Exam 17: Responsibility Accounting, Performance Evaluation and Transfer Pricing

A segment with an ROI of 30% has a profit of $84,000. The company's required rate of return on segment investments is 18%. The segment's residual income is

Division A produces a component for Honda Ltd's main product - motor vehicles. The division operates as a profit centre. It also sells to outsiders. The present selling price is $75 per component. The company buys 600,000 units of a similar component per year from outside sources. The external purchase price is $73 as a result of a quantity discount. Division A has adequate capacity to supply the needs of the Assembly division. The following data are for Division A: The price range within which A would sell components to the Assembly Division is

Return on investment can be decomposed into two ratios: investment turnover and return on sales.

THN Pty Ltd reported operating profit of $30,000, revenue of $50,000, and average operating assets of $40,000 for a recent year. Which of the following is true?

Which of the following best describes "general knowledge" in a decision-making context?

Specific knowledge is

Economic value added can be measured so that it reduces most of the problems that arise under residual income.

Which of the following transfer pricing systems potentially takes the most time to establish?

Problems with market-based transfer prices include

Responsibility accounting is the process of using financial information to justify pay increases and promotions for managers.

Division A produces a component for Honda Ltd's main product - motor vehicles. The division operates as a profit centre. It also sells to outsiders. The present selling price is $75 per component. The company buys 600,000 units of a similar component per year from outside sources. The external purchase price is $73 as a result of a quantity discount. Division A has adequate capacity to supply the needs of the Assembly division. The following data are for Division A: The minimum price at which A would sell components internally is

Which type of knowledge is most costly to transfer within an organisation?

An advantage of centralised decision making is

In a profit centre, managers' primary goal is to maximise revenues.

If a supplying division has excess capacity, the best transfer price is the product's variable cost.

Which of the following is an advantage of cost-based transfer prices?

Choices about decision-making authority and about organisational structure are often related.

Responsibility accounting includes

Dual-rate transfer pricing systems are appropriate when the

Decision-making based on general knowledge is more likely to occur in this type of organisation