Question 1

Responsibility accounting is defined as a system that

Accepted Answer

A)  defines responsibility by function only. 
B)  measures actual results against a flexible budget. 
C)  measures the results of a manager responsible for revenues and costs. 
D)  measures the results of each responsibility center and compares those results with some measure of expected or budgeted outcome. 
A)  defines responsibility by function only. 
B)  measures actual results against a flexible budget. 
C)  measures the results of a manager responsible for revenues and costs. 
D)  measures the results of each responsibility center and compares those results with some measure of expected or budgeted outcome. D

Question 2

Olden Company has a tax rate of 40 percent. Information for the company is as follows:   What is the EVA if the before-tax operating income is $1,500,000?

Accepted Answer

A)  $(198,000) 
B)  $402,000 
C)  $534,000 
D)  $1,134,000 
A)  $(198,000) 
B)  $402,000 
C)  $534,000 
D)  $1,134,000 A

Question 3

Cornwall Company has two divisions, A and B. Information for each division is as follows:   What is the return on investment for A?

Accepted Answer

A)  18% 
B)  40% 
C)  20% 
D)  15% 
A)  18% 
B)  40% 
C)  20% 
D)  15% B

Question 4

Lambda Division had the following information: Asset base in Lambda Division $400,000
Net income in Lambda Division $50,000
Weighted average cost of capital 12%
Target ROI 15%
Margin for Lambda Division 20%
What is the residual income for Lambda Division?

Accepted Answer

A)  $(10,000) 
B)  $48,000 
C)  $7,500 
D)  $60,000 
A)  $(10,000) 
B)  $48,000 
C)  $7,500 
D)  $60,000

Question 5

Which of the following is a disadvantage of both residual income and ROI?

Accepted Answer

A)  They are both absolute measures of return. 
B)  They are both difficult to calculate. 
C)  They both do not discourage myopic behavior. 
D)  All of these are disadvantages of both ROI and residual income. 
A)  They are both absolute measures of return. 
B)  They are both difficult to calculate. 
C)  They both do not discourage myopic behavior. 
D)  All of these are disadvantages of both ROI and residual income.

Question 6

The following information pertains to the three divisions of Merrymount Company:   What are the average operating assets for Division Z?

Accepted Answer

A)  $75,000 
B)  $500,000 
C)  $1,250,000 
D)  $187,500 
A)  $75,000 
B)  $500,000 
C)  $1,250,000 
D)  $187,500

Question 7

Cornwall Company has two divisions, A and B. Information for each division is as follows:   What is EVA for Division A?

Accepted Answer

A)  $40,000 
B)  $28,000 
C)  $15,000 
D)  $25,000 
A)  $40,000 
B)  $28,000 
C)  $15,000 
D)  $25,000

Question 8

Mako Division had the following information: Asset base in Mako Division $400,000
Net income in Mako Division $50,000
Weighted average cost of capital 12%
Target ROI 15%
Margin for Mako Division 20%
What is the turnover ratio for Mako Division?

Accepted Answer

A)  0.200 
B)  0.625 
C)  0.125 
D)  8.000 
A)  0.200 
B)  0.625 
C)  0.125 
D)  8.000

Question 9

Which of the following managerial rewards is NOT a short-term reward?

Accepted Answer

A)  stock ownership 
B)  cash bonuses 
C)  stock options 
D)  both a and b 
A)  stock ownership 
B)  cash bonuses 
C)  stock options 
D)  both a and b

Question 10

are a fringe benefit received over and above salary.

Accepted Answer

The answer of are a fringe benefit received over and...

Question 11

Which of the following departments would NOT be a cost center?

Accepted Answer

A)  advertising department 
B)  city police department 
C)  building and grounds department 
D)  sales department 
A)  advertising department 
B)  city police department 
C)  building and grounds department 
D)  sales department

Question 12

A transfer price is the price charged by one division of a company to another company.

Accepted Answer

A) True 
 B)False

Question 13

The return on investment is computed as

Accepted Answer

A)  operating income divided by sales. 
B)  operating income divided by average operating assets. 
C)  sales divided by average operating assets. 
D)  operating asset turnover divided by the operating income margin. 
A)  operating income divided by sales. 
B)  operating income divided by average operating assets. 
C)  sales divided by average operating assets. 
D)  operating asset turnover divided by the operating income margin.

Question 14

Economic value added (EVA) is after-tax operating income minus the total annual cost of capital.

Accepted Answer

A) True 
 B)False

Question 15

The transfer pricing problem concerns finding a system that simultaneously satisfies the three objectives of the transfer pricing system.

Accepted Answer

A) True 
 B)False

Question 16

Worldwide Inc., is a multinational company with divisions around the world. Division A in the United States purchases a part from Division G in China. There is no outside market for the part. The part is sold for $12 and normally receives a 20% markup on cost. What is the transfer price using the resale price method?

