Exam 23: Performance Evaluation for Decentralized Operations

A responsibility center in which the department manager is responsible for costs, revenues, and assets for a department is called:

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: Micro Macro Super Direct revenues \ 700,000 \ 850,000 \ 650,000 Direct operating expenses 50,000 70,000 100,000 Number of copies made 20,000 30,000 50,000 Number of invoices processed 700 800 500 Number of employees 130 145 125 -What will the income of the Micro Division be after all service department allocations?

The profit margin component of rate of return on investment analysis focuses on profitability by indicating the rate of profit earned on each sales dollar.

The DuPont formula uses financial information to measure the performance of a business.

The balanced scorecard is a set of financial and nonfinancial measures that reflect the performance of the business.

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 employees

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: Micro Macro Super Direct revenues \ 700,000 \ 850,000 \ 650,000 Direct operating expenses 50,000 70,000 100,000 Number of copies made 20,000 30,000 50,000 Number of invoices processed 700 800 500 Number of employees 130 145 125 -What will the income of the Macro Division be after all service department allocations?

In a profit center, the department manager has responsibility for and the authority to make decisions that affect

The rate of return on investment may be computed by multiplying investment turnover by the profit margin.

The sales, income from operations, and invested assets for each division of Wren Company are as follows: Management has established a minimum rate of return for invested assets of 8%. a) Determine the residual income for each division. b) Based on residual income, which of the divisions is the most profitable?

Which of the following is not a measure that management can use in evaluating and controlling investment center performance?

The profit margin for Mason is

Managers of what type of decentralized units have authority and responsibility for revenues, costs, and assets invested in the unit?

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are

The major advantage of residual income as a performance measure is that it gives consideration to not only a minimum rate of return on investment but also the total magnitude of income from operations earned by each division.

The excess of divisional income from operations over a minimum acceptable amount of divisional income from operations is

Tom's Tool Factory is an investment center and is responsible for all of its net income and the use of its assets. This year, the invested assets totaled $475,000, and net income was $275,000. What is the rate of return on assets?