company has an operating income of $80,000 on revenues of $1,000,000.Average invested assets are $500,000,and Avocado Company has an 8% cost of capital.What is the return on investment?

The transfer pricing method that uses either the variable cost or the full cost as the basis for setting the transfer price is the:

Eureka Corp.has a hurdle rate of 8%.Calculate the missing values on each line.(Each line is independent of the others).

Colonial has an ROI of 18% based on revenues of $300,000.The investment turnover is 1.5 and residual income is $20,000.What is the hurdle rate?

Palm Inc.has a profit margin of 15% and an investment turnover of 2.Sales revenue is $800,000.What is the operating income?

Residual income is a leading indicator of financial performance.

Almond,Inc.uses a balanced scorecard.One of the measures on the scorecard is the change in stock price.Which balanced scorecard perspective would this measure most likely fit into?

The responsibility center in which the manager does not have responsibility and authority over revenues is:

Which of the following statements is not correct about using the balanced scorecard for sustainability accounting?

Return on investment can be calculated as:

The responsibility center in which the manager does not have responsibility and authority over costs is the:

When negotiating a transfer price,the highest price the buyer will be willing to pay is the ________,while the lowest price the seller will be willing to accept is the ________.

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing and Cost Management

Cost Behavior

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgetary Planning

Standard Costing and Variance Analysis

Capital Budgeting

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

When negotiating a transfer price,the highest price the buyer will be willing to pay is the ,while the lowest price the seller will be willing to accept is the .