Exam 10: Management Control in Decentralized Organizations

_____cost is not a usual definition of cost assuming a company uses a cost-based pricing system for transfer pricing.

A management by objectives approach stresses budgeted results.

Higher-level managers have the best information concerning local conditions.

The following information pertains to Ames 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 stockholders' equity.

The lower in the organization that the freedom to make decisions exists, the greater the centralization.

According to agency theory, employment contracts will trade off the following three factors: risk, incentive, and the cost of measuring performance.

When a company measures performance using economic profit, managers tend to invest in any project earning more than the cost of capital and, thus, raise the firm's total profits.

Those informal and formal performance-based rewards that enhance managerial effort toward organizational goals

The Table and Chair Divisions are part of the same company.Currently the Chair Division buys a part from Table for $384.The Table Division wants to increase the price of the part it sells to Chair by $96 to $480.The manager of Chair has stated that it cannot afford to go that high, as it will decrease the division's profit to near zero.Chair can buy the part from an outside supplier for $448.The cost data for the Table Division is as follows: Direct materials \ 136.00 Direct labor 200.00 Variable overhead 40.00 Fixed overhead 38.40 If Table ceases to produce the parts for Chair, it will be able to avoid one?third of the fixed manufacturing overhead.The Table Division has excess capacity but no alternative uses for its facilities._____ is the maximum transfer price that should be charged.

The following information pertains to Voyager Company: Total assets \ 150,000 Total current liabilities 110,000 Total expenses 70,000 Total liabilities 115,000 Total revenues 80,000 The income percentage of revenue is _____.

Decentralization is more popular in nonprofit organizations than it is in profit-seeking organizations.

Division Y sells soybean paste internally to Division Z, which, in turn, produces soybean burgers that sell for $5 per pound.Division Y incurs costs of $0.75 per pound, while Division Z incurs additional costs of $2.50 per pound.Identify which of the following formulas correctly reflects the company's operating income.

The following information pertains to Bono Company: Current assets \ 200,000 Current liabilities \ 100,000 Property, plant and equipment 350,000 Long-term liabilities 200,000 Construction in progress 100,000 Stockholders' equity 350,000 Total assets \6 50,000 Total assets \6 50,000 Invested capital is _____ if it is defined as total assets employed.

The time and effort spent negotiating a transfer price between a company's divisions add nothing directly to the profits of the company.

Income taxes rarely influence the setting of transfer prices.

The following information is available for the Heaven Company: Sales \ 500,000 Invested capital 312,500 ROI 10\% The return on sales is _____.

In measuring the performance of a division manager, stockholders' equity should not be used as the amount of invested capital.

If segments do much buying from the same outside suppliers, they are candidates for heavier decentralization.

The following information is available for the Trooper Company: Sales \ 1,000,000 Invested capital 500,000 ROI 10\% The capital turnover ratio is _____.

Trevor Company paid $8 million cash for research and development.EVA capital was computed as $20 million.Trevor Company cost of capital was 20%.To add economic value to the firm, Trevor Company must generate revenues less operating costs of at least _____.