Exam 24: Performance Evaluation for Decentralized Operations

Income from operations of the Commercial Aviation Division is $2,225,000. If income from operations before service department charges is $3,250,000:

The Ukulele Company's radio division currently is purchasing transistors from the Xiang Co. for $3.50 each. The total number of transistors needed is 8,000 per month. Ukulele Company's electronics division can produce the transistors for a cost of $4.00 each and they have plenty of capacity to manufacture the units. The $4 is made up of $3.25 in variable costs, and $0.75 in allocated fixed costs. What should be the range of a possible transfer price?

A factor in determining the rate of return on investment--the ratio of income from operations to sales--is called:

The Eastern Division of Kentucky Company has a rate of return on investment of 28% and a profit margin of 20%. What is the investment turnover?

The profit margin is the:

Managers of what type of decentralized units have authority and responsibility for revenues, costs, and assets invested in the unit?

If income from operations for a division is $30,000, sales are $263,750, and invested assets are $187,500, the investment turnover is 1.3.

Franklin Industries has several divisions. The Northern Division has $350,000 of invested assets, income from operations of $200,000, and residual income of $158,000. Determine the minimum acceptable rate of return on divisional assets.

Xang Company's costs were over budget by $46,000. The Xang Company is divided in two regions. The first region's costs were over budget by $7,000. Required: Determine the amount that the second region's cost was over or under budget.

Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5 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 $3 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6's current sales. How much would Division 3's income from operations increase?

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 residual income?

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

The balanced scorecard measures financial and nonfinancial performance of a business. The balanced scorecard measures four areas. Identify one of the following that is not included as a performance measurement.

Which one of the following is NOT a measure that management can use in evaluating and controlling investment center performance?

The ratio of sales to investment is termed the rate of return on investment.

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 profit margin for Division A?

A department store apportions payroll costs on the basis of the number of payroll checks issued. Accounting costs are apportioned on the basis of the number of reports. The payroll costs for the year were $231,000 and the accounting costs for the year totaled $75,500. The departments and the number of payroll checks and accounting reports for each are as follows: Determine the amount of (a) payroll cost and (b) accounting cost to be apportioned to each department.

The budget for Department 10 of Treble Company for the current month ending March 31 is as follows: During March, the costs incurred in Department 10 of Treble Company were materials, $204,000; factory wages, $285,000; supervisory salaries, $63,600; depreciation of plant and equipment, $35,000; power and light, $21,360; insurance and property taxes, $14,400; maintenance, $9,456.

If income from operations for a division is $120,000, sales are $975,000, and invested assets are $750,000, the investment turnover is 1.3.

A disadvantage to using the residual income performance measure is that it encourages managers to spend only the minimum acceptable rate of return on assets set by upper management.