Question 1

Which of the following types of organizations can use management by objectives?

Accepted Answer

A)  profit-seeking organizations only 
B)  nonprofit organizations only 
C)  universities, hospitals and churches only 
D)  all of the above 
A)  profit-seeking organizations only 
B)  nonprofit organizations only 
C)  universities, hospitals and churches only 
D)  all of the above

Question 2

The following information is available for the Paul Ryan Company:
$\begin{array}{ll}
\text { Sales for year } & \$ 150,000 \
\text { Average invested capital for year } & \$ 156,250 \
\text { Returnon investment } & 10 \%
\end{array}$
What is the return on sales?

Accepted Answer

A)  10.00% 
B)  10.42% 
C)  62.50% 
D)  100.00% 
A)  10.00% 
B)  10.42% 
C)  62.50% 
D)  100.00%

Question 3

The following information pertains to Sanjay Company:
$\begin{array}{ll}
\text { Total assets } & \$ 50,000 \
\text { Total current liabilities } & \$ 30,000 \
\text { Total expenses } & \$ 60,000 \
\text { Total liabilities } & \$ 45,000 \
\text { Total revenues } & \$ 100,000
\end{array}$
Invested capital is defined as total assets.What is the capital turnover?

Accepted Answer

A)  0.40 
B)  0.63 
C)  1.79 
D)  2.00 
A)  0.40 
B)  0.63 
C)  1.79 
D)  2.00

Question 4

Decentralization is more popular in nonprofit organizations than in profit-seeking organizations.

Accepted Answer

A) True 
 B)False

Question 5

Higher-level managers have the best information concerning local conditions.

Accepted Answer

A) True 
 B)False

Question 6

Operating income divided by sales is ________.

Accepted Answer

A)  residual income 
B)  capital turnover 
C)  return on investment 
D)  return on sales 
A)  residual income 
B)  capital turnover 
C)  return on investment 
D)  return on sales

Question 7

Gokey Company reports the following information:
$\begin{array} { l  }
 \text {Net operating profit after taxes }&\$400,000 \
 \text {Adjusted net operating profit after taxes }&\$570,000 \
 \text {Average invested capital }&\$ 600,000\
 \text {Adjusted average invested capital }&\$700,000 \
 \text { After-taxcost of capital}&10\%\
\end{array}$

The adjusted figures reflect adjustments used by Stern Stewart & Company.What is the EVA for Gokey Company?

Accepted Answer

A)  $330,000 
B)  $340,000 
C)  $500,000 
D)  $510,000 
A)  $330,000 
B)  $340,000 
C)  $500,000 
D)  $510,000

Question 8

Return on investment equals operating income divided by investment.

Accepted Answer

A) True 
 B)False

Question 9

Companies must pay managers more if the managers bear more risk,assuming the managers are risk averse.

Accepted Answer

A) True 
 B)False

Question 10

The following information is available for the Tyson Company:
 $\begin{array}{ll}
\text { Sales for year } & \$ 1,000,000 \
\text { Average invested capital for year } & \$ 500,000 \
\text { Return on investment for year } & 25 \%
\end{array}$ 
Required: 
A) Compute capital turnover.
B) Compute operating income.
C) Compute return on sales.

Accepted Answer

A)2.0 = $1,000,000/$

Question 11

Return on investment can be computed as ________ times ________.

Accepted Answer

A)  residual income; capital turnover 
B)  return on assets; asset turnover 
C)  return on sales; capital turnover 
D)  net income; cost of capital 
A)  residual income; capital turnover 
B)  return on assets; asset turnover 
C)  return on sales; capital turnover 
D)  net income; cost of capital

Question 12

________ is the delegation of decision-making power to segment managers of an organization.

Accepted Answer

A)  Goal congruence 
B)  Segment autonomy 
C)  Managerial effort 
D)  Segment contribution 
A)  Goal congruence 
B)  Segment autonomy 
C)  Managerial effort 
D)  Segment contribution

Question 13

Maury Company's revenues are $300 for the year.Average invested capital for the year is $240.Expenses are currently 84% of revenues.If Maury Company can reduce its expenses to 70% of revenues,return on investment will be ________.

Accepted Answer

A)  20% 
B)  37.5% 
C)  70% 
D)  93.75% 
A)  20% 
B)  37.5% 
C)  70% 
D)  93.75%

Question 14

Return on sales equals revenue divided by income.

Accepted Answer

A) True 
 B)False

Question 15

In cases of constrained capacity,the opportunity cost of transferring a product internally is zero.

Accepted Answer

A) True 
 B)False

Question 16

All of the following are disadvantages of decentralization EXCEPT for ________.

Accepted Answer

A)  Local managers make decisions that are not in the organization's best interests. 
B)  Managers spend time negotiating transfer prices for goods and services transferred between divisions and segments. 
C)  Local managers duplicate services. 
D)  Local managers have more authority and greater levels of job satisfaction. 
A)  Local managers make decisions that are not in the organization's best interests. 
B)  Managers spend time negotiating transfer prices for goods and services transferred between divisions and segments. 
C)  Local managers duplicate services. 
D)  Local managers have more authority and greater levels of job satisfaction.

Question 17

Managers' incentives for performance are defined as the ________.

Accepted Answer

A)  relationship between cost and perceived benefit 
B)  relationship between goal congruence and managerial effort 
C)  rewards for managerial effort and actions 
D)  influence of uncontrollable factors on a manager's performance 
A)  relationship between cost and perceived benefit 
B)  relationship between goal congruence and managerial effort 
C)  rewards for managerial effort and actions 
D)  influence of uncontrollable factors on a manager's performance

Question 18

In companies with segment autonomy,who determines the transfer price for internal sales and purchases of products?

