Question 1

Goal congruence can be defined as

Accepted Answer

A) an incentive plan arranged so the managers' goals are aligned with the shareholders' goals. 
B) managers operating the business in the best interest of the shareholders. 
C) tying management rewards to shareholder results. 
D) all of these are correct. 
A) an incentive plan arranged so the managers' goals are aligned with the shareholders' goals. 
B) managers operating the business in the best interest of the shareholders. 
C) tying management rewards to shareholder results. 
D) all of these are correct.

Question 2

Decentralization is the practice of delegating decision-making authority to the lower levels of management.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following departments in an organization is a profit center?

Accepted Answer

A) The Marketing Department 
B) The Administration Department 
C) The Automotive Department 
D) The Accounting Department 
A) The Marketing Department 
B) The Administration Department 
C) The Automotive Department 
D) The Accounting Department

Question 4

Margin is the ratio of operating income to sales.

Accepted Answer

A) True 
 B)False

Question 5

Cornwall Company has two divisions, A and B. Information for each division is as follows: $\begin{array}{lrr}&A&B\
\text { Net earnings for division } & \$ 40,000 & \$ 260,000 \
\text { Asset base for division } & \$ 100,000 & \$ 1,200,000 \
\text { Target rate of return } & 15 \% & 18 \% \
\text { Margin } & 10 \% & 20 \% \
\text { Weighted average cost of capital } & 12 \% & 12 \%
\end{array}$ What is EVA for Division B?

Accepted Answer

A) $144,000 
B) $216,000 
C) $116,000 
D) $44,000 
A) $144,000 
B) $216,000 
C) $116,000 
D) $44,000

Question 6

The price charged for goods produced in one division to another division within the company is called the __________ price.

Accepted Answer

The answer of The price charged for goods produced in...

Question 7

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: $\begin{array}{lrr}&\text {Case 1 }&\text {Case } 2\
\text { Division A: } & & \
\text { Capacity in units } & 100,000 & 100,000 \
\text { Number of units sold externally } & 100,000 & 60,000 \
\text { Market selling price } & \$ 90 & \$ 75 \
\text { Variable costs per unit } & 73 & 58 \
\text { Fixed costs per unit based on capacity } & 10 & 10\\
\text { Division } B:\
\text { Number of units needed for production } & 40,000 & 40,000 \
\text { Purchase price per unit from external supplier } & \$ 91 & \$ 74
\end{array}$ The company uses the opportunity cost approach to transfer pricing. Which case should not be transferred internally?

Accepted Answer

A) Both should be transferred internally. 
B) Neither should be transferred internally. 
C) Case 1 
D) Case 2 
A) Both should be transferred internally. 
B) Neither should be transferred internally. 
C) Case 1 
D) Case 2

Question 8

Olden Company has a tax rate of 40 percent. Information for the company is as follows: $$\begin{array} { l r c } 
 & \text { Amount } & \text { After-tax Cost } \
\text { Mortgage bonds }& \$ 1,000,000 & 0.048 \
\text { Unsecured bonds } & 3,000,000 & 0.050 \
\text { Common stock } & 6,000,000 & 0.150
\end{array}$$ What is the weighted average cost of capital?

Accepted Answer

A) 0.0827 
B) 0.2480 
C) 0.1098 
D) 0.0366 
A) 0.0827 
B) 0.2480 
C) 0.1098 
D) 0.0366

Question 9

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: $\begin{array}{lrr}&\text {Case 1 }&\text {Case } 2\
\text { Division A: } & & \
\text { Capacity in units } & 100,000 & 100,000 \
\text { Number of units sold externally } & 100,000 & 60,000 \
\text { Market selling price } & \$ 90 & \$ 75 \
\text { Variable costs per unit } & 73 & 58 \
\text { Fixed costs per unit based on capacity } & 10 & 10\\
\text { Division } B:\
\text { Number of units needed for production } & 40,000 & 40,000 \
\text { Purchase price per unit from external supplier } & \$ 91 & \$ 74
\end{array}$ The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 1?

