Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

If divisional income from operations is $75,000, invested assets are $637,500, and the minimum rate of return on the invested assets is 6%, the residual income calculated would be $36,750.

Accepted Answer

A) True 
 B)False

Question 3

A common balanced scorecard measures performance in all of the following areas except:

Accepted Answer

A)  education. 
B)  internal process. 
C)  financial. 
D)  innovation and learning. 
A)  education. 
B)  internal process. 
C)  financial. 
D)  innovation and learning.

Question 4

Materials used by Boone Company in producing Division C's product are currently purchased from outside suppliers at a cost of $20 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 $17 per unit. A transfer price of $19 per unit is negotiated and 60,000 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)  $180,000 
C)  $60,000 
D)  $120,000 
A)  $0 
B)  $180,000 
C)  $60,000 
D)  $120,000

Question 5

Materials used by Beta-Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $15 per unit. However, the same materials are available from Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $12 per unit. A transfer price of $13 per unit is established, and 50,000 units of material are transferred with no reduction in Division 6's current sales. How much would Division 3's income from operations increase?

Accepted Answer

A)  $150,000 
B)  $50,000 
C)  $100,000 
D)  $25,000 
A)  $150,000 
B)  $50,000 
C)  $100,000 
D)  $25,000

Question 6

Personnel administration expense for a department in a store is an indirect expense.

Accepted Answer

A) True 
 B)False

Question 7

Which component of the balanced scorecard evaluates the economic performance of the responsibility centers?

Accepted Answer

A)  Internal process 
B)  Financial 
C)  Innovation and learning 
D)  Customer 
A)  Internal process 
B)  Financial 
C)  Innovation and learning 
D)  Customer

Question 8

If income from operations for a division is $30,000, sales are $243,750, and invested assets are $187,500, the investment turnover would be 1.3.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  the assets invested in the center but not costs and revenues. 
B)  costs and assets invested in the center but not revenues. 
C)  both costs and revenues for the department or division. 
D)  not only costs and revenues but also assets invested in the center. 
A)  the assets invested in the center but not costs and revenues. 
B)  costs and assets invested in the center but not revenues. 
C)  both costs and revenues for the department or division. 
D)  not only costs and revenues but also assets invested in the center.

Question 10

If the profit margin for a division is 8% and the investment turnover is 1.20, the rate of return on investment computed would be 6.7%.

Accepted Answer

A) True 
 B)False

Question 11

The rate of return on investment can be computed by dividing investment turnover by the profit margin.

Accepted Answer

A) True 
 B)False

Question 12

Division T reported income from operations of $900,000 and total service department charges of $575,000. Therefore,:

Accepted Answer

A)  net income was $325,000. 
B)  the gross profit margin was $325,000. 
C)  income from operations before service department charges was $1,475,000. 
D)  consolidated net income was $325,000. 
A)  net income was $325,000. 
B)  the gross profit margin was $325,000. 
C)  income from operations before service department charges was $1,475,000. 
D)  consolidated net income was $325,000.

Question 13

Which of the following is not a commonly used approach for setting transfer prices?

Accepted Answer

A)  Market price approach 
B)  Revenue price approach 
C)  Negotiated price approach 
D)  Cost price approach 
A)  Market price approach 
B)  Revenue price approach 
C)  Negotiated price approach 
D)  Cost price approach

Question 14

The excess of divisional income from operations over a minimum amount of desired income from operations is termed residual income.

Accepted Answer

A) True 
 B)False

Question 15

PDT Co. has two divisions, East and West. Invested assets and condensed income statement data for each division for the past year ended December 31 are as follows:
 $\begin{array}{lll}
 \text { West Division}& \text { East Division}\
\$ 800,000 & \$ 1,200,000 & \text { Revenues } \
640,000 & 950,000 & \text { Operating expenses } \
72,000 & 145,000 & \text { Service department charget } \
500,000 & 800,000 & \text { Invested assets }
\end{array}$

Accepted Answer

(a)
 11ea9298_a

Question 16

For higher levels of management, responsibility accounting reports:

Accepted Answer

A)  are more detailed than for lower levels of management. 
B)  are more summarized than for lower levels of management. 
C)  contain almost the same level of detail as reports for lower levels of management. 
D)  are rarely provided or reviewed. 
A)  are more detailed than for lower levels of management. 
B)  are more summarized than for lower levels of management. 
C)  contain almost the same level of detail as reports for lower levels of management. 
D)  are rarely provided or reviewed.

Question 17

In a profit center, the manager has responsibility and authority for making decisions that affect:

Accepted Answer

A)  only costs. 
B)  only assets. 
C)  both costs and assets. 
D)  both costs and revenues. 
A)  only costs. 
B)  only assets. 
C)  both costs and assets. 
D)  both costs and revenues.

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

If divisional income from operations is $75,000, invested assets are $637,500, and the minimum rate of return on the invested assets is 6%, the residual income calculated would be $36,750.

A common balanced scorecard measures performance in all of the following areas except:

Personnel administration expense for a department in a store is an indirect expense.

Which component of the balanced scorecard evaluates the economic performance of the responsibility centers?

If income from operations for a division is $30,000, sales are $243,750, and invested assets are $187,500, the investment turnover would be 1.3.

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

If the profit margin for a division is 8% and the investment turnover is 1.20, the rate of return on investment computed would be 6.7%.

The rate of return on investment can be computed by dividing investment turnover by the profit margin.

Division T reported income from operations of $900,000 and total service department charges of $575,000. Therefore,:

Which of the following is not a commonly used approach for setting transfer prices?

The excess of divisional income from operations over a minimum amount of desired income from operations is termed residual income.

For higher levels of management, responsibility accounting reports:

In a profit center, the manager has responsibility and authority for making decisions that affect:

The Role of Accounting in Business

Basic Accounting Concepts

Accrual Accounting Concepts

Accounting for Merchandising Businesses

Sarbanes-Oxley, Internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Liabilities and Stockholders Equity

Financial Statement Analysis

Accounting Systems for Manufacturing Businesses

Cost Behavior and Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Capital Investment Analysis

Filters

Exam 14: Performance Evaluation for Decentralized Operations

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

If divisional income from operations is $75,000, invested assets are $637,500, and the minimum rate of return on the invested assets is 6%, the residual income calculated would be $36,750.

A common balanced scorecard measures performance in all of the following areas except:

Personnel administration expense for a department in a store is an indirect expense.

Which component of the balanced scorecard evaluates the economic performance of the responsibility centers?

If income from operations for a division is $30,000, sales are $243,750, and invested assets are $187,500, the investment turnover would be 1.3.

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

If the profit margin for a division is 8% and the investment turnover is 1.20, the rate of return on investment computed would be 6.7%.

The rate of return on investment can be computed by dividing investment turnover by the profit margin.

Division T reported income from operations of $900,000 and total service department charges of $575,000. Therefore,:

Which of the following is not a commonly used approach for setting transfer prices?

The excess of divisional income from operations over a minimum amount of desired income from operations is termed residual income.

For higher levels of management, responsibility accounting reports:

In a profit center, the manager has responsibility and authority for making decisions that affect:

The Role of Accounting in Business

Basic Accounting Concepts

Accrual Accounting Concepts

Accounting for Merchandising Businesses

Sarbanes-Oxley, Internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Liabilities and Stockholders Equity

Financial Statement Analysis

Accounting Systems for Manufacturing Businesses

Cost Behavior and Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Capital Investment Analysis

Filters