Question 1

Which of the following would most likely be evaluated using residual income?

Accepted Answer

A) cost center 
B) profit center 
C) revenue center 
D) investment center 
A) cost center 
B) profit center 
C) revenue center 
D) investment center

Question 2

Net income is used in the numerator of the return on investment formula.

Accepted Answer

A) True 
 B)False

Question 3

The manager of a profit center is responsible for generating revenues and managing the center's invested capital.

Accepted Answer

A) True 
 B)False

Question 4

The following is divisional information for EVQ Enterprises:
 $$\begin{array} { | l | r | r | } 
\hline & \text { East Division } & \text { West Division } \
\hline \text { Operating income } & \$ 250,000 & \$ 200,000 \
\hline \text { Net sales } & 2,225,000 & 1,575,000 \
\hline \text { Total assets at Jan. 1 } & 1,500,000 & 840,000 \
\hline \text { Total assets at Dec .31 } & 1,200,000 & 1,000,000 \
\hline
\end{array}$$ The target rate of return is 12% for the East Division and is 10% for the West Division.
Compute the return on investment for each division.(Round to one decimal place. )

Accepted Answer

Average assets: (Beginning assets + Endi

Question 5

Which of the following is a key performance indicator of the financial perspective in a balanced scorecard?

Accepted Answer

A) hours of employee training 
B) number of warranty claims 
C) percentage of market share 
D) return on investment 
A) hours of employee training 
B) number of warranty claims 
C) percentage of market share 
D) return on investment

Question 6

Dellarte Corporation has two major divisions-Agricultural Products and Industrial Products.It provides the following information for the year. $$\begin{array} { | l | r | r | } 
\hline & \text { Agriculture Division } & \text { Industrial Division } \
\hline \text { Net sales } & \$ 150,000 & \$ 1,000,000 \
\hline \text { Operating income } & \$ 47,000 & \$ 235,000 \
\hline \text { Average assets } & \$ 290,000 & \$ 5,580,000 \
\hline \text { Target rate of return } & 13,0 \% & 10.0 \% \
\hline
\end{array}$$ Calculate the residual income for the Agriculture Division.

Accepted Answer

A) $27,500 
B) $9,300 
C) $103,000 
D) $47,000 
A) $27,500 
B) $9,300 
C) $103,000 
D) $47,000

Question 7

The production line of a manufacturing company is most likely to be considered as a(n)________.

Accepted Answer

A) cost center 
B) profit center 
C) revenue center 
D) investment center 
A) cost center 
B) profit center 
C) revenue center 
D) investment center

Question 8

Trainor Logistics provides the following information: $$\begin{array} { | l | r | } 
\hline \text { Operating income } & \$ 1,500,000 \
\hline \text { Net sales } & \$ 13,500,000 \
\hline \text { Average total assets } & \$ 2,000,000 \
\hline \text { Management's target rate of return } & 25 \% \
\hline
\end{array}$$ What is the company's return on investment? (Round your answer to two decimal places. )

Accepted Answer

A) 11.11% 
B) 14.81% 
C) 75.00% 
D) 25.00% 
A) 11.11% 
B) 14.81% 
C) 75.00% 
D) 25.00%

Question 9

Both the sales volume variance and the flexible budget variance help revenue center managers understand why they have exceeded or fallen short of budgeted revenue.

Accepted Answer

A) True 
 B)False

Question 10

In general,calculating ROI based on the gross book value of assets gives managers an incentive to continue using old,outdated equipment.

Accepted Answer

A) True 
 B)False

Question 11

The return on investment formula focuses on the amount of operating income earned before considering other revenue and expense items,such as interest expense.

Accepted Answer

A) True 
 B)False

Question 12

Bernaise,Inc.sells cosmetic products in the United States.Which one of the following is most likely to be a revenue center for Bernaise?

Accepted Answer

A) a Bernaise retail store in Dallas 
B) the Bernaise human resource department 
C) a Bernaise kiosk at a mall for selling its products 
D) the Bernaise product lines 
A) a Bernaise retail store in Dallas 
B) the Bernaise human resource department 
C) a Bernaise kiosk at a mall for selling its products 
D) the Bernaise product lines

Question 13

Decentralized companies rarely struggle to achieve goal congruence.

