Exam 10: Decentralized Performance Evaluation

Almond,Inc.uses a balanced scorecard.One of the measures on the scorecard is the percentage of revenue from repeat sales.Which balanced scorecard perspective would this measure most likely fit into?

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.What would be the impact on Swan Company's overall profits if the internal transfer is made?

Evergreen Corp.has two divisions,Fern and Bark.Fern produces a widget that Bark could use in the production of units that cost $175 in variable costs,plus the cost of the widget,to manufacture.Fern's variable costs are $60 per widget,and fixed manufacturing costs are applied at a rate of $36 per widget.Widgets sell on the open market for $105 each.Evergreen's policy is that internal transfers will be made at variable cost plus 20%.If Bark purchases the widgets from Fern,what will be the transfer price?

The most common method of evaluating a profit center manager is the:

Investment turnover can be calculated as:

Washington Company has two divisions,Jefferson and Adams.Jefferson produces an item that Adams could use in its production.Adams currently is purchasing 100,000 units from an outside supplier for $78.40 per unit.Jefferson is currently operating at full capacity of 900,000 units and has variable costs of $46.40 per unit.The full cost to manufacture the unit is $59.20.Jefferson currently sells 900,000 units at a selling price of $86.40 per unit. a.What will be the effect on Washington Company's operating profit if the transfer is made internally? b.What will be the change in profits for Jefferson if the transfer price is $67.20 per unit? c.What will be the change in profits for Adams if the transfer price is $67.20 per unit?

Almond,Inc.uses a balanced scorecard.One of the measures on the scorecard is the average education level of the firm's managers.Which balanced scorecard perspective would this measure most likely fit into?

Holiday Corp.has two divisions,Quail and Marlin.Quail produces a widget that Marlin could use in its production.Quail's variable costs are $4 per widget while the full cost is $7.Widgets sell on the open market for $12 each.If Quail is operating at capacity,what would be the cost savings if the transfer were made and Marlin currently is purchasing 100,000 units on the open market?

Grove Corp.has revenues of $1,500,000 resulting in an operating income of $105,000.Average invested assets total $750,000.If sales increase by 10% and the investment level remains constant,what is the investment turnover?

The responsibility center in which the manager has responsibility and authority over revenues,costs,and assets is the:

In a decentralized organization,lower-level managers are given a great deal of autonomy in decision making.

The Marine Division of Pacific Corp.has average invested assets of $110,000,000.Sales revenue of $50,250,000 results in an operating income of $9,967,000.The hurdle rate is 7%. a.Calculate the return on investment. b.Calculate the profit margin. c.Calculate the investment turnover. d.Calculate the residual income.

Which of the following is considered a disadvantage of decentralization?

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

Almond,Inc.uses a balanced scorecard.One of the measures on the scorecard is the average age of raw materials inventory.Which balanced scorecard perspective would this measure most likely fit into?

Holiday Corp.has two divisions,Quail and Marlin.Quail produces a widget that Marlin could use in its production.Quail's variable costs are $4 per widget while the full cost is $7.Widgets sell on the open market for $12 each.If Quail is operating at capacity,what would be the minimum transfer price if Marlin currently is purchasing 100,000 units on the open market?

Tiffany Company has two divisions,Gold and Silver.Gold produces a unit that Silver could use in its production.Silver currently is purchasing 50,000 units from an outside supplier for $25.Gold is operating at less than full capacity and has variable costs of $13.50 per unit.The full cost to manufacture the unit is $20.Gold currently sells 450,000 units at a selling price of $27.If an internal transfer is made,variable shipping and administrative costs of $1 per unit could be avoided.How much profit will Gold receive from the transfer if a transfer price of $22.50 is agreed upon?

Which of the following is the primary tool used by cost centers to manage costs?

Avery Company has two divisions,Polk and Bishop.Polk produces an item that Bishop could use in its production.Bishop currently is purchasing 25,000 units from an outside supplier for $24 per unit.Polk is currently operating at less than its full capacity of 600,000 units and has variable costs of $12 per unit.The full cost to manufacture the unit is $18.Polk currently sells 450,000 units at a selling price of $25.50 per unit. a.What will be the effect on Avery Company's operating profit if the transfer is made internally? b.What is the minimum transfer price from Polk's perspective? c.What is the maximum transfer price from Bishop's perspective?

The balanced scorecard attempts to focus managers' attention on more than just financial measures.