Question 1

Transfer-pricing systems exist to _____.

Accepted Answer

A) encourage managers to purchase goods and services internally 
B) maximize worldwide taxes, duties, and tariffs 
C) evaluate segment performance 
D) all of these answers are correct 
A) encourage managers to purchase goods and services internally 
B) maximize worldwide taxes, duties, and tariffs 
C) evaluate segment performance 
D) all of these answers are correct C

Question 2

Capital turnover = revenue / invested capital

Accepted Answer

A) True 
 B)False  True

Question 3

Return on sales can be increased by increasing expenses.

Accepted Answer

A) True 
 B)False  False

Question 4

Capital turnover can be increased by decreasing investment.

Accepted Answer

A) True 
 B)False

Question 5

The following information pertains to Jupiter Company: $$\begin{array} { l r } 
\text { Total assets } & \$ 50,000 \
\text { Total current liabilities } & 30,000 \
\text { Total expenses } & 60,000 \
\text { Total liabilities } & 45,000 \
\text { Total revenues } & 100,000
\end{array}$$ If invested capital is defined as total assets, the capital turnover is _____.

Accepted Answer

A) 0.633 
B) 1.792 
C) 0.400 
D) 2.0 
A) 0.633 
B) 1.792 
C) 0.400 
D) 2.0

Question 6

Frances Company records reveal the following: $\begin{array}{lr}\text { Division } \mathrm{X}\
\text { Market price of finished component to outsiders } & \$ 32 \
\text { Variable costs per component } & \underline{24} \
\text { Contribution margin per component } & \underline{\$ 8} \
\text { Total contribution for } 20,000 \text { components } & \$ 160,000
\end{array}$

$\begin{array}{ll}\text { Division Y }\
\text {Sales price of finished product Variable costs: } & &&\$42 \
\text {Division X 1 component @ \$24) } &  \
\text {Division Y } & &\$24 \
\text { Assembly} & \$9 \
\text { Packaging} & 4&13&-37 \
\text {Contribution margin per unit } & &&\$5 \
\text {Total contribution for 20,000 units } & &&\$100,000 \
\end{array}$
 The variable costs of Division Y will be incurred whether it buys from Division X or from an outside supplier.If Division X is not at full capacity, the lowest transfer price at which it would be willing to sell to Division Y would be _____.

Accepted Answer

A) $32 
B) $24 
C) $8 
D) $22 
A) $32 
B) $24 
C) $8 
D) $22

Question 7

The income percentage of revenue is determined by multiplying return on investment by the capital turnover.

Accepted Answer

A) True 
 B)False

Question 8

When the selling division cannot sell an item on the external market, using either a market-based or cost-based transfer for the item can lead to dysfunctional decisions.

Accepted Answer

A) True 
 B)False

Question 9

Outlay cost + opportunity cost

Accepted Answer

The answer of Outlay cost + opportunity cost...

Question 10

Companies will not be harmed if they overemphasize meeting a budget when evaluating managers.

Accepted Answer

A) True 
 B)False

Question 11

The asset section of the January 1, 20X9, balance sheet of Big Valley Company includes a machine which was acquired on January 1, 20X5.The machine's original cost was $500,000, and the estimated life was determined to be 10 years.The estimated residual value was zero, and the straight-line method of depreciation was chosen.The book value of the machine as of January 1, 20X9, is _____.

Accepted Answer

A) $500,000 
B) $450,000 
C) $250,000 
D) $300,000 
A) $500,000 
B) $450,000 
C) $250,000 
D) $300,000

Question 12

Dusty Company's records reveal the following: $\begin{array}{lr}\text { Division A }\
\text { Market price of finished part to outsiders } & \$ 75 \
\text { Variable costs per part } & \underline{51} \
\text { Contribution margin per part } & \underline{\$ 24} \
\text { Total contribution for } 10,000 \text { parts } & \$ 240,000
\end{array}$

$\begin{array}{ll}\text { Division B }\
\text {Sales price of finished product Variable costs: }&&&\$105\
\text {Division A 1 part @ \$51) }&\
\text {Division B }&&\$51\
\text {Processing }&\$27\
\text {Selling }&12&39&-90\
\text {Contribution margin per unit }&&&\$15\
\text { Total contribution for } 10,000 \text { units }&&&\$150,000
\end{array}$
 The variable costs of Division B will be incurred whether it buys from Division A or from an outside supplier.If Division A is not at full capacity, the lowest transfer price at which it would be willing to sell to Division B would be _____.

Accepted Answer

A) $75 
B) $51 
C) $24 
D) $66 
A) $75 
B) $51 
C) $24 
D) $66

Question 13

Economic profit is defined as _____.

Accepted Answer

A) net income less "imputed" interest 
B) sales less expenses 
C) income divided by revenue 
D) the same as ROI 
A) net income less "imputed" interest 
B) sales less expenses 
C) income divided by revenue 
D) the same as ROI

Question 14

Historical cost is widely used for asset valuation because it _____.

