Question 1

An example of an agency cost because of inefficient behavior is

Accepted Answer

A)  Employees surfing the internet for personal reasons during working hours 
B)  Employees spending an appropriate amount of time on long-term projects 
C)  Team members working together with concentrated effort 
D)  Exceeding a time budget because of uncontrollable price increases 
A)  Employees surfing the internet for personal reasons during working hours 
B)  Employees spending an appropriate amount of time on long-term projects 
C)  Team members working together with concentrated effort 
D)  Exceeding a time budget because of uncontrollable price increases

Question 2

Decision-making based on general knowledge is more likely to occur in this type of organization

Accepted Answer

A)  Centralized 
B)  Decentralized 
C)  Effective 
D)  Ineffective 
A)  Centralized 
B)  Decentralized 
C)  Effective 
D)  Ineffective

Question 3

The Southern Division of WDY Corporation reported net income of $2,500, operating income of $4,000, average equity of $24,000, and average operating assets of $30,000 in a recent accounting period. If Southern's required rate of return is 12%, its residual income was

Accepted Answer

A)  $380 
B)  $(380) 
C)  $400 
D)  $1,100 
A)  $380 
B)  $(380) 
C)  $400 
D)  $1,100

Question 4

An organization's required rate of return is 13%. The ROI of Divisions A and B, respectively, is 10% and 15%. Each Division is considering a project that will have a 12% rate of return. If ROI is used to evaluate divisions, which of the following statements is true?

Accepted Answer

A)  Both divisions will accept the project 
B)  Both divisions will reject the project 
C)  Division A will accept, and Division B will reject, the project 
D)  Division A will reject, and Division B will accept, the project 
A)  Both divisions will accept the project 
B)  Both divisions will reject the project 
C)  Division A will accept, and Division B will reject, the project 
D)  Division A will reject, and Division B will accept, the project

Question 5

Use the following information for the next 3 questions.
Chicago Division has a required rate of return of 15%. The weighted average cost of capital is 10%. Information for Chicago Divisions operations over the past 2 years follows.  
-The Shannon Division of the Wasson Widget Co. requires a 12% rate of return. During a recent year Shannon had a net income of $400,000 and a residual income of $250,000. What was its ROI?

Accepted Answer

A)  32% 
B)  15% 
C)  12% 
D)  26% 
A)  32% 
B)  15% 
C)  12% 
D)  26%

Question 6

Use the following information for the next 2 questions.
Division A produces a component for Hielkema Company's main product - automobiles. The division operates as a profit center. It also sells to outsiders. The present selling price is $75 per component. The company buys 600,000 units of a similar component per year from outside sources. The external purchase price is $73 as a result of a quantity discount. Division A has adequate capacity to supply the needs of the Assembly division. The following data are for Division A:  
-The minimum price at which A would sell components internally is

Accepted Answer

A)  $71 
B)  $73 
C)  $75 
D)  $65 
A)  $71 
B)  $73 
C)  $75 
D)  $65

Question 7

Among the responsibility centers listed, which type of responsibility center is most likely to use growth in sales as a performance measure?

Accepted Answer

A)  Cost 
B)  Profit 
C)  Revenue 
D)  Investment 
A)  Cost 
B)  Profit 
C)  Revenue 
D)  Investment

Question 8

Managers can reduce agency costs by

Accepted Answer

A)  Giving agents less decision-making authority. 
B)  Holding agents responsible for the results of their decisions and rewarding them for good performance. 
C)  Constantly monitoring agents' actions to ensure goal congruence. 
D)  Reporting residual income in their SEC reports. 
A)  Giving agents less decision-making authority. 
B)  Holding agents responsible for the results of their decisions and rewarding them for good performance. 
C)  Constantly monitoring agents' actions to ensure goal congruence. 
D)  Reporting residual income in their SEC reports.

Question 9

Return on investment is typically calculated as net income divided by total sales.

Accepted Answer

A) True 
 B)False

An example of an agency cost because of inefficient behavior is

Decision-making based on general knowledge is more likely to occur in this type of organization

The Southern Division of WDY Corporation reported net income of $2,500, operating income of $4,000, average equity of $24,000, and average operating assets of $30,000 in a recent accounting period. If Southern's required rate of return is 12%, its residual income was

An organization's required rate of return is 13%. The ROI of Divisions A and B, respectively, is 10% and 15%. Each Division is considering a project that will have a 12% rate of return. If ROI is used to evaluate divisions, which of the following statements is true?

Among the responsibility centers listed, which type of responsibility center is most likely to use growth in sales as a performance measure?

Managers can reduce agency costs by

Return on investment is typically calculated as net income divided by total sales.

The Role of Accounting Information in Management Decision Making

The Cost Function

Cost-Volume-Profit Analysis

Relevant Costs for Nonroutine Operating Decision

Job Costing

Process Costing

Activity-Based Costing and Management

Measuring and Assigning Support Department Costs

Joint Product and By-Product Costing

Static and Flexible Budgets

Standard Costs and Variance Analysis

Strategic Investment Decisions

Joint Management of Revenues and Costs

Measuring and Assigning Costs for Income Statements

Strategic Performance Measurement

Sustainability Accounting

Filters

Exam 15: Performance Evaluation and Compensation

An example of an agency cost because of inefficient behavior is

Decision-making based on general knowledge is more likely to occur in this type of organization

The Southern Division of WDY Corporation reported net income of $2,500, operating income of $4,000, average equity of $24,000, and average operating assets of $30,000 in a recent accounting period. If Southern's required rate of return is 12%, its residual income was

An organization's required rate of return is 13%. The ROI of Divisions A and B, respectively, is 10% and 15%. Each Division is considering a project that will have a 12% rate of return. If ROI is used to evaluate divisions, which of the following statements is true?

Among the responsibility centers listed, which type of responsibility center is most likely to use growth in sales as a performance measure?

Managers can reduce agency costs by

Return on investment is typically calculated as net income divided by total sales.

The Role of Accounting Information in Management Decision Making

The Cost Function

Cost-Volume-Profit Analysis

Relevant Costs for Nonroutine Operating Decision

Job Costing

Process Costing

Activity-Based Costing and Management

Measuring and Assigning Support Department Costs

Joint Product and By-Product Costing

Static and Flexible Budgets

Standard Costs and Variance Analysis

Strategic Investment Decisions

Joint Management of Revenues and Costs

Measuring and Assigning Costs for Income Statements

Strategic Performance Measurement

Sustainability Accounting

Filters