Question 1

All of the following statements are true about return on investment (ROI)except:

Accepted Answer

A) Breaking out ROI into two ratios provides information that helps division managers identify areas for improvement. 
B) ROI can be improved by decreasing the operating profit margin. 
C) ROI can be calculated using the gross book value method. 
D) ROI can be improved by increasing asset turnover. 
E) None of the answer choices is correct. 
A) Breaking out ROI into two ratios provides information that helps division managers identify areas for improvement. 
B) ROI can be improved by decreasing the operating profit margin. 
C) ROI can be calculated using the gross book value method. 
D) ROI can be improved by increasing asset turnover. 
E) None of the answer choices is correct. B

Question 2

Exhibit 11-2
Manford Inc.has two divisions - Refrigerators and Dish Washer.
  
-Refer to Exhibit 11-2.Assume the Refrigerator Division has average operating assets totaling $24,000,000 for the year and the company's cost of capital rate is 15 percent.What is the residual income for the Refrigerator division?

Accepted Answer

A) $2,200,000 
B) $2,580,000 
C) $6,400,000 
D) $480,000 
E) None of the answer choices is correct. 
A) $2,200,000 
B) $2,580,000 
C) $6,400,000 
D) $480,000 
E) None of the answer choices is correct. D

Question 3

A profit center is an organizational segment in which the manager is responsible for costs and revenues,but not investments in assets.

Accepted Answer

A) True 
 B)False  True

Question 4

Operating income typically excludes items such as income tax expense,interest income,and interest expense.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 11-5
Sports Products Inc.sells skis and snowboards.Below is some financial information for each division at Sports Products for the most recent fiscal year.
   To calculate economic value added (EVA),management requires adjustments for marketing and non-interest bearing current liabilities as outlined below.
Marketing will be capitalized and amortized over several years resulting in an increase to average operating assets of $125,000 for the Skis division and $82,500 for the Snowboards division.On the income statement,marketing expenses for the year will be added back to operating income,then marketing amortization expense for one year will be deducted.The current year amortization expense will total $60,000 for the Ski division and $45,000 for the Snowboards division.
Non-interest bearing liabilities will be deducted from average operating assets.
-Refer to Exhibit 11-5.After the EVA adjustments to operating income,what would be the amount of net operating profit after tax (adjusted)for the Snowboards Division?

Accepted Answer

A) $493,500 
B) $467,250 
C) $705,000 
D) $570,000 
E) None of the answer choices is correct. 
A) $493,500 
B) $467,250 
C) $705,000 
D) $570,000 
E) None of the answer choices is correct.

Question 6

Exhibit 11-4
The following information is for two divisions at Wiley Company.
  
-Refer to Exhibit 11-4.What is the ROI for the Chair Division (rounded to the nearest tenth of a percent)?

Accepted Answer

A) 66.7% 
B) 14.0% 
C) 33.3% 
D) 9.3% 
E) None of the answer choices is correct. 
A) 66.7% 
B) 14.0% 
C) 33.3% 
D) 9.3% 
E) None of the answer choices is correct.

Question 7

Exhibit 11-4
The following information is for two divisions at Wiley Company.
  
-Refer to Exhibit 11-4.What is the asset turnover for the Chair Division (rounded to the nearest tenth)?

Accepted Answer

A) 0.7 
B) 7.1 
C) 1.5 
D) 0.1 
E) None of the answer choices is correct. 
A) 0.7 
B) 7.1 
C) 1.5 
D) 0.1 
E) None of the answer choices is correct.

Question 8

When using the net book value to calculate return on investment (ROI),division managers controlling newer assets with little accumulated depreciation have an advantage over division managers controlling older assets with more accumulated depreciation.

Accepted Answer

A) True 
 B)False

Question 9

Cambridge Products manufactures and sells cat toys and cat beds.The Bed Division incurs the following costs for the production of a single cat bed when 5,000 beds are produced each year.
 
The company sells cat beds to various pet stores for $26.00.The Toy Division is doing a promotion whereby each customer that purchases ten cat toys during the months of January,February,and March will receive a free cat bed.The Toy Division would like to purchase these beds from the Bed Division.
Assuming the Bed Division is at full capacity,what is the optimal transfer price?

Accepted Answer

A) $ 26.00 
B) $13.50 
C) $16.00 
D) $18.00 
E) None of the answer choices is correct. 
A) $ 26.00 
B) $13.50 
C) $16.00 
D) $18.00 
E) None of the answer choices is correct.

Question 10

All of the following are true about Economic Value Added (EVA)except:

Accepted Answer

A) EVA requires compliance with GAAP. 
B) EVA was trademarked. 
C) EVA uses operating income after taxes. 
D) EVA does not require compliance with GAAP. 
E) None of the answer choices is correct. 
A) EVA requires compliance with GAAP. 
B) EVA was trademarked. 
C) EVA uses operating income after taxes. 
D) EVA does not require compliance with GAAP. 
E) None of the answer choices is correct.

