Question 1

Operating income of the Pierce Automobile Division is $2,225,000. If operating income before support department allocations is $3,250,000,

Accepted Answer

A) operating expenses are $1,025,000 
B) total support department allocations are $1,025,000 
C) noncontrollable charges are $1,025,000 
D) direct manufacturing charges are $1,025,000 
A) operating expenses are $1,025,000 
B) total support department allocations are $1,025,000 
C) noncontrollable charges are $1,025,000 
D) direct manufacturing charges are $1,025,000

Question 2

The operating income of the Super Division after all support department allocations will be

Accepted Answer

A) $300,000 
B) $325,000 
C) $550,000 
D) $200,000 
A) $300,000 
B) $325,000 
C) $550,000 
D) $200,000

Question 3

A manager in a cost center also has responsibility and authority over the revenues.

Accepted Answer

A) True 
 B)False

Question 4

A franchise fee is often expressed as a percent of revenues earned by the franchisee.

Accepted Answer

A) True 
 B)False

Question 5

Materials used by Layton Company's Division 1 are currently purchased from outside supplier at $58 per unit. Division 2 is able to supply Division 1 with 20,000 units at a variable cost of $46 per unit. The two divisions have recently negotiated a transfer price of $50 per unit for the 20,000 units.​
a. By how much will each division's income increase as a result of this transfer?
b. What is the total increase in income for Layton Company?

Accepted Answer

The answer of Materials used by Layton Company's Division 1...

Question 6

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are _____ expenses.

Accepted Answer

A) miscellaneous administrative 
B) direct operating 
C) indirect 
D) fixed 
A) miscellaneous administrative 
B) direct operating 
C) indirect 
D) fixed

Question 7

The primary accounting tool for controlling and reporting for cost centers is a budget performance report.

Accepted Answer

A) True 
 B)False

Question 8

If divisional operating income is $75,000, invested assets are $737,500, and the minimum return on invested assets is 6%, the residual income is $36,750.

Accepted Answer

A) True 
 B)False

Question 9

Mason Corporation had $650,000 in invested assets, sales of $700,000, operating income amounting to $99,000, and a desired minimum return on investment of 15%.
-The investment turnover for Mason Corporation is

Accepted Answer

A) 1.08 
B) 0.93 
C) 6.57 
D) 7.07 
A) 1.08 
B) 0.93 
C) 6.57 
D) 7.07

Question 10

The operating income of the Macro Division after all support department allocations will be

Accepted Answer

A) $780,000 
B) $375,000 
C) $575,000 
D) $435,000 
A) $780,000 
B) $375,000 
C) $575,000 
D) $435,000

Question 11

The profit center income statement should include only controllable revenues and expenses.

Accepted Answer

A) True 
 B)False

Question 12

If the profit margin for a division is 8% and the investment turnover is 1.2, the return on investment is 9.6%.

Accepted Answer

A) True 
 B)False

Question 13

Budget performance reports prepared for the vice president of production would generally contain less detail than reports prepared for the various plant managers.

Accepted Answer

A) True 
 B)False

Question 14

The right or license granted to an individual or group to market another company's goods or services is called a franchise.

Accepted Answer

A) True 
 B)False

Question 15

The process of measuring and reporting operating data by responsibility centers is termed responsibility accounting.

Accepted Answer

A) True 
 B)False

Question 16

The sales, operating income, invested assets, and residual income for each division of Marcus Company are as follows:   Determine the minimum return on invested assets

Accepted Answer

The answer of The sales, operating income, invested assets, and...

Question 17

Which of the following is a disadvantage of decentralization?

Accepted Answer

A) Decisions made by one manager may negatively affect the profitability of the entire company. 
B) Decentralization helps retain quality managers. 
C) Managers closest to the operations make decisions. 
D) Managers are able to acquire expertise in their areas of responsibility. 
A) Decisions made by one manager may negatively affect the profitability of the entire company. 
B) Decentralization helps retain quality managers. 
C) Managers closest to the operations make decisions. 
D) Managers are able to acquire expertise in their areas of responsibility.

Question 18

In return on investment analysis, the investment turnover component focuses on efficiency in the use of assets and indicates the rate at which sales are being generated for each dollar of invested assets.

Accepted Answer

A) True 
 B)False

Question 19

It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.

Accepted Answer

A) True 
 B)False

Question 20

Three measures of investment center performance are operating income, return on investment, and residual income.

Accepted Answer

A) True 
 B)False

Exam 24: Evaluating Decentralized Operations

Operating income of the Pierce Automobile Division is $2,225,000. If operating income before support department allocations is $3,250,000,

The operating income of the Super Division after all support department allocations will be

A manager in a cost center also has responsibility and authority over the revenues.

A franchise fee is often expressed as a percent of revenues earned by the franchisee.

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are _____ expenses.

The primary accounting tool for controlling and reporting for cost centers is a budget performance report.

If divisional operating income is $75,000, invested assets are $737,500, and the minimum return on invested assets is 6%, the residual income is $36,750.

Mason Corporation had $650,000 in invested assets, sales of $700,000, operating income amounting to $99,000, and a desired minimum return on investment of 15%. -The investment turnover for Mason Corporation is

The operating income of the Macro Division after all support department allocations will be

The profit center income statement should include only controllable revenues and expenses.

If the profit margin for a division is 8% and the investment turnover is 1.2, the return on investment is 9.6%.

Budget performance reports prepared for the vice president of production would generally contain less detail than reports prepared for the various plant managers.

The right or license granted to an individual or group to market another company's goods or services is called a franchise.

The process of measuring and reporting operating data by responsibility centers is termed responsibility accounting.

The sales, operating income, invested assets, and residual income for each division of Marcus Company are as follows: Determine the minimum return on invested assets

Which of the following is a disadvantage of decentralization?

In return on investment analysis, the investment turnover component focuses on efficiency in the use of assets and indicates the rate at which sales are being generated for each dollar of invested assets.

It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.

Three measures of investment center performance are operating income, return on investment, and residual income.

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

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