Accepted Answer

A) $90 
B) $91 
C) $83 
D) $73 
A) $90 
B) $91 
C) $83 
D) $73

Question 10

Panther Company had the following historical accounting data per unit: $\begin{array}{lr}
\text { Direct materials } & \$ 60 \
\text { Direct labor } & 30 \
\text { Variable overhead } & 15 \
\text { Fixed overhead } & 24 \
\text { Variable selling expenses } & 45 \
\text { Fixed selling expenses } & 9
\end{array}$ 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 variable manufacturing costs without a fixed fee are used as the transfer price, Division A's transfer price would be

Accepted Answer

A) $60. 
B) $105. 
C) $90. 
D) $144. 
A) $60. 
B) $105. 
C) $90. 
D) $144.

Question 11

Which of the following is NOT an environmental factor affecting performance evaluation in the multinational firm?

Accepted Answer

A) sociological factors 
B) economic factors 
C) political or legal factors 
D) All of these are environmental factors affecting performance evaluation in the multinational firm. 
A) sociological factors 
B) economic factors 
C) political or legal factors 
D) All of these are environmental factors affecting performance evaluation in the multinational firm.

Question 12

When the major functions of a company are controlled by top management, it is called __________.

Accepted Answer

The answer of When the major functions of a company...

Question 13

Cornwall Company has two divisions, A and B. Information for each division is as follows: $\begin{array}{lrr}&A&B\
\text { Net earnings for division } & \$ 40,000 & \$ 260,000 \
\text { Asset base for division } & \$ 100,000 & \$ 1,200,000 \
\text { Target rate of return } & 15 \% & 18 \% \
\text { Margin } & 10 \% & 20 \% \
\text { Weighted average cost of capital } & 12 \% & 12 \%
\end{array}$ What is EVA for Division A?

Accepted Answer

A) $40,000 
B) $28,000 
C) $15,000 
D) $25,000 
A) $40,000 
B) $28,000 
C) $15,000 
D) $25,000

Question 14

Omikron Division had the following information: $\begin{array}{lr}
\text { Asset base in Omikron Division } & \$ 400,000 \
\text { Met income in Omikron Division } & \$ 0,000 \
\text { Weighted average cost of capital } & 12 \% \
\text { Target ROI } & 15 \% \
\text { Margin for Omikron Division } & 20 \%
\end{array}$ What is EVA for Omikron Division?

Accepted Answer

A) $2,000 
B) $7,500 
C) $48,000 
D) $60,000 
A) $2,000 
B) $7,500 
C) $48,000 
D) $60,000

Question 15

Benjamin Manufacturing Company has two divisions, X and Y. Division X prepares the steel for processing. Division Y processes the steel into the final product. No inventories exist in either division at the beginning or end of 2018. During the year, Division X prepared 80,000 lbs. of steel at a cost of $800,000. All the steel was transferred to Division Y where additional operating costs of $5 per lb. were incurred. The final product was sold for $3,000,000.
Required:
a.Determine the gross profit for each division and for the company as a whole if the transfer price is $8 per lb.
b.Determine the gross profit for each division and for the company as a whole if the transfer price is $12 per lb.

Accepted Answer

The answer of Benjamin Manufacturing Company has two divisions, X...

Question 16

If the operating asset turnover ratio increased by 40 percent and the margin increased by 30 percent, the divisional ROI

Accepted Answer

A) would decrease by 70 percent. 
B) would increase by 82 percent. 
C) would increase by 30 percent. 
D) cannot be determined. 
A) would decrease by 70 percent. 
B) would increase by 82 percent. 
C) would increase by 30 percent. 
D) cannot be determined.

Question 17

Solister, Inc., had the following information: $$\begin{array} { l r } 
\text { Asset base in Solister, Inc. } & \$ 625,500 \
\text { Net income in Solister, Inc. } & \$ 75,950 \
\text { Weighted average cost of capital } & 12 \% \
\text { Target return on investment (ROI) } & 15 \% \
\text { Margin for Solister, Inc. } & 20 \%
\end{array}$$ If the asset base is decreased by $185,450, with no other changes, what will the return on investment of Solister, Inc. be? (Round the answer to two decimal places.)

