Question 1

The manager of an investment center is responsible for

Accepted Answer

A) decisions regarding costs. 
B) decisions regarding revenues. 
C) decisions to invest in assets. 
D) all of these. 
A) decisions regarding costs. 
B) decisions regarding revenues. 
C) decisions to invest in assets. 
D) all of these.

Question 2

The Engine Division provides engines for the Tractor Division of a company. The standard unit costs for the Engine Division are as follows: $\begin{array} { l  }
 \text {Direct materials }&\$600\
 \text {Direct labor }&1,200\
 \text { Variable overhead}&300\
 \text {Fixed overhead }&150\
 \text { Market price per unit}&2,730\
\end{array}$
 What is the transfer price based on variable product costs plus 20 percent?

Accepted Answer

A) $720 
B) $2,160 
C) $2,100 
D) $2,520 
A) $720 
B) $2,160 
C) $2,100 
D) $2,520

Question 3

Which of the following is NOT a disadvantage of the ROI performance measure?

Accepted Answer

A) It encourages managers to focus on the long run rather than the short run. 
B) It discourages managers from investing in projects that would decrease divisional ROI but increase the profitability of the company as a whole. 
C) It encourages myopic behavior. 
D) All are disadvantages of the ROI measure. 
A) It encourages managers to focus on the long run rather than the short run. 
B) It discourages managers from investing in projects that would decrease divisional ROI but increase the profitability of the company as a whole. 
C) It encourages myopic behavior. 
D) All are disadvantages of the ROI measure.

Question 4

A responsibility center is a part of a business whose workers are accountable for specified activities.

Accepted Answer

A) True 
 B)False

Question 5

Nantucket Company has two divisions that report on a decentralized basis. Their results for 2018 were as follows: $\begin{array}{lrr}&\text { Helmet } &\text { Ball }\
 \text {Sales }&\$ 150,000 & \$ 300,000 \
 \text {Income }&\$ 15,000 & \$ 45,000 \
 \text {Asset base }&\$ 75,000 & \$ 150,000 \
 \text {Weighted average cost of capital }&12 \% & 12 \%
\end{array}$ 
Required:
Compute the following amounts for each division: 
a.Return on investment (ROI).
b.Residual income if the desired rate of return is 20 percent.
c.EVA.
d.Turnover.
e.Margin for each division.

Accepted Answer

The answer of Nantucket Company has two divisions that report...

Question 6

If the Southern Division of American Products Company had a turnover ratio of 4.2 and a margin of 0.10, the return on investment would be

Accepted Answer

A) 23.8%. 
B) 42.0%. 
C) 420.0%. 
D) 238.0%. 
A) 23.8%. 
B) 42.0%. 
C) 420.0%. 
D) 238.0%.

Question 7

Decentralization stimulates competition among the divisions of a firm.

Accepted Answer

A) True 
 B)False

Question 8

It is important to separate the evaluation of the manager from the evaluation of the division in a multinational firm. A manager's evaluation should NOT include

Accepted Answer

A) revenues. 
B) income taxes. 
C) operating costs. 
D) cost of goods sold. 
A) revenues. 
B) income taxes. 
C) operating costs. 
D) cost of goods sold.

Question 9

The "floor" in transfer pricing is

Accepted Answer

A) the transfer price that would leave the buying division no worse off if an input is purchased from an internal division. 
B) the transfer price that would leave the selling division no worse off if the good is sold to an internal division. 
C) the transfer price that would leave the buying division worse off if an input is purchased from an internal division. 
D) none of these. 
A) the transfer price that would leave the buying division no worse off if an input is purchased from an internal division. 
B) the transfer price that would leave the selling division no worse off if the good is sold to an internal division. 
C) the transfer price that would leave the buying division worse off if an input is purchased from an internal division. 
D) none of these.

Question 10

Investments are not controlled by managers of a __________ center.

Accepted Answer

The answer of Investments are not controlled by managers of...

Question 11

One of the reasons for decentralization is more timely response. This means

Accepted Answer

A) lower-level managers being more in contact with immediate operating conditions. 
B) central management can be free to focus on strategic planning. 
C) allowing an organization to determine each division's contribution to profit and expose each division to market forces. 
D) local management both makes and implements decisions. 
A) lower-level managers being more in contact with immediate operating conditions. 
B) central management can be free to focus on strategic planning. 
C) allowing an organization to determine each division's contribution to profit and expose each division to market forces. 
D) local management both makes and implements decisions.

Question 12

The Engine Division provides diesel engines for the Motor Home Division of a company. The standard unit costs for Engine Division are as follows: $\begin{array}{lr}
\text { Direct materials } & \$ 600 \
\text { Direct labor } & 1,200 \
\text { Variable overhead } & 300 \
\text { Fixed overhead } & 150 \
\text { Market price per unit } & 2,730
\end{array}$ What is the best transfer price to avoid transfer price problems?

Accepted Answer

A) $2,100 
B) $600 
C) $1,800 
D) $2,730 
A) $2,100 
B) $600 
C) $1,800 
D) $2,730

Question 13

Which of the following responsibility centers would have a manager responsible for revenues, costs, and investments?

Accepted Answer

A) cost center 
B) investment center 
C) profit center 
D) expense center 
A) cost center 
B) investment center 
C) profit center 
D) expense center

The manager of an investment center is responsible for

Which of the following is NOT a disadvantage of the ROI performance measure?

A responsibility center is a part of a business whose workers are accountable for specified activities.

If the Southern Division of American Products Company had a turnover ratio of 4.2 and a margin of 0.10, the return on investment would be

Decentralization stimulates competition among the divisions of a firm.

It is important to separate the evaluation of the manager from the evaluation of the division in a multinational firm. A manager's evaluation should NOT include

The "floor" in transfer pricing is

Investments are not controlled by managers of a __________ center.

One of the reasons for decentralization is more timely response. This means

Which of the following responsibility centers would have a manager responsible for revenues, costs, and investments?

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

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Exam 10: Decentralization: Responsibility Accounting, Performance

The manager of an investment center is responsible for

Which of the following is NOT a disadvantage of the ROI performance measure?

A responsibility center is a part of a business whose workers are accountable for specified activities.

If the Southern Division of American Products Company had a turnover ratio of 4.2 and a margin of 0.10, the return on investment would be

Decentralization stimulates competition among the divisions of a firm.

It is important to separate the evaluation of the manager from the evaluation of the division in a multinational firm. A manager's evaluation should NOT include

The "floor" in transfer pricing is

Investments are not controlled by managers of a __________ center.

One of the reasons for decentralization is more timely response. This means

Which of the following responsibility centers would have a manager responsible for revenues, costs, and investments?

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