Question 1

The transfer price is revenue to the acquiring segment, and it is a cost to the segment producing the product or service.

Accepted Answer

A) True 
 B)False

Question 2

Increasing capital turnover is one of the advantages of implementing the JIT philosophy.

Accepted Answer

A) True 
 B)False

Question 3

Decentralization is more popular in nonprofit organizations than it is in profit- seeking organizations.

Accepted Answer

A) True 
 B)False

Question 4

If using actual costs for cost- based transfer pricing, the supplying division lacks incentive to control its costs.

Accepted Answer

A) True 
 B)False

Question 5

The increasing sophistication of telecommunications aids decentralization.

Accepted Answer

A) True 
 B)False

Question 6

The asset section of the January 1, 20X9, balance sheet of Junction 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. If operating income before depreciation is $95,000, the rate of return on gross book value for 20X9 is:

Accepted Answer

A)  9% 
B)  18% 
C)  14.4% 
D)  35% 
A)  9% 
B)  18% 
C)  14.4% 
D)  35%

Question 7

A full- cost or full- cost plus profit transfer price would potentially create dysfunctional behavior.

Accepted Answer

A) True 
 B)False

Question 8

Gonzalez Company's after- tax operating income was $882 million. Total assets were $4,900 million and stockholder's equity was $2,050 million. Gonzalez Company's cost of capital was 10%. Gonzalez Company's EVA was:

Accepted Answer

A)  $392 million 
B)  $667 million 
C)  $187 million 
D)  $597 million 
A)  $392 million 
B)  $667 million 
C)  $187 million 
D)  $597 million

Question 9

With no opportunity cost, using the market price as a transfer price will not create dysfunctional decisions.

Accepted Answer

A) True 
 B)False

Question 10

The greater the influence of noncontrollable factors on responsibility center results, the more problems there are in using the results to represent a manager's performance.

Accepted Answer

A) True 
 B)False

Question 11

Most companies use residual income in evaluating projects, not ROI.

Accepted Answer

A) True 
 B)False

Question 12

The Lasorda Company provided the following information: $\begin{array} { l  }
 \text { Cost of machine}&\$300,000 \
 \text {Life in years }&\text {3 YEARS } \
 \text {Residual value }& \text {zero }\
 \text { Depreciation method}& \text { stright-line}\
\end{array}$
 The operating income before depreciation during each of the three years the machine was in use was $150,000.
a. Compute the rate of return on the average investment for each of the three years using the net book value.
b. Compute the rate of return on the average investment for each of the three years using the gross book value.

Accepted Answer

$300,000 / 3 years =

Question 13

Those informal and formal performance- based rewards that enhance managerial effort toward organizational goals

Accepted Answer

The answer of Those informal and formal performance- based rewards...

Question 14

is the decision- making power of segment managers.

Accepted Answer

A)  Goal congruence 
B)  Managerial effort 
C)  Segment autonomy 
D)  Segment superiority 
A)  Goal congruence 
B)  Managerial effort 
C)  Segment autonomy 
D)  Segment superiority

Question 15

A firm is a good candidate for decentralization if:

Accepted Answer

A)  segments buy from the same suppliers 
B)  an organization's segments are relatively independent of one another 
C)  segments sell to the same customers 
D)  there is frequent transferring of products between segments 
A)  segments buy from the same suppliers 
B)  an organization's segments are relatively independent of one another 
C)  segments sell to the same customers 
D)  there is frequent transferring of products between segments

Question 16

Decentralization may increase a firm's costs because:

Accepted Answer

A)  managers duplicate services that might be less expensive if centralized and information costs rise as responsibility reports are needed 
B)  managers duplicate services that might be less expensive if centralized 
C)  information costs rise as responsibility reports are needed 
D)  None of these answers is correct. 
A)  managers duplicate services that might be less expensive if centralized and information costs rise as responsibility reports are needed 
B)  managers duplicate services that might be less expensive if centralized 
C)  information costs rise as responsibility reports are needed 
D)  None of these answers is correct.

Question 17

The delegation of freedom to make decisions

Accepted Answer

The answer of The delegation of freedom to make decisions...

Question 18

A theory that deals with contracting between an organization and the managers that it hires to make decisions on its behalf

Accepted Answer

The answer of A theory that deals with contracting between...

