Question 1

Assume the following information for a product line:
  What is the product line's segment income?

Accepted Answer

A)  $775,000 
B)  $900,000 
C)  $815,000 
D)  $915,000 
A)  $775,000 
B)  $900,000 
C)  $815,000 
D)  $915,000

Question 2

Walid Corp is a decentralized company that rewards division managers based on ROI. The City Division produces a component that is used by the County Division. City's unit cost of manufacturing 2,500 components (capacity) is:
   City can sell 2,000 units on the open market for $30 by incurring selling costs of $2 per unit.
An outside supplier has offered County 2,500 units of this same component for $27. Orders of less than 2,500 units would cost the County Division $30 each. County needs the 2,500 components to make finished goods, which provide a total contribution of $250,000, without subtracting the cost of the component. The County Division's manager has approached the City Division manager with an offer to purchase the entire 2,500 units from the City Division for a total cost of $130,000 ($26 per unit). If this internal transaction is completed, the City Division would not incur the $2 unit selling costs.
Required: Analyze the effect of this offer considering the following:
a. Is the City Division better off by accepting the offer to sell 2,500 units internally for $26 each?
b. How much is the corporation as a whole better or worse off if the transaction is completed internally as opposed to each division dealing externally? Justify your answer.
c. What is the highest price the County Division would consider paying the City Division for the component?
d. How does the analysis change if City can sell 2,500 units on the open market for $30 with the $2 selling cost?

Accepted Answer

a. If City sells externally, the divisio

Question 3

Assume the following information for a product line:
  What is the product line's contribution margin?

Accepted Answer

A)  $ 825,000 
B)  $ 940,000 
C)  $ 890,000 
D)  $ 450,000 
A)  $ 825,000 
B)  $ 940,000 
C)  $ 890,000 
D)  $ 450,000

Question 4

Information for Tube division is as follows:
  What is Tube's residual income?

Accepted Answer

A)  $13,000 
B)  $ 8,000 
C)  $16,000 
D)  $12,000 
A)  $13,000 
B)  $ 8,000 
C)  $16,000 
D)  $12,000

Question 5

The optimal transfer price from the corporation's viewpoint is:

Accepted Answer

A)  The seller's variable cost plus the seller's opportunity cost 
B)  The amount that equals segment margin 
C)  The seller's variable cost plus the buyer's opportunity cost 
D)  The highest it can possibly obtain 
A)  The seller's variable cost plus the seller's opportunity cost 
B)  The amount that equals segment margin 
C)  The seller's variable cost plus the buyer's opportunity cost 
D)  The highest it can possibly obtain

Question 6

If a company has sales of $1,000,000, net income of $170,000, and an asset base of $1,000,000, what is its return on investment?

Accepted Answer

(Income / Sales) x (Sales / As

Question 7

Product X contribution margin minus Direct product fixed expenses, is termed:

Accepted Answer

A)  Manufacturing margin 
B)  Operating income 
C)  Product margin 
D)  Gross margin 
A)  Manufacturing margin 
B)  Operating income 
C)  Product margin 
D)  Gross margin

Question 8

The following information pertains to the Hillside Division, which operates as an investment center:
   Calculate Hillside Division's net income.

Accepted Answer

Income / Sales = Return on sal

Question 9

First Fleet Company is a two-division firm and has the following information available for this year:
  What is Division A's contribution margin?

Accepted Answer

A)  $ 420,000 
B)  $ 450,000 
C)  $ 480,000 
D)  $(120,000) 
A)  $ 420,000 
B)  $ 450,000 
C)  $ 480,000 
D)  $(120,000)

Question 10

Transfer pricing is a system used only in assigning a price to a product or service transferred between two profit centers within a company.

Accepted Answer

A) True 
 B)False

Question 11

Beverage Depot's Juice Division, has two product lines (Orange and Apple) and has the following information available for the current year:
  The Product Income for Apple is:

Accepted Answer

A)  $335,000 
B)  $502,500 
C)  $640,000 
D)  $577,500 
A)  $335,000 
B)  $502,500 
C)  $640,000 
D)  $577,500

Question 12

Which of the sources listed below would a manager be least likely to consider in deciding whether or not to discontinue a given segment?

Accepted Answer

A)  Direct segment costs 
B)  An evaluation of the importance of the segment to overall operations 
C)  The common costs allocated to the segment 
D)  Segment reports 
A)  Direct segment costs 
B)  An evaluation of the importance of the segment to overall operations 
C)  The common costs allocated to the segment 
D)  Segment reports

Question 13

Falcon Company had sales of $2,400,000, net income of $400,000, and an asset base of $600,000. Its investment turnover is:

Accepted Answer

A)  0.25 
B)  3.30 
C)  2.50 
D)  4.00 
A)  0.25 
B)  3.30 
C)  2.50 
D)  4.00

Question 14

Which of the following situations gives rise to the need for a transfer price?

Accepted Answer

A)  Two divisions of the same company sell to the same wholesaler 
B)  Two divisions of the same company sell competing products to the same customer 
C)  Two divisions of the same company sell to one another 
D)  Both B and C 
A)  Two divisions of the same company sell to the same wholesaler 
B)  Two divisions of the same company sell competing products to the same customer 
C)  Two divisions of the same company sell to one another 
D)  Both B and C

Question 15

In a segment report for territories, the contribution margin less direct segment fixed costs is typically called the:

Accepted Answer

A)  Segment margin 
B)  Product margin 
C)  Territory margin 
D)  Fixed costs 
A)  Segment margin 
B)  Product margin 
C)  Territory margin 
D)  Fixed costs

Question 16

The Timberland Lumber Company had the following historical accounting data, per 100 board feet, concerning one of its products in the Sawmill Division:
  The historical data is based on an average volume per period of 20,000 board feet. The shelving is normally transferred internally from the Sawmill Division to the Finishing Division. Timberland may also sell the shelving externally for $90 per 100 board feet. The divisions are taxed at identical rates.
Which of the following transfer pricing methods would lead to the highest Finishing Division income if 10,000 board feet are produced and transferred in entirety this period from Sawmill to Finishing?

