Question 1

An investment center manager's performance can be based on

Accepted Answer

A) The same methods as managers of cost centers. 
B) The same methods as managers of profit centers. 
C) Residual income. 
D) All of these answer choices are correct. 
A) The same methods as managers of cost centers. 
B) The same methods as managers of profit centers. 
C) Residual income. 
D) All of these answer choices are correct.

Question 2

The goal of setting a transfer price is to

Accepted Answer

A) Maximize the overall profit of the organization. 
B) Maximize the profit of the transferring division. 
C) Motivate managers to behave in the best interest of the firm as a whole. 
D) Ensure that all divisions have the products they need to operate. 
A) Maximize the overall profit of the organization. 
B) Maximize the profit of the transferring division. 
C) Motivate managers to behave in the best interest of the firm as a whole. 
D) Ensure that all divisions have the products they need to operate.

Question 3

Durango Corporation's Midwestern region operates as an investment center.Rich Ruhlman,the division's manager,has set a 15% required minimum rate of return.Ruhlman is considering investing in computerized manufacturing equipment with a cost of $220,000.The equipment is expected to generate $65,000 in additional operating income.What is the equipment's residual income?

Accepted Answer

A) $65,000 
B) $33,000 
C) $32,000 
D) None of these answer choices are correct 
A) $65,000 
B) $33,000 
C) $32,000 
D) None of these answer choices are correct

Question 4

Which of the following is an advantage of decentralization?

Accepted Answer

A) Duplication of effort is minimized. 
B) The potential for sharing ideas throughout the organization is enhanced. 
C) Lower-level managers understand the company's strategies and goals,and thus make decisions that are in the best interest of the organization as a whole. 
D) Top management is free to focus on the long-term strategies of the organization. 
A) Duplication of effort is minimized. 
B) The potential for sharing ideas throughout the organization is enhanced. 
C) Lower-level managers understand the company's strategies and goals,and thus make decisions that are in the best interest of the organization as a whole. 
D) Top management is free to focus on the long-term strategies of the organization.

Question 5

-Bethel Corporation provided the following income statement for two of its divisions: North and South.
   Required:
The home office allocated common fixed costs of $18,000 to North and $2,000 to South.Prepare a segment margin income statement.

Accepted Answer

The answer of  
-Bethel Corporation provided the following income...

Question 6

-Martin Company sells two products,Standard and Deluxe.Data for activity during January are as follows:
   Required:
Prepare a Segment Margin income statement.Common fixed costs of $25,000 are allocated one-half to Standard and one-half to Deluxe.

Accepted Answer

The answer of  
-Martin Company sells two products,Standard and...

Question 7

Which of the following is the formula for setting a minimum transfer price?

Accepted Answer

A) Sales less variable cost 
B) Contribution less income taxes and interest 
C) Variable cost to produce/sell + contribution margin forgone from the transfer 
D) Variable cost to produce/sell + allocated fixed costs 
A) Sales less variable cost 
B) Contribution less income taxes and interest 
C) Variable cost to produce/sell + contribution margin forgone from the transfer 
D) Variable cost to produce/sell + allocated fixed costs

Question 8

ABC Corporation has three divisions,a service division with two locations,a retail division with four locations,and a home office,each of which is evaluated individually.This is an example of which type of organization?

Accepted Answer

A) Segmented decision making 
B) Decentralized 
C) Divisional instability 
D) None of these answer choices are correct. 
A) Segmented decision making 
B) Decentralized 
C) Divisional instability 
D) None of these answer choices are correct.

Question 9

One thing that is missing from GAAP-based segment reporting is a breakdown of

Accepted Answer

A) Product and period costs. 
B) Cost of goods sold and operating costs. 
C) Variable and fixed costs. 
D) Gross margin and net income. 
A) Product and period costs. 
B) Cost of goods sold and operating costs. 
C) Variable and fixed costs. 
D) Gross margin and net income.

Question 10

The most common measure used as the denominator in the ROI calculation is a simple average of the assets used during the year.

Accepted Answer

A) True 
 B)False

Question 11

City Retail sells two products: Standard and Deluxe.The company had sales of $800,000 during the current year.The company's contribution margin ratio was 40% and total fixed costs totaled $300,000.Sales were $600,000 for Standard and $200,000 for Deluxe.Traceable fixed costs were $150,000 for Standard and $90,000 for Deluxe.Variable costs were $360,000 for Standard and $120,000 for Deluxe.What is the segment margin for the Deluxe product?
a.$10,000
b.$10,000
c.$20,000
d.$80,000

Accepted Answer

$200,000 -

Question 12

Brian Lochte operates a popular water park.Projections for the current year are as follows:
Sales revenue $8,000,000
Operating income $700,000
Average total assets $4,000,000
The park's weighted-average cost of capital is 10%,and Brian requires that all new investments generate a return on investment of at least 13%.
At last week's board meeting,Brian told the board that he had up to $50,000 to invest in new facilities at the Park and asked them to recommend some projects.Today the board's president presented Brian with the following list of three potential investments to improve the park facilities.
Wading Pool Diving Pool Hot Tub
Incremental operating income $ 3,250 $ 4,800 $ 2,700
Average total assets 25,000 45,000 16,000
Required
a.Calculate the residual income and economic value added for each of the three projects.
b.Which of the three projects do you recommend Brian undertake? Why?