Accepted Answer

A) 5.79% 
B) 12.50% 
C) 17.26% 
D) 30.00% 
A) 5.79% 
B) 12.50% 
C) 17.26% 
D) 30.00%

Question 18

The Propeller Division provides propellers for the Plane Division of a company. The standard unit costs for the Propeller Division are as follows: $\begin{array}{lr}
\text { Direct materials } & \$ 890 \
\text { Direct labor } & 1,590 \
\text { Variable overhead } & 575 \
\text { Fixed overhead } & 385 \
\text { Market price per unit } & 4,395
\end{array}$
The propeller department has excess capacity. What is the best transfer price to avoid transfer price problems?

Accepted Answer

A) $2,865 
B) $1,340 
C) $3,055 
D) $955 
A) $2,865 
B) $1,340 
C) $3,055 
D) $955

Question 19

Which of the following departments is likely to be an investment center?

Accepted Answer

A) machining department 
B) food products division 
C) personnel department 
D) accounting department 
A) machining department 
B) food products division 
C) personnel department 
D) accounting department

Question 20

If a company has sales of $2,500,000, net income of $250,000, and an asset base of $1,250,000, its return on investment is

Accepted Answer

A) 20%. 
B) 10%. 
C) 500%. 
D) 200%. 
A) 20%. 
B) 10%. 
C) 500%. 
D) 200%.

Goal congruence can be defined as

Decentralization is the practice of delegating decision-making authority to the lower levels of management.

Which of the following departments in an organization is a profit center?

Margin is the ratio of operating income to sales.

The price charged for goods produced in one division to another division within the company is called the __________ price.

Olden Company has a tax rate of 40 percent. Information for the company is as follows: Amount After-tax Cost Mortgage bonds \ 1,000,000 0.048 Unsecured bonds 3,000,000 0.050 Common stock 6,000,000 0.150 What is the weighted average cost of capital?

Which of the following is NOT an environmental factor affecting performance evaluation in the multinational firm?

When the major functions of a company are controlled by top management, it is called __________.

Omikron Division had the following information: Asset base in Omikron Division \ 400,000 Met income in Omikron Division \ 0,000 Weighted average cost of capital 12\% Target ROI 15\% Margin for Omikron Division 20\% What is EVA for Omikron Division?

If the operating asset turnover ratio increased by 40 percent and the margin increased by 30 percent, the divisional ROI

Which of the following departments is likely to be an investment center?

If a company has sales of $2,500,000, net income of $250,000, and an asset base of $1,250,000, its return on investment is

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Cost-Volume-Profit Analysis

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

Filters

Exam 10: Decentralization: Responsibility Accounting, Performance

Goal congruence can be defined as

Decentralization is the practice of delegating decision-making authority to the lower levels of management.

Which of the following departments in an organization is a profit center?

Margin is the ratio of operating income to sales.

The price charged for goods produced in one division to another division within the company is called the __________ price.

Olden Company has a tax rate of 40 percent. Information for the company is as follows: Amount After-tax Cost Mortgage bonds \ 1,000,000 0.048 Unsecured bonds 3,000,000 0.050 Common stock 6,000,000 0.150 What is the weighted average cost of capital?

Which of the following is NOT an environmental factor affecting performance evaluation in the multinational firm?

When the major functions of a company are controlled by top management, it is called __________.

Omikron Division had the following information: Asset base in Omikron Division \ 400,000 Met income in Omikron Division \ 0,000 Weighted average cost of capital 12\% Target ROI 15\% Margin for Omikron Division 20\% What is EVA for Omikron Division?

If the operating asset turnover ratio increased by 40 percent and the margin increased by 30 percent, the divisional ROI

Which of the following departments is likely to be an investment center?

If a company has sales of $2,500,000, net income of $250,000, and an asset base of $1,250,000, its return on investment is

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Cost-Volume-Profit Analysis

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

Filters