Exam 10: Management Control in Decentralized Organizations

A larger bonus portion compared with the guaranteed portion of a contract creates more incentive.

The original cost of an asset less any accumulated depreciation

would not increase return on investment.

Income divided by revenue

The joint formulation by a manager and his or her superior of a set of goals and plans for achieving the goals for a forthcoming period is known as:

How does the presence or absence of idle capacity affect the optimal transfer- pricing policy?

Performance- based rewards can be informal.

Identify which of the following statements is a benefit of decentralization.

The following information pertains to Saturn Company: Total assets \ 50,000 Total current liabilities 30,000 Total expenses 60,000 Total liabilities 45,000 Total revenues \8 0,000 If invested capital is defined as total assets, the capital turnover is:

The following information is available for the Copeland Company: Sales \ 1,000,000 Invested c apital 312,500 ROI 10\% The return on sales is:

The following information pertains to Gloria Company: Property, plant and Currentassets \ 200,000 Currentliabilities \ 100,000 equipment 400,000 Long term liabilities 200,000 Constructioninprogress 50,000 Stockholders'equity 350,000 Total assets \6 50,000 Total equities \6 50,000 Currentassets \ 200,000 Currentliabilities \ 100,000 equipment 400,000 Long term liabilities 200,000 Constructioninprogress 50,000 Stockholders'equity 350,000 Total assets \6 50,000 Total equities \6 50,000 Invested capital is _ if it is defined as total assets employed.

The asset section of the January 1, 20X9, balance sheet of Big Valley Company includes a machine which was acquired on January 1, 20X5. The machine's original cost was $500,000, and the estimated life was determined to be 10 years. The estimated residual value was zero, and the straight- line method of depreciation was chosen. The book value of the machine as of January 1, 20X9, is:

Income taxes rarely influence the setting of transfer prices.

In general, for companies using ROI, the most profitable divisions have more incentive to invest in new projects than do the least profitable divisions.

ROI = income (or profit) / investment.

Wayne Company's records reveal the following: Division $A$ M arket pric of finished part to out siders \ 75 Variable costs per part 51 Contribution margin per part \ 24 Tot al contribution for 10000 parts \ 240,000 Division $B$ ales price of finished product \1 05 Variable costs: Division A (1 p art @ \ 51) \5 1 Division B Processing \2 7 Selling 12 39 -90 Contribution margin per unit \1 5 Total contribution for 10,000 \1 50,000 units The variable costs of Division B will be incurred whether it buys from Division A or from an outside supplier. If Division A wants to transfer the parts to Division B for $81, the manager of Division B would:

Tyson Company's revenues are $300 and invested capital is $240. Expenses are currently 80% of sales. Tyson Company's current return on investment is:

The following data are available for the three divisions of Barnum Company: Division X Division Y Division Z Income (a) \ 45,000 (i) Revenue (b) (e) \ 84,000 ROI 15\% () 12\% Invested capital \ 150,000 (g) \ 35,000 Return on sales 8\% 9\% () Cost of capital \% () 10\% C apital turnover ( c) 2.5 () Residual income (d) \ 15,000 (1) Required: Provide the missing data.

is a measure of income or profit divided by the investment required to obtain that income or profit.

The lower in the organization that the freedom to make decisions exists, the greater the centralization.