Exam 24: Responsibility Accounting and Performance Evaluation

Which of the following would most likely be evaluated using residual income?

The primary objective in setting transfer prices is to achieve goal congruence by selecting a price that will maximize the overall company profits.

Which of the following four perspectives of the balanced scorecard enables management to answer the question,"How can we continue to improve and create value?"

Profit center responsibility reports include ________.

Which of the following is the correct formula for the profit margin ratio?

The primary objective in setting transfer prices is to ________.

Net income is used in the numerator of the return on investment formula.

The manager of a cost center is responsible for controlling costs and generating revenues for the company.

Which responsibility center managers are responsible for both generating revenue and either controlling costs or efficiently managing invested capital?

When a division is operating at capacity,the transfer price should be ________.

The return on investment formula focuses on the amount of operating income earned before considering other revenue and expense items,such as interest expense.

Worldwide Logistics provides the following information: Operating income \ 1,500,000 Net sales \ 14,000,000 Average total assets \ 2,000,000 Management's target rate of return 30\% What is the company's residual income?

Provisions Company,a manufacturer of office supplies,provides the following financial information: Pen Division Pencil Division Operating income \ 100,000 \ 40,000 Net sales \ 500,000 \ 150,000 Total assets at Jan. 1 \ 580,000 \ 350,000 Total assets at Dec. 31 \ 610,000 \ 300,000 Calculate the return on investment for the Pen Division.(Round your answer to two decimal places.)

The best measure for evaluating the effectiveness of a manger in an investment center would be ________.

The transfer price is the transaction amount of one unit of goods when the transaction occurs between the company and its customers.

In decentralized companies,performance evaluation systems provide upper management with the feedback it needs to maintain control over the entire organization.

Return on investment measures the profitability of an investment center but not the efficiency in using its assets.

How is the use of a balanced scorecard as a performance evaluation system helpful to companies?

Which of the following is the correct formula for calculating return on investment?

Sirius,Inc.has average total assets of $300,000.The annual operating income of the company is $125,000.The target rate of return for the company is 15%.Calculate the residual income.