Question 1

Which of the following can increase a company's return on investment?

Accepted Answer

A) decrease in operating income 
B) decrease in total assets 
C) decrease in asset turnover ratio 
D) decrease in residual income 
A) decrease in operating income 
B) decrease in total assets 
C) decrease in asset turnover ratio 
D) decrease in residual income

Question 2

In a decentralized company,segment managers may not fully understand the big picture when making decisions.

Accepted Answer

A) True 
 B)False

Question 3

Ewan Logistics provides the following information: $$\begin{array} { | l | r | } 
\hline \text { Operating income } & \$ 1,500,000 \
\hline \text { Net sales } & \$ 14,500,000 \
\hline \text { Average total assets } & \$ 1,950,000 \
\hline \text { Management's target rate of return } & 20 \% \
\hline
\end{array}$$ What is the company's residual income?

Accepted Answer

A) $(450,000) 
B) $390,000 
C) $1,650,000 
D) $1,110,000 
A) $(450,000) 
B) $390,000 
C) $1,650,000 
D) $1,110,000

Question 4

Milliken,Inc.provides the following information: $$\begin{array} { | l | c | c | c | c | } 
\hline & \text { Actual Sales } & \text { Static Budget } & \text { Flexible Budget } & \text { Sales Volume Variance } \
\hline \text { Sales Revenue } & \$ 560,000 & \$ 535,000 & \$ 450,000 & ? \
\hline
\end{array}$$ Calculate the sales volume variance.

Accepted Answer

A) 25,000 F 
B) 25,000 U 
C) $85,000 U 
D) $110,000 F 
A) 25,000 F 
B) 25,000 U 
C) $85,000 U 
D) $110,000 F

Question 5

An investment center manager is responsible for generating profits and managing invested capital.

Accepted Answer

A) True 
 B)False

Question 6

Uniox,Inc.intends to increase its profits by 50% in the next fiscal year.Which of the following is most likely to be a lag indicator in Uniox's performance report?

Accepted Answer

A) return on investment 
B) number of repeat customers 
C) rate of on-time deliveries 
D) defect rate 
A) return on investment 
B) number of repeat customers 
C) rate of on-time deliveries 
D) defect rate

Question 7

Lakefront Equipment Company has several divisions that are investment centers.Data for the Boat Division and the Trailer Division are shown here: $$\begin{array} { | l | r | r | } 
\hline & \text { Boat Division } & \text { Trailer Division } \
\hline \text { Operating income } & \$ 80,000 & \$ 50,000 \
\hline \text { Total assets at Jan. 1 } & \$ 680,000 & \$ 215,000 \
\hline \text { Total assets at Dec .31 } & \$ 780,000 & \$ 200,000 \
\hline
\end{array}$$ Which of the following statements would be the most meaningful interpretation of this data?

Accepted Answer

A) The Boat Division's performance is better than that of the Trailer Division because it has higher assets. 
B) The Boat Division uses its assets less efficiently than the Trailer Division does because it has a lower return on investment. 
C) The Boat Division shows a more efficient use of assets than the Trailer Division because it has a higher operating income. 
D) The Boat Division is financially more successful than the Trailer Division because it shows an increase in assets. 
A) The Boat Division's performance is better than that of the Trailer Division because it has higher assets. 
B) The Boat Division uses its assets less efficiently than the Trailer Division does because it has a lower return on investment. 
C) The Boat Division shows a more efficient use of assets than the Trailer Division because it has a higher operating income. 
D) The Boat Division is financially more successful than the Trailer Division because it shows an increase in assets.

Question 8

List two objectives in setting transfer prices.

Accepted Answer

1.Achieving goal congruence by

Question 9

Which of the following managers is likely to have the least amount of responsibilities?

Accepted Answer

A) the manager of a cost center 
B) the manager of a profit center 
C) the manager of an investment center 
D) the manager of a transfer pricing center 
A) the manager of a cost center 
B) the manager of a profit center 
C) the manager of an investment center 
D) the manager of a transfer pricing center

Question 10

In many cases,the amount of the transfer price does not affect overall company profits.

Accepted Answer

A) True 
 B)False

Question 11

To evaluate the financial performance of an investment center,a business needs key performance indicators that measure ________.

Accepted Answer

A) manufacturing efficiency and product defect rate 
B) operating income and the use of the center's assets 
C) customer satisfaction and market share 
D) generation of sales revenues and control of operating expenses 
A) manufacturing efficiency and product defect rate 
B) operating income and the use of the center's assets 
C) customer satisfaction and market share 
D) generation of sales revenues and control of operating expenses

