Question 1

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

Accepted Answer

A)  miscellaneous administrative expenses 
B)  direct operating expenses 
C)  indirect expenses 
D)  fixed expenses 
A)  miscellaneous administrative expenses 
B)  direct operating expenses 
C)  indirect expenses 
D)  fixed expenses

Question 2

What is the profit margin?

Accepted Answer

A)  33.3% 
B)  5.2% 
C)  16.0% 
D)  19.1% 
A)  33.3% 
B)  5.2% 
C)  16.0% 
D)  19.1%

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Use this information for ABC Corporation to answer the questions that follow.
​
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 is as follows:
​
  
-Marshall Corporation had $220,000 in invested assets, sales of $242,000, income from operations of $66,000, and a desired minimum return of 3%. The return on investment for Marshall is

Accepted Answer

A)  9.1% 
B)  30% 
C)  3.0% 
D)  27.3% 
A)  9.1% 
B)  30% 
C)  3.0% 
D)  27.3%

Question 5

The ratio of income from operations to sales, which is also a factor in the DuPont formula for determining the return on investment, is called

Accepted Answer

A)  profit margin 
B)  indirect expenses 
C)  investment turnover 
D)  cost 
A)  profit margin 
B)  indirect expenses 
C)  investment turnover 
D)  cost

Question 6

Use this information for ABC Corporation to answer the questions that follow.
​
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 is as follows:
​
  
-What will the income of the Macro Division be after all service department allocations?

Accepted Answer

A)  $780,000 
B)  $375,000 
C)  $575,000 
D)  $435,000 
A)  $780,000 
B)  $375,000 
C)  $575,000 
D)  $435,000

Question 7

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 8

A decentralized business organization is one in which all major planning and operating decisions are made by top management.

Accepted Answer

A) True 
 B)False

Question 9

A manager is responsible for costs only in a (n)

Accepted Answer

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

Question 10

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the investment turnover is 5.

Accepted Answer

A) True 
 B)False

Question 11

Income from operations of the Pierce Automobile Division is $2,225,000. If income from operations before service department charges is $3,250,000,

Accepted Answer

A)  operating expenses are $1,025,000 
B)  total service department charges are $1,025,000 
C)  noncontrollable charges are $1,025,000 
D)  direct manufacturing charges are $1,025,000 
A)  operating expenses are $1,025,000 
B)  total service department charges are $1,025,000 
C)  noncontrollable charges are $1,025,000 
D)  direct manufacturing charges are $1,025,000

Question 12

To calculate income from operations, total service department charges are

Accepted Answer

A)  added to income from operations before service department charges 
B)  subtracted from operating expenses 
C)  subtracted from income from operations before service department charges 
D)  subtracted from gross profit margin 
A)  added to income from operations before service department charges 
B)  subtracted from operating expenses 
C)  subtracted from income from operations before service department charges 
D)  subtracted from gross profit margin

Question 13

The primary disadvantage of decentralized operations is that decisions made by one manager may affect other managers in such a way that the profitability of the entire company may suffer.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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 16

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

Accepted Answer

A)  return on investment 
B)  negotiated price 
C)  residual income 
D)  income from operations 
A)  return on investment 
B)  negotiated price 
C)  residual income 
D)  income from operations

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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 19

The approach that requires the transfer price to be less than the market price but greater than the supplying division's variable costs per unit is called the

Accepted Answer

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

Question 20

Purchase requisitions for Purchasing and the number of payroll checks for Payroll Accounting are examples of activity bases.

Accepted Answer

A) True 
 B)False

Exam 23: Decentralized Operations

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

What is the profit margin?

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

The ratio of income from operations to sales, which is also a factor in the DuPont formula for determining the return on investment, is called

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%.

A decentralized business organization is one in which all major planning and operating decisions are made by top management.

A manager is responsible for costs only in a (n)

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the investment turnover is 5.

Income from operations of the Pierce Automobile Division is $2,225,000. If income from operations before service department charges is $3,250,000,

To calculate income from operations, total service department charges are

The primary disadvantage of decentralized operations is that decisions made by one manager may affect other managers in such a way that the profitability of the entire company may suffer.

All of the following are advantages of decentralization except

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?

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

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

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

The approach that requires the transfer price to be less than the market price but greater than the supplying division's variable costs per unit is called the

Purchase requisitions for Purchasing and the number of payroll checks for Payroll Accounting are examples of activity bases.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Cost-Volume-Profit Analysis

Evaluating Variances From Standard Costs

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

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