Question 1

In the short run, the best profitability number for deciding the impact of discontinuing a segment is segment margin.

Accepted Answer

A) True 
 B)False

Question 2

A balanced scorecard typically includes:

Accepted Answer

A)  Financial measures 
B)  Customer satisfaction measures 
C)  Internal processes measures 
D)  All of the above 
A)  Financial measures 
B)  Customer satisfaction measures 
C)  Internal processes measures 
D)  All of the above

Question 3

The return on investment can be obtained by multiplying return on equity times asset turnover.

Accepted Answer

A) True 
 B)False

Question 4

Diamond Division had the following information:
   Calculate Diamond Division's economic value added.

Accepted Answer

The answer of Diamond Division had the following information:
 ...

Question 5

Bolingbrook Company has the following data for this year:
   Bolingbrook Company has a target ROI of 20 percent.
Required: Calculate the following amounts for each division:
a. Return on sales ratio
b. Operating investment turnover
c. ROI
d. Residual income

Accepted Answer

Bottling Division
a. Return on sales rat

Question 6

Under which of the following circumstances is a return on investment performance measure more likely to be misleading in comparing the performance of several divisions?

Accepted Answer

A)  Inventories are valued on a FIFO costing basis. 
B)  Long-term assets are stated at current prices rather than at book value. 
C)  Long-term assets are stated at book value. 
D)  A division manager is over investing in assets that provide little contribution toward earnings. 
A)  Inventories are valued on a FIFO costing basis. 
B)  Long-term assets are stated at current prices rather than at book value. 
C)  Long-term assets are stated at book value. 
D)  A division manager is over investing in assets that provide little contribution toward earnings.

Question 7

Landscape Manufacturing Company has three divisions. Engine components are transferred from Components to Assembly. Assembled engines are transferred from Assembly to the Mower Division. Costs for each division are given below. Mowers are sold on in a competitive outside market for $250.
   All transfers are made at 130% of variable cost. During this period, Components sends Assembly 10,000 packages of engine components. Assembly then sends the Mower division 10,000 assembled engines.
What is the transfer price the Mower Division pays Assembly for engines? (Note: Transfers from one division to another are treated as a variable cost of the buying division.)

Accepted Answer

Transfer price to Assembly fro

Question 8

Landscape Manufacturing Company has three divisions. Engine components are transferred from Components to Assembly. Assembled engines are transferred from Assembly to the Mower Division. Costs for each division are given below. Mowers are sold on in a competitive outside market for $250.
   All transfers are made at 100% of absorption cost. During this period, Components sends Assembly 10,000 packages of engine components. Assembly then sends the Mower division 10,000 assembled engines.
Determine the transfer price the Mower Division pays Assembly for engines.

Accepted Answer

$50 for Component's variable cost + ($60

Question 9

Which of the following is a legitimate disadvantage of residual income?

Accepted Answer

A)  It does not explicitly capture cost of capital in the computation of the measure. 
B)  It does not encourage managers to accept all projects above the minimum return. 
C)  It is not an effective basis for comparing divisions of substantially different sizes 
D)  It does not provide any new information beyond ROI. 
A)  It does not explicitly capture cost of capital in the computation of the measure. 
B)  It does not encourage managers to accept all projects above the minimum return. 
C)  It is not an effective basis for comparing divisions of substantially different sizes 
D)  It does not provide any new information beyond ROI.

Question 10

Segment reports are most often produced to coincide with:

Accepted Answer

A)  Internal value chains 
B)  Managerial lines of responsibility 
C)  Capital budget centers 
D)  None of the above 
A)  Internal value chains 
B)  Managerial lines of responsibility 
C)  Capital budget centers 
D)  None of the above

