Question 1

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

Accepted Answer

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

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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 miles

Accepted Answer

A) Purchasing 
B) Payroll Accounting 
C) Human Resources 
D) Maintenance 
E) Information Systems
F)Marketing
G)President's Office
H)Transportation 
A) Purchasing 
B) Payroll Accounting 
C) Human Resources 
D) Maintenance 
E) Information Systems
F)Marketing
G)President's Office
H)Transportation

Question 4

What is the return on investment for Division A?

Accepted Answer

A)  9.3% 
B)  99.3% 
C)  74.6% 
D)  4.6% 
A)  9.3% 
B)  99.3% 
C)  74.6% 
D)  4.6%

Question 5

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 Micro Division be after all service department allocations?

Accepted Answer

A)  $305,000 
B)  $650,000 
C)  $345,000 
D)  $610,000 
A)  $305,000 
B)  $650,000 
C)  $345,000 
D)  $610,000

Question 6

Most manufacturing plants are considered cost centers because they have control over

Accepted Answer

A)  sales and costs 
B)  fixed assets and costs 
C)  costs only 
D)  fixed assets and sales 
A)  sales and costs 
B)  fixed assets and costs 
C)  costs only 
D)  fixed assets and sales

Question 7

Assume that Division Blue has achieved a yearly income from operations of $110,000 using $900,000 of invested assets. If management has set a minimum acceptable return of 11%, the residual income is

Accepted Answer

A)  $99,000 
B)  $691,000 
C)  $209,000 
D)  $11,000 
A)  $99,000 
B)  $691,000 
C)  $209,000 
D)  $11,000

Question 8

In evaluating the profit center manager, the income from operations should be compared

Accepted Answer

A)  across profit centers 
B)  to historical performance or budget 
C)  to the competitor's net income 
D)  to the total company earnings per share 
A)  across profit centers 
B)  to historical performance or budget 
C)  to the competitor's net income 
D)  to the total company earnings per share

Question 9

Property tax expense for a department store's store equipment is an example of a direct expense.

Accepted Answer

A) True 
 B)False

Question 10

Ratio of sales to invested assets

Accepted Answer

A) True 
 B)False

Question 11

Some items are omitted from each of the following condensed divisional income statements of Demi Inc.?    (a)Determine the amount of the missing items, identifying them by letter 
(a-f).
(b)Based on income from operations, which division is the most profitable?

Accepted Answer

(a)
(a)$710,000  ($480,000 + $230,000)
(

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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:
​
  
-The investment turnover for Mason is

Accepted Answer

A)  1.08 
B)  0.93 
C)  6.57 
D)  7.07 
A)  1.08 
B)  0.93 
C)  6.57 
D)  7.07

Question 14

Match each definition that follows with the term (a-e) it defines.
-Income from operations divided by invested assets

Accepted Answer

A) Controllable revenues 
B) Profit margin 
C) Investment turnover 
D) Return on investment 
E) Residual income 
A) Controllable revenues 
B) Profit margin 
C) Investment turnover 
D) Return on investment 
E) Residual income

Question 15

By using the return on investment as a divisional performance measure, divisional managers will always be motivated to invest in proposals that will increase the overall return for the company.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Under the negotiated price approach, the transfer price is the price at which the product or service transferred could be sold to outside buyers.

Accepted Answer

A) True 
 B)False

Question 18

The sales, income from operations, and invested assets for each division of Grosbeak Company are as follows:​   (a)Using the DuPont formula, determine the profit margin, investment turnover, and return on investment for each division. Round profit margin percentage to two decimal places, investment turnover to four decimal places, and return on investment to one decimal place.
(b)Which division is the most profitable per dollar invested?

Accepted Answer

​ @#IMG-DLM& (b)Divi

Question 19

Division A reported income from operations of $975,000 and total service department charges of $675,000. As a result,

Accepted Answer

A)  net income was $300,000 
B)  the gross profit margin was $300,000 
C)  income from operations before service department charges was $1,650,000 
D)  consolidated net income was $300,000 
A)  net income was $300,000 
B)  the gross profit margin was $300,000 
C)  income from operations before service department charges was $1,650,000 
D)  consolidated net income was $300,000

Question 20

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

Accepted Answer

A) True 
 B)False

Exam 23: Decentralized Operations

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

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

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 miles

What is the return on investment for Division A?

Most manufacturing plants are considered cost centers because they have control over

Assume that Division Blue has achieved a yearly income from operations of $110,000 using $900,000 of invested assets. If management has set a minimum acceptable return of 11%, the residual income is

In evaluating the profit center manager, the income from operations should be compared

Property tax expense for a department store's store equipment is an example of a direct expense.

Ratio of sales to invested assets

Some items are omitted from each of the following condensed divisional income statements of Demi Inc.? (a)Determine the amount of the missing items, identifying them by letter (a-f). (b)Based on income from operations, which division is the most profitable?

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

Match each definition that follows with the term (a-e) it defines. -Income from operations divided by invested assets

By using the return on investment as a divisional performance measure, divisional managers will always be motivated to invest in proposals that will increase the overall return for the company.

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

Under the negotiated price approach, the transfer price is the price at which the product or service transferred could be sold to outside buyers.

Division A reported income from operations of $975,000 and total service department charges of $675,000. As a result,

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

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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