Question 1

Which of the following is a measure of a cost center manager's performance?

Accepted Answer

A) budget performance report 
B) return on investment and residual income measures 
C) divisional income statements 
D) balance sheet 
A) budget performance report 
B) return on investment and residual income measures 
C) divisional income statements 
D) balance sheet

Question 2

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, operating income amounting to $302,500, and a desired minimum return on investment of 15%.​
-The residual income for Chicks Corporation is

Accepted Answer

A) $165,000 
B) $302,500 
C) $137,500 
D) $191,500 
A) $165,000 
B) $302,500 
C) $137,500 
D) $191,500

Question 3

If divisional operating income is $100,000, invested assets are $850,000, and the minimum return on invested assets is 8%, the residual income is $68,000.

Accepted Answer

A) True 
 B)False

Question 4

The rates at which centralized services are charged to each division are called support department allocation rates.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following transfer price approaches is used when the transfer price is set at the amount sold to outside buyers?

Accepted Answer

A) market price 
B) cost price 
C) negotiated price 
D) variable price 
A) market price 
B) cost price 
C) negotiated price 
D) variable price

Question 6

Operating income for Division L is $250,000, total support department allocations are $400,000, and operating expenses are $2,750,000. The revenues for Division L are

Accepted Answer

A) $650,000 
B) $3,000,000 
C) $3,400,000 
D) $2,750,000 
A) $650,000 
B) $3,000,000 
C) $3,400,000 
D) $2,750,000

Question 7

The investment turnover is the ratio of

Accepted Answer

A) operating income to sales 
B) operating income to invested assets 
C) assets to liabilities 
D) sales to invested assets 
A) operating income to sales 
B) operating income to invested assets 
C) assets to liabilities 
D) sales to invested assets

Question 8

Clydesdale Company's residual income is

Accepted Answer

A) $252,000 
B) $900,000 
C) $1,400,000 
D) $760,000 
A) $252,000 
B) $900,000 
C) $1,400,000 
D) $760,000

Question 9

If Division Q's yearly operating income was $30,000 on invested assets of $200,000, the return on investment is 15%.

Accepted Answer

A) True 
 B)False

Question 10

Investment turnover (as used in determining the return on investment) focuses on the rate of profit earned on each sales dollar.

Accepted Answer

A) True 
 B)False

Question 11

Operating income for Division H is $220,000, and operating income before support department allocations is $975,000. As a result,

Accepted Answer

A) total operating expenses are $565,000 
B) total manufacturing expenses are $565,000 
C) direct materials, direct labor, and factory overhead total $565,000 
D) total support department allocations are $755,000 
A) total operating expenses are $565,000 
B) total manufacturing expenses are $565,000 
C) direct materials, direct labor, and factory overhead total $565,000 
D) total support department allocations are $755,000

Question 12

The profit margin component of return on investment analysis focuses on profitability by indicating the rate of profit earned on each sales dollar.

Accepted Answer

A) True 
 B)False

Question 13

In an investment center, the manager has the responsibility and the authority to make decisions that affect not only costs and revenues, but also the plant assets invested in the center.

Accepted Answer

A) True 
 B)False

Question 14

Division A of Chacha Company has sales of $140,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000.​
-The investment turnover for Division A is

Accepted Answer

A) 0.93 
B) 9.3 
C) 1.07 
D) 10.7 
A) 0.93 
B) 9.3 
C) 1.07 
D) 10.7

Question 15

The objective of transfer pricing is to encourage each division manager to transfer goods and services between divisions if overall company income can be increased by doing so.

Accepted Answer

A) True 
 B)False

Question 16

The profit margin is the

Accepted Answer

A) ratio of operating income to sales 
B) ratio of operating income to invested assets 
C) ratio of assets to liabilities 
D) ratio of sales to invested assets 
A) ratio of operating income to sales 
B) ratio of operating income to invested assets 
C) ratio of assets to liabilities 
D) ratio of sales to invested assets

Question 17

The major advantage of the return on investment over operating income as a divisional performance measure is that divisional investment is directly considered and thus comparability of divisions is facilitated.

Accepted Answer

A) True 
 B)False

Question 18

Developing and retaining quality managers are advantages of decentralization.

Accepted Answer

A) True 
 B)False

Question 19

The major advantage of residual income as a performance measure is that it gives consideration to not only a minimum return on investment but also to the total magnitude of operating income earned by each division.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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

Exam 24: Evaluating Decentralized Operations

Which of the following is a measure of a cost center manager's performance?

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, operating income amounting to $302,500, and a desired minimum return on investment of 15%.​ -The residual income for Chicks Corporation is

If divisional operating income is $100,000, invested assets are $850,000, and the minimum return on invested assets is 8%, the residual income is $68,000.

The rates at which centralized services are charged to each division are called support department allocation rates.

Which of the following transfer price approaches is used when the transfer price is set at the amount sold to outside buyers?

Operating income for Division L is $250,000, total support department allocations are $400,000, and operating expenses are $2,750,000. The revenues for Division L are

The investment turnover is the ratio of

Clydesdale Company's residual income is

If Division Q's yearly operating income was $30,000 on invested assets of $200,000, the return on investment is 15%.

Investment turnover (as used in determining the return on investment) focuses on the rate of profit earned on each sales dollar.

Operating income for Division H is $220,000, and operating income before support department allocations is $975,000. As a result,

The profit margin component of return on investment analysis focuses on profitability by indicating the rate of profit earned on each sales dollar.

In an investment center, the manager has the responsibility and the authority to make decisions that affect not only costs and revenues, but also the plant assets invested in the center.

Division A of Chacha Company has sales of $140,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000.​ -The investment turnover for Division A is

The objective of transfer pricing is to encourage each division manager to transfer goods and services between divisions if overall company income can be increased by doing so.

The profit margin is the

The major advantage of the return on investment over operating income as a divisional performance measure is that divisional investment is directly considered and thus comparability of divisions is facilitated.

Developing and retaining quality managers are advantages of decentralization.

The major advantage of residual income as a performance measure is that it gives consideration to not only a minimum return on investment but also to the total magnitude of operating income earned by each division.

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

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

The Accounting Cycle

Accounting for Retail Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Liabilities: Current, Installment Notes, and Contingencies

Liabilities: Bonds Payable

Corporations: Organization, Stock Transactions, and Dividends

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity-Based Costing

Support Department and Joint Cost Allocation

Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Evaluating Variances From Standard Costs

Differential Analysis and Product Pricing

Capital Investment Analysis

Lean Manufacturing and Activity Analysis

The Balanced Scorecard and Corporate Social Responsibility

Investments

Filters

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, operating income amounting to $302,500, and a desired minimum return on investment of 15%. -The residual income for Chicks Corporation is

Division A of Chacha Company has sales of $140,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000. -The investment turnover for Division A is