Exam 14: Performance Evaluation for Decentralized Operations

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

In the rate of return on investment analysis, the investment turnover component focuses on the efficiency in the use of assets and indicates the number of sales dollar generated for each dollar of invested assets.

The rates at which services are charged to each division are called service department charge rates.

The following data are taken from the management accounting reports of Dancer Co.: 2,700,000 \ 3,700,000 \ 3,600,000 Income from operations 2,200,000 2,100,000 3,400,000 Total service department charges If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that:

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the investment turnover would be 1.2.

If income from operations for a division is $120,000, sales are $975,000, and invested assets are $750,000, the investment turnover would be 6.3.

In large businesses, decentralization is often advantageous because:

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

Since transfer prices will affect a division's financial performance, it is used by decentralized segments of a business.

The major advantage of using 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.

The balanced scorecard evaluates managers on financial and nonfinancial measures of performance.

The profit margin for Division K is 9% and the investment turnover is 1.20. What is the rate of return on investment for Division K?

To calculate income from operations, total service department charges are:

A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called a(n):

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

Budget performance reports prepared for the vice-president of production would generally contain less detail than the reports prepared for the various plant managers.

Which of the following is true of the balanced scorecard?

The profit margin is the ratio of:

Identify the formula for the rate of return on investment.

If divisional income from operations is $100,000, invested assets are $850,000, and the minimum rate of return on invested assets is 8%, the residual income would be $32,000.