Question 1

In a profit center, the manager has responsibility and authority for making decisions that affect

Accepted Answer

A)  long-term liabilities 
B)  assets 
C)  investments 
D)  costs 
A)  long-term liabilities 
B)  assets 
C)  investments 
D)  costs

Question 2

Budget performance reports prepared for the vice president of production would generally contain less detail than reports prepared for the various plant managers.

Accepted Answer

A) True 
 B)False

Question 3

The Nelson Company's radio division currently is purchasing transistors from the Charlotte Co. for $3.50 each. The total number of transistors needed is 8,000 per month. Nelson Company's electronics division can produce the transistors for a cost of $4.00 each and they have plenty of capacity to manufacture the units. The $4 is made up of $3.25 in variable costs, and $0.75 in allocated fixed costs. What should be the range of a possible transfer price?

Accepted Answer

A)  $3.26 to $3.49 
B)  $3.51 to $3.99 
C)  $3.26 to $3.99 
D)  $3.25 to $3.50 
A)  $3.26 to $3.49 
B)  $3.51 to $3.99 
C)  $3.26 to $3.99 
D)  $3.25 to $3.50

Question 4

Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be

Accepted Answer

A)  decentralized 
B)  consolidated 
C)  diversified 
D)  centralized 
A)  decentralized 
B)  consolidated 
C)  diversified 
D)  centralized

Question 5

The Bottlebrush Company has income from operations of $60,000, invested assets of $345,000, and sales of $786,000. Use the DuPont formula to calculate the rate of return on investment, and show a) the profit margin, b) the investment turnover, and c) rate of return on investment. Round the profit margin percentage to two decimal places and the investment turnover to three decimal places.

Accepted Answer

a) Profit margin = $60,000/$78

Question 6

Two divisions of Oregano Company Divisions TX and OY) have the same profit margins. Division TX's investment turnover is larger than that of Division OY 1.2 to 1.0). Income from operations for Division TX is $55,000, and income from operations for Division OY is $43,000. Division TX has a higher return on investment than Division OY by

Accepted Answer

A)  using income from operations as a performance measure 
B)  comparing the profit margins 
C)  applying a negotiated price measure 
D)  using its assets more efficiently in generating sales 
A)  using income from operations as a performance measure 
B)  comparing the profit margins 
C)  applying a negotiated price measure 
D)  using its assets more efficiently in generating sales

Question 7

Investment centers differ from profit centers in that they

Accepted Answer

A)  are responsible for net income only 
B)  are able to invest in assets 
C)  have less responsibilities than cost centers and profit centers 
D)  are only responsible for revenues 
A)  are responsible for net income only 
B)  are able to invest in assets 
C)  have less responsibilities than cost centers and profit centers 
D)  are only responsible for revenues

Question 8

Piano Company's costs were over budget by $47,000. The Piano Company is divided in two regions. The first region's costs were over budget by $5,000. Determine the amount that the second region's cost was over or under budget.

Accepted Answer

The answer of Piano Company's costs were over budget by...

Question 9

What is the profit margin for Division A?

Accepted Answer

A)  11.1% 
B)  10.0% 
C)  9.0% 
D)  0.90% 
A)  11.1% 
B)  10.0% 
C)  9.0% 
D)  0.90%

Question 10

The amount of detail presented in a budget performance report for a cost center depends upon the level of management to which the report is directed.

Accepted Answer

A) True 
 B)False

Question 11

Income from operations for Division L is $250,000, total service department charges are $400,000 and operating expenses are $2,750,000. What are the revenues for Division L?

Accepted Answer

A)  $650,000 
B)  $3,000,000 
C)  $3,400,000 
D)  $2,750,000 
A)  $650,000 
B)  $3,000,000 
C)  $3,400,000 
D)  $2,750,000

Question 12

A responsibility center in which the authority over and responsibility for costs and revenues is vested in the department manager is termed a profit center.

Accepted Answer

A) True 
 B)False

Question 13

The balanced scorecard measures

Accepted Answer

A)  only financial information 
B)  only nonfinancial information 
C)  both financial and nonfinancial information 
D)  external and internal information 
A)  only financial information 
B)  only nonfinancial information 
C)  both financial and nonfinancial information 
D)  external and internal information

Question 14

A disadvantage to using the residual income performance measure is that it encourages managers to spend only the minimum acceptable rate of return on assets set by upper management.

Accepted Answer

A) True 
 B)False

Question 15

The manager of the furniture department of a leading retailer does not control the salaries of departmental personnel.

Accepted Answer

A) True 
 B)False

Question 16

All of the following are advantages of decentralization except

Accepted Answer

A)  Managers make better decisions when closer to the operations of the company. 
B)  Expertise in all areas of the business is difficult; decentralization makes it better to delegate certain responsibilities. 
C)  Each decentralized operation purchases its own assets and pays for operating costs. 
D)  Decentralized managers can respond quickly to customer needs. 
A)  Managers make better decisions when closer to the operations of the company. 
B)  Expertise in all areas of the business is difficult; decentralization makes it better to delegate certain responsibilities. 
C)  Each decentralized operation purchases its own assets and pays for operating costs. 
D)  Decentralized managers can respond quickly to customer needs.

Question 17

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 will be allocated to the Micro Division?

Accepted Answer

A)  $200,000 
B)  $145,000 
C)  $60,000 
D)  $345,000 
A)  $200,000 
B)  $145,000 
C)  $60,000 
D)  $345,000

Question 18

Three measures of investment center performance are income from operations, rate of return on investment, and residual income.

Accepted Answer

A) True 
 B)False

Question 19

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 Locomotive Division is

Accepted Answer

A)  $57,960 
B)  $14,790 
C)  $27,240 
D)  $47,280 
A)  $57,960 
B)  $14,790 
C)  $27,240 
D)  $47,280

Question 20

One of the advantages of decentralization is that delegating authority to managers closest to the operation always results in better decisions.

Accepted Answer

A) True 
 B)False

Exam 23: Performance Evaluation for Decentralized Operations

In a profit center, the manager has responsibility and authority for making decisions that affect

Budget performance reports prepared for the vice president of production would generally contain less detail than reports prepared for the various plant managers.

Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be

Investment centers differ from profit centers in that they

Piano Company's costs were over budget by $47,000. The Piano Company is divided in two regions. The first region's costs were over budget by $5,000. Determine the amount that the second region's cost was over or under budget.

What is the profit margin for Division A?

The amount of detail presented in a budget performance report for a cost center depends upon the level of management to which the report is directed.

Income from operations for Division L is $250,000, total service department charges are $400,000 and operating expenses are $2,750,000. What are the revenues for Division L?

A responsibility center in which the authority over and responsibility for costs and revenues is vested in the department manager is termed a profit center.

The balanced scorecard measures

A disadvantage to using the residual income performance measure is that it encourages managers to spend only the minimum acceptable rate of return on assets set by upper management.

The manager of the furniture department of a leading retailer does not control the salaries of departmental personnel.

All of the following are advantages of decentralization except

Three measures of investment center performance are income from operations, rate of return on investment, and residual income.

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 Locomotive Division is

One of the advantages of decentralization is that delegating authority to managers closest to the operation always results in better decisions.

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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