Question 12

Murphy Construction Materials Company has a sales office that sells concrete culvert pipes to property developers.The sales office is a revenue center and prepares a monthly responsibility report.The partially completed responsibility report is provided. $$\begin{array}{c}
\text { Revenue Center Respansibility Repart }\
\begin{array} {| c | c | c | l | c | c | c | c| } 
\hline \begin{array} { c } 
\text { Product } \
\text { Type }
\end{array} & \begin{array} { c } 
\text { Actual } \
\text { Sales } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Flexible } \
\text { Budget } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Flexible } \
\text { Budget }
\end{array} & \begin{array} { c } 
\text { Sales } \
\text { Volume } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Static } \
\text { Budget }
\end{array} \
\hline 40 \text { inch } & \$ 31,700 & & & \$ 30,750 & & & \$ 40,800 \
\hline 36 \text { inch long } & 40,150 & & & 42,200 & & & 33,000 \
\hline 36 \text { inch short } & 36,200 & & & 33,100 & & & 31,000 \
\hline \text { 32 inch } & 19,100 & & & 20,000 & & & 28,400 \
\hline
\end{array}
\end{array}$$ The company uses management by exception to address flexible budget variances.On which product type would the company first focus?

Accepted Answer

A) 40 inch 
B) 36 inch long 
C) 36 inch short 
D) 32 inch 
A) 40 inch 
B) 36 inch long 
C) 36 inch short 
D) 32 inch

Question 13

A cost center responsibility report ________.

Accepted Answer

A) includes depreciation expense 
B) typically focuses on the flexible budget variance 
C) is the same as a performance report 
D) shows all costs incurred by the department 
A) includes depreciation expense 
B) typically focuses on the flexible budget variance 
C) is the same as a performance report 
D) shows all costs incurred by the department

Question 14

The production manager is responsible for ________.

Accepted Answer

A) all product costs 
B) decisions to acquire new equipment 
C) his or her own salary 
D) efficiently and effectively producing quality products 
A) all product costs 
B) decisions to acquire new equipment 
C) his or her own salary 
D) efficiently and effectively producing quality products

Question 15

Alexander Consumer Products has a small car division that operates as a profit center.Below is a partially completed responsibility report for the first quarter.   Compute the percentage variance for the flexible budget variance for traceable fixed expenses.(Round your answer to two decimal places. )

Accepted Answer

A) 0.82% F 
B) 0.82% U 
C) 1.04% U 
D) 1.04% F 
A) 0.82% F 
B) 0.82% U 
C) 1.04% U 
D) 1.04% F

Question 16

Grady Corporation provides the following financial information: $$\begin{array} { | l | r | } 
\hline \text { Minimum acceptable operating income } & \$ 556,600 \
\hline \text { Average total assets } & \$ 2,000,000 \
\hline \text { Operating income } & \$ 708,000 \
\hline \text { Return on investment } & 35.40 \% \
\hline \text { Net sales } & \$ 900,000 \
\hline
\end{array}$$ Calculate the target rate of return.(Round your answer to two decimal places. )

Accepted Answer

A) 27.83% 
B) 78.67% 
C) 35.40% 
D) 61.84% 
A) 27.83% 
B) 78.67% 
C) 35.40% 
D) 61.84%

Question 17

The transfer price should be an amount between the market price and the variable cost.

Accepted Answer

A) True 
 B)False

Question 18

Performance evaluation systems provide top management with a framework for maintaining control over the entire organization.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Explain the difference between a controllable and a noncontrollable cost.

Accepted Answer

A controllable cost is one the

Exam 24: Responsibility Accounting and Performance Evaluation

Which of the following can increase a company's return on investment?

In a decentralized company,segment managers may not fully understand the big picture when making decisions.

Ewan Logistics provides the following information: Operating income \ 1,500,000 Net sales \ 14,500,000 Average total assets \ 1,950,000 Management's target rate of return 20\% What is the company's residual income?

Milliken,Inc.provides the following information: Actual Sales Static Budget Flexible Budget Sales Volume Variance Sales Revenue \ 560,000 \ 535,000 \ 450,000 ? Calculate the sales volume variance.

An investment center manager is responsible for generating profits and managing invested capital.

Uniox,Inc.intends to increase its profits by 50% in the next fiscal year.Which of the following is most likely to be a lag indicator in Uniox's performance report?

List two objectives in setting transfer prices.

Which of the following managers is likely to have the least amount of responsibilities?

In many cases,the amount of the transfer price does not affect overall company profits.

To evaluate the financial performance of an investment center,a business needs key performance indicators that measure ________.

A cost center responsibility report ________.

The production manager is responsible for ________.

Alexander Consumer Products has a small car division that operates as a profit center.Below is a partially completed responsibility report for the first quarter. Compute the percentage variance for the flexible budget variance for traceable fixed expenses.(Round your answer to two decimal places. )

Grady Corporation provides the following financial information: Minimum acceptable operating income \ 556,600 Average total assets \ 2,000,000 Operating income \ 708,000 Return on investment 35.40\% Net sales \ 900,000 Calculate the target rate of return.(Round your answer to two decimal places. )

The transfer price should be an amount between the market price and the variable cost.

Performance evaluation systems provide top management with a framework for maintaining control over the entire organization.

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

Explain the difference between a controllable and a noncontrollable cost.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Internal Control and Cash

Receivables

Plant Assets, natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based, just-In-Time, and Quality Management Systems

Cost-Volume-Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

Accounting Information Systems

Filters