Question 1

The transfer price approach that uses a variety of cost concepts is the

Accepted Answer

A)  negotiated price approach 
B)  standard cost approach 
C)  cost price approach 
D)  market price approach 
A)  negotiated price approach 
B)  standard cost approach 
C)  cost price approach 
D)  market price approach C

Question 2

The ratio of sales to invested assets is termed the investment turnover component of the rate of return on investment.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following would not be considered an internal centralized service department?

Accepted Answer

A)  Payroll Accounting Department 
B)  Manufacturing Department 
C)  Information Systems Department 
D)  Purchasing Department 
A)  Payroll Accounting Department 
B)  Manufacturing Department 
C)  Information Systems Department 
D)  Purchasing Department B

Question 4

If Division Q's yearly income from operations was $30,000 on invested assets of $200,000, the rate of return on investment is 15%.

Accepted Answer

A) True 
 B)False

Question 5

The profit margin for Central Division is 20% and the investment turnover is 2.8. What is the rate of return on investment for Central Division?

Accepted Answer

A)  20% 
B)  7.1% 
C)  14% 
D)  56% 
A)  20% 
B)  7.1% 
C)  14% 
D)  56%

Question 6

The balanced scorecard measures four areas of financial and nonfinancial performance of a business. Identify one of the following that is not included as a performance measurement.

Accepted Answer

A)  internal process 
B)  financial 
C)  innovation and learning 
D)  employees 
A)  internal process 
B)  financial 
C)  innovation and learning 
D)  employees

Question 7

Match each definition that follows with the term a-e) it defines.
-Ratio of income from operations to sales

Accepted Answer

A) Controllable revenues 
B) Profit margin 
C) Investment turnover 
D) Rate of return on investments 
E) Residual income 
A) Controllable revenues 
B) Profit margin 
C) Investment turnover 
D) Rate of return on investments 
E) Residual income

Question 8

ABC Corporation has three service departments with the following costs and activity base:   ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information are as follows: $$\begin{array} { | l | l | l | l | } 
\hline & \text { Micro } & \text { Macro } & \text { Super } \
\hline \text { Direct revenues } & \$ 700,000 & \$ 850,000 & \$ 650,000 \
\hline \text { Direct operating expenses } & 50,000 & 70,000 & 100,000 \
\hline \text { Number of copies made } & 20,000 & 30,000 & 50,000 \
\hline \text { Number of invoices processed } & 700 & 800 & 500 \
\hline \text { Number of employees } & 130 & 145 & 125 \
\hline
\end{array}$$
-How much service department cost would be allocated to the Macro Division?

Accepted Answer

A)  $405,000 
B)  $175,000 
C)  $130,000 
D)  $305,000 
A)  $405,000 
B)  $175,000 
C)  $130,000 
D)  $305,000

Question 9

How much will Square Yard Products total income from operations increase?

Accepted Answer

A)  $32,000 
B)  $112,000 
C)  $80,000 
D)  $150,000 
A)  $32,000 
B)  $112,000 
C)  $80,000 
D)  $150,000

Question 10

An activity base is used to charge service department expenses. Match each of the following activity bases with the appropriate department a-h).
-Number of work orders

Accepted Answer

A) Purchasing 
B) Payroll accounting 
C) Human resources 
D) Maintenance 
E) Information systems
F)Marketing
G)President's Office
H)Transportation 
A) Purchasing 
B) Payroll accounting 
C) Human resources 
D) Maintenance 
E) Information systems
F)Marketing
G)President's Office
H)Transportation

Question 11

Using the data below for the Coffee & Cocoa Company,
a) determine the divisional income from operations for the three regions by allocating the service department expenses proportional to the sales of the regions.
b) determine the increase or decrease in net income if C Region did not operate.

Accepted Answer

a)@#IMG-DLM&
b) $10,

Question 12

What is the investment turnover?

