Question 1

The net income reduced by the total annual cost of capital is equal to the economic value added.

Accepted Answer

A) True 
 B)False  True

Question 2

Full Serve Inc.has a number of divisions.One division, Gamma, makes zippers that are used in the manufacture of boots.Another division, Delta, makes boots that use the zippers and needs 95,000 zippers per year.Gamma incurs the following costs for one zipper:
  
Full Serve has the capacity to make 960,000 zippers per year, but due to a soft market, it only plans to produce and sell 630,000 zippers next year.Delta currently buys zippers from an outside supplier for $4.00 each (the same price that Gamma receives).
- Assume that Full Serve allows negotiated transfer pricing.What is the ceiling of the bargaining range and which division sets it?

Accepted Answer

A)  $3.50; Gamma 
B)  $4.00; Delta 
C)  $2.70; Gamma 
D)  $2.70; Delta 
E)  $1.38; Gamma 
A)  $3.50; Gamma 
B)  $4.00; Delta 
C)  $2.70; Gamma 
D)  $2.70; Delta 
E)  $1.38; Gamma B

Question 3

Decentralization usually is achieved by creating units called ___________.

Accepted Answer

divisions

Question 4

The Balanced Scorecard perspective that defines the capabilities than an organization needs to create long-term growth and improvement is the ____ perspective.

Accepted Answer

A)  learning and growth 
B)  internal business process 
C)  customer 
D)  financial 
E)  None of these. 
A)  learning and growth 
B)  internal business process 
C)  customer 
D)  financial 
E)  None of these.

Question 5

The manager of Synergy Company's Stock Division projects the following for next year: 
 
The manager can invest in an additional project that would require $50,000 investment in additional assets and would generate $9,000 of additional income.
-The company's minimum rate of return is 15%.What is the residual income for the Stock Division without the additional investment?

Accepted Answer

A)  $13,450 
B)  $6,000 
C)  $16,600 
D)  $18,000 
E)  $12,250 
A)  $13,450 
B)  $6,000 
C)  $16,600 
D)  $18,000 
E)  $12,250

Question 6

Which of the following is a disadvantage of a focus on return on investment?

Accepted Answer

A)  It can encourage managers to focus on cost cutting efforts. 
B)  It can produce a narrow focus on divisional profitability at the expense of profitability for the overall firm. 
C)  It can encourage managers to cut inventories and reduce overall investment. 
D)  It can encourage managers to focus on the long run at the expense of the short run. 
E)  It can accomplish all of these disadvantages. 
A)  It can encourage managers to focus on cost cutting efforts. 
B)  It can produce a narrow focus on divisional profitability at the expense of profitability for the overall firm. 
C)  It can encourage managers to cut inventories and reduce overall investment. 
D)  It can encourage managers to focus on the long run at the expense of the short run. 
E)  It can accomplish all of these disadvantages.

Question 7

The level of the transfer price can affect the overall company because

Accepted Answer

A)  the higher the transfer price, the higher the operating income. 
B)  it may impact on the taxes paid by the multinational company. 
C)  the lower the transfer price, the lower the total costs. 
D)  internal transfers are always costly to the firm. 
E)  the transfer price may be higher than the cost-based price. 
A)  the higher the transfer price, the higher the operating income. 
B)  it may impact on the taxes paid by the multinational company. 
C)  the lower the transfer price, the lower the total costs. 
D)  internal transfers are always costly to the firm. 
E)  the transfer price may be higher than the cost-based price.

Question 8

The strategic management system that translates an organization's mission and strategy into operational objectives and performance measures is

Accepted Answer

A)  activity-based management. 
B)  responsibility accounting. 
C)  strategic accounting. 
D)  cost information management. 
E)  Balanced Scorecard. 
A)  activity-based management. 
B)  responsibility accounting. 
C)  strategic accounting. 
D)  cost information management. 
E)  Balanced Scorecard.

Question 9

Unlike ROI, residual income does not encourage a short-run orientation.

Accepted Answer

A) True 
 B)False

Question 10

The ________________ is a strategic management system that defines a strategic-based responsibility accounting system.

Accepted Answer

The answer of The ________________ is a strategic management system...

Question 11

The manager of Synergy Company's Stock Division projects the following for next year: 
 
The manager can invest in an additional project that would require $50,000 investment in additional assets and would generate $9,000 of additional income.
- The company's minimum rate of return is 15%.What is the residual income for the Stock Division with the additional project?

Accepted Answer

A)  $40,000 
B)  $6,000 
C)  $13,750 
D)  $4,200 
E)  $25,600 
A)  $40,000 
B)  $6,000 
C)  $13,750 
D)  $4,200 
E)  $25,600

Question 12

A responsibility center in which a manager is responsible for revenues, cost, and investment is a(n)

Accepted Answer

A)  cost center. 
B)  revenue center. 
C)  profit center. 
D)  investment center. 
E)  None of these. 
A)  cost center. 
B)  revenue center. 
C)  profit center. 
D)  investment center. 
E)  None of these.

Question 13

When a product is transferred at market price, the transfer will optimize both divisional and company-wide profits.

Accepted Answer

A) True 
 B)False

Question 14

The direct comparison of the performance of two different investment centers is difficult using residual income because residual income is an absolute measure.

Accepted Answer

A) True 
 B)False

Question 15

_____________________ refers to earnings before non-operating revenue, expenses, interest and taxes.

Accepted Answer

The answer of _____________________ refers to earnings before non-operating revenue,...