Accepted Answer

A)  all segment managers 
B)  segment mangers involved in transfer 
C)  upper management 
D)  outside suppliers 
A)  all segment managers 
B)  segment mangers involved in transfer 
C)  upper management 
D)  outside suppliers

Question 19

Capricorn Company's records reveal the following:
$\begin{array} { l  }
\text { Division X }\
 \text {Market price of finished component to outsiders  }&\$ 32 \text { per unit } \
 \text {Variable costs per component }&\$ 24 \text { per unit } \\text { Division Y }\
 \text {Sale price of finished product }&\$ 42 \text { per unit } \
\end{array}$

Variable costs:
$\begin{array}{ll}
\text { Division } X(1 \text { component }) & ? \
\text { Division } Y \text { Assembly } & 9 \text { per unit } \
\text { Division } Y \text { Packaging } & 4 \text { per unit }
\end{array}$
Division Y wants to buy the component from Division X.The variable costs of Division Y will be incurred whether it buys the component from Division X or from an outside supplier.Division Y can buy the component for $30 per unit from an outside supplier.Division X has no excess capacity.What is the highest price per unit that Division Y should pay to Division X for the components?

Accepted Answer

A)  $22 per unit 
B)  $29 per unit 
C)  $30 per unit 
D)  $32 per unit 
A)  $22 per unit 
B)  $29 per unit 
C)  $30 per unit 
D)  $32 per unit

Question 20

Residual income is defined as ________.

Accepted Answer

A)  sales less operating expenses 
B)  operating income divided by revenue 
C)  net operating profit after tax less a capital charge 
D)  net operating profit after tax 
A)  sales less operating expenses 
B)  operating income divided by revenue 
C)  net operating profit after tax less a capital charge 
D)  net operating profit after tax

Which of the following types of organizations can use management by objectives?

The following information is available for the Paul Ryan Company: Sales for year \ 150,000 Average invested capital for year \ 156,250 Returnon investment 10\% What is the return on sales?

The following information pertains to Sanjay Company: Total assets \ 50,000 Total current liabilities \ 30,000 Total expenses \ 60,000 Total liabilities \ 45,000 Total revenues \ 100,000 Invested capital is defined as total assets.What is the capital turnover?

Decentralization is more popular in nonprofit organizations than in profit-seeking organizations.

Higher-level managers have the best information concerning local conditions.

Operating income divided by sales is ________.

Return on investment equals operating income divided by investment.

Companies must pay managers more if the managers bear more risk,assuming the managers are risk averse.

The following information is available for the Tyson Company: Sales for year \ 1,000,000 Average invested capital for year \ 500,000 Return on investment for year 25\% Required: A) Compute capital turnover. B) Compute operating income. C) Compute return on sales.

Return on investment can be computed as times .

________ is the delegation of decision-making power to segment managers of an organization.

Maury Company's revenues are $300 for the year.Average invested capital for the year is $240.Expenses are currently 84% of revenues.If Maury Company can reduce its expenses to 70% of revenues,return on investment will be ________.

Return on sales equals revenue divided by income.

In cases of constrained capacity,the opportunity cost of transferring a product internally is zero.

All of the following are disadvantages of decentralization EXCEPT for ________.

Managers' incentives for performance are defined as the ________.

In companies with segment autonomy,who determines the transfer price for internal sales and purchases of products?

Residual income is defined as ________.

Managerial Accounting,the Business Organization,and Professional Ethics

Introduction to Cost Behavior and Cost Volume Profit Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus on Pricing Decisions

Relevant Information for Decision Making With a Focus on Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

Exam 10: Management Control in Decentralized Organizations

Which of the following types of organizations can use management by objectives?

The following information is available for the Paul Ryan Company: Sales for year \ 150,000 Average invested capital for year \ 156,250 Returnon investment 10\% What is the return on sales?

The following information pertains to Sanjay Company: Total assets \ 50,000 Total current liabilities \ 30,000 Total expenses \ 60,000 Total liabilities \ 45,000 Total revenues \ 100,000 Invested capital is defined as total assets.What is the capital turnover?

Decentralization is more popular in nonprofit organizations than in profit-seeking organizations.

Higher-level managers have the best information concerning local conditions.

Operating income divided by sales is ________.

Return on investment equals operating income divided by investment.

Companies must pay managers more if the managers bear more risk,assuming the managers are risk averse.

The following information is available for the Tyson Company: Sales for year \ 1,000,000 Average invested capital for year \ 500,000 Return on investment for year 25\% Required: A) Compute capital turnover. B) Compute operating income. C) Compute return on sales.

Return on investment can be computed as ________ times ________.

________ is the delegation of decision-making power to segment managers of an organization.

Maury Company's revenues are $300 for the year.Average invested capital for the year is $240.Expenses are currently 84% of revenues.If Maury Company can reduce its expenses to 70% of revenues,return on investment will be ________.

Return on sales equals revenue divided by income.

In cases of constrained capacity,the opportunity cost of transferring a product internally is zero.

All of the following are disadvantages of decentralization EXCEPT for ________.

Managers' incentives for performance are defined as the ________.

In companies with segment autonomy,who determines the transfer price for internal sales and purchases of products?

Residual income is defined as ________.

Managerial Accounting,the Business Organization,and Professional Ethics

Introduction to Cost Behavior and Cost Volume Profit Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus on Pricing Decisions

Relevant Information for Decision Making With a Focus on Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

Return on investment can be computed as times .