Question 1

In the calculation of ROI,the most common measure for average operating assets is

Accepted Answer

A) Ending balance. 
B) Beginning balance. 
C) Appraised balance. 
D) Average of the assets during the year. 
A) Ending balance. 
B) Beginning balance. 
C) Appraised balance. 
D) Average of the assets during the year.

Question 2

A disadvantage of evaluating managers' performance based on ROI is that it can lead to undesirable managerial actions.Residual income can overcome many of the problems of ROI.
Required:
a.Define residual income and explain how it is calculated.
b.What are the shortcomings of residual income? Give an example of when ROI is a better measure than residual income.

Accepted Answer

a.Residual income is the income that is

Question 3

The formula for calculating ROI is

Accepted Answer

A) Segment margin divided by average operating assets. 
B) Segment margin divided by internal rate of return. 
C) Internal rate of return divided by average operating assets. 
D) None of these answer choices are correct. 
A) Segment margin divided by average operating assets. 
B) Segment margin divided by internal rate of return. 
C) Internal rate of return divided by average operating assets. 
D) None of these answer choices are correct.

Question 4

Jackson Brothers Instruments sells stringed instruments.Trent Jackson,the company's president,just received the following income statement reporting the results of the past year.
Banjos Guitars Fiddles Total
Sales revenue $1,250,000 $3,600,000 $2,380,000 $7,230,000
Variable cost of goods sold 850,000 2,340,000 1,904,000 5,094,000
Fixed cost of goods sold 115,000 188,000 166,000 469,000
Gross profit 285,000 1,072,000 310,000 1,667,000
Variable operating expenses 170,000 675,000 238,000 1,083,000
Fixed operating expenses 85,000 80,000 83,000 248,000
Common fixed costs 40,000 110,000 77,000 227,000
Operating income $10,000 $ 207,000 $88,000 $ 109,000
Trent is concerned that two of the company's divisions are showing a loss,and he wonders if the company should stop selling Banjos and Fiddles to concentrate solely on guitars.
Required
a.Prepare a segment margin income statement.Fixed cost of goods sold and fixed operating expenses can be traced to each division.
b.Should Trent close the banjos and fiddles divisions? Why or why not?
c.Trent wants to change the allocation method used to allocate common fixed costs to the divisions.His plan is to allocate these costs based on sales revenue.Will this new allocation method change your decision on whether to close the guitars and fiddles divisions? Why or why not?

Accepted Answer

a. Banjos Guitars Fiddles Total Sales re

Question 5

Kitty City Company's Canned Foods division has collected the following information: Normal selling price $3.90 per can
Variable product costs 2.20 per can
Fixed product costs .80 per can
Variable selling and administrative costs .30 per can
Production capacity 2,500,000 cans
The Canned Foods division is currently producing 2,000,500 cans.The company's Dinner Pack division wants to buy 350,000 cans.The minimum transfer price would be

Accepted Answer

A) $1.10 
B) $2.50 
C) $3.00 
D) $3.30 
A) $1.10 
B) $2.50 
C) $3.00 
D) $3.30

Question 6

The division director for Natchez Corporation's Mississippi division,which operates as an investment center,is considering investing in machinery which costs of $2,200,000 and is expected to generate $332,000 in additional operating income.If the division's weighted average cost of capital is 11% and its tax rate is 20%,what is the equipment's EVA?

Accepted Answer

A) $23,600 
B) $90,000 
C) $242,000 
D) $332,000 
A) $23,600 
B) $90,000 
C) $242,000 
D) $332,000

Question 7

Net income after interest and taxes is a common income measurement choice used to calculate ROI for an entire organization,because all expenses are under the CEO's control at the corporate level.

Accepted Answer

A) True 
 B)False

Question 8

A segment margin income statement excludes all ________ costs in the calculation of the segment margin.

Accepted Answer

A) Selling 
B) Traceable 
C) Fixed 
D) Allocated 
A) Selling 
B) Traceable 
C) Fixed 
D) Allocated

Question 9

Breton Corporation's Longboat division's segment margin as a percentage of net sales is 12% for the current reporting period.The division has net sales revenue of $2,500,000.Operating assets were $800,000 at the beginning of the period and $1,200,000 at the end.What is the division's ROI?

Accepted Answer

A) 10% 
B) 12% 
C) 15% 
D) 30% 
A) 10% 
B) 12% 
C) 15% 
D) 30%

Question 10

Logan Corporation reported the following operating data for the past year:
   Required: 
a.Calculate Logan's margin.
b.Calculate Logan's asset turnover.
c.Calculate Logan's ROI.

Accepted Answer

a.$20,000/$400,000 =

Question 11

The segment margin income statement excludes

Accepted Answer

A) All allocated costs in the calculation of the segment margin. 
B) All fixed costs. 
C) All period costs. 
D) Manufacturing overhead. 
A) All allocated costs in the calculation of the segment margin. 
B) All fixed costs. 
C) All period costs. 
D) Manufacturing overhead.

Question 12

A cost center manager's performance might be measured by

Accepted Answer

A) The center's ROI. 
B) Direct material variance. 
C) Segment profit. 
D) Any of these answer choices are correct. 
A) The center's ROI. 
B) Direct material variance. 
C) Segment profit. 
D) Any of these answer choices are correct.

