Question 1

Developing and retaining quality managers is an advantage of decentralization.

Accepted Answer

A) True 
 B)False

Question 2

The balanced scorecard is a set of financial and nonfinancial measures that reflect the performance of the business.

Accepted Answer

A) True 
 B)False

Question 3

The major shortcoming of income from operations as an investment center performance measure is that it ignores the amount of revenues earned by the center.

Accepted Answer

A) True 
 B)False

Question 4

The Everest Company has income from operations of $80,000, invested assets of $500,000, and sales of $1,050,000. What is the investment turnover?

Accepted Answer

A)  1.8 
B)  2.1 
C)  .48 
D)  13.13 
A)  1.8 
B)  2.1 
C)  .48 
D)  13.13

Question 5

Under the negotiated price approach, the transfer price is the price at which the product or service transferred could be sold to outside buyers.

Accepted Answer

A) True 
 B)False

Question 6

The Magnolia Company Division A has income from operations of $80,000 and assets of $400,000. The minimum acceptable rate of return on assets is 12%. What is the residual income for the division?

Accepted Answer

The answer of The Magnolia Company Division A has income...

Question 7

Three measures of investment center performance are income from operations, rate of return on investment, and residual income.

Accepted Answer

A) True 
 B)False

Question 8

The Eastern Division of Kentucky Company has a rate of return on investment of 28% and a profit margin of 20%. What is the investment turnover?

Accepted Answer

A)  3.6 
B)  1.4 
C)  5.0 
D)  .7 
A)  3.6 
B)  1.4 
C)  5.0 
D)  .7

Question 9

The Creative Division of the Barry Company reported the following results for December 2012:
   Required: Based on this information, what were the sales?

Accepted Answer

$1,200,000

Question 10

One of the advantages of decentralization is that delegating authority to managers closest to the operation always results in better decisions.

Accepted Answer

A) True 
 B)False

Question 11

The following is a measure of a manager's performance working in a profit center.

Accepted Answer

A)  balance sheet 
B)  rate of return and residual income measures 
C)  budget performance report 
D)  divisional income statements 
A)  balance sheet 
B)  rate of return and residual income measures 
C)  budget performance report 
D)  divisional income statements

Question 12

The profit center income statement should include only controllable revenues and expenses.

Accepted Answer

A) True 
 B)False

Question 13

The profit center income statement should include only revenues and expenses that are controlled by the manager.

Accepted Answer

A) True 
 B)False

Question 14

The minimum amount of desired divisional income from operations is set by top management by establishing a minimum rate of return considered acceptable for invested assets.

Accepted Answer

A) True 
 B)False

Question 15

Responsibility accounting reports for profit centers will include

Accepted Answer

A)  costs. 
B)  revenues. 
C)  expenses and fixed assets. 
D)  revenues, expenses, net income or loss from operations. 
A)  costs. 
B)  revenues. 
C)  expenses and fixed assets. 
D)  revenues, expenses, net income or loss from operations.

Question 16

The investment turnover is the:

Accepted Answer

A)  ratio of income from operations to sales 
B)  ratio of income from operations to invested assets 
C)  ratio of assets to liabilities 
D)  ratio of sales to invested assets 
A)  ratio of income from operations to sales 
B)  ratio of income from operations to invested assets 
C)  ratio of assets to liabilities 
D)  ratio of sales to invested assets

Question 17

In an investment center, the manager has the responsibility and the authority to make decisions that affect not only costs and revenues, but also the plant assets invested in the center.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following would not be considered an internal centralized service department?

Accepted Answer

A)  Payroll accounting department 
B)  Manufacturing department 
C)  Information systems department 
D)  Purchasing department 
A)  Payroll accounting department 
B)  Manufacturing department 
C)  Information systems department 
D)  Purchasing department

Question 19

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum rate of return of 15%. The residual income for Chicks is:

Accepted Answer

A)  $165,000 
B)  $302,500 
C)  $137,500 
D)  $191,500 
A)  $165,000 
B)  $302,500 
C)  $137,500 
D)  $191,500

Question 20

In an investment center, the manager has responsibility and authority for making decisions that affect:

Accepted Answer

A)  costs 
B)  revenues 
C)  assets 
D)  costs, revenues, and assets 
A)  costs 
B)  revenues 
C)  assets 
D)  costs, revenues, and assets

Exam 23: Performance Evaluation for Decentralized Operations

Developing and retaining quality managers is an advantage of decentralization.

The balanced scorecard is a set of financial and nonfinancial measures that reflect the performance of the business.

The major shortcoming of income from operations as an investment center performance measure is that it ignores the amount of revenues earned by the center.

The Everest Company has income from operations of $80,000, invested assets of $500,000, and sales of $1,050,000. What is the investment turnover?

Under the negotiated price approach, the transfer price is the price at which the product or service transferred could be sold to outside buyers.

The Magnolia Company Division A has income from operations of $80,000 and assets of $400,000. The minimum acceptable rate of return on assets is 12%. What is the residual income for the division?

Three measures of investment center performance are income from operations, rate of return on investment, and residual income.

The Eastern Division of Kentucky Company has a rate of return on investment of 28% and a profit margin of 20%. What is the investment turnover?

The Creative Division of the Barry Company reported the following results for December 2012: Required: Based on this information, what were the sales?

One of the advantages of decentralization is that delegating authority to managers closest to the operation always results in better decisions.

The following is a measure of a manager's performance working in a profit center.

The profit center income statement should include only controllable revenues and expenses.

The profit center income statement should include only revenues and expenses that are controlled by the manager.

The minimum amount of desired divisional income from operations is set by top management by establishing a minimum rate of return considered acceptable for invested assets.

Responsibility accounting reports for profit centers will include

The investment turnover is the:

In an investment center, the manager has the responsibility and the authority to make decisions that affect not only costs and revenues, but also the plant assets invested in the center.

Which of the following would not be considered an internal centralized service department?

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum rate of return of 15%. The residual income for Chicks is:

In an investment center, the manager has responsibility and authority for making decisions that affect:

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Differential Analysis and Product Pricing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Cost Management for Just-In-Time Environments

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