Question 16

Using Economic Value Added (EVA) to calculate residual income, the cost of capital employed is

Accepted Answer

A)  the standard percentage cost of capital multiplied by the average capital employed. 
B)  the actual percentage cost of capital multiplied by the average capital employed. 
C)  the standard percentage cost of capital multiplied by the total capital employed. 
D)  the actual percentage cost of capital multiplied by the total capital employed. 
A)  the standard percentage cost of capital multiplied by the average capital employed. 
B)  the actual percentage cost of capital multiplied by the average capital employed. 
C)  the standard percentage cost of capital multiplied by the total capital employed. 
D)  the actual percentage cost of capital multiplied by the total capital employed.

Question 17

The manager of Stock Division projects the following for next year: 
 
The manager can invest in an additional project that would require $40,000 investment in additional assets and would generate $6,000 of additional income.
-The company's minimum rate of return is 14%.Which of the following statements is true?

Accepted Answer

A)  If the manager invests in the additional project, ROI of the division will decrease. 
B)  The residual income of the project is less than the residual income of the division without the project; therefore the project will be rejected. 
C)  Average investment for Stock Division will decrease if the project is accepted for investment. 
D)  If the manager invests in the additional project, residual income of the division will increase. 
E)  None of these. 
A)  If the manager invests in the additional project, ROI of the division will decrease. 
B)  The residual income of the project is less than the residual income of the division without the project; therefore the project will be rejected. 
C)  Average investment for Stock Division will decrease if the project is accepted for investment. 
D)  If the manager invests in the additional project, residual income of the division will increase. 
E)  None of these.

Question 18

If there is a competitive outside market for the transferred product, then the best transfer price is the _____________.

Accepted Answer

The answer of If there is a competitive outside market...

Question 19

Typically, investment centers are evaluated on the basis of __________________.

Accepted Answer

return on

Question 20

The Auto Division of Big Department Store had a net operating income of $560,000, a net asset base of $4,000,000, and a required rate of return of 12%.Sales for the period totaled $3,000,000.The residual income for the period is

Accepted Answer

A)  $480,000. 
B)  $360,000. 
C)  $120,000. 
D)  $80,000. 
A)  $480,000. 
B)  $360,000. 
C)  $120,000. 
D)  $80,000.

The net income reduced by the total annual cost of capital is equal to the economic value added.

Decentralization usually is achieved by creating units called ___________.

The Balanced Scorecard perspective that defines the capabilities than an organization needs to create long-term growth and improvement is the ____ perspective.

Which of the following is a disadvantage of a focus on return on investment?

The level of the transfer price can affect the overall company because

The strategic management system that translates an organization's mission and strategy into operational objectives and performance measures is

Unlike ROI, residual income does not encourage a short-run orientation.

The ________________ is a strategic management system that defines a strategic-based responsibility accounting system.

A responsibility center in which a manager is responsible for revenues, cost, and investment is a(n)

When a product is transferred at market price, the transfer will optimize both divisional and company-wide profits.

The direct comparison of the performance of two different investment centers is difficult using residual income because residual income is an absolute measure.

_____________________ refers to earnings before non-operating revenue, expenses, interest and taxes.

Using Economic Value Added (EVA) to calculate residual income, the cost of capital employed is

If there is a competitive outside market for the transferred product, then the best transfer price is the _____________.

Typically, investment centers are evaluated on the basis of __________________.

The Auto Division of Big Department Store had a net operating income of $560,000, a net asset base of $4,000,000, and a required rate of return of 12%.Sales for the period totaled $3,000,000.The residual income for the period is

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior, Cost Forecasting, and Segmented Income Statements

Job-Order Costing and Normal Cost Overhead Application

Activity-Based Costing and Management

Process Costing

Cost-Volume-Profit Analysis

Tactical Decision-Making and Relevant Costing

Profit Planning and Flexible Budgets

Standard Costing and Variance Analysis

Capital Investment Decisions

Emerging Topics in Managerial Accounting: Sustainability, Quality Cost, Lean Accounting, International Issues, Enterprise Risk Management, the Managerial Accountant in Forensicfraud Accounting

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 11: Performance Evaluation and Decentralization

The net income reduced by the total annual cost of capital is equal to the economic value added.

Decentralization usually is achieved by creating units called ___________.

The Balanced Scorecard perspective that defines the capabilities than an organization needs to create long-term growth and improvement is the ____ perspective.

Which of the following is a disadvantage of a focus on return on investment?

The level of the transfer price can affect the overall company because

The strategic management system that translates an organization's mission and strategy into operational objectives and performance measures is

Unlike ROI, residual income does not encourage a short-run orientation.

The ________________ is a strategic management system that defines a strategic-based responsibility accounting system.

A responsibility center in which a manager is responsible for revenues, cost, and investment is a(n)

When a product is transferred at market price, the transfer will optimize both divisional and company-wide profits.

The direct comparison of the performance of two different investment centers is difficult using residual income because residual income is an absolute measure.

_____________________ refers to earnings before non-operating revenue, expenses, interest and taxes.

Using Economic Value Added (EVA) to calculate residual income, the cost of capital employed is

If there is a competitive outside market for the transferred product, then the best transfer price is the _____________.

Typically, investment centers are evaluated on the basis of __________________.

The Auto Division of Big Department Store had a net operating income of $560,000, a net asset base of $4,000,000, and a required rate of return of 12%.Sales for the period totaled $3,000,000.The residual income for the period is

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior, Cost Forecasting, and Segmented Income Statements

Job-Order Costing and Normal Cost Overhead Application

Activity-Based Costing and Management

Process Costing

Cost-Volume-Profit Analysis

Tactical Decision-Making and Relevant Costing

Profit Planning and Flexible Budgets

Standard Costing and Variance Analysis

Capital Investment Decisions

Emerging Topics in Managerial Accounting: Sustainability, Quality Cost, Lean Accounting, International Issues, Enterprise Risk Management, the Managerial Accountant in Forensicfraud Accounting

Statement of Cash Flows

Financial Statement Analysis

Filters