Question 1

List two objectives in setting transfer prices.

Accepted Answer

1.Achieving goal congruence by

Question 2

Recreation Equipment Company has several divisions that are investment centers.Data for the Boat Division and the Trailer Division are shown here:
 $$\begin{array} { | l | r | r | } 
\hline & \text { Boat Division } & \text { Trailer Division } \
\hline \text { Operating income } & \$ 75,000 & \$ 40,000 \
\hline \text { Total assets at Jan. 1 } & \$ 694,000 & \$ 234,000 \
\hline \text { Total assets at Dec. 31 } & \$ 700,000 & \$ 218,000 \
\hline
\end{array}$$ 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 3

Parkinson Ladders Company provides the following financial information: $$\begin{array} { | l | r | } 
\hline \text { Income from operations } & \$ 300,000 \
\hline \text { Interest expense } & 48,000 \
\hline \text { Gains/(losses) on sale of equipment } & 2,600 \
\hline \text { Net income } & 249,400 \
\hline \text { Total assets at Jan. 1 } & 2,900,000 \
\hline \text { Total assets at Dec .31 } & 3,500,000 \
\hline
\end{array}$$ Calculate return on investment based on the information given above.(Round your answer to two decimal places.)

Accepted Answer

A)  10.34% 
B)  7.79% 
C)  9.38% 
D)  8.57% 
A)  10.34% 
B)  7.79% 
C)  9.38% 
D)  8.57%

Question 4

Holmes,Inc.has a division that manufactures a component that sells for $165 and has a variable cost of $45.Another division of the company wants to purchase the component.Fixed cost per unit of the component is $24.What is the transfer price if the division is operating at full capacity?

Accepted Answer

A)  $69 
B)  $189 
C)  $165 
D)  $24 
A)  $69 
B)  $189 
C)  $165 
D)  $24

Question 5

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 6

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

Accepted Answer

A)  return on investment 
B)  number of repeat customers 
C)  net profit margin 
D)  sales revenue growth 
A)  return on investment 
B)  number of repeat customers 
C)  net profit margin 
D)  sales revenue growth

Question 7

Moonrays,Inc.manufactures both normal and premium tube lights.The company allocates manufacturing overhead using a single plantwide rate with machine hours as the allocation base.Estimated overhead costs for the year are $106,000.Additional estimated information is given below. $$\begin{array} { | l | r | r | } 
\hline & \text { Normal } & \text { Premium } \
\hline \text { Machine hours (MHr) } & 21,000 & 38,000 \
\hline \text { Direct materials } & \$ 60,000 & \$ 500,000 \
\hline
\end{array}$$ Calculate the predetermined overhead allocation rate.(Round your answer to the nearest cent.)

Accepted Answer

A)  $5.05 per direct labor hour 
B)  $1.80 per machine hour 
C)  $2.79 per machine hour 
D)  $0.19 per direct labor hour 
A)  $5.05 per direct labor hour 
B)  $1.80 per machine hour 
C)  $2.79 per machine hour 
D)  $0.19 per direct labor hour

Question 8

Howard Consumer Products has a small car division that operates as a profit center.Below is a partially completed responsibility report for the first quarter.Complete the responsibility report.(Round percentages to one decimal place.)
Howard Consumer Products
Responsibility Report
 $$\begin{array} { | l | r | r | r | r | } 
\hline  { \begin{array} { c } 
\text { Product } \ 
\text { Type }
\end{array} } & \begin{array} { c } 
\text { Actual } \
\text { Results }
\end{array} & \begin{array} { c } 
\text { Flexible } \
\text { Budget }
\end{array} & \begin{array} { c } 
\text { Flexible Budget } \
\text { Variance } \
\text { (F or U) }
\end{array} & \begin{array} { c } 
\text { Sales Volume } \
\text { Variance }
\end{array} \
\hline \text { Sales Revenue } & \$ 688,200 & \$ 700,000 & & \
\hline \text { Variable Expense } & \underline { 309,000 } & \underline { 320,000 } & & \
\hline \text { Contribution Margin } & & & & \
\hline \text { Traceable Fixed Expense } & \underline { 371,000 } & \underline { 369,000 } & & \
\hline \text { Divisional Segment Margin } & & & & \
\hline 
\end{array}$$

Accepted Answer

Howard Consumer Products
Responsibility

Question 9

Ewan Logistics provides the following information: $$\begin{array} { | l | r | } 
\hline \text { Operating income } & \$ 1,600,000 \
\hline \text { Net sales } & \$ 14,000,000 \
\hline \text { Average total assets } & \$ 1,800,000 \
\hline \text { Management's target rate of return } & 30 \% \
\hline
\end{array}$$ What is the company's residual income?

Accepted Answer

A)  $(200,000) 
B)  $540,000 
C)  $1,320,000 
D)  $1,060,000 
A)  $(200,000) 
B)  $540,000 
C)  $1,320,000 
D)  $1,060,000

Question 10

A cost-based transfer price considers the cost of producing the goods when determining the price.

Accepted Answer

A) True 
 B)False

Question 11

A lag indicator is a performance measure that forecasts future performance.

Accepted Answer

A) True 
 B)False

Question 12

Trainor Logistics provides the following information: $$\begin{array} { | l | r | } 
\hline \text { Operating income } & \$ 1,600,000 \
\hline \text { Net sales } & \$ 13,500,000 \
\hline \text { Average total assets } & \$ 2,000,000 \
\hline \text { Management's target rate of return } & 30 \% \
\hline
\end{array}$$ What is the company's return on investment? (Round your answer to two decimal places.)

Accepted Answer

A)  11.85% 
B)  14.81% 
C)  80.00% 
D)  30.00% 
A)  11.85% 
B)  14.81% 
C)  80.00% 
D)  30.00%

Question 13

Which of the following managers is likely to have the most diverse 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 revenue 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 revenue center

Question 14

Companies calculate the predetermined overhead rate at the beginning of an accounting period using the actual values of overhead costs.

Accepted Answer

A) True 
 B)False

Question 15

The responsibility report of Keith Parker,the manager of one of the divisions of an auto parts manufacturing company,includes profits as well as return on investment and residual income.Keith is most likely the manager of a(n)________.

Accepted Answer

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

Question 16

The performance evaluation system should provide incentives to segment managers for coordinating the activities of the subunits and directing them toward the overall company goals.Which of the following performance measurement goals has been described by this statement?

Accepted Answer

A)  motivating segment managers 
B)  promoting goal congruence 
C)  providing feedback 
D)  benchmarking 
A)  motivating segment managers 
B)  promoting goal congruence 
C)  providing feedback 
D)  benchmarking

Question 17

Which of the following is a disadvantage of decentralization?

Accepted Answer

A)  It results in increased customer response time. 
B)  It allows only the top management to make decisions. 
C)  It does not motivate employees because the decision-making powers are not delegated. 
D)  It results in problems with achieving goal congruence. 
A)  It results in increased customer response time. 
B)  It allows only the top management to make decisions. 
C)  It does not motivate employees because the decision-making powers are not delegated. 
D)  It results in problems with achieving goal congruence.

Question 18

Sun,Inc.has average total assets of $300,000.The annual operating income of the company is $200,000.The target rate of return for the company is 15%.Calculate the residual income.

Accepted Answer

A)  $45,000 
B)  $100,000 
C)  $30,000 
D)  $155,000 
A)  $45,000 
B)  $100,000 
C)  $30,000 
D)  $155,000

Question 19

The manager of which of the following centers has the authority to open new stores or close existing ones?

Accepted Answer

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

Question 20

Carey,Inc.provides the following information: $$\begin{array} { | l | r | } 
\hline \text { Profit margin ratio } & 6 \% \
\hline \text { Asset turnover ratio } & 2 \text { times } \
\hline \text { Net sales } & \$ 500,000 \
\hline \text { Target rate of return } & 9 \% \
\hline
\end{array}$$ Calculate the return on investment.

Accepted Answer

A)  12% 
B)  54% 
C)  3% 
D)  15% 
A)  12% 
B)  54% 
C)  3% 
D)  15%

List two objectives in setting transfer prices.

Holmes,Inc.has a division that manufactures a component that sells for $165 and has a variable cost of $45.Another division of the company wants to purchase the component.Fixed cost per unit of the component is $24.What is the transfer price if the division is operating at full capacity?

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

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

Ewan Logistics provides the following information: Operating income \ 1,600,000 Net sales \ 14,000,000 Average total assets \ 1,800,000 Management's target rate of return 30\% What is the company's residual income?

A cost-based transfer price considers the cost of producing the goods when determining the price.

A lag indicator is a performance measure that forecasts future performance.

Trainor Logistics provides the following information: Operating income \ 1,600,000 Net sales \ 13,500,000 Average total assets \ 2,000,000 Management's target rate of return 30\% What is the company's return on investment? (Round your answer to two decimal places.)

Which of the following managers is likely to have the most diverse responsibilities?

Companies calculate the predetermined overhead rate at the beginning of an accounting period using the actual values of overhead costs.

The responsibility report of Keith Parker,the manager of one of the divisions of an auto parts manufacturing company,includes profits as well as return on investment and residual income.Keith is most likely the manager of a(n)________.

The performance evaluation system should provide incentives to segment managers for coordinating the activities of the subunits and directing them toward the overall company goals.Which of the following performance measurement goals has been described by this statement?

Which of the following is a disadvantage of decentralization?

Sun,Inc.has average total assets of $300,000.The annual operating income of the company is $200,000.The target rate of return for the company is 15%.Calculate the residual income.

The manager of which of the following centers has the authority to open new stores or close existing ones?

Carey,Inc.provides the following information: Profit margin ratio 6\% Asset turnover ratio 2 times Net sales \ 500,000 Target rate of return 9\% Calculate the return on investment.

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

Filters

Exam 24: Cost Allocation and Responsibility Accounting

List two objectives in setting transfer prices.

Holmes,Inc.has a division that manufactures a component that sells for $165 and has a variable cost of $45.Another division of the company wants to purchase the component.Fixed cost per unit of the component is $24.What is the transfer price if the division is operating at full capacity?

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

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

Ewan Logistics provides the following information: Operating income \ 1,600,000 Net sales \ 14,000,000 Average total assets \ 1,800,000 Management's target rate of return 30\% What is the company's residual income?

A cost-based transfer price considers the cost of producing the goods when determining the price.

A lag indicator is a performance measure that forecasts future performance.

Trainor Logistics provides the following information: Operating income \ 1,600,000 Net sales \ 13,500,000 Average total assets \ 2,000,000 Management's target rate of return 30\% What is the company's return on investment? (Round your answer to two decimal places.)

Which of the following managers is likely to have the most diverse responsibilities?

Companies calculate the predetermined overhead rate at the beginning of an accounting period using the actual values of overhead costs.

The responsibility report of Keith Parker,the manager of one of the divisions of an auto parts manufacturing company,includes profits as well as return on investment and residual income.Keith is most likely the manager of a(n)________.

The performance evaluation system should provide incentives to segment managers for coordinating the activities of the subunits and directing them toward the overall company goals.Which of the following performance measurement goals has been described by this statement?

Which of the following is a disadvantage of decentralization?

Sun,Inc.has average total assets of $300,000.The annual operating income of the company is $200,000.The target rate of return for the company is 15%.Calculate the residual income.

The manager of which of the following centers has the authority to open new stores or close existing ones?

Carey,Inc.provides the following information: Profit margin ratio 6\% Asset turnover ratio 2 times Net sales \ 500,000 Target rate of return 9\% Calculate the return on investment.

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

Filters