Accepted Answer

A)  16.0 
B)  3.05 
C)  0.33 
D)  27.5 
A)  16.0 
B)  3.05 
C)  0.33 
D)  27.5

Question 13

The formula for the rate of return on investment is

Accepted Answer

A)  Invested assets/Income from operations 
B)  Sales/Invested assets 
C)  Income from operations/Sales 
D)  Income from operations/Invested assets 
A)  Invested assets/Income from operations 
B)  Sales/Invested assets 
C)  Income from operations/Sales 
D)  Income from operations/Invested assets

Question 14

Controllable expenses are those that can be influenced by the decisions of the profit center management.

Accepted Answer

A) True 
 B)False

Question 15

The underlying principle of allocating direct operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.

Accepted Answer

A) True 
 B)False

Question 16

If the profit margin for a division is 8% and the investment turnover is 1.20, the rate of return on investment is 9.6%.

Accepted Answer

A) True 
 B)False

Question 17

Match each definition that follows with the term a-e) it defines.
-Income from operations divided by invested assets

Accepted Answer

A) Controllable revenues 
B) Profit margin 
C) Investment turnover 
D) Rate of return on investments 
E) Residual income 
A) Controllable revenues 
B) Profit margin 
C) Investment turnover 
D) Rate of return on investments 
E) Residual income

Question 18

ABC Corporation has three service departments with the following costs and activity base:   ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information are as follows: $$\begin{array} { | l | l | l | l | } 
\hline & \text { Micro } & \text { Macro } & \text { Super } \
\hline \text { Direct revenues } & \$ 700,000 & \$ 850,000 & \$ 650,000 \
\hline \text { Direct operating expenses } & 50,000 & 70,000 & 100,000 \
\hline \text { Number of copies made } & 20,000 & 30,000 & 50,000 \
\hline \text { Number of invoices processed } & 700 & 800 & 500 \
\hline \text { Number of employees } & 130 & 145 & 125 \
\hline
\end{array}$$
-What is the service department charge rate for the Accounting Department?

Accepted Answer

A)  $714 
B)  $250 
C)  $625 
D)  $0.004 
A)  $714 
B)  $250 
C)  $625 
D)  $0.004

Question 19

The materials used by the Hibiscus Company's Division A are currently purchased from an outside supplier at $55 per unit. Division B is able to supply Division A with 20,000 units at a variable cost of $42 per unit. The two divisions have recently negotiated a transfer price of $48 per unit for the 20,000 units. a) By how much will each division's income increase as a result of this transfer? b) What is the total increase in income for Hibiscus Company?

Accepted Answer

The answer of The materials used by the Hibiscus Company's...

Question 20

The residual income for Mason is

Accepted Answer

A)  $0 
B)  $84,150 
C)  $6,000) 
D)  $1,500 
A)  $0 
B)  $84,150 
C)  $6,000) 
D)  $1,500

Exam 23: Performance Evaluation for Decentralized Operations

The transfer price approach that uses a variety of cost concepts is the

The ratio of sales to invested assets is termed the investment turnover component of the rate of return on investment.

Which of the following would not be considered an internal centralized service department?

If Division Q's yearly income from operations was $30,000 on invested assets of $200,000, the rate of return on investment is 15%.

The profit margin for Central Division is 20% and the investment turnover is 2.8. What is the rate of return on investment for Central Division?

The balanced scorecard measures four areas of financial and nonfinancial performance of a business. Identify one of the following that is not included as a performance measurement.

Match each definition that follows with the term a-e) it defines. -Ratio of income from operations to sales

How much will Square Yard Products total income from operations increase?

An activity base is used to charge service department expenses. Match each of the following activity bases with the appropriate department a-h). -Number of work orders

Using the data below for the Coffee & Cocoa Company, a) determine the divisional income from operations for the three regions by allocating the service department expenses proportional to the sales of the regions. b) determine the increase or decrease in net income if C Region did not operate.

What is the investment turnover?

The formula for the rate of return on investment is

Controllable expenses are those that can be influenced by the decisions of the profit center management.

The underlying principle of allocating direct operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.

If the profit margin for a division is 8% and the investment turnover is 1.20, the rate of return on investment is 9.6%.

Match each definition that follows with the term a-e) it defines. -Income from operations divided by invested assets

The residual income for Mason is

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Lean Principles, Lean Accounting, and Activity Analysis

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