Exam 8: Performance Evaluation for Decentralized Operations

The objective of transfer pricing is to encourage each division manager to transfer goods and services between divisions if overall company income can be increased by doing so.

The gross profit for the Rails Division is

The following data are taken from the management accounting reports of Dulcimer Co.: If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

The primary disadvantage of decentralized operations is that decisions made by one manager may affect other managers in such a way that the profitability of the entire company may suffer.

The profit margin component of rate of return on investment analysis focuses on profitability by indicating the rate of profit earned on each sales dollar.

A centralized business organization is one in which all major planning and operating decisions are made by top management.

What is the profit margin for Division A?

In a cost center, the manager has responsibility and authority for making decisions that affect

How much service department cost would be allocated to the Macro Division?

Budget performance reports prepared for the vice president of production would generally contain less detail than reports prepared for the various plant managers.

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are termed direct operating expenses.

The budget for Department 6 of Cardinal Company for the current month ending March 31 is as follows: During March, the costs incurred in Department 6 of Cardinal Company were materials, $204,000; factory wages, $285,000; supervisory salaries, $63,600; depreciation of plant and equipment, $35,000; power and light, $21,360; insurance and property taxes, $14,400; maintenance, $9,456. a Prepare a budget performance report for the supervisor of Department 6 of Cardinal Company for the month of March. b Are there any significant variances 5% or greater of the budgeted amounts that should be examined by the supervisor?

Several items are missing from the following table of rate of return on investment and residual income.Determine the missing items, identifying each item by the appropriate letter a-l.Round percentage values to one decimal point

The approach that required the transfer price to be less than the market price but greater than the supplying division's variable costs per unit is called the

Bentz Co.has two divisions, A and B.Invested assets and condensed income statement data for each division for the year ended December 31, are as follows: a Prepare condensed income statements for the past year for each division. b Using the DuPont formula, determine the profit margin, investment turnover, and rate of return on investment for each division.Round the profit margin percentage to two decimal places and investment turnover to four decimal places.

Which of the following formulas is the investment turnover factor as used in determining the rate of return on investment?

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the investment turnover is 5.

The Creative Division of the Barry Company reported the following results for December: Based on this information, what were sales?

The plant managers in a cost center can be held responsible for major differences between budgeted and actual costs in their plants.