The following information pertains to Calhoun Company: Property, plant and $\begin{array}{rrrr} \text { Currentassets } & \$ 100,000 & \text { Currentliabilities } & \$ 75,000 \\ \text { equipment } & 150,000 & \text { Long term liabilities } & 100,000\\ \text { Constructioninprogress } &50,000&\text { Stockholders'equity }&125,000\\ \text { Total assets }&\$300,000&\text { Total equities }&\$300,000 \end{array}$ Invested capital is _ if it is defined as total assets employed.

A) $225,000 B) $250,000 C) $300,000 D) $100,000 A) $225,000 B) $250,000 C) $300,000 D) $100,000

The following information pertains to Moore Company: \[\begin{array} { l l } \text { Total assets } & \$ 50,000 \\ \text { Total current liabilities } & 30,000 \\ \text { Total expens es } & 60,000 \\ \text { Total liabilities } & 35,000 \\ \text { Total revenues } & 80,000 \end{array}\] If invested capital is defined as total assets, and the imputed interest rate is 8%, the residual income is:

A) $20,000 B) $4,000 C) $1,600 D) $16,000 A) $20,000 B) $4,000 C) $1,600 D) $16,000

The following information pertains to Stewart Company: Property, plant and $\begin{array}{rrrr} \text { Currentassets } & \$ 100,000 & \text { Currentliabilities } & \$ 75,000 \\ \text { equipment } & 150,000 & \text { Long term liabilities } & 100,000\\ \text { Constructioninprogress } &50,000&\text { Stockholders'equity }&125,000\\ \text { Total assets }&\$300,000&\text { Total equities }&\$300,000 \end{array}$ $\begin{array}{rrrr} \text { Currentassets } & \$ 100,000 & \text { Currentliabilities } & \$ 75,000 \\ \text { equipment } & 150,000 & \text { Long term liabilities } & 100,000\\ \text { Constructioninprogress } &50,000&\text { Stockholders'equity }&125,000\\ \text { Total assets }&\$300,000&\text { Total equities }&\$300,000 \end{array}$ Invested capital is _ if it is defined as total assets.

A) $100,000 B) $250,000 C) $225,000 D) $300,000 A) $100,000 B) $250,000 C) $225,000 D) $300,000

The following information pertains to Gable Company: Property, plant and $\begin{array}{rrrr} \text { Currentassets } & \$ 200,000 & \text { Currentliabilities } & \$ 100,000 \\ \text { equipment } & 400,000 & \text { Long term liabilities } & 200,000\\ \text { Constructioninprogress } &50,000&\text { Stockholders'equity }&350,000\\ \text { Total assets }&\$650,000&\text { Total equities }&\$650,000 \end{array}$ Invested capital is if it is defined as total assets less current liabilities.

A) $650,000 B) $550,000 C) $600,000 D) $350,000 A) $650,000 B) $550,000 C) $600,000 D) $350,000

The following information pertains to Milton Company: \[\begin{array} { l l } \text { Total assets } & \$ 150,000 \\ \text { Total current liabilities } & 110,000 \\ \text { Total expenses } & 160,000 \\ \text { Total liabilities } & 115,000 \\ \text { Total revenues } & 180,000 \end{array}\] If invested capital is defined as total assets minus current liabilities, a project earning an ROI of 30% should be:

A) rejected B) accepted C) rejected if the cost of capital is less than 30% D) rejected if the desired rate of return is greater than 30% A) rejected B) accepted C) rejected if the cost of capital is less than 30% D) rejected if the desired rate of return is greater than 30%

The Table and Chair Divisions are part of the same company. Currently the Chair Division buys a part from Table for $384. The Table Division wants to increase the price of the part it sells to Chair by $96 to $480. The manager of Chair has stated that it cannot afford to go that high, as it will decrease the division's profit to near zero. Chair can buy the part from an outside supplier for $448. The cost data for the Table Division is as follows: \[\begin{array} { l l } \text { Direct materials } & \$ 136.00 \\ \text { Direct labor } & 200.00 \\ \text { Variable overhead } & 40.00 \\ \text { Fixed overhead } & 38.40 \end{array}\] If Table ceases to produce the parts for Chair, it will be able to avoid one- third of the fixed manufacturing overhead. The Table Division has excess capacity but no alternative uses for its facilities. _ is the maximum transfer price that should be charged.