Accepted Answer

A) True 
 B)False

Question 14

Recreation Equipment Company has several divisions that are investment centers.Data for the Boat Division and the Trailer Division are shown here:
 $$\begin{array} { | l | r | r | } 
\hline & \text { Boat Division } & \text { Trailer Division } \
\hline \text { Operating income } & \$ 70,000 & \$ 42,000 \
\hline \text { Total assets at Jan. 1 } & \$ 692,000 & \$ 233,000 \
\hline \text { Total assets at Dec. 31 } & \$ 700,000 & \$ 218,000 \
\hline
\end{array}$$ With regard to the efficient use of assets,the Boat Division has a higher return on investment (ROI)because it has the highest operating income.

Accepted Answer

A) True 
 B)False

Question 15

Qvoware,Inc.sells cosmetic products in the United States.Which one of the following is most likely to be a cost center for Qvoware?

Accepted Answer

A) a Qvoware retail store in Dallas 
B) the Qvoware human resource department 
C) a Qvoware kiosk at a mall for selling its products 
D) the Qvoware product lines 
A) a Qvoware retail store in Dallas 
B) the Qvoware human resource department 
C) a Qvoware kiosk at a mall for selling its products 
D) the Qvoware product lines

Question 16

When using financial performance measures,which of the following statements is incorrect?

Accepted Answer

A) Most companies use a weighted-average to determine the amount of average inventory. 
B) Average total assets are used for both ROI and RI computations. 
C) The limitations of financial performance measures reinforce the importance of the balanced scorecard. 
D) In general,calculating ROI based on the net book value of assets gives managers an incentive to continue using old,outdated equipment because its low net book value results in a higher ROI. 
A) Most companies use a weighted-average to determine the amount of average inventory. 
B) Average total assets are used for both ROI and RI computations. 
C) The limitations of financial performance measures reinforce the importance of the balanced scorecard. 
D) In general,calculating ROI based on the net book value of assets gives managers an incentive to continue using old,outdated equipment because its low net book value results in a higher ROI.

Question 17

Long-term investments are made by the investment center manager for the purpose of ________.

Accepted Answer

A) increasing profits 
B) decreasing profits 
C) increasing interest expense 
D) decreasing plant assets 
A) increasing profits 
B) decreasing profits 
C) increasing interest expense 
D) decreasing plant assets

Question 18

A market-based transfer price considers the ________ when determining the transfer price.

Accepted Answer

A) variable costs 
B) sales price of goods 
C) cost of the goods 
D) contribution margin 
A) variable costs 
B) sales price of goods 
C) cost of the goods 
D) contribution margin

Question 19

Discuss the difference between a centralized company and a decentralized company.

Accepted Answer

In a small company,the owner or top mana

Question 20

Companies evaluate investment centers using the same measures as the profit centers.

Accepted Answer

A) True 
 B)False

Exam 24: Responsibility Accounting and Performance Evaluation

Which of the following would most likely be evaluated using residual income?

Net income is used in the numerator of the return on investment formula.

The manager of a profit center is responsible for generating revenues and managing the center's invested capital.

Which of the following is a key performance indicator of the financial perspective in a balanced scorecard?

The production line of a manufacturing company is most likely to be considered as a(n)________.

Trainor Logistics provides the following information: Operating income \ 1,500,000 Net sales \ 13,500,000 Average total assets \ 2,000,000 Management's target rate of return 25\% What is the company's return on investment? (Round your answer to two decimal places. )

Both the sales volume variance and the flexible budget variance help revenue center managers understand why they have exceeded or fallen short of budgeted revenue.

In general,calculating ROI based on the gross book value of assets gives managers an incentive to continue using old,outdated equipment.

The return on investment formula focuses on the amount of operating income earned before considering other revenue and expense items,such as interest expense.

Bernaise,Inc.sells cosmetic products in the United States.Which one of the following is most likely to be a revenue center for Bernaise?

Decentralized companies rarely struggle to achieve goal congruence.

Qvoware,Inc.sells cosmetic products in the United States.Which one of the following is most likely to be a cost center for Qvoware?

When using financial performance measures,which of the following statements is incorrect?

Long-term investments are made by the investment center manager for the purpose of ________.

A market-based transfer price considers the ________ when determining the transfer price.

Discuss the difference between a centralized company and a decentralized company.

Companies evaluate investment centers using the same measures as the profit centers.

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