Accepted Answer

A)  $9.60 
B)  $10 
C)  $12 
D)  $14.40 
A)  $9.60 
B)  $10 
C)  $12 
D)  $14.40

Question 17

The records for the Venusian Division show the following data:
   
a. What is the margin, turnover, and ROI for Venusian Division?
b. Venusian has an option to make an additional investment that would add $100,000 to the asset base. It would generate an additional $50,000 in sales revenue and no additional expenses. What would be the effect on margin, turnover, and ROI?
c. Another alternative (independent of alternative 'b') for Venusian is to run an advertising campaign that would require additional advertising expenses of $37,500, but the best estimate is the campaign would generate an additional $75,000 of revenue. What would be the effect on margin, turnover, and ROI?

Accepted Answer

a b c
Asset base $500,000 $600,000 $500,

Question 18

Cornwall Company has two divisions, A and B. Information for each division is as follows:   What is the total sales amount for B?

Accepted Answer

A)  $666,667 
B)  $800,000 
C)  $1,300,000 
D)  $1,200,000 
A)  $666,667 
B)  $800,000 
C)  $1,300,000 
D)  $1,200,000

Question 19

is after-tax operating profit minus the total annual cost of capital.

Accepted Answer

Economic v

Question 20

In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below:   The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 2?

Accepted Answer

A)  $75 
B)  $68 
C)  $74 
D)  $58 
A)  $75 
B)  $68 
C)  $74 
D)  $58

Responsibility accounting is defined as a system that

Olden Company has a tax rate of 40 percent. Information for the company is as follows: What is the EVA if the before-tax operating income is $1,500,000?

Cornwall Company has two divisions, A and B. Information for each division is as follows: What is the return on investment for A?

Lambda Division had the following information: Asset base in Lambda Division $400,000 Net income in Lambda Division $50,000 Weighted average cost of capital 12% Target ROI 15% Margin for Lambda Division 20% What is the residual income for Lambda Division?

Which of the following is a disadvantage of both residual income and ROI?

The following information pertains to the three divisions of Merrymount Company: What are the average operating assets for Division Z?

Cornwall Company has two divisions, A and B. Information for each division is as follows: What is EVA for Division A?

Mako Division had the following information: Asset base in Mako Division $400,000 Net income in Mako Division $50,000 Weighted average cost of capital 12% Target ROI 15% Margin for Mako Division 20% What is the turnover ratio for Mako Division?

Which of the following managerial rewards is NOT a short-term reward?

are a fringe benefit received over and above salary.

Which of the following departments would NOT be a cost center?

A transfer price is the price charged by one division of a company to another company.

The return on investment is computed as

Economic value added (EVA) is after-tax operating income minus the total annual cost of capital.

The transfer pricing problem concerns finding a system that simultaneously satisfies the three objectives of the transfer pricing system.

Cornwall Company has two divisions, A and B. Information for each division is as follows: What is the total sales amount for B?

is after-tax operating profit minus the total annual cost of capital.

In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 2?

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Cost-Volume-Profit Analysis

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

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Exam 10: Decentralization: Responsibility, Accounting, Performance Evaluation, and Transfer Pricing

Responsibility accounting is defined as a system that

Olden Company has a tax rate of 40 percent. Information for the company is as follows: What is the EVA if the before-tax operating income is $1,500,000?

Cornwall Company has two divisions, A and B. Information for each division is as follows: What is the return on investment for A?

Lambda Division had the following information: Asset base in Lambda Division $400,000 Net income in Lambda Division $50,000 Weighted average cost of capital 12% Target ROI 15% Margin for Lambda Division 20% What is the residual income for Lambda Division?

Which of the following is a disadvantage of both residual income and ROI?

The following information pertains to the three divisions of Merrymount Company: What are the average operating assets for Division Z?

Cornwall Company has two divisions, A and B. Information for each division is as follows: What is EVA for Division A?

Mako Division had the following information: Asset base in Mako Division $400,000 Net income in Mako Division $50,000 Weighted average cost of capital 12% Target ROI 15% Margin for Mako Division 20% What is the turnover ratio for Mako Division?

Which of the following managerial rewards is NOT a short-term reward?

are a fringe benefit received over and above salary.

Which of the following departments would NOT be a cost center?

A transfer price is the price charged by one division of a company to another company.

The return on investment is computed as

Economic value added (EVA) is after-tax operating income minus the total annual cost of capital.

The transfer pricing problem concerns finding a system that simultaneously satisfies the three objectives of the transfer pricing system.

Cornwall Company has two divisions, A and B. Information for each division is as follows: What is the total sales amount for B?

is after-tax operating profit minus the total annual cost of capital.

In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 2?

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Cost-Volume-Profit Analysis

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

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