Exam 24: Performance Evaluation for Decentralized Operations

What is the term used to describe expenses that are incurred for the benefit of a specific department?

An activity base is used to charge service department expenses. Match each of the following questions with an activity base.

Which of the following would be most effective in a small owner/manager-operated business?

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.

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

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the investment turnover is 5.

The manager of the furniture department of a leading retailer does not control the salaries of departmental personnel.

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

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's rate of return on investment?

Mandolin Company has two divisions. Division A is interested in purchasing 10,000 units from Division B. Capacity is available for Division B to produce these units. The per unit market price is $30 per unit, with a variable cost of $17. The manager of Division A has offered to purchase the units at $15 per unit. In an effort to make this transfer price beneficial for the company as a whole, what is the range of prices that should be used during negotiations between the two divisions?

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 Graphics Production?

The materials used by the Holly Company Division A are currently purchased from outside supplier. Division B is able to supply Division A with 20,000 units at a variable cost of $42 per unit. The normal price that Division B normally sells its units is $53 per unit. What is the range of transfer prices that the two division managers should negotiate?

The transfer price which uses a variety of cost concepts is the

Which transfer price approach is used when the transfer price is set at the amount sold to outside buyers?

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:

The following data are taken from the management accounting reports of Dulcimer Co.: If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that:

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

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

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

The DuPont formula uses financial and nonfinancial information to measure the performance of a business.