Exam 12: Managing and Reporting Performance

Delegating decision making to lower-level managers,thereby enabling an organisation to react quickly to opportunities and problems as they arise,is a characteristic of:

Which of the following statements is/are false?

Corporate policy at Weber Pty Ltd requires that all transfers between divisions be recorded at variable cost as a transfer price.Divisional managers have complete autonomy in choosing their sources of customers and suppliers.The Milling Division sells a product called RK2.Forty per cent of the sales of RK2 are to the Products Division,while the remainder of the sales are to outside customers.The manager of the Milling Division is evaluating a special offer from an outside customer for 10 000 units of RK2 at a per unit price of $15.If the special offer were accepted,the Milling Division would be unable to supply those units to the Products Division.The Products Division could purchase those units from another supplier for $17 per unit.Annual capacity for the Milling Division is 25 000 units.The 2008 budget information for the Milling Division,based on full capacity,is presented below.Assume the company permits the division managers to negotiate a transfer price.The managers agree to a $15 transfer price adjusted to share equally the additional gross margin to Milling Division resulting from the sale to the Products Division.What is the agreed transfer price?

Nova Company has two divisions: OPA Division and LPA Division.The OPA Division manufactures a single product,presently operates at 95 per cent of full capacity (100 000 units)and can sell all 95 000 units produced to outside customers.This product is also a component used in a product made by the LPA Division.OPA's full cost of production is $22.50 per unit,including $4.50 of applied fixed overhead costs.The applied fixed overhead is calculated based on production of 95 000 units.OPA's management believes that production can be raised to 100 000 units without affecting cost behaviour.OPA's selling price per unit is $30 with a 10 per cent sales commission on outside sales.LPA is presently negotiating the purchase of units from OPA.LPA can purchase a comparable component outside for $29.Using the general transfer-pricing formula,calculate a transfer price for 5000 units that would be in the best interests of the company as a whole.

The following information was taken from the business united profit and loss statement of Resell Real Estate Agents for 2008: In addition,the company incurred common fixed costs of $18 000.Which amount should be used to evaluate the Sydney Division as an investment of the company?

When responsibility centres are established as revenue centres,one way of measuring performance in these centres is to evaluate the return on investment.

Which of the following is a benefit of decentralisation?

Which of the following statements about transfer pricing is/are true? i.Income taxes and import duties are an important consideration when setting a transfer price for international companies ii.Transfer prices cannot be used by organisations in a service industry. iii.Transfer prices are totally cost based and not market based.

Symonds Bendigo Division purchases from an outside supplier for $52 per unit.The company's Ballarat Division,which has no excess capacity,makes and sells the same part for external customers at a variable cost of $38 and a selling price of $58.If Ballarat commences sales to Bendigo it will (1)use the general rule and (2)be able to reduce the variable cost on internal transfers by $4.If external sales are not affected,Ballarat should establish a transfer price of:

Which of the following might you expect to see being used as a performance measure for a revenue centre?

Which of the following information should be taken into account when using a negotiated transfer price method to determine transfer price? i.external market price Ii savings in selling and distribution costs when transferring internally Iii excess capacity in the selling division Iv excess capacity in the buying division

Fruities Ltd has two divisions,Durian Division and Juice Division.Durian Division has an annual capacity of 10 000 units of durian juice concentrate.Juice Division's annual requirement of durian juice concentrate is 8000 units.Fruities Ltd requires that divisions should purchase inputs internally where available and uses a cost-plus transfer price policy,where transfer price is set at variable cost plus 25 per cent.Therefore,Durian Division always satisfies the demand of the Juice Division first,before selling the remaining durian concentrate to external suppliers at the market price of $10 per unit.The variable cost of one unit of durian juice concentrate at Durian Division is $6.What is the difference in Durian Division's profit under the cost-plus transfer price policy and a market-price transfer price policy?

Fruities Ltd has two divisions,Durian Division and Juice Division.Durian Division has an annual capacity of 10 000 units of durian juice concentrate.Juice Division's annual requirement of durian juice concentrate is 8000 units.The variable production cost of one unit of durian juice concentrate at Durian Division is $6,but the division incurs $1 additional shipping cost per unit when selling to external suppliers.The market price for the division's durian juice concentrate is $10 per unit,and currently,the external demand for Durian Division's durian juice concentrate is 5000 units.Using the transfer pricing formula,Durian Division should charge the Juice Division:

The biggest challenge in making a decentralised organisation function effectively is:

Which of the following might you expect to see being used as a performance measure for an investment centre?

The amount charged when one business unit sells goods or services to another business unit is called a(n):

Fragrance Pty Ltd has two divisions: the Cologne Division and the Bottle Division.The company is decentralised and each division is evaluated as a profit centre.The Bottle Division produces bottles that can be used by the Cologne Division.The Bottle Division's variable manufacturing cost per unit is $2.00 and shipping costs are $0.10 per unit.The Bottle Division's external sales price is $3.00 per unit.No shipping costs are incurred on sales to the Cologne Division.The Cologne Division can purchase similar bottles in the external market for $2.50.Assume the Bottle Division has no excess capacity and can sell everything produced externally.What is the maximum amount Cologne Division would be willing to pay for the bottles?

Which of the following managers is held responsible for only the costs incurred in the subunit?

When organisational structures move to a flatter structure,it is anticipated that the levels of management are reduced which in turn allows the organisation to react quicker to potential opportunities.

A sales department manager is an example of a: