Question 1

The ratio of sales to invested assets is termed investment turnover.

Accepted Answer

A) True 
 B)False

Question 2

Operating income of the Commercial Aviation Division is $3,300,000.If operating income before service department charges is $3,900,000:

Accepted Answer

A)  operating expenses are $600,000. 
B)  total service department charges are $600,000. 
C)  noncontrollable charges are $7,200,000. 
D)  direct manufacturing charges are $3,900,000. 
A)  operating expenses are $600,000. 
B)  total service department charges are $600,000. 
C)  noncontrollable charges are $7,200,000. 
D)  direct manufacturing charges are $3,900,000.

Question 3

The best measure of managerial efficiency in the use of investments in assets is:

Accepted Answer

A)  rate of return on stockholders' equity. 
B)  rate of return on investment. 
C)  operating income. 
D)  inventory turnover. 
A)  rate of return on stockholders' equity. 
B)  rate of return on investment. 
C)  operating income. 
D)  inventory turnover.

Question 4

Materials used by Boone Company in producing Division C's product are currently purchased from outside suppliers at a cost of $20 per unit.However, the same materials are available from Division A.Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $17 per unit.A transfer price of $19 per unit is negotiated and 60,000 units of material are transferred, with no reduction in Division A's current sales. How much would Division A's operating income increase?

Accepted Answer

A)  $0 
B)  $180,000 
C)  $60,000 
D)  $120,000 
A)  $0 
B)  $180,000 
C)  $60,000 
D)  $120,000

Question 5

​Identify the type of organization in which all major planning and operating decisions are made by top management. ​

Accepted Answer

A)  Decentralized 
B)  Centralized 
C)  Consolidated 
D)  Segmented 
A)  Decentralized 
B)  Centralized 
C)  Consolidated 
D)  Segmented

Question 6

Personnel administration expense for a department in a store is an indirect expense.

Accepted Answer

A) True 
 B)False

Question 7

Identify the formula used to calculate profit margin.

Accepted Answer

A)  Profit margin = Sales ÷ Operating income 
B)  ​Profit margin = Operating income ÷ Invested assets 
C)  Profit margin = Invested assets ÷ Operating income 
D)  Profit margin = Operating income ÷ Sales 
A)  Profit margin = Sales ÷ Operating income 
B)  ​Profit margin = Operating income ÷ Invested assets 
C)  Profit margin = Invested assets ÷ Operating income 
D)  Profit margin = Operating income ÷ Sales

Question 8

Materials used by Ford Company in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit.However, the same materials are available from Division B.Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit.
(a)If a transfer price of $25 per unit is established and 60,000 units of material are transferred with no reductions in Division B's current sales, how much would Ford Company's total operating income increase?
(b)How much would the operating income of Division A increase?
(c)How much would the operating income of Division B increase?
(d)If the negotiated price approach is used, what would be the range of acceptable transfer prices?

Accepted Answer

(a)$600,000; [60,000 × ($30 - $25)] + [6

Question 9

Materials used by Boone Company in producing Division C's product are currently purchased from outside suppliers at a cost of $20 per unit.However, the same materials are available from Division A.Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $17 per unit.A transfer price of $19 per unit is negotiated and 60,000 units of material are transferred, with no reduction in Division A's current sales. How much would Boone's total operating income increase?

Accepted Answer

A)  $180,000 
B)  $240,000 
C)  $120,000 
D)  $300,000 
A)  $180,000 
B)  $240,000 
C)  $120,000 
D)  $300,000

Question 10

Depreciation expense on store equipment for a department store is a direct expense.

Accepted Answer

A) True 
 B)False

Question 11

Division M for Movism Company has a rate of return on investment of 20% and an investment turnover of 1.5.What is the profit margin?

Accepted Answer

A)  20% 
B)  13% 
C)  15% 
D)  30% 
A)  20% 
B)  13% 
C)  15% 
D)  30%

Question 12

The process of measuring and reporting operating data by areas of responsibility is termed responsibility accounting.

Accepted Answer

A) True 
 B)False

Question 13

Identify the formula for the rate of return on investment.

Accepted Answer

A)  Invested Assets/Operating Income 
B)  Sales/Invested Assets 
C)  Operating Income/Sales 
D)  Operating Income/Invested Assets 
A)  Invested Assets/Operating Income 
B)  Sales/Invested Assets 
C)  Operating Income/Sales 
D)  Operating Income/Invested Assets

Question 14

Big Inc.had $275,000 invested in assets, sales of $302,500, operating income of $60,500, and a minimum acceptable rate of return of 5% on its invested assets.The rate of return on investment for Big Inc.is:

Accepted Answer

A)  22%. 
B)  20%. 
C)  32%. 
D)  6.4%. 
A)  22%. 
B)  20%. 
C)  32%. 
D)  6.4%.

Question 15

Which of the following is true of the balanced scorecard?

Accepted Answer

A)  It ignores the financial performance of the company. 
B)  It has the ability to reveal the underlying nonfinancial drivers of financial performance. 
C)  It aims to improve the nonfinancial performance of the business. 
D)  It focuses primarily on the short term performance of the business. 
A)  It ignores the financial performance of the company. 
B)  It has the ability to reveal the underlying nonfinancial drivers of financial performance. 
C)  It aims to improve the nonfinancial performance of the business. 
D)  It focuses primarily on the short term performance of the business.