A) $480.00 B) $414.40 C) $388.80 D) $448.00 A) $480.00 B) $414.40 C) $388.80 D) $448.00

The following information is available for the Bumbling Company: $\begin{array} { l } \text { Sales}& \$250,000\\ \text {Invested capital }&156,250 \\ \text { ROI}& 10\%\\ \end{array}$ The net income is:

A) $93,750 B) $50,000 C) $156,250 D) $15,625 A) $93,750 B) $50,000 C) $156,250 D) $15,625

A) residual income x capital turnover B) income percentage of revenue x return on sales C) cost of capital x income percentage of revenue D) capital turnover x return on sales A) residual income x capital turnover B) income percentage of revenue x return on sales C) cost of capital x income percentage of revenue D) capital turnover x return on sales

The following information pertains to Newhart Company: \[\begin{array} { l l } \text { Total asset } & \$ 50,000 \\ \text { Total current liabilities } & 10,000 \\ \text { Total expenses } & 60,000 \\ \text { Total liabilities } & 15,000 \\ \text { Total revenues } & 80,000 \end{array}\] If invested capital is defined as total assets minus current liabilities, the residual income at an imputed interest rate of 10% is:

A) $16,000 B) $2,600 C) $20,000 D) $4,000 A) $16,000 B) $2,600 C) $20,000 D) $4,000

Exam 10: Management Control in Decentralized Organizations

Diaz Company makes internal transfers at 180% of full cost. The Soda Refining division purchases 30,000 containers of carbonated water per day, on average, from a local supplier who delivers the water for $30 per container via an external shipper. To reduce costs, the company located an independent producer in Iowa who is willing to sell 30,000 containers at $20 each, delivered to Diaz Company's shipping division in Iowa. The company's Shipping Division in Iowa has excess capacity and can ship the 30,000 containers at a variable cost of $2.50 per container. is the total cost of purchasing the water from the Iowa supplier and shipping it to the Soda Division.

(Multiple Choice)

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Question 141

The following information pertains to Calhoun Company: Property, plant and Currentassets \ 100,000 Currentliabilities \ 75,000 equipment 150,000 Long term liabilities 100,000 Constructioninprogress 50,000 Stockholders'equity 125,000 Total assets \3 00,000 Total equities \3 00,000 Invested capital is _ if it is defined as total assets employed.

(Multiple Choice)

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Question 142

"Managers who use a historical- cost accounting system look backward at what something cost yesterday, instead of forward to what it will cost tomorrow." Do you agree? Why?

(Essay)

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Question 143

Transfer prices are the amounts charged by one segment of an organization for a product or service that it supplies to an outside firm.

(True/False)

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Question 144

Segment autonomy means that the activities of segment managers are directed by top managers.

(True/False)

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Question 145

North Division sells cloth internally to South Division. South Division uses the cloth to produce inexpensive curtains sold at discount stores. North Division incurs costs of $1.50 per pound, while South Division incurs additional costs of $4.80 per pound. The product is sold to external customers for $8.00 per set of curtains. Identify which of the following formulas correctly reflects the company's operating income.

(Multiple Choice)

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Question 146

The following information pertains to Moore Company: Total assets \ 50,000 Total current liabilities 30,000 Total expens es 60,000 Total liabilities 35,000 Total revenues 80,000 If invested capital is defined as total assets, and the imputed interest rate is 8%, the residual income is:

(Multiple Choice)

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Question 147

The following information pertains to Stewart Company: Property, plant and Currentassets \ 100,000 Currentliabilities \ 75,000 equipment 150,000 Long term liabilities 100,000 Constructioninprogress 50,000 Stockholders'equity 125,000 Total assets \3 00,000 Total equities \3 00,000 Currentassets \ 100,000 Currentliabilities \ 75,000 equipment 150,000 Long term liabilities 100,000 Constructioninprogress 50,000 Stockholders'equity 125,000 Total assets \3 00,000 Total equities \3 00,000 Invested capital is _ if it is defined as total assets.