Question 11

Exhibit 11-2
Manford Inc.has two divisions - Refrigerators and Dish Washer.
  
-Refer to Exhibit 11-2.Using the segmented income statements,what is the profit margin ratio for the Refrigerator Division (to the nearest hundredth of a percent)?

Accepted Answer

A) 22.44% 
B) 40.80% 
C) 58.00% 
D) 42.00% 
E) None of the answer choices is correct. 
A) 22.44% 
B) 40.80% 
C) 58.00% 
D) 42.00% 
E) None of the answer choices is correct.

Question 12

All of the following are false about transfer pricing except:

Accepted Answer

A) using negotiated transfer pricing is always the best approach. 
B) the cost approach can base the transfer price on either the variable cost or full absorption cost. 
C) using the cost approach is always the best approach. 
D) companies should always use the selling division's variable cost as the transfer price. 
E) None of the answer choices is correct. 
A) using negotiated transfer pricing is always the best approach. 
B) the cost approach can base the transfer price on either the variable cost or full absorption cost. 
C) using the cost approach is always the best approach. 
D) companies should always use the selling division's variable cost as the transfer price. 
E) None of the answer choices is correct.

Question 13

Which of the following ratios can managers use to break down return on investment (ROI)for improving performance?

Accepted Answer

A) Inventory turnover and gross margin ratio. 
B) Inventory turnover and profit margin ratio. 
C) Operating profit margin and EVA. 
D) Operating profit margin and asset turnover. 
E) None of the answer choices is correct. 
A) Inventory turnover and gross margin ratio. 
B) Inventory turnover and profit margin ratio. 
C) Operating profit margin and EVA. 
D) Operating profit margin and asset turnover. 
E) None of the answer choices is correct.

Question 14

An investment center is an organizational segment in which the manager is responsible for costs,revenues,and investment in assets.

Accepted Answer

A) True 
 B)False

Question 15

Return on investment (ROI)can be calculated several different ways depending on the company.

Accepted Answer

A) True 
 B)False

Question 16

If decisions within a company are made by top management at headquarters,which of the following terms best describes this company?

Accepted Answer

A) cost center. 
B) decentralized organization. 
C) centralized organization. 
D) investment center. 
E) None of the answer choices is correct. 
A) cost center. 
B) decentralized organization. 
C) centralized organization. 
D) investment center. 
E) None of the answer choices is correct.

Question 17

Starline Inc.manufactures and sells commercial coffee makers and coffee grinders.The Coffee Grinder Division incurs the following costs for the production of each coffee grinder when 4,000 coffee grinders are produced each year.
 
The company sells the coffee grinders to various retail stores for $60.00.The Coffee Maker Division is doing a promotion whereby each customer that purchases a coffee maker will receive a free coffee grinder.The Coffee Maker Division would like to purchase these coffee grinders from the Coffee Grinder Division.
Assuming the Coffee Grinder Division has excess capacity and there would be no lost sales by selling internally,what is the optimal transfer price that should be charged to the Coffee Maker Division?

Accepted Answer

A) $30.00 
B) $22.50 
C) $36.00 
D) $60.00 
E) None of the answer choices is correct. 
A) $30.00 
B) $22.50 
C) $36.00 
D) $60.00 
E) None of the answer choices is correct.

Question 18

When defining operating income for return on investment (ROI)purposes,many organizations do not include which of the following?

Accepted Answer

A) Cost of goods sold. 
B) Allocated overhead. 
C) Operating expenses. 
D) Sales revenue. 
E) None of the answer choices is correct. 
A) Cost of goods sold. 
B) Allocated overhead. 
C) Operating expenses. 
D) Sales revenue. 
E) None of the answer choices is correct.

Question 19

Exhibit 11-1
Ashville Company has two divisions - Bikes and Trikes.
  
-Refer to Exhibit 11-1.Using the segmented income statements,what is the profit margin ratio for the Bikes Division (to the nearest tenth of a percent)?

Accepted Answer

A) 13.5 
B) 41.7% 
C) 22.5% 
D) 58.3% 
E) None of the answer choices is correct. 
A) 13.5 
B) 41.7% 
C) 22.5% 
D) 58.3% 
E) None of the answer choices is correct.

Question 20

A cost center is an organizational segment in which the manager is responsible for costs and revenues,but not investments in assets.

Accepted Answer

A) True 
 B)False

All of the following statements are true about return on investment (ROI)except:

A profit center is an organizational segment in which the manager is responsible for costs and revenues,but not investments in assets.

Operating income typically excludes items such as income tax expense,interest income,and interest expense.