Question 19

All of the following should be considered when determining transfer pricing except:

Accepted Answer

A)  international taxation 
B)  import duties 
C)  income or dividend payment restrictions 
D)  currency exchange rates 
A)  international taxation 
B)  import duties 
C)  income or dividend payment restrictions 
D)  currency exchange rates

Question 20

The following information is available for the Denison Company: $$\begin{array} { l l } 
\text { Sales } & \$ 3,000,000 \
\text { Invested capital } & 500,000 \
\text { ROI } & 15 \%
\end{array}$$ Compute:
a. capital turnover
b. net income
c. return on sales

Accepted Answer

a. $3,000,000 / $500,000 = 6.0

The transfer price is revenue to the acquiring segment, and it is a cost to the segment producing the product or service.

Increasing capital turnover is one of the advantages of implementing the JIT philosophy.

Decentralization is more popular in nonprofit organizations than it is in profit- seeking organizations.

If using actual costs for cost- based transfer pricing, the supplying division lacks incentive to control its costs.

The increasing sophistication of telecommunications aids decentralization.

A full- cost or full- cost plus profit transfer price would potentially create dysfunctional behavior.

Gonzalez Company's after- tax operating income was $882 million. Total assets were $4,900 million and stockholder's equity was $2,050 million. Gonzalez Company's cost of capital was 10%. Gonzalez Company's EVA was:

With no opportunity cost, using the market price as a transfer price will not create dysfunctional decisions.

The greater the influence of noncontrollable factors on responsibility center results, the more problems there are in using the results to represent a manager's performance.

Most companies use residual income in evaluating projects, not ROI.

Those informal and formal performance- based rewards that enhance managerial effort toward organizational goals

is the decision- making power of segment managers.

A firm is a good candidate for decentralization if:

Decentralization may increase a firm's costs because:

The delegation of freedom to make decisions

A theory that deals with contracting between an organization and the managers that it hires to make decisions on its behalf

All of the following should be considered when determining transfer pricing except:

The following information is available for the Denison Company: Sales \ 3,000,000 Invested capital 500,000 ROI 15\% Compute: a. capital turnover b. net income c. return on sales

Managerial Accounting and the Business Organization

Introduction to Cost Behavior and Cost Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information and Decision-Making: Marketing Decisions

Relevant Information and Decision-Making: Product Decisions

The Master Budget

Flexible Budget and Variance Analysis

Management Control Systems and Responsibility Accounting

Capital Budgeting

Cost Allocation

Job-Costing

Process-Costing Systems

Overhead Application: Variable and Absorbtion Costing

Basic Accounting Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

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Exam 10: Management Control in Decentralized Organizations

The transfer price is revenue to the acquiring segment, and it is a cost to the segment producing the product or service.

Increasing capital turnover is one of the advantages of implementing the JIT philosophy.

Decentralization is more popular in nonprofit organizations than it is in profit- seeking organizations.

If using actual costs for cost- based transfer pricing, the supplying division lacks incentive to control its costs.

The increasing sophistication of telecommunications aids decentralization.

A full- cost or full- cost plus profit transfer price would potentially create dysfunctional behavior.

Gonzalez Company's after- tax operating income was $882 million. Total assets were $4,900 million and stockholder's equity was $2,050 million. Gonzalez Company's cost of capital was 10%. Gonzalez Company's EVA was:

With no opportunity cost, using the market price as a transfer price will not create dysfunctional decisions.

The greater the influence of noncontrollable factors on responsibility center results, the more problems there are in using the results to represent a manager's performance.

Most companies use residual income in evaluating projects, not ROI.

Those informal and formal performance- based rewards that enhance managerial effort toward organizational goals

is the decision- making power of segment managers.

A firm is a good candidate for decentralization if:

Decentralization may increase a firm's costs because:

The delegation of freedom to make decisions

A theory that deals with contracting between an organization and the managers that it hires to make decisions on its behalf

All of the following should be considered when determining transfer pricing except:

The following information is available for the Denison Company: Sales \ 3,000,000 Invested capital 500,000 ROI 15\% Compute: a. capital turnover b. net income c. return on sales

Managerial Accounting and the Business Organization

Introduction to Cost Behavior and Cost Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information and Decision-Making: Marketing Decisions

Relevant Information and Decision-Making: Product Decisions

The Master Budget

Flexible Budget and Variance Analysis

Management Control Systems and Responsibility Accounting

Capital Budgeting

Cost Allocation

Job-Costing

Process-Costing Systems

Overhead Application: Variable and Absorbtion Costing

Basic Accounting Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Filters