Exam 12: Performance Evaluation and Decentralization

Match each term with the correct statement from below. -A Balanced Scorecard viewpoint that defines customer and market segments in which the business will compete.

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

What is the price the selling division charges for a component purchased by the buying division of the same company?

Plank,Inc.has a division that makes paint and another division that constructs subdivisions.The paint division incurs the following costs for one litre of paint: The Paint Division can make 1,000,000 L per year,and expects to produce 1,000,000 L next year.The Construction Division currently buys 200,000 L of paint from an outside supplier for $5.20 per litre (the same price that the Paint Division receives). Direct materials \ 1.10 Direct labour 1.45 Variable overhead 0.90 Fixed overhead 1.15 Total \ 4.60 A. The maximum transfer price per litre of paint is $\$$ _____. B. The minimum transfer price per litre of $p$ aint is $\$$ _____. C. Does it matter whether or not the two divisions transfer?

The Sunshine National Bank has a mortgage loan office with conversion cost of $73,950 per month. The five employees each work 170 hours per month. Last month, 1,020 loan applications were processed, but the staff believes that system improvements could lead to the processing of as many as 1,700 per month. -Refer to the Figure.Calculate the following: A. Conversion cost in minutes B. Theoretical conversion cost per unit C. Actual conversion cost per unit D. How much more is the department spending per application than it should be if perfect efficiency could be attained?

Two transfer pricing policies are used in practice.These transfer pricing policies include cost-based transfer prices and negotiated transfer prices.

What is the best transfer price when the transferred product has a competitive outside market?

The manager of Gamma Division projects the following for next year: The manager can invest in an additional project that would require $30,000 investment in additional assets and would generate $4,200 of additional income. The company's minimum rate of return is 12%. Sales \ 100,000 Operating income \ 30,000 Operating assets \ 200,000 -Refer to the Figure.What will happen to Gamma Division if the manager invests in the additional project?

Which of the following positive results does the use of return on investment (ROI)encourage managers to focus on?

Corrugated, Inc. has many divisions that are evaluated on the basis of ROI. One division, the Box Division, makes boxes. The Candy Division makes candy and needs 50,000 boxes per year. The Box Division incurs the following costs for one box: The Box Division has capacity to make 500,000 boxes per year. The Candy Division currently buys its boxes from an outside supplier for $1.40 each (the same price that the Box Division receives). Direct materials \ 0.20 Direct labour 0.70 Variable overhead 0.10 Fixed overhead 0.23 Total \ 1.23 -Refer to the Figure.Assume that Corrugated,Inc.allows division managers to negotiate the transfer price.The Box Division is producing 500,000 boxes.Suppose the Box Division and the Candy Division agree to transfer boxes.What would be the floor of the bargaining range and which division sets it?

In negotiated transfer pricing,the selling division sets the ceiling (maximum possible transfer price)for the bargaining range.

What is the definition of a testable strategy?

Last night,Rebecca worked on her accounting homework for two and a half hours.During that time,she completed eight problems.What is Rebecca's velocity in problems per hour?

The Glass Division of a company makes glass vases,which have the following unit costs: The Florist Division of the company sells cut flowers and uses the glass vases.The Florist Division uses 10,000 vases per year and currently buys them from an outside supplier for $4 each.The Glass Division produces and sells 100,000 glass vases per year and sells them on the outside market for $4 each.Vases sold outside incur the sales commission; this commission would not be paid on internal transfers.The Glass Division and the Florist Division managers just met and agreed on a transfer price of $3.75 per vase.Is this a good idea for each division? Explain. Direct materials \ 0.20 Direct labour 0.35 Variable overhead 0.15 Fixed overhead 1.30 Selling commission 0.50

Daytona,Inc.has a division that makes paint and another division that constructs subdivision houses.The paint division incurs the following costs for one litre of paint: The Paint Division can make 1,000,000 L per year and is at capacity.The Construction Division currently buys its paint from an outside supplier for $8.20 per litre (the same price that the Paint Division receives). Direct materials \ 2,101.10 Direct labour 1,451.45 Variable overhead 1,900.90 Fixed overhead 2,151.15 Total \ 7,604.60 A. The maximum transfer price per litre of paint is $\$$ _____This price is set by which of the two divisions? B. The minimum transfer price per litre of $p$ aint is $\$$ _____ This price is set by which of the two divisions?

Suppose the margin of 0.2 stayed the same and the turnover ratio of 4.0 increased by 10%.What would be the effect on the ROI?

Match each term with the correct statement from below. -A Balanced Scorecard viewpoint that defines the capabilities that an organization needs to create long-term improvement.

What does the process value chain consist of?

How is margin calculated?

In which of the following responsibility centres is a manager responsible only for sales?