Question 1

Which of the following areas lends themselves to the concept of decentralization?

Accepted Answer

A)  dividend decisions 
B)  long-term financing 
C)  product advertising 
D)  strategic planning 
A)  dividend decisions 
B)  long-term financing 
C)  product advertising 
D)  strategic planning

Question 2

Assume the transfer price for a pair of shoes is 180% of total costs of the Stitching Division and 40,000 of soles are produced and transferred to the Polishing Division.The Stitching Division's operating income is ________.

Accepted Answer

A)  $896,000 
B)  $720,000 
C)  $800,000 
D)  $880,000 
A)  $896,000 
B)  $720,000 
C)  $800,000 
D)  $880,000

Question 3

A perfectly competitive market exists when ________.

Accepted Answer

A)  individual buyers or sellers can affect prices by their own actions 
B)  market prices reach well above their historical averages due to demand outstripping supply 
C)  market prices drop well below their historical averages due to supply outstripping demand 
D)  there is a homogeneous product with buying prices equal to selling prices 
A)  individual buyers or sellers can affect prices by their own actions 
B)  market prices reach well above their historical averages due to demand outstripping supply 
C)  market prices drop well below their historical averages due to supply outstripping demand 
D)  there is a homogeneous product with buying prices equal to selling prices

Question 4

Decisions regarding sources of long-term financing are best made at subunit level as the subunit has local knowledge and can leverage it in negotiations.

Accepted Answer

A) True 
 B)False

Question 5

Assume the transfer price for a compressor is 150% of total costs of the Compressor Division and 1,000 of the compressors are produced and transferred to the Fabrication Division.The Compressor Division's operating income is ________.

Accepted Answer

A)  $15,875 
B)  $16,375 
C)  $17,375 
D)  $18,250 
A)  $15,875 
B)  $16,375 
C)  $17,375 
D)  $18,250

Question 6

________ means minimum constraints and maximum freedom for managers at the lowest levels of an organization to make decisions and to take actions.

Accepted Answer

A)  Total centralization 
B)  Use of market-based transfer pricing 
C)  Total decentralization 
D)  Use of negotiated transfer pricing 
A)  Total centralization 
B)  Use of market-based transfer pricing 
C)  Total decentralization 
D)  Use of negotiated transfer pricing

Question 7

Which of the following statements is true of decentralization?

Accepted Answer

A)  A decentralized structure does not empower employees to handle customer complaints directly. 
B)  A decentralized structure forces top management to lose some control over the organization. 
C)  Decentralization slows responsiveness to local needs for decision making. 
D)  A decentralized structure only delegate recurring and structured decisions to lower levels. 
A)  A decentralized structure does not empower employees to handle customer complaints directly. 
B)  A decentralized structure forces top management to lose some control over the organization. 
C)  Decentralization slows responsiveness to local needs for decision making. 
D)  A decentralized structure only delegate recurring and structured decisions to lower levels.

Question 8

The Microchip Division of Silicon Computers produces computer chips that are sold to the Personal Computer Division and to outsiders.Operating data for the Microchip Division for 20X5 are as follows:
 $$\begin{array} { | l | r | r | } 
\hline & \text { Internal Sales } & \text { External Sales } \
\hline \text { Sales: } & & \
\hline 300,000 \text { chips at } \$ 10 & \$ 3,000,000 & \
\hline 200,000 \text { chips at } \$ 12 & & \$ 2,400,000 \
\hline \text { Variable expenses at } \$ 4 & 1,200,000 & \underline { 800,000 } \
\hline \text { Contribution margin } & \$ 1,800,000 & \$ 1,600,000 \
\hline \text { Fixed cost (allocated in units) } & 1,500,000 & 1,000,000 \
\hline \text { Operating income } & \$ 300,000 & \$ 600,000 \
\hline
\end{array}$$ The Personal Computer Division has just received an offer from an outside supplier to furnish chips at $8.90 each.The manager of Microchip Division is not willing to meet the $8.90 price.She argues that it costs her $9.00 to produce and sell each chip.Sales to outside customers are at a maximum of 200,000 chips.
Required:
a.Verify the Microchip Division's $9.00 unit cost figure.
b.Should the Microchip Division meet the outside price of $8.90? Explain.
c.Could the $8.60 price be met and still show a profit for the Microchip Division sales to the Personal Computer Division? Show computations.

