Exam 10: Decentralization: Responsibility Accounting, Performance

Hydroxide Company has two divisions, the Blending Division and Canning Division. The Blending Division sells chemicals to the Canning Division. Standard costs for the Blending Division are as follows: Direct materials \ 3.00 per gallon Direct labor 2.40 per gallon The Canning Division uses the following predetermined overhead rate: variable overhead \ 3.60 per gallon Fixed overhead 2.40 per gallon Total \ 6.00 per gallon What is the transfer price for the chemicals per gallon based on standard variable cost?

Manifold, Inc., is a multinational company with divisions around the world. Division X in the United States purchases a part from Division Z in China. There is no outside market for the part. The part is sold for $20 and normally receives a 35 percent markup on cost. What is the transfer price using the resale price method? (Round the answer to two decimal places.)

Worldwide Inc., is a multinational company with divisions around the world. Division A in the United States purchases a part from Division G in China. The part can be purchased externally for $7 each. Transportation costs amount to $1 and the commission of $.50 will not need to be paid. What is the transfer price using the comparable uncontrolled price method?

The transfer price that would leave the selling division no worse off if the good is sold to an internal division is(are) called:

If the margin of 0.3 stayed the same and the turnover ratio of 5.0 increased by 10 percent, the ROI would

Panther Company had the following historical accounting data per unit: Direct materials \ 60 Direct labor 30 Variable overhead 15 Fixed overhead 24 Variable selling expenses 45 Fixed selling expenses 9 The units are normally transferred internally from Division A to Division B. The units also may be sold externally for $210 per unit. The minimum profit level accepted by the company is a markup of 30 percent. There were no beginning or ending inventories. If the negotiated price is used, Division A's transfer price should be a

The following information pertains to the three divisions of Merrymount Company: Division X Division Y Division Z Sales ? ? 1,250,000 Net operating income \ 36,000 \ 25,000 \ 7,000 Average operating assets 300,000 ? ? Retum on investment ? 20\% 15\% Margin 0.10 0.05 ? Turnover 1.5 ? ? Target ROI 15\% 12\% 10\% What is the turnover for Division Z?

In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: Case 1 Case 2 Division A: Capacity in units 100,000 100,000 Number of units sold externally 100,000 60,000 Market selling price \ 90 \ 75 Variable costs per unit 73 58 Fixed costs per unit based on capacity 10 10 Division B: Number of units needed for production 40,000 40,000 Purchase price per unit from external supplier \ 91 \ 74 The company uses the opportunity cost approach to transfer pricing. What is the minimum transfer price in Case 1?

When there is an outside market for an intermediate product that is perfectly competitive, the most equitable method of transfer pricing is

The delegation of decision-making authority to successively lower management levels is called __________.

The transfer price that would leave the buying division no worse off if an input is purchased from an internal division is(are) called:

Firms encourage goal congruence by constructing management early retirement programs.

Indigo Company had the following historical accounting data per unit: Direct materials \ 95 Direct labor 52 Variable overhead 32 Fixed overhead 40 Variable selling expenses 60 Fixed selling expenses 15 The units are normally transferred internally from Division 1 to Division 2. The units also may be sold externally for $320 per unit. The minimum profit level accepted by the company is a markup of 45 percent. There were no beginning or ending inventories. What would be the transfer price if Division X uses full cost plus markup? (Round the answer to two decimal places.)

In centralized organizations, lower-level managers are responsible only for implementing decisions.

What problems do owners face in encouraging goal congruence of managers? What is a stock option? How can stock options encourage goal congruence?

Which of the following departments would NOT be a cost center?

Both revenue center and profit center managers are responsible for achieving

__________ are a fringe benefit received over and above salary.

Which of the following is an advantage of return on investment (ROI)?

Mycrux Company had the following information: Asset base in Mycrux Company \ 987,500 Net income in Mycrux Company \ 105,700 Weighted average cost of capital 12\% Target retum on investment (ROI) 15\% Margin for Mycrux Company 20\% What is the return on investment of Mycrux Company? (Round the answer to two decimal places.)