Exam 10: Management Control in Decentralized Organizations

The joint formulation by a manager and his or her superior of a set of goals and plans for achieving the goals for a forthcoming period is known as _____.

Managers evaluated using net book value will tend to replace assets sooner than will those managers in firms using gross book value.

The following information pertains to Moore Company: Total assets \ 150,000 Total current liabilities 110,000 Total expenses 160,000 Total liabilities 115,000 Total revenues 180,000 If invested capital is defined as total assets, a project earning an ROI of 12% should be _____.

_____ is not an acceptable means of asset valuation.

ROI = return on sales / capital turnover.

EVA companies look upon R&D as a capital investment, and not immediately expensed.

The following information pertains to Berle Company: Total assets \ 150,000 Total current liabilities 110,000 Total expenses 160,000 Total liabilities 115,000 Total revenues 180,000 If invested capital is defined as total assets minus current liabilities, a project earning an ROI of 30% should be _____.

The following information pertains to Gable Company: Current assets \ 100,000 Current liabilities \ 75,000 Property, plant and equipment 150,000 Long-term liabilities 100,000 Construction in progress 50,000 Stockholders' equity 125,000 Total assets \3 00,000 Total assets \3 00,000 Invested capital is _____ if it is defined as total assets.

Identify which of the following statements is not a problem with decentralization.

Incentives do not enhance managerial effort toward goal congruence.

The maximum contribution to profit that the selling segment forgoes by transferring the item internally

There is no perfect transfer pricing system.

Campy Company's records reveal the following: Division A Market price of finished part to outsiders \ 75 Variable costs per part Contribution margin per part Total contribution for 10,000 parts \ 240,000 Division B Sales price of finished product Variable costs: \1 05 Division A 1 part @ \5 1) Division B \5 1 Processing \2 7 Selling 12 39 -90 Contribution margin per unit \1 5 Total contribution for 10,000 units \1 50,000 The variable costs of Division B will be incurred whether it buys from Division A or from an outside supplier.If Division A is working at full capacity, the lowest transfer price it would be willing to accept from Division B would be _____.

The following information pertains to Mary Company: Total assets \ 50,000 Total current liabilities 30,000 Total expenses 60,000 Total liabilities 35,000 Total revenues 80,000 If invested capital is defined as total assets, and the imputed interest rate is 10%, the residual income is _____.

Invested capital can mean any of the following, except _____.

Optimal corporate decisions are made when goods or services are transferred at _____ prices.

The following information pertains to Timberlake Company: Current assets \ 200,000 Current liabilities \ 50,000 Property, plant and equipment 400,000 Long-term liabilities 250,000 Construction in progress 50,000 Stockholders' equity 350,000 Total assets \6 50,000 Total assets \6 50,000 Invested capital is _____ if it is defined as total assets less current liabilities.

Some level of decentralization creates benefits for most organizations.

Companies must pay managers more if the managers bear more risk, assuming the managers are risk averse.

Profit centers can exist only in a decentralized organization.