Question 13

What is a transfer price? List the four ways of determining a transfer price.

Accepted Answer

When organizations choose to decentraliz

Question 14

A disadvantage of decentralization is that

Accepted Answer

A) If lower-level managers do not understand the company's strategies and goals,they may make decisions that are not in the best interest of the organization as a whole. 
B) Two or more operational managers may evaluate and make the same decision,duplicating their efforts. 
C) Managers tend to focus on their own units and often lose contact with others in the organization. 
D) All of these answer choices are correct. 
A) If lower-level managers do not understand the company's strategies and goals,they may make decisions that are not in the best interest of the organization as a whole. 
B) Two or more operational managers may evaluate and make the same decision,duplicating their efforts. 
C) Managers tend to focus on their own units and often lose contact with others in the organization. 
D) All of these answer choices are correct.

Question 15

Which of the following is an advantage of decentralization?

Accepted Answer

A) Managers at the operational level of the organization have the authority to identify problems,recognize situational changes,and respond quickly. 
B) Companies can develop their own managers internally by giving lower-level managers practice in developing their decision-making skills. 
C) Top management is free to focus on the long-term strategies of the organization. 
D) All of these answer choices are correct. 
A) Managers at the operational level of the organization have the authority to identify problems,recognize situational changes,and respond quickly. 
B) Companies can develop their own managers internally by giving lower-level managers practice in developing their decision-making skills. 
C) Top management is free to focus on the long-term strategies of the organization. 
D) All of these answer choices are correct.

Question 16

To calculate the weighted-average cost of capital we do not need to know

Accepted Answer

A) The relative percentage of capital provided by each source. 
B) The required rate of return. 
C) The date of each capital source. 
D) All of these answer choices are necessary to calculate the weighted-average cost of capital. 
A) The relative percentage of capital provided by each source. 
B) The required rate of return. 
C) The date of each capital source. 
D) All of these answer choices are necessary to calculate the weighted-average cost of capital.

Question 17

What is the minimum acceptable transfer price for a division that has excess operating capacity?

Accepted Answer

The minimum acceptable transfe

Question 18

A segment margin income statement includes all allocated costs in the calculation of the segment margin.

Accepted Answer

A) True 
 B)False

Question 19

Return on investment measures the rate of return generated by an investment in assets.

Accepted Answer

A) True 
 B)False

Question 20

In a responsibility accounting environment,upper managers evaluate the performance of the

Accepted Answer

A) On those items over which the unit managers have control. 
B) Not only on cost,but also on revenues. 
C) On the overall profit of the organization. 
D) None of these answer choices of correct. 
A) On those items over which the unit managers have control. 
B) Not only on cost,but also on revenues. 
C) On the overall profit of the organization. 
D) None of these answer choices of correct.

In the calculation of ROI,the most common measure for average operating assets is

The formula for calculating ROI is

Net income after interest and taxes is a common income measurement choice used to calculate ROI for an entire organization,because all expenses are under the CEO's control at the corporate level.

A segment margin income statement excludes all ________ costs in the calculation of the segment margin.

Breton Corporation's Longboat division's segment margin as a percentage of net sales is 12% for the current reporting period.The division has net sales revenue of $2,500,000.Operating assets were $800,000 at the beginning of the period and $1,200,000 at the end.What is the division's ROI?

Logan Corporation reported the following operating data for the past year: Required: a.Calculate Logan's margin. b.Calculate Logan's asset turnover. c.Calculate Logan's ROI.

The segment margin income statement excludes

A cost center manager's performance might be measured by

What is a transfer price? List the four ways of determining a transfer price.

A disadvantage of decentralization is that

Which of the following is an advantage of decentralization?

To calculate the weighted-average cost of capital we do not need to know

What is the minimum acceptable transfer price for a division that has excess operating capacity?

A segment margin income statement includes all allocated costs in the calculation of the segment margin.

Return on investment measures the rate of return generated by an investment in assets.

In a responsibility accounting environment,upper managers evaluate the performance of the

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

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Exam 10: Decentralizing and Performance Evaluation

In the calculation of ROI,the most common measure for average operating assets is

The formula for calculating ROI is

Net income after interest and taxes is a common income measurement choice used to calculate ROI for an entire organization,because all expenses are under the CEO's control at the corporate level.

A segment margin income statement excludes all ________ costs in the calculation of the segment margin.

Breton Corporation's Longboat division's segment margin as a percentage of net sales is 12% for the current reporting period.The division has net sales revenue of $2,500,000.Operating assets were $800,000 at the beginning of the period and $1,200,000 at the end.What is the division's ROI?

Logan Corporation reported the following operating data for the past year: Required: a.Calculate Logan's margin. b.Calculate Logan's asset turnover. c.Calculate Logan's ROI.

The segment margin income statement excludes

A cost center manager's performance might be measured by

What is a transfer price? List the four ways of determining a transfer price.

A disadvantage of decentralization is that

Which of the following is an advantage of decentralization?

To calculate the weighted-average cost of capital we do not need to know

What is the minimum acceptable transfer price for a division that has excess operating capacity?

A segment margin income statement includes all allocated costs in the calculation of the segment margin.

Return on investment measures the rate of return generated by an investment in assets.

In a responsibility accounting environment,upper managers evaluate the performance of the

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