Question 1

Investment centers differ from profit centers in that they

Accepted Answer

A)  are responsible for net income only. 
B)  are able to invest in assets. 
C)  have less responsibilities than cost centers and profit centers. 
D)  are only responsible for revenues. 
A)  are responsible for net income only. 
B)  are able to invest in assets. 
C)  have less responsibilities than cost centers and profit centers. 
D)  are only responsible for revenues.

Question 2

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 3

Identify the formula for the rate of return on investment.

Accepted Answer

A)  Invested Assets/Income From Operations 
B)  Sales/Invested Assets 
C)  Income From Operations/Sales 
D)  Income From Operations/Invested Assets 
A)  Invested Assets/Income From Operations 
B)  Sales/Invested Assets 
C)  Income From Operations/Sales 
D)  Income From Operations/Invested Assets

Question 4

Sales commissions expense for a department store is an example of a direct expense.

Accepted Answer

A) True 
 B)False

Question 5

Property tax expense for a department store's store equipment is an example of a direct expense.

Accepted Answer

A) True 
 B)False

Question 6

A portion of the divisional income statement for the year just ended is presented below in condensed form.

Accepted Answer

The operating expenses of Department B i

Question 7

Match between columns
                        Premises: Profit margin
Rate of return on investments
Investment turnover
Residual income
Controllable revenues

Accepted Answer

The Answer of Ratio of income from operations to sales is...

Question 8

A responsibility center in which the department manager has responsibility for and authority over costs, revenues, and assets invested in the department is termed a cost center.

Accepted Answer

A) True 
 B)False

Question 9

If the profit margin for a division is 8% and the investment turnover is 1.20, the rate of return on investment is 9.6%.

Accepted Answer

A) True 
 B)False

Question 10

The best measure of managerial efficiency in the use of investments in assets is:

Accepted Answer

A)  rate of return on stockholders' equity 
B)  investment turnover 
C)  income from operations 
D)  inventory turnover 
A)  rate of return on stockholders' equity 
B)  investment turnover 
C)  income from operations 
D)  inventory turnover

Question 11

Assume that Division J has achieved income from operations of $165,000 using $900,000 of invested assets. If management desires a minimum rate of return of 11%, the residual income is:

Accepted Answer

A)  $99,000 
B)  $18,150 
C)  $264,000 
D)  $66,000 
A)  $99,000 
B)  $18,150 
C)  $264,000 
D)  $66,000

Question 12

The excess of divisional income from operations over a minimum amount of divisional income from operations is termed:

Accepted Answer

A)  profit margin 
B)  residual income 
C)  rate of return on investment 
D)  gross profit 
A)  profit margin 
B)  residual income 
C)  rate of return on investment 
D)  gross profit

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The profit margin component of rate of return on investment analysis focuses on profitability by indicating the rate of profit earned on each sales dollar.

Accepted Answer

A) True 
 B)False

Question 15

Service department charges are similar to the expenses of a profit center that purchased services from a source outside the company.

Accepted Answer

A) True 
 B)False

Question 16

The major advantage of the rate of return on investment over income from operations as a divisional performance measure is that divisional investment is directly considered and thus comparability of divisions is facilitated.

Accepted Answer

A) True 
 B)False

Question 17

A manager in a cost center also has responsibility and authority over the revenues and the costs.

Accepted Answer

A) True 
 B)False

Question 18

Depreciation expense on store equipment for a department store is an indirect expense.

Accepted Answer

A) True 
 B)False

Question 19

The sales, income from operations, and invested assets for each division of Wren Company are as follows:

Accepted Answer

Management has estab

Question 20

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

Investment centers differ from profit centers in that they

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.

Identify the formula for the rate of return on investment.

Sales commissions expense for a department store is an example of a direct expense.

Property tax expense for a department store's store equipment is an example of a direct expense.

A portion of the divisional income statement for the year just ended is presented below in condensed form.

A responsibility center in which the department manager has responsibility for and authority over costs, revenues, and assets invested in the department is termed a cost center.

If the profit margin for a division is 8% and the investment turnover is 1.20, the rate of return on investment is 9.6%.

The best measure of managerial efficiency in the use of investments in assets is:

Assume that Division J has achieved income from operations of $165,000 using $900,000 of invested assets. If management desires a minimum rate of return of 11%, the residual income is:

The excess of divisional income from operations over a minimum amount of divisional income from operations is termed:

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

The profit margin component of rate of return on investment analysis focuses on profitability by indicating the rate of profit earned on each sales dollar.

Service department charges are similar to the expenses of a profit center that purchased services from a source outside the company.

The major advantage of the rate of return on investment over income from operations as a divisional performance measure is that divisional investment is directly considered and thus comparability of divisions is facilitated.

A manager in a cost center also has responsibility and authority over the revenues and the costs.

Depreciation expense on store equipment for a department store is an indirect expense.

The sales, income from operations, and invested assets for each division of Wren Company are as follows:

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

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

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Filters

Exam 8: Performance Evaluation for Decentralized Operations

Investment centers differ from profit centers in that they

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.

Identify the formula for the rate of return on investment.

Sales commissions expense for a department store is an example of a direct expense.

Property tax expense for a department store's store equipment is an example of a direct expense.

A portion of the divisional income statement for the year just ended is presented below in condensed form.

A responsibility center in which the department manager has responsibility for and authority over costs, revenues, and assets invested in the department is termed a cost center.

If the profit margin for a division is 8% and the investment turnover is 1.20, the rate of return on investment is 9.6%.

The best measure of managerial efficiency in the use of investments in assets is:

Assume that Division J has achieved income from operations of $165,000 using $900,000 of invested assets. If management desires a minimum rate of return of 11%, the residual income is:

The excess of divisional income from operations over a minimum amount of divisional income from operations is termed:

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

The profit margin component of rate of return on investment analysis focuses on profitability by indicating the rate of profit earned on each sales dollar.

Service department charges are similar to the expenses of a profit center that purchased services from a source outside the company.

The major advantage of the rate of return on investment over income from operations as a divisional performance measure is that divisional investment is directly considered and thus comparability of divisions is facilitated.

A manager in a cost center also has responsibility and authority over the revenues and the costs.

Depreciation expense on store equipment for a department store is an indirect expense.

The sales, income from operations, and invested assets for each division of Wren Company are as follows:

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

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

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Filters