Question 1

The balanced scorecard is a set of financial and nonfinancial measures that reflect the performance of the business.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

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

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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 6's income from operations increase?

Accepted Answer

A)  $8,000 
B)  $15,000 
C)  $80,000 
D)  $150,000 
A)  $8,000 
B)  $15,000 
C)  $80,000 
D)  $150,000

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Which of the following would not be considered an internal centralized service department?

Accepted Answer

A)  Payroll accounting department 
B)  Manufacturing department 
C)  Information systems department 
D)  Purchasing department 
A)  Payroll accounting department 
B)  Manufacturing department 
C)  Information systems department 
D)  Purchasing department

Question 7

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 about 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 about the same level of detail as reports for lower levels of management 
D)  are rarely provided or reviewed

Question 8

The primary disadvantage of decentralized operations is that decisions made by one manager may affect other managers in such a way that the profitability of the entire company may suffer.

Accepted Answer

A) True 
 B)False

Question 9

Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The investment turnover for Mason is:

Accepted Answer

A)  1.08 
B)  .93 
C)  6.57 
D)  7.07 
A)  1.08 
B)  .93 
C)  6.57 
D)  7.07

Question 10

Division X reported income from operations of $975,000 and total service department charges of $575,000. Therefore:

Accepted Answer

A)  net income was $400,000 
B)  the gross profit margin was $400,000 
C)  income from operations before service department charges was $1,550,000 
D)  consolidated net income was $400,000 
A)  net income was $400,000 
B)  the gross profit margin was $400,000 
C)  income from operations before service department charges was $1,550,000 
D)  consolidated net income was $400,000

Question 11

Materials used by Best Bread Company in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit. However, the same materials are available from Division
B. Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit.

Accepted Answer

The answer of Materials used by Best Bread Company in...

Question 12

In evaluating the profit center manager, the income from operations should be compared:

Accepted Answer

A)  across profit centers 
B)  to historical performance or budget 
C)  to the competitor's net income 
D)  to the total company earnings per share 
A)  across profit centers 
B)  to historical performance or budget 
C)  to the competitor's net income 
D)  to the total company earnings per share

Question 13

The primary accounting tool for controlling and reporting for cost centers is a budget.

Accepted Answer

A) True 
 B)False

Question 14

All of the following are advantages of decentralization except:

Accepted Answer

A)  Managers make better decisions when closer to the operation of the company. 
B)  Expertise in all areas of the business is difficult, decentralization makes it better to delegate certain responsibilities. 
C)  Each decentralized operation purchases their own assets and pays for operating costs. 
D)  Decentralized managers can respond quickly to customer satisfaction and quality service. 
A)  Managers make better decisions when closer to the operation of the company. 
B)  Expertise in all areas of the business is difficult, decentralization makes it better to delegate certain responsibilities. 
C)  Each decentralized operation purchases their own assets and pays for operating costs. 
D)  Decentralized managers can respond quickly to customer satisfaction and quality service.

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

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

Accepted Answer

@#IMG-DLM&_TB2013_00

Question 17

The investment turnover is the:

Accepted Answer

A)  ratio of income from operations to sales 
B)  ratio of income from operations to invested assets 
C)  ratio of assets to liabilities 
D)  ratio of sales to invested assets 
A)  ratio of income from operations to sales 
B)  ratio of income from operations to invested assets 
C)  ratio of assets to liabilities 
D)  ratio of sales to invested assets

Question 18

The following is a measure of a manager's performance working in a profit center.

Accepted Answer

A)  balance sheet 
B)  rate of return and residual income measures 
C)  budget performance report 
D)  divisional income statements 
A)  balance sheet 
B)  rate of return and residual income measures 
C)  budget performance report 
D)  divisional income statements

Question 19

The following is a measure of a manager's performance working in an investment center.

Accepted Answer

A)  rate of return on investment 
B)  residual income 
C)  divisional income statements 
D)  all of the responses 
A)  rate of return on investment 
B)  residual income 
C)  divisional income statements 
D)  all of the responses

Question 20

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31:   The income from operations for the Rails Division is:

Accepted Answer

A)  $60,800 
B)  $33,600 
C)  $8,700 
D)  $21,150 
A)  $60,800 
B)  $33,600 
C)  $8,700 
D)  $21,150

Exam 24: Performance Evaluation for Decentralized Operations

The balanced scorecard is a set of financial and nonfinancial measures that reflect the performance of the business.

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

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

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

Which of the following would not be considered an internal centralized service department?

For higher levels of management, responsibility accounting reports:

The primary disadvantage of decentralized operations is that decisions made by one manager may affect other managers in such a way that the profitability of the entire company may suffer.

Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The investment turnover for Mason is:

Division X reported income from operations of $975,000 and total service department charges of $575,000. Therefore:

In evaluating the profit center manager, the income from operations should be compared:

The primary accounting tool for controlling and reporting for cost centers is a budget.

All of the following are advantages of decentralization except:

Which of the following is a disadvantage of decentralization?

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

The investment turnover is the:

The following is a measure of a manager's performance working in a profit center.

The following is a measure of a manager's performance working in an investment center.

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: The income from operations for the Rails Division is:

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Differential Analysis and Product Pricing

Capital Investment Analysis

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