(Multiple Choice)

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Question 148

The proponents of gross book value maintain that it facilitates comparisons between years and between plants or divisions.

(True/False)

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Question 149

Companies will not be harmed if they overemphasize meeting a budget when evaluating managers.

(True/False)

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Question 150

This equals net operating income minus the after- tax weighted- average cost of capital multiplied by the sum of long- term liabilities and stockholders' equity

(Short Answer)

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Question 151

The following information pertains to Gable 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 Invested capital is if it is defined as total assets less current liabilities.

(Multiple Choice)

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Question 152

EVA = adjusted after- tax operating income - (cost of invested capital - a percentage x adjusted average invested capital).

(True/False)

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Question 153

The following information pertains to Milton Company: Total assets \ 150,000 Total current liabilities 110,000 Total expenses 160,000 Total liabilities 115,000 Total revenues 180,000 If invested capital is defined as total assets minus current liabilities, a project earning an ROI of 30% should be:

(Multiple Choice)

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Question 154

The Table and Chair Divisions are part of the same company. Currently the Chair Division buys a part from Table for $384. The Table Division wants to increase the price of the part it sells to Chair by $96 to $480. The manager of Chair has stated that it cannot afford to go that high, as it will decrease the division's profit to near zero. Chair can buy the part from an outside supplier for $448. The cost data for the Table Division is as follows: Direct materials \ 136.00 Direct labor 200.00 Variable overhead 40.00 Fixed overhead 38.40 If Table ceases to produce the parts for Chair, it will be able to avoid one- third of the fixed manufacturing overhead. The Table Division has excess capacity but no alternative uses for its facilities. _ is the maximum transfer price that should be charged.

(Multiple Choice)

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Question 155

The Scotch Company has gathered the following information: Total assets \ 4,000,000 Total current 600,000 liabilities Total liabilities 800,000 Revenue 2,500,000 Expenses 900,000 Compute: a. ROI assuming invested capital is equal to total assets b. ROI assuming invested capital is equal to total assets minus current liabilities c. ROI assuming invested capital is equal to stockholders' equity

(Essay)

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Question 156

The following information is available for the Bumbling Company: Sales \2 50,000 Invested capital 156,250 ROI 10\% The net income is:

(Multiple Choice)

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Question 157

ROI is computed as:

(Multiple Choice)

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Question 158

The following information pertains to Newhart Company: Total asset \ 50,000 Total current liabilities 10,000 Total expenses 60,000 Total liabilities 15,000 Total revenues 80,000 If invested capital is defined as total assets minus current liabilities, the residual income at an imputed interest rate of 10% is:

(Multiple Choice)

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Question 159

A possible allocation base for receivables, when assets are not directly identifiable with a specific division, is sales weighted by payment terms.

(True/False)

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Question 160

"Managers who use a historical- cost accounting system look backward at what something cost yesterday, instead of forward to what it will cost tomorrow." Do you agree? Why?

Transfer prices are the amounts charged by one segment of an organization for a product or service that it supplies to an outside firm.

Segment autonomy means that the activities of segment managers are directed by top managers.

The following information pertains to Moore Company: Total assets \ 50,000 Total current liabilities 30,000 Total expens es 60,000 Total liabilities 35,000 Total revenues 80,000 If invested capital is defined as total assets, and the imputed interest rate is 8%, the residual income is:

The proponents of gross book value maintain that it facilitates comparisons between years and between plants or divisions.

Companies will not be harmed if they overemphasize meeting a budget when evaluating managers.

This equals net operating income minus the after- tax weighted- average cost of capital multiplied by the sum of long- term liabilities and stockholders' equity

EVA = adjusted after- tax operating income - (cost of invested capital - a percentage x adjusted average invested capital).

The following information pertains to Milton Company: Total assets \ 150,000 Total current liabilities 110,000 Total expenses 160,000 Total liabilities 115,000 Total revenues 180,000 If invested capital is defined as total assets minus current liabilities, a project earning an ROI of 30% should be:

The following information is available for the Bumbling Company: Sales \2 50,000 Invested capital 156,250 ROI 10\% The net income is:

ROI is computed as:

A possible allocation base for receivables, when assets are not directly identifiable with a specific division, is sales weighted by payment terms.

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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