Question 1

Net asset value promotes a more conservative approach to asset replacement as compared with gross book value.

Accepted Answer

A) True 
 B)False

Question 2

Cost of capital is the company's cost of capital multiplied by the amount of the investment.

Accepted Answer

A) True 
 B)False

Question 3

Captain 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.The highest price that Division Y would want to pay Division X for the components would be _____.

Accepted Answer

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

Question 4

Multinational companies use transfer pricing to minimize their worldwide taxes, duties, and tariffs.

Accepted Answer

A) True 
 B)False

Question 5

The following information pertains to Des Moines Company: $ \begin{array}{llll}\text { Current assets } & \$ 100,000 & \text { Current liabilities } & \$ 175,000\
\text { Property, plant and } \\
\text { equipment } & 150,000 & \text { Long-term liabilities } & 100,000 \
\text { Construction in progress } & 50,000 & \text { Stockholders' equity } & 25,000\
\text { Total assets }&\$300,000&\text { Total assets }&\$300,000
\end{array} $  Invested capital is _____ if it is defined as total assets less current liabilities.

Accepted Answer

A) $300,000 
B) $250,000 
C) $125,000 
D) $100,000 
A) $300,000 
B) $250,000 
C) $125,000 
D) $100,000

Question 6

"Decentralization has benefits and costs." Name three of each.

Accepted Answer

Benefits of decentralization include: 1)

Question 7

Managers tend to focus their efforts in areas where performance is measured and where their performance affects rewards.

Accepted Answer

A) True 
 B)False

Question 8

The rate of return on net book value decreases as the equipment ages.

Accepted Answer

A) True 
 B)False

Question 9

The amount of income generated by the investment is a better test of profitability than the return on investment.

Accepted Answer

A) True 
 B)False

Question 10

The fact that _____ is not a disadvantage of transferring items at cost.

Accepted Answer

A) transferring items at cost can disguise a cost's behavior pattern 
B) the buying segment will not be able to plan its costs 
C) cost inefficiencies are passed along to the buying department 
D) it cannot be used to evaluate segment performance 
A) transferring items at cost can disguise a cost's behavior pattern 
B) the buying segment will not be able to plan its costs 
C) cost inefficiencies are passed along to the buying department 
D) it cannot be used to evaluate segment performance

Question 11

The historical-cost system may be superior for the nonroutine evaluation of performance.

Accepted Answer

A) True 
 B)False

Question 12

In general, use of economic profit or EVA will promote goal congruence and lead to better decisions than use of ROI.

Accepted Answer

A) True 
 B)False

Net asset value promotes a more conservative approach to asset replacement as compared with gross book value.

Cost of capital is the company's cost of capital multiplied by the amount of the investment.

Multinational companies use transfer pricing to minimize their worldwide taxes, duties, and tariffs.

"Decentralization has benefits and costs." Name three of each.

Managers tend to focus their efforts in areas where performance is measured and where their performance affects rewards.

The rate of return on net book value decreases as the equipment ages.

The amount of income generated by the investment is a better test of profitability than the return on investment.

The fact that _____ is not a disadvantage of transferring items at cost.

The historical-cost system may be superior for the nonroutine evaluation of performance.

In general, use of economic profit or EVA will promote goal congruence and lead to better decisions than use of ROI.

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

Net asset value promotes a more conservative approach to asset replacement as compared with gross book value.

Cost of capital is the company's cost of capital multiplied by the amount of the investment.

Multinational companies use transfer pricing to minimize their worldwide taxes, duties, and tariffs.

"Decentralization has benefits and costs." Name three of each.

Managers tend to focus their efforts in areas where performance is measured and where their performance affects rewards.

The rate of return on net book value decreases as the equipment ages.

The amount of income generated by the investment is a better test of profitability than the return on investment.

The fact that _____ is not a disadvantage of transferring items at cost.

The historical-cost system may be superior for the nonroutine evaluation of performance.

In general, use of economic profit or EVA will promote goal congruence and lead to better decisions than use of ROI.

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