Exhibit 11-4 The following information is for two divisions at Wiley Company. -Refer to Exhibit 11-4.What is the ROI for the Chair Division (rounded to the nearest tenth of a percent)?

Exhibit 11-4 The following information is for two divisions at Wiley Company. -Refer to Exhibit 11-4.What is the asset turnover for the Chair Division (rounded to the nearest tenth)?

When using the net book value to calculate return on investment (ROI),division managers controlling newer assets with little accumulated depreciation have an advantage over division managers controlling older assets with more accumulated depreciation.

All of the following are true about Economic Value Added (EVA)except:

Exhibit 11-2 Manford Inc.has two divisions - Refrigerators and Dish Washer. -Refer to Exhibit 11-2.Using the segmented income statements,what is the profit margin ratio for the Refrigerator Division (to the nearest hundredth of a percent)?

All of the following are false about transfer pricing except:

Which of the following ratios can managers use to break down return on investment (ROI)for improving performance?

An investment center is an organizational segment in which the manager is responsible for costs,revenues,and investment in assets.

Return on investment (ROI)can be calculated several different ways depending on the company.

If decisions within a company are made by top management at headquarters,which of the following terms best describes this company?

When defining operating income for return on investment (ROI)purposes,many organizations do not include which of the following?

Exhibit 11-1 Ashville Company has two divisions - Bikes and Trikes. -Refer to Exhibit 11-1.Using the segmented income statements,what is the profit margin ratio for the Bikes Division (to the nearest tenth of a percent)?

A cost center is an organizational segment in which the manager is responsible for costs and revenues,but not investments in assets.

What Is Managerial Accounting

How Is Job Costing Used to Track Production Costs

How Does an Organization Use Activity-Based Costing to Allocate Overhead Costs

How Is Process Costing Used to Track Production Costs

How Do Organizations Identify Cost Behavior Patterns

How Is Cost-Volume-Profit Analysis Used for Decision Making

How Are Relevant Revenues and Costs Used to Make Decisions

How Is Capital Budgeting Used to Make Decisions

How Are Operating Budgets Created

How Do Managers Evaluate Performance Using Cost Variance Analysis

How Is the Statement of Cash Flows Prepared and Used

How Do Managers Use Financial and Nonfinancial Performance Measures

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Exam 11: How Do Managers Evaluate Performance in Decentralized Organizations

All of the following statements are true about return on investment (ROI)except:

A profit center is an organizational segment in which the manager is responsible for costs and revenues,but not investments in assets.

Operating income typically excludes items such as income tax expense,interest income,and interest expense.

Exhibit 11-4 The following information is for two divisions at Wiley Company. -Refer to Exhibit 11-4.What is the ROI for the Chair Division (rounded to the nearest tenth of a percent)?

Exhibit 11-4 The following information is for two divisions at Wiley Company. -Refer to Exhibit 11-4.What is the asset turnover for the Chair Division (rounded to the nearest tenth)?

When using the net book value to calculate return on investment (ROI),division managers controlling newer assets with little accumulated depreciation have an advantage over division managers controlling older assets with more accumulated depreciation.

All of the following are true about Economic Value Added (EVA)except:

Exhibit 11-2 Manford Inc.has two divisions - Refrigerators and Dish Washer. -Refer to Exhibit 11-2.Using the segmented income statements,what is the profit margin ratio for the Refrigerator Division (to the nearest hundredth of a percent)?

All of the following are false about transfer pricing except:

Which of the following ratios can managers use to break down return on investment (ROI)for improving performance?

An investment center is an organizational segment in which the manager is responsible for costs,revenues,and investment in assets.

Return on investment (ROI)can be calculated several different ways depending on the company.

If decisions within a company are made by top management at headquarters,which of the following terms best describes this company?

When defining operating income for return on investment (ROI)purposes,many organizations do not include which of the following?

Exhibit 11-1 Ashville Company has two divisions - Bikes and Trikes. -Refer to Exhibit 11-1.Using the segmented income statements,what is the profit margin ratio for the Bikes Division (to the nearest tenth of a percent)?

A cost center is an organizational segment in which the manager is responsible for costs and revenues,but not investments in assets.

What Is Managerial Accounting

How Is Job Costing Used to Track Production Costs

How Does an Organization Use Activity-Based Costing to Allocate Overhead Costs

How Is Process Costing Used to Track Production Costs

How Do Organizations Identify Cost Behavior Patterns

How Is Cost-Volume-Profit Analysis Used for Decision Making

How Are Relevant Revenues and Costs Used to Make Decisions

How Is Capital Budgeting Used to Make Decisions

How Are Operating Budgets Created

How Do Managers Evaluate Performance Using Cost Variance Analysis

How Is the Statement of Cash Flows Prepared and Used

How Do Managers Use Financial and Nonfinancial Performance Measures

Filters