Question 11

Tesla Enterprises is a decentralized corporation that evaluates its divisions based on their reported return on investment. One of Tesla's divisions, the Pipe division, manufactures pipe fittings that are used by the Equipment division as well as other users outside the organization. Pipe has the capacity to make only 3,000 of these fittings at a variable cost of $14 per fitting. Fixed costs of the Pipe division are $90,000 per period and include costs that are common to other products the Pipe division makes. Fixed costs allocated to the fittings sold to the Equipment division are $24,000 per period. The Equipment division uses the fittings and incurs $100 per unit of additional variable costs to make the equipment that sells on the open market for $150. Equipment expects to sell 1,000 pieces of equipment this period. Fixed costs of this division related to depreciation on past expenditures are estimated at $15,000. Fittings like those transferred from Pipe to Equipment sell on the open market for $30 each. Top management of the organization allows divisions to negotiate transfer prices and has a policy of not inferring with the negotiation process.
Required:
a. What is the absolute minimum price Pipe would accept from Equipment for the fittings if Pipe has excess capacity? State any assumptions necessary to answer the question.
b. What is the maximum price Equipment would pay the Pipe division for the fittings?
c. What is the minimum price Pipe would accept if Pipe is operating at capacity to fill orders for these fittings on the open market?

Accepted Answer

a. The minimum price Pipe could accept a

Question 12

Which of the following is not used in the formulation of economic value added (EVA)?

Accepted Answer

A)  A minimum rate of return set by top management 
B)  After tax income 
C)  The weighted average cost of capital 
D)  Total net assets 
A)  A minimum rate of return set by top management 
B)  After tax income 
C)  The weighted average cost of capital 
D)  Total net assets

Question 13

Holland Company had sales of $18,000,000, investment turnover of 60%, and an ROI of 13%. Holland's net assets equal:

Accepted Answer

A)  $ 20,000,000 
B)  $ 30,000,000 
C)  $ 10,000,000 
D)  $ 88,888,888 
A)  $ 20,000,000 
B)  $ 30,000,000 
C)  $ 10,000,000 
D)  $ 88,888,888

Question 14

Which of the following is not relevant when evaluating managers using return on investment?

Accepted Answer

A)  Allocating corporate costs to divisions 
B)  Measuring division assets 
C)  Measuring division revenues 
D)  Measuring division costs 
A)  Allocating corporate costs to divisions 
B)  Measuring division assets 
C)  Measuring division revenues 
D)  Measuring division costs

Question 15

Sprout Company produces three products: A, B, and C. The income statement for 2017 is as follows:
   The sales, contribution margin ratios, and direct fixed expenses for the three types of products are as follows:
   Prepare income statements segmented by products and include a column for the entire firm in the statement.

Accepted Answer

The answer of Sprout Company produces three products: A, B,...

Question 16

An advantage of absorption cost transfer pricing arises from the fact that:

Accepted Answer

A)  This method is not as easy to implement as other methods. 
B)  This method encourages the selling division to operate efficiently. 
C)  This method allows the selling division to make a contribution toward covering long run fixed costs. 
D)  This method keeps the purchasing division content. 
A)  This method is not as easy to implement as other methods. 
B)  This method encourages the selling division to operate efficiently. 
C)  This method allows the selling division to make a contribution toward covering long run fixed costs. 
D)  This method keeps the purchasing division content.

Question 17

What is a transfer price?

Accepted Answer

A)  The amount charged for a product or service that one division provides another 
B)  The amount charged for goods and services offered to the government 
C)  An amount charged to cover the costs associated with import/export taxes 
D)  The amount charged the final consumer to cover all costs incurred along the value chain 
A)  The amount charged for a product or service that one division provides another 
B)  The amount charged for goods and services offered to the government 
C)  An amount charged to cover the costs associated with import/export taxes 
D)  The amount charged the final consumer to cover all costs incurred along the value chain

Question 18

Which if the following statements about financial performance measures on a balanced scorecard is not true?

Accepted Answer

A)  No single financial measure captures all performance aspects of an organization. 
B)  Financial measures have reporting time lags that could hinder timely decision making. 
C)  Financial measures may not accurately capture the information needed for current decision making. 
D)  Financial performance measures typically include customer satisfaction and internal processes. 
A)  No single financial measure captures all performance aspects of an organization. 
B)  Financial measures have reporting time lags that could hinder timely decision making. 
C)  Financial measures may not accurately capture the information needed for current decision making. 
D)  Financial performance measures typically include customer satisfaction and internal processes.