Accepted Answer

a.
 @#IMG-DLM& b.Yes,because the contribution marg

Question 9

In analyzing transfer prices,the ________.

Accepted Answer

A)  buyer will not willingly purchase a product for less than the incremental costs incurred to manufacture the product internally 
B)  seller will not willingly sell a product for less than the incremental costs incurred to make the product 
C)  buyer will willingly pay more than the ceiling transfer price 
D)  buyer will not pay less than the ceiling transfer price 
A)  buyer will not willingly purchase a product for less than the incremental costs incurred to manufacture the product internally 
B)  seller will not willingly sell a product for less than the incremental costs incurred to make the product 
C)  buyer will willingly pay more than the ceiling transfer price 
D)  buyer will not pay less than the ceiling transfer price

Question 10

What is goal congruence?

Accepted Answer

Goal congruence exists when individuals

Question 11

Calculate and compare the difference in overall corporate net income of Branded Shoe Company between Scenario A and Scenario B if the Assembly Division sells 100,000 pairs of shoes for $120 per pair to customers. 
Scenario A: Negotiated transfer price of $30 per pair of soles
Scenario B: Market-based transfer price

Accepted Answer

A)  $1,000,000 more net income under Scenario A 
B)  $1,000,000 of net income using Scenario B 
C)  $200,000 of net income using Scenario A. 
D)  The net income would be the same under both scenarios. 
A)  $1,000,000 more net income under Scenario A 
B)  $1,000,000 of net income using Scenario B 
C)  $200,000 of net income using Scenario A. 
D)  The net income would be the same under both scenarios.

Question 12

Which of the following denotes minimum transfer price?

Accepted Answer

A)  Minimum transfer price = Incremental cost per unit incurred up to the point of transfer + Opportunity cost per unit to the selling subunit 
B)  Minimum transfer price = Total cost per unit incurred up to the point of transfer + Sunk cost per unit to the selling subunit 
C)  Minimum transfer price = Current cost per unit incurred up to the point of transfer + Historical cost per unit to the selling subunit 
D)  Minimum transfer price = Variable cost per unit incurred up to the point of transfer + Fixed cost per unit to the selling subunit 
A)  Minimum transfer price = Incremental cost per unit incurred up to the point of transfer + Opportunity cost per unit to the selling subunit 
B)  Minimum transfer price = Total cost per unit incurred up to the point of transfer + Sunk cost per unit to the selling subunit 
C)  Minimum transfer price = Current cost per unit incurred up to the point of transfer + Historical cost per unit to the selling subunit 
D)  Minimum transfer price = Variable cost per unit incurred up to the point of transfer + Fixed cost per unit to the selling subunit

Question 13

If a computer manufacturer used its common stock price as a Balanced Scorecard control measure,it would represent the ________ perspective.

Accepted Answer

A)  financial 
B)  customer 
C)  internal business process 
D)  learning and growth 
A)  financial 
B)  customer 
C)  internal business process 
D)  learning and growth

Question 14

In markets that are not perfectly competitive,companies can increase their capacity utilization only by decreasing their prices.

Accepted Answer

A) True 
 B)False

Question 15

If the selling subunit is operating at capacity,the opportunity cost of transferring a unit internally rather than selling it externally is equal to the market price minus the variable cost.

Accepted Answer

A) True 
 B)False

Question 16

What are transfer prices and what are its criteria?

Accepted Answer

Transfer prices are the prices that one

Question 17

Sandra's Sheet Metal Company has two divisions.The Raw Material Division prepares sheet metal at its warehouse facility.The Finishing Division prepares the cut sheet metal into finished products for the air conditioning industry.No inventories exist in either division at the beginning of 20X8.During the year,the Raw Material Division prepared 450,000 square feet of sheet metal at a cost of $1,800,000.All the sheet metal was transferred to the Finishing Division,where additional operating costs of $1.50 per square foot were incurred.The 450,000 square feet of finished fabricated sheet metal products were sold for $3,875,000.
Required:
a.Determine the operating income for each division if the transfer price from Raw Material to Finishing is at a cost of $4 per square foot.
b.Determine the operating income for each division if the transfer price is $6 per square foot.
c.Since the Raw Materials Division sells all of its sheet metal internally to the Finishing Division,does the Raw Materials manager care what price is selected? Why? Should the Raw Materials Division be a cost center or a profit center under the circumstances?