Accepted Answer

A)  Market price 
B)  All variable costs plus 50 percent markup 
C)  Full absorption costing plus 10 percent markup 
D)  None of these methods generates a higher division income than another. 
A)  Market price 
B)  All variable costs plus 50 percent markup 
C)  Full absorption costing plus 10 percent markup 
D)  None of these methods generates a higher division income than another.

Question 17

The Jackson Division of Florida Motors had an operating income of $335,000 and net assets of $1,340,000. Florida Motors has a target rate of return of 12 percent. The Jackson Division has an opportunity to increase operating income by $50,000 if a $200,000 investment in assets is made.
What will Jackson's ROI and Residual Income be if the project is undertaken?

Accepted Answer

A)  ROI 12 percent, Residual Income $ 50,000 
B)  ROI 27 percent, Residual Income $ 198,000 
C)  ROI 26 percent, Residual Income $ 200,000 
D)  ROI 25 percent, Residual Income $ 200,200 
A)  ROI 12 percent, Residual Income $ 50,000 
B)  ROI 27 percent, Residual Income $ 198,000 
C)  ROI 26 percent, Residual Income $ 200,000 
D)  ROI 25 percent, Residual Income $ 200,200

Question 18

When an outside market exists for an intermediate product that is perfectly competitive, the ideal method of transfer pricing is generally:

Accepted Answer

A)  The one that creates the highest margin to the selling unit 
B)  The price at which the product sells in the external market 
C)  One that is higher than what the outside market is quoting 
D)  Based on management accounting numbers 
A)  The one that creates the highest margin to the selling unit 
B)  The price at which the product sells in the external market 
C)  One that is higher than what the outside market is quoting 
D)  Based on management accounting numbers

Question 19

Beverage Depot has two divisions (Soda and Juice) and has the following information available for the current year:
  Beverage Depot's Juice segment income is:

Accepted Answer

A)  $1,200,000 
B)  $1,100,000 
C)  $ 980,000 
D)  $1,380,000 
A)  $1,200,000 
B)  $1,100,000 
C)  $ 980,000 
D)  $1,380,000

Question 20

In the long run, the best profitability number for deciding the impact of discontinuing a segment is segment income after subtracting allocated common segment costs.

Accepted Answer

A) True 
 B)False

Assume the following information for a product line: What is the product line's segment income?

Assume the following information for a product line: What is the product line's contribution margin?

Information for Tube division is as follows: What is Tube's residual income?

The optimal transfer price from the corporation's viewpoint is:

If a company has sales of $1,000,000, net income of $170,000, and an asset base of $1,000,000, what is its return on investment?

Product X contribution margin minus Direct product fixed expenses, is termed:

The following information pertains to the Hillside Division, which operates as an investment center: Calculate Hillside Division's net income.

First Fleet Company is a two-division firm and has the following information available for this year: What is Division A's contribution margin?

Transfer pricing is a system used only in assigning a price to a product or service transferred between two profit centers within a company.

Beverage Depot's Juice Division, has two product lines (Orange and Apple) and has the following information available for the current year: The Product Income for Apple is:

Which of the sources listed below would a manager be least likely to consider in deciding whether or not to discontinue a given segment?

Falcon Company had sales of $2,400,000, net income of $400,000, and an asset base of $600,000. Its investment turnover is:

Which of the following situations gives rise to the need for a transfer price?

In a segment report for territories, the contribution margin less direct segment fixed costs is typically called the:

When an outside market exists for an intermediate product that is perfectly competitive, the ideal method of transfer pricing is generally:

Beverage Depot has two divisions (Soda and Juice) and has the following information available for the current year: Beverage Depot's Juice segment income is:

In the long run, the best profitability number for deciding the impact of discontinuing a segment is segment income after subtracting allocated common segment costs.

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

Assume the following information for a product line: What is the product line's segment income?

Assume the following information for a product line: What is the product line's contribution margin?

Information for Tube division is as follows: What is Tube's residual income?

The optimal transfer price from the corporation's viewpoint is:

If a company has sales of $1,000,000, net income of $170,000, and an asset base of $1,000,000, what is its return on investment?

Product X contribution margin minus Direct product fixed expenses, is termed:

The following information pertains to the Hillside Division, which operates as an investment center: Calculate Hillside Division's net income.

First Fleet Company is a two-division firm and has the following information available for this year: What is Division A's contribution margin?

Transfer pricing is a system used only in assigning a price to a product or service transferred between two profit centers within a company.

Beverage Depot's Juice Division, has two product lines (Orange and Apple) and has the following information available for the current year: The Product Income for Apple is:

Which of the sources listed below would a manager be least likely to consider in deciding whether or not to discontinue a given segment?

Falcon Company had sales of $2,400,000, net income of $400,000, and an asset base of $600,000. Its investment turnover is:

Which of the following situations gives rise to the need for a transfer price?

In a segment report for territories, the contribution margin less direct segment fixed costs is typically called the:

When an outside market exists for an intermediate product that is perfectly competitive, the ideal method of transfer pricing is generally:

Beverage Depot has two divisions (Soda and Juice) and has the following information available for the current year: Beverage Depot's Juice segment income is:

In the long run, the best profitability number for deciding the impact of discontinuing a segment is segment income after subtracting allocated common segment costs.

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