Question 19

The return on investment is computed as:

Accepted Answer

A)  Investment center income divided by sales 
B)  Investment center income divided by Investment center asset base 
C)  Sales divided by Investment center asset base 
D)  Investment turnover divided by the Investment center income margin 
A)  Investment center income divided by sales 
B)  Investment center income divided by Investment center asset base 
C)  Sales divided by Investment center asset base 
D)  Investment turnover divided by the Investment center income margin

Question 20

The following information pertains to the Twix Division, which operates as an investment center:
  What were Twix Division's net assets?

Accepted Answer

A)  $16,000,000 
B)  $32,333,333 
C)  $25,000,000 
D)  $24,000,000 
A)  $16,000,000 
B)  $32,333,333 
C)  $25,000,000 
D)  $24,000,000

In the short run, the best profitability number for deciding the impact of discontinuing a segment is segment margin.

A balanced scorecard typically includes:

The return on investment can be obtained by multiplying return on equity times asset turnover.

Diamond Division had the following information: Calculate Diamond Division's economic value added.

Bolingbrook Company has the following data for this year: Bolingbrook Company has a target ROI of 20 percent. Required: Calculate the following amounts for each division: a. Return on sales ratio b. Operating investment turnover c. ROI d. Residual income

Under which of the following circumstances is a return on investment performance measure more likely to be misleading in comparing the performance of several divisions?

Which of the following is a legitimate disadvantage of residual income?

Segment reports are most often produced to coincide with:

Which of the following is not used in the formulation of economic value added (EVA)?

Holland Company had sales of $18,000,000, investment turnover of 60%, and an ROI of 13%. Holland's net assets equal:

Which of the following is not relevant when evaluating managers using return on investment?

An advantage of absorption cost transfer pricing arises from the fact that:

What is a transfer price?

Which if the following statements about financial performance measures on a balanced scorecard is not true?

The return on investment is computed as:

The following information pertains to the Twix Division, which operates as an investment center: What were Twix Division's net assets?

Managerial Accounting: Tools for Decision Making

Cost Behavior, Activity Analysis, and Cost Estimation

Cost-Volume-Profit Analysis and Planning

Relevant Costs and Benefits for Decision Making

Product Costing: Job and Process Operations

Activity-Based Costing, Customer Profitability, and Activity-Based Management

Additional Topics in Product Costing

Pricing and Other Product Management Decisions

Operational Budgeting and Profit Planning

Standard Costs and Performance Reports

Capital Budgeting Decisions

Appendix: Managerial Analysis of Financial Statements

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Exam 11: Segment Reporting, Transfer Pricing, and Balanced Scorecard

In the short run, the best profitability number for deciding the impact of discontinuing a segment is segment margin.

A balanced scorecard typically includes:

The return on investment can be obtained by multiplying return on equity times asset turnover.

Diamond Division had the following information: Calculate Diamond Division's economic value added.

Bolingbrook Company has the following data for this year: Bolingbrook Company has a target ROI of 20 percent. Required: Calculate the following amounts for each division: a. Return on sales ratio b. Operating investment turnover c. ROI d. Residual income

Under which of the following circumstances is a return on investment performance measure more likely to be misleading in comparing the performance of several divisions?

Which of the following is a legitimate disadvantage of residual income?

Segment reports are most often produced to coincide with:

Which of the following is not used in the formulation of economic value added (EVA)?

Holland Company had sales of $18,000,000, investment turnover of 60%, and an ROI of 13%. Holland's net assets equal:

Which of the following is not relevant when evaluating managers using return on investment?

An advantage of absorption cost transfer pricing arises from the fact that:

What is a transfer price?

Which if the following statements about financial performance measures on a balanced scorecard is not true?

The return on investment is computed as:

The following information pertains to the Twix Division, which operates as an investment center: What were Twix Division's net assets?

Managerial Accounting: Tools for Decision Making

Cost Behavior, Activity Analysis, and Cost Estimation

Cost-Volume-Profit Analysis and Planning

Relevant Costs and Benefits for Decision Making

Product Costing: Job and Process Operations

Activity-Based Costing, Customer Profitability, and Activity-Based Management

Additional Topics in Product Costing

Pricing and Other Product Management Decisions

Operational Budgeting and Profit Planning

Standard Costs and Performance Reports

Capital Budgeting Decisions

Appendix: Managerial Analysis of Financial Statements

Filters