Accepted Answer

a.
 @#IMG-DLM& * 450,000 square feet × $4 = $1,800

Question 18

The management accounting system is an informal management control system which provide information about the firm's costs,revenues,and income.

Accepted Answer

A) True 
 B)False

Question 19

Match between columns
                        Premises: Freedom for managers at lower organizational levels to make decisions
Gathering information may be very expensive
Greater responsiveness to user needs
Have few interdependencies among divisions
Maximum constraints and minimum freedom for managers at lowest levels
Maximization of benefits over costs
Minimization of duplicate functions
Minimum of suboptimization
Multiple responsibility centers with various reporting units
Profit centers

Accepted Answer

The Answer of centralized organization and decentralized organization and Both is...

Question 20

Hybrid transfer prices take into account both cost and market information.

Accepted Answer

A) True 
 B)False

Which of the following areas lends themselves to the concept of decentralization?

Assume the transfer price for a pair of shoes is 180% of total costs of the Stitching Division and 40,000 of soles are produced and transferred to the Polishing Division.The Stitching Division's operating income is ________.

A perfectly competitive market exists when ________.

Decisions regarding sources of long-term financing are best made at subunit level as the subunit has local knowledge and can leverage it in negotiations.

Assume the transfer price for a compressor is 150% of total costs of the Compressor Division and 1,000 of the compressors are produced and transferred to the Fabrication Division.The Compressor Division's operating income is ________.

________ means minimum constraints and maximum freedom for managers at the lowest levels of an organization to make decisions and to take actions.

Which of the following statements is true of decentralization?

In analyzing transfer prices,the ________.

What is goal congruence?

Which of the following denotes minimum transfer price?

If a computer manufacturer used its common stock price as a Balanced Scorecard control measure,it would represent the ________ perspective.

In markets that are not perfectly competitive,companies can increase their capacity utilization only by decreasing their prices.

If the selling subunit is operating at capacity,the opportunity cost of transferring a unit internally rather than selling it externally is equal to the market price minus the variable cost.

What are transfer prices and what are its criteria?

The management accounting system is an informal management control system which provide information about the firm's costs,revenues,and income.

Hybrid transfer prices take into account both cost and market information.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Performance Measurement, compensation, and Multinational Considerations

Filters

Exam 22: Management Control Systems, transfer Pricing, and Multinational Considerations

Which of the following areas lends themselves to the concept of decentralization?

Assume the transfer price for a pair of shoes is 180% of total costs of the Stitching Division and 40,000 of soles are produced and transferred to the Polishing Division.The Stitching Division's operating income is ________.

A perfectly competitive market exists when ________.

Decisions regarding sources of long-term financing are best made at subunit level as the subunit has local knowledge and can leverage it in negotiations.

Assume the transfer price for a compressor is 150% of total costs of the Compressor Division and 1,000 of the compressors are produced and transferred to the Fabrication Division.The Compressor Division's operating income is ________.

________ means minimum constraints and maximum freedom for managers at the lowest levels of an organization to make decisions and to take actions.

Which of the following statements is true of decentralization?

In analyzing transfer prices,the ________.

What is goal congruence?

Which of the following denotes minimum transfer price?

If a computer manufacturer used its common stock price as a Balanced Scorecard control measure,it would represent the ________ perspective.

In markets that are not perfectly competitive,companies can increase their capacity utilization only by decreasing their prices.

If the selling subunit is operating at capacity,the opportunity cost of transferring a unit internally rather than selling it externally is equal to the market price minus the variable cost.

What are transfer prices and what are its criteria?

The management accounting system is an informal management control system which provide information about the firm's costs,revenues,and income.

Hybrid transfer prices take into account both cost and market information.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Performance Measurement, compensation, and Multinational Considerations

Filters