Accepted Answer

A) is more objective than current cost 
B) requires no additional data collection 
C) is more useful for predicting the effects of decision making 
D) all of these answers are correct 
A) is more objective than current cost 
B) requires no additional data collection 
C) is more useful for predicting the effects of decision making 
D) all of these answers are correct

Question 15

In agency theory, risk is the _____.

Accepted Answer

A) influence of uncontrollable factors on a manager's performance 
B) probability that a desired outcome may not be achieved 
C) relationship between cost and perceived benefit 
D) possibility that performance will be measured incorrectly 
A) influence of uncontrollable factors on a manager's performance 
B) probability that a desired outcome may not be achieved 
C) relationship between cost and perceived benefit 
D) possibility that performance will be measured incorrectly

Question 16

When companies maximize economic profit, they are maximizing their rate of return a percentage.

Accepted Answer

A) True 
 B)False

Question 17

Outlay cost is often the variable cost for producing the item transferred.

Accepted Answer

A) True 
 B)False

Question 18

_____ is the decision?making power of segment managers.

Accepted Answer

A) Goal congruence 
B) Segment autonomy 
C) Managerial effort 
D) Segment superiority 
A) Goal congruence 
B) Segment autonomy 
C) Managerial effort 
D) Segment superiority

Question 19

_____ is any action taken in conflict with organizational goals.

Accepted Answer

A) Congruent behavior 
B) Managerial effort 
C) Dysfunctional behavior 
D) Negotiating 
A) Congruent behavior 
B) Managerial effort 
C) Dysfunctional behavior 
D) Negotiating

Question 20

Opportunity cost is the minimum contribution to profit that the selling segment forgoes by transferring the item internally.

Accepted Answer

A) True 
 B)False

Transfer-pricing systems exist to _____.

Capital turnover = revenue / invested capital

Return on sales can be increased by increasing expenses.

Capital turnover can be increased by decreasing investment.

The following information pertains to Jupiter Company: Total assets \ 50,000 Total current liabilities 30,000 Total expenses 60,000 Total liabilities 45,000 Total revenues 100,000 If invested capital is defined as total assets, the capital turnover is _____.

The income percentage of revenue is determined by multiplying return on investment by the capital turnover.

When the selling division cannot sell an item on the external market, using either a market-based or cost-based transfer for the item can lead to dysfunctional decisions.

Outlay cost + opportunity cost

Companies will not be harmed if they overemphasize meeting a budget when evaluating managers.

Economic profit is defined as _____.

Historical cost is widely used for asset valuation because it _____.

In agency theory, risk is the _____.

When companies maximize economic profit, they are maximizing their rate of return a percentage.

Outlay cost is often the variable cost for producing the item transferred.

_____ is the decision?making power of segment managers.

_____ is any action taken in conflict with organizational goals.

Opportunity cost is the minimum contribution to profit that the selling segment forgoes by transferring the item internally.

Managerial Accounting, the Business Organization, and Professional Ethics

Introduction to Cost Behavior and Cost-Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and an Introduction to Activity-Based Costing

Relevant Information and Decision Making With a Focus on Pricing Decisions

Relevant Information and Decision Making: Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Costing and Process-Costing Systems

Basic Accounting: Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

Exam 10: Management Control in Decentralized Organizations

Transfer-pricing systems exist to _____.

Capital turnover = revenue / invested capital

Return on sales can be increased by increasing expenses.

Capital turnover can be increased by decreasing investment.

The following information pertains to Jupiter Company: Total assets \ 50,000 Total current liabilities 30,000 Total expenses 60,000 Total liabilities 45,000 Total revenues 100,000 If invested capital is defined as total assets, the capital turnover is _____.

The income percentage of revenue is determined by multiplying return on investment by the capital turnover.

When the selling division cannot sell an item on the external market, using either a market-based or cost-based transfer for the item can lead to dysfunctional decisions.

Outlay cost + opportunity cost

Companies will not be harmed if they overemphasize meeting a budget when evaluating managers.

Economic profit is defined as _____.

Historical cost is widely used for asset valuation because it _____.

In agency theory, risk is the _____.

When companies maximize economic profit, they are maximizing their rate of return a percentage.

Outlay cost is often the variable cost for producing the item transferred.

_____ is the decision?making power of segment managers.

_____ is any action taken in conflict with organizational goals.

Opportunity cost is the minimum contribution to profit that the selling segment forgoes by transferring the item internally.

Managerial Accounting, the Business Organization, and Professional Ethics

Introduction to Cost Behavior and Cost-Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and an Introduction to Activity-Based Costing

Relevant Information and Decision Making With a Focus on Pricing Decisions

Relevant Information and Decision Making: Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Costing and Process-Costing Systems

Basic Accounting: Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters