Question 1

One of the advantages of decentralization is that it allows top management to concentrate on long-term strategic planning.

Accepted Answer

A) True 
 B)False

Question 2

Grady Corporation provides the following financial information:
 
Calculate the target rate of return.(Round your answer to two decimal places. )

Accepted Answer

A) 20.00% 
B) 82.35% 
C) 26.92% 
D) 61.18% 
A) 20.00% 
B) 82.35% 
C) 26.92% 
D) 61.18%

Question 3

Decentralization may cause the company to duplicate certain costs or activities.

Accepted Answer

A) True 
 B)False

Question 4

The manager of a revenue center is responsible for generating profits.

Accepted Answer

A) True 
 B)False

Question 5

Centralized companies split their operations into segments and top management delegates decision making to the segment managers.

Accepted Answer

A) True 
 B)False

Question 6

A company may prefer to use residual income over return on investment for performance evaluation because ________.

Accepted Answer

A) residual income is a ratio but return on investment is an absolute figure 
B) residual income is more likely to lead to goal congruence than return on investment 
C) residual income is easier to calculate than return on investment 
D) residual income considers three elements but return on investment considers only two elements 
A) residual income is a ratio but return on investment is an absolute figure 
B) residual income is more likely to lead to goal congruence than return on investment 
C) residual income is easier to calculate than return on investment 
D) residual income considers three elements but return on investment considers only two elements

Question 7

Which of the following is a responsibility that is common to the managers of cost,profit,and investment centers?

Accepted Answer

A) generating revenues 
B) generating profits 
C) managing the invested capital 
D) controlling costs 
A) generating revenues 
B) generating profits 
C) managing the invested capital 
D) controlling costs

Question 8

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 9

Which would be an appropriate cost driver for the warranty services activity?

Accepted Answer

A) direct labor hours 
B) number of service calls 
C) number of purchase orders 
D) number of batches 
A) direct labor hours 
B) number of service calls 
C) number of purchase orders 
D) number of batches

Question 10

Investment center managers are responsible for generating profits and making use of the investment center's assets.

Accepted Answer

A) True 
 B)False

Question 11

The return on investment of a company can be improved by either increasing average total assets or decreasing operating income.

Accepted Answer

A) True 
 B)False

Question 12

Powers,Inc.manufactures two kinds of bags-totes and satchels.The company allocates manufacturing overhead using a single plantwide rate with direct labor cost as the allocation base.Estimated overhead costs for the year are $25,500.Additional estimated information is given below.
 
Calculate the amount of overhead to be allocated to Satchels,if the actual units produced and direct labor costs equal the estimated amounts.(Round any percentages to two decimal places and your final answer to the nearest dollar. )

Accepted Answer

A) $464 
B) $14,734 
C) $10,765 
D) $21,700 
A) $464 
B) $14,734 
C) $10,765 
D) $21,700

Question 13

Performance evaluation systems provide top management with a framework for maintaining control over the entire organization.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Which of the following is the correct formula for the asset turnover ratio?

Accepted Answer

A) Net sales / Average total assets 
B) Net sales / Cost of goods sold 
C) Net sales / Net assets 
D) Net profit / Net sales 
A) Net sales / Average total assets 
B) Net sales / Cost of goods sold 
C) Net sales / Net assets 
D) Net profit / Net sales

Question 16

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 17

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 18

Aimee Cosmetics Company uses the following allocation rates from its activity-based costing system to assign overhead costs to products:
 
Product A1 uses the following:
 
How much overhead cost would be assigned to Product A1?

Accepted Answer

A) $7,095 
B) $215 
C) $600 
D) $1,580 
A) $7,095 
B) $215 
C) $600 
D) $1,580

Question 19

Carey,Inc.provides the following information:
 
Calculate the return on investment.

Accepted Answer

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

Question 20

List two objectives in setting transfer prices.

Accepted Answer

1.Achieving goal congruence by

Exam 24: Cost Allocation and Responsibility Accounting

One of the advantages of decentralization is that it allows top management to concentrate on long-term strategic planning.

Grady Corporation provides the following financial information: Calculate the target rate of return.(Round your answer to two decimal places. )

Decentralization may cause the company to duplicate certain costs or activities.

The manager of a revenue center is responsible for generating profits.

Centralized companies split their operations into segments and top management delegates decision making to the segment managers.

A company may prefer to use residual income over return on investment for performance evaluation because ________.

Which of the following is a responsibility that is common to the managers of cost,profit,and investment centers?

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 would be an appropriate cost driver for the warranty services activity?

Investment center managers are responsible for generating profits and making use of the investment center's assets.

The return on investment of a company can be improved by either increasing average total assets or decreasing operating income.

Performance evaluation systems provide top management with a framework for maintaining control over the entire organization.

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

Which of the following is the correct formula for the asset turnover ratio?

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

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

Aimee Cosmetics Company uses the following allocation rates from its activity-based costing system to assign overhead costs to products: Product A1 uses the following: How much overhead cost would be assigned to Product A1?

Carey,Inc.provides the following information: Calculate the return on investment.

List two objectives in setting transfer prices.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

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

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