Question 16

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 to the total magnitude of operating income earned by each division.

Accepted Answer

A) True 
 B)False

Question 17

In large businesses, decentralization is often advantageous because:

Accepted Answer

A)  it allows top management to make all decisions, thus ensuring that overall operational goals are met. 
B)  it prevents decisions from one unit to negatively affect the profitability of the entire company. 
C)  it allows departmental managers to focus on acquiring expertise in their areas of responsibility. 
D)  it prevents duplication of assets and expense. 
A)  it allows top management to make all decisions, thus ensuring that overall operational goals are met. 
B)  it prevents decisions from one unit to negatively affect the profitability of the entire company. 
C)  it allows departmental managers to focus on acquiring expertise in their areas of responsibility. 
D)  it prevents duplication of assets and expense.

Question 18

The profit margin is calculated as the ratio of operating income to:

Accepted Answer

A)  invested assets. 
B)  investment turnover. 
C)  sales. 
D)  residual income. 
A)  invested assets. 
B)  investment turnover. 
C)  sales. 
D)  residual income.

Question 19

The costs of services charged to a profit center based on the usage of the service are called:

Accepted Answer

A)  operating expenses. 
B)  noncontrollable charges. 
C)  service department charges. 
D)  activity charges. 
A)  operating expenses. 
B)  noncontrollable charges. 
C)  service department charges. 
D)  activity charges.

Question 20

In an investment center, the manager has the responsibility for and the authority to make decisions that affect:

Accepted Answer

A)  the assets invested in the center but not costs and revenues. 
B)  costs and assets invested in the center but not revenues. 
C)  both costs and revenues for the department or division. 
D)  not only costs and revenues but also assets invested in the center. 
A)  the assets invested in the center but not costs and revenues. 
B)  costs and assets invested in the center but not revenues. 
C)  both costs and revenues for the department or division. 
D)  not only costs and revenues but also assets invested in the center.

The ratio of sales to invested assets is termed investment turnover.

Operating income of the Commercial Aviation Division is $3,300,000.If operating income before service department charges is $3,900,000:

The best measure of managerial efficiency in the use of investments in assets is:

Identify the type of organization in which all major planning and operating decisions are made by top management.

Personnel administration expense for a department in a store is an indirect expense.

Identify the formula used to calculate profit margin.

Depreciation expense on store equipment for a department store is a direct expense.

Division M for Movism Company has a rate of return on investment of 20% and an investment turnover of 1.5.What is the profit margin?

The process of measuring and reporting operating data by areas of responsibility is termed responsibility accounting.

Identify the formula for the rate of return on investment.

Big Inc.had $275,000 invested in assets, sales of $302,500, operating income of $60,500, and a minimum acceptable rate of return of 5% on its invested assets.The rate of return on investment for Big Inc.is:

Which of the following is true of the balanced scorecard?

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 to the total magnitude of operating income earned by each division.

In large businesses, decentralization is often advantageous because:

The profit margin is calculated as the ratio of operating income to:

The costs of services charged to a profit center based on the usage of the service are called:

In an investment center, the manager has the responsibility for and the authority to make decisions that affect:

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Basic Accounting Systems: Accrual Basis

Accounting for Merchandising Businesses

Internal Control and Cash

Receivables and Inventories

Fixed Assets, Natural Resources, and Intangible Assets

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Costs

Capital Investment Analysis

Filters

Exam 14: Performance Evaluation for Decentralized Operations

The ratio of sales to invested assets is termed investment turnover.

Operating income of the Commercial Aviation Division is $3,300,000.If operating income before service department charges is $3,900,000:

The best measure of managerial efficiency in the use of investments in assets is:

​Identify the type of organization in which all major planning and operating decisions are made by top management. ​

Personnel administration expense for a department in a store is an indirect expense.

Identify the formula used to calculate profit margin.

Depreciation expense on store equipment for a department store is a direct expense.

Division M for Movism Company has a rate of return on investment of 20% and an investment turnover of 1.5.What is the profit margin?

The process of measuring and reporting operating data by areas of responsibility is termed responsibility accounting.

Identify the formula for the rate of return on investment.

Big Inc.had $275,000 invested in assets, sales of $302,500, operating income of $60,500, and a minimum acceptable rate of return of 5% on its invested assets.The rate of return on investment for Big Inc.is:

Which of the following is true of the balanced scorecard?

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 to the total magnitude of operating income earned by each division.

In large businesses, decentralization is often advantageous because:

The profit margin is calculated as the ratio of operating income to:

The costs of services charged to a profit center based on the usage of the service are called:

In an investment center, the manager has the responsibility for and the authority to make decisions that affect:

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Basic Accounting Systems: Accrual Basis

Accounting for Merchandising Businesses

Internal Control and Cash

Receivables and Inventories

Fixed Assets, Natural Resources, and Intangible Assets

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Costs

Capital Investment Analysis

Filters

Identify the type of organization in which all major planning and operating decisions are made by top management.