Accepted Answer

a. @#IMG-DLM& 
b.Both the wading pool and the hot

Question 13

The DuPont Model decomposes the original ROI formula into two components to show the different choices managers have to improve ROI.What are the terms for the two components and how do you calculate the ratios?

Accepted Answer

The two components are margin

Question 14

Which of the following is a shortcoming of ROI as a performance measure?

Accepted Answer

A) ROI can increase without any change in operations because of depreciation. 
B) It can encourage some undesirable behavior by managers. 
C) Both ROI can increase without any change in operations because of depreciation and it can encourage some undesirable behavior by managers. 
D) Neither ROI can increase without any change in operations because of depreciation nor it can encourage some undesirable behavior by managers. 
A) ROI can increase without any change in operations because of depreciation. 
B) It can encourage some undesirable behavior by managers. 
C) Both ROI can increase without any change in operations because of depreciation and it can encourage some undesirable behavior by managers. 
D) Neither ROI can increase without any change in operations because of depreciation nor it can encourage some undesirable behavior by managers.

An investment center manager's performance can be based on

The goal of setting a transfer price is to

Which of the following is an advantage of decentralization?

-Bethel Corporation provided the following income statement for two of its divisions: North and South. Required: The home office allocated common fixed costs of $18,000 to North and $2,000 to South.Prepare a segment margin income statement.

-Martin Company sells two products,Standard and Deluxe.Data for activity during January are as follows: Required: Prepare a Segment Margin income statement.Common fixed costs of $25,000 are allocated one-half to Standard and one-half to Deluxe.

Which of the following is the formula for setting a minimum transfer price?

ABC Corporation has three divisions,a service division with two locations,a retail division with four locations,and a home office,each of which is evaluated individually.This is an example of which type of organization?

One thing that is missing from GAAP-based segment reporting is a breakdown of

The most common measure used as the denominator in the ROI calculation is a simple average of the assets used during the year.

The DuPont Model decomposes the original ROI formula into two components to show the different choices managers have to improve ROI.What are the terms for the two components and how do you calculate the ratios?

Which of the following is a shortcoming of ROI as a performance measure?

Accounting As a Tool for Management

Cost Behavior and Cost Estimation

Cost-Volume-Profit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting

Performance Evaluation: Variance Analysis

Activity-Based Costing and Activity Based Management

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

Statement of Cash Flows

Topic Focus: Process Costing

Topic Focus Variable and Absorption Costing

Topic Focus Standard Costing Systems

Topic Focus Customer Profitability

Filters

Exam 10: Decentralizing and Performance Evaluation

An investment center manager's performance can be based on

The goal of setting a transfer price is to

Which of the following is an advantage of decentralization?

-Bethel Corporation provided the following income statement for two of its divisions: North and South. Required: The home office allocated common fixed costs of $18,000 to North and $2,000 to South.Prepare a segment margin income statement.

-Martin Company sells two products,Standard and Deluxe.Data for activity during January are as follows: Required: Prepare a Segment Margin income statement.Common fixed costs of $25,000 are allocated one-half to Standard and one-half to Deluxe.

Which of the following is the formula for setting a minimum transfer price?

ABC Corporation has three divisions,a service division with two locations,a retail division with four locations,and a home office,each of which is evaluated individually.This is an example of which type of organization?

One thing that is missing from GAAP-based segment reporting is a breakdown of

The most common measure used as the denominator in the ROI calculation is a simple average of the assets used during the year.

The DuPont Model decomposes the original ROI formula into two components to show the different choices managers have to improve ROI.What are the terms for the two components and how do you calculate the ratios?

Which of the following is a shortcoming of ROI as a performance measure?

Accounting As a Tool for Management

Cost Behavior and Cost Estimation

Cost-Volume-Profit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting

Performance Evaluation: Variance Analysis

Activity-Based Costing and Activity Based Management

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

Statement of Cash Flows

Topic Focus: Process Costing

Topic Focus Variable and Absorption Costing

Topic Focus Standard Costing Systems

Topic Focus Customer Profitability

Filters