Question 1

If income from operations for a division is $5,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not one of the common types of responsibility centers?

Accepted Answer

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

Question 3

A manager in a cost center also has responsibility and authority over the revenues.

Accepted Answer

A) True 
 B)False

Question 4

What is Clydesdale Company's residual income?

Accepted Answer

A)  $252,000 
B)  $900,000 
C)  $1,400,000 
D)  $760,000 
A)  $252,000 
B)  $900,000 
C)  $1,400,000 
D)  $760,000

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Which of the following would be most effective in a small owner/manager-operated business?

Accepted Answer

A)  profit centers 
B)  centralization 
C)  investment centers 
D)  cost centers 
A)  profit centers 
B)  centralization 
C)  investment centers 
D)  cost centers

Question 7

What is Clydesdale Company's investment turnover?

Accepted Answer

A)  1.80 
B)  2.25 
C)  1.25 
D)  1.4 
A)  1.80 
B)  2.25 
C)  1.25 
D)  1.4

Question 8

Miller's Quarter Horse Company has sales of $4,500,000. It also has invested assets of $2,500,000 and operating expenses of $3,800,000. The company has established a minimum rate of return of 7%.
a) What is Miller's profit margin?
b) What is the investment turnover?
c) What is the rate of return on investment?
d) What is Miller's residual income?

Accepted Answer

a) $4,500,000 - $3,800,000 = $

Question 9

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 will the income of the Super Division be after all service department allocations?

Accepted Answer

A)  $300,000 
B)  $325,000 
C)  $550,000 
D)  $200,000 
A)  $300,000 
B)  $325,000 
C)  $550,000 
D)  $200,000

Question 10

What is the profit margin for Division D?

Accepted Answer

A)  42.9% 
B)  83.4% 
C)  49.1% 
D)  65.7% 
A)  42.9% 
B)  83.4% 
C)  49.1% 
D)  65.7%

Question 11

The profit center income statement should include only revenues and expenses that are controlled by the manager.

Accepted Answer

A) True 
 B)False

Question 12

The sales, income from operations, invested assets, and residual income for each division of Marcus Company are as follows:   Determine the minimum rate of return for invested assets.

Accepted Answer

Division X: $645,000 - $4,100,

Question 13

4. What is the profit margin?

Accepted Answer

A)  20% 
B)  15.7% 
C)  14% 
D)  6.36% 
A)  20% 
B)  15.7% 
C)  14% 
D)  6.36%

Question 14

Service department charges are similar to the expenses of a profit center that purchased services from a source outside the company.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is a disadvantage of decentralization?

Accepted Answer

A)  Decisions made by one manager may negatively affect the profitability of the entire company. 
B)  Decentralization helps retain quality managers. 
C)  Managers closest to the operations make decisions. 
D)  Managers are able to acquire expertise in their areas of responsibility. 
A)  Decisions made by one manager may negatively affect the profitability of the entire company. 
B)  Decentralization helps retain quality managers. 
C)  Managers closest to the operations make decisions. 
D)  Managers are able to acquire expertise in their areas of responsibility.

Question 16

How much will Division 6's income from operations increase?

Accepted Answer

A)  $8,000 
B)  $15,000 
C)  $80,000 
D)  $150,000 
A)  $8,000 
B)  $15,000 
C)  $80,000 
D)  $150,000

Question 17

The primary accounting tool for controlling and reporting for cost centers is a budget.

Accepted Answer

A) True 
 B)False

Question 18

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31:  
-The gross profit for the Rails Division is

Accepted Answer

A)  $60,800 
B)  $33,600 
C)  $8,700 
D)  $21,150 
A)  $60,800 
B)  $33,600 
C)  $8,700 
D)  $21,150

Question 19

The following data are taken from the management accounting reports of Dulcimer Co.:   If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that

Accepted Answer

A)  Division A's manager is given the bonus 
B)  Division B's manager is given the bonus 
C)  Division C's manager is given the bonus 
D)  Divisions B and C's managers divide the bonus 
A)  Division A's manager is given the bonus 
B)  Division B's manager is given the bonus 
C)  Division C's manager is given the bonus 
D)  Divisions B and C's managers divide the bonus

Question 20

Which of the following is not a disadvantage of decentralized operation?

Accepted Answer

A)  competition among managers 
B)  duplication of operations 
C)  price cutting by departments that are competing in the same product market 
D)  top management freed from everyday tasks to do strategic planning 
A)  competition among managers 
B)  duplication of operations 
C)  price cutting by departments that are competing in the same product market 
D)  top management freed from everyday tasks to do strategic planning

Exam 23: Performance Evaluation for Decentralized Operations

If income from operations for a division is $5,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

Which of the following is not one of the common types of responsibility centers?

A manager in a cost center also has responsibility and authority over the revenues.

What is Clydesdale Company's residual income?

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

Which of the following would be most effective in a small owner/manager-operated business?

What is Clydesdale Company's investment turnover?

What is the profit margin for Division D?

The profit center income statement should include only revenues and expenses that are controlled by the manager.

The sales, income from operations, invested assets, and residual income for each division of Marcus Company are as follows: Determine the minimum rate of return for invested assets.

4. What is the profit margin?

Service department charges are similar to the expenses of a profit center that purchased services from a source outside the company.

Which of the following is a disadvantage of decentralization?

How much will Division 6's income from operations increase?

The primary accounting tool for controlling and reporting for cost centers is a budget.

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: -The gross profit for the Rails Division is

The following data are taken from the management accounting reports of Dulcimer Co.: If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that

Which of the following is not a disadvantage of decentralized operation?

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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