Question 1

The ratio of sales to invested assets is termed the investment turnover component of the rate of return on investment.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

The answer of The sales, income from operations, and invested...

Question 3

It is beneficial for two related companies to use the cost price approach for transfer pricing when both of the companies operate as cost centers and are not concerned with the revenue.

Accepted Answer

A) True 
 B)False

Question 4

Division A of Mocha Company has sales of $155,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000. What is the investment turnover for Division A?

Accepted Answer

A)  1.03 
B)  1.0 
C)  5.17 
D)  5.34 
A)  1.03 
B)  1.0 
C)  5.17 
D)  5.34

Question 5

Office salaries expense for a department store is an indirect expense.

Accepted Answer

A) True 
 B)False

Question 6

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 7

The three common types of responsibility centers are referred to as cost centers, profit centers, and investment centers.

Accepted Answer

A) True 
 B)False

Question 8

Transfer prices may be used when decentralized units are organized as cost, profit, or investment centers.

Accepted Answer

A) True 
 B)False

Question 9

A manager is responsible for costs only in a(n):

Accepted Answer

A)  profit center 
B)  investment center 
C)  volume center 
D)  cost center 
A)  profit center 
B)  investment center 
C)  volume center 
D)  cost center

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Data for Divisions A, B, C, D, and E are as follows:

Accepted Answer

@#IMG-DLM& Round per

Question 12

Materials used by Jefferson Company in producing Division C's product are currently purchased from outside suppliers at a cost of $10 per unit. However, the same materials are available from  Division A. Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $8.50 per unit. A transfer price of $9.50 per unit is negotiated and 25,000 units of material are transferred, with no reduction in Division A's current sales.
How much would Division C's income from operations increase?

Accepted Answer

A)  $0 
B)  $75,000 
C)  $12,500 
D)  $50,000 
A)  $0 
B)  $75,000 
C)  $12,500 
D)  $50,000

Question 13

Controllable expenses are those that can be influenced by the decisions of the profit center management.

Accepted Answer

A) True 
 B)False

Question 14

Ralston Company has income from operations of $75,000, invested assets of $360,000, and sales of $790,000.
Required:
Use the DuPont formula to calculate the rate of return on investment, and show (a) the profit margin, (b) the investment turnover, and (c) rate of return on investment.
Round profit margin percentage to two decimal places and investment turnover to three decimal places.

Accepted Answer

a) Profit margin = $75,000 / $

Question 15

Which of the following is a disadvantage of decentralization?

Accepted Answer

A)  Decisions made by one manager may negatively affect the profitability of the entire company. 
B)  Helps retain quality managers. 
C)  Decision making by managers closest to the operations. 
D)  Managers are able to acquire expertise in their areas of responsibility. 
A)  Decisions made by one manager may negatively affect the profitability of the entire company. 
B)  Helps retain quality managers. 
C)  Decision making by managers closest to the operations. 
D)  Managers are able to acquire expertise in their areas of responsibility.

Question 16

ABC Corporation has three service departments with the following costs and activity base:   ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information are as follows:
  What is the service department charge rate for the Accounting Department?

Accepted Answer

A)  $714 
B)  $250 
C)  $625 
D)  $.004 
A)  $714 
B)  $250 
C)  $625 
D)  $.004

Question 17

It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is NOT a disadvantage of decentralized operation?

Accepted Answer

A)  Competition among managers decreases profits 
B)  Duplication of operations 
C)  Price cutting by departments that are competing in the same product market 
D)  Top management freed from everyday tasks to do strategic planning 
A)  Competition among managers decreases profits 
B)  Duplication of operations 
C)  Price cutting by departments that are competing in the same product market 
D)  Top management freed from everyday tasks to do strategic planning

Question 19

If divisional income from operations is $75,000, invested assets are $737,500, and the minimum rate of return on invested assets is 6%, the residual income is $36,750.

Accepted Answer

A) True 
 B)False

Question 20

A responsibility center in which the authority over and responsibility for costs and revenues is vested in the department manager is termed a profit center.

Accepted Answer

A) True 
 B)False

The ratio of sales to invested assets is termed the investment turnover component of the rate of return on investment.

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

It is beneficial for two related companies to use the cost price approach for transfer pricing when both of the companies operate as cost centers and are not concerned with the revenue.

Division A of Mocha Company has sales of $155,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000. What is the investment turnover for Division A?

Office salaries expense for a department store is an indirect expense.

Responsibility accounting reports for profit centers will include

The three common types of responsibility centers are referred to as cost centers, profit centers, and investment centers.

Transfer prices may be used when decentralized units are organized as cost, profit, or investment centers.

A manager is responsible for costs only in a(n):

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

Data for Divisions A, B, C, D, and E are as follows:

Controllable expenses are those that can be influenced by the decisions of the profit center management.

Which of the following is a disadvantage of decentralization?

ABC Corporation has three service departments with the following costs and activity base: ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information are as follows: What is the service department charge rate for the Accounting Department?

It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.

Which of the following is NOT a disadvantage of decentralized operation?

If divisional income from operations is $75,000, invested assets are $737,500, and the minimum rate of return on invested assets is 6%, the residual income is $36,750.

A responsibility center in which the authority over and responsibility for costs and revenues is vested in the department manager is termed a profit center.

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

The ratio of sales to invested assets is termed the investment turnover component of the rate of return on investment.

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

It is beneficial for two related companies to use the cost price approach for transfer pricing when both of the companies operate as cost centers and are not concerned with the revenue.

Division A of Mocha Company has sales of $155,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000. What is the investment turnover for Division A?

Office salaries expense for a department store is an indirect expense.

Responsibility accounting reports for profit centers will include

The three common types of responsibility centers are referred to as cost centers, profit centers, and investment centers.

Transfer prices may be used when decentralized units are organized as cost, profit, or investment centers.

A manager is responsible for costs only in a(n):

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

Data for Divisions A, B, C, D, and E are as follows:

Controllable expenses are those that can be influenced by the decisions of the profit center management.

Which of the following is a disadvantage of decentralization?

ABC Corporation has three service departments with the following costs and activity base: ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information are as follows: What is the service department charge rate for the Accounting Department?

It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.

Which of the following is NOT a disadvantage of decentralized operation?

If divisional income from operations is $75,000, invested assets are $737,500, and the minimum rate of return on invested assets is 6%, the residual income is $36,750.

A responsibility center in which the authority over and responsibility for costs and revenues is vested in the department manager is termed a profit center.

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