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

Local managers can make better decisions using distant information and outside managers can provide more timely responses to changing conditions.

Hydroxide Company has two divisions, the Blending Division and Canning Division. The Blending Division sells chemicals to the Canning Division. Standard costs for the Blending Division are as follows: Direct materials $3.00 per gallon Direct labor 2.40 per gallon The Canning Division uses the following predetermined overhead rate: Variable overhead $3.60 per gallon Fixed overhead 2.40 per gallon Total $6.00 per gallon What is the transfer price for the chemicals per gallon based on standard variable cost?

It is important to separate the evaluation of the manager from the evaluation of the division in a multinational firm. A manager's evaluation should NOT include

The transfer price is the minimum price acceptable when transferring a product.

Goal congruence means that the goals of managers are aligned with the goals of the company.

When there is an outside market for an intermediate product that is perfectly competitive, the most equitable method of transfer pricing is

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

Panther Company had the following historical accounting data per unit: The units are normally transferred internally from Division A to Division B. The units also may be sold externally for $210 per unit. The minimum profit level accepted by the company is a markup of 30 percent. There were no beginning or ending inventories. If the negotiated price is used, Division A's transfer price should be a

Decentralization is the practice of delegating decision-making authority to the lower levels of management.

Patron Corporation had sales of $350,000, income of $10,000, and an asset base of $100,000. The turnover is

Rags-to-Riches Corporation has two divisions, X and Y. Division X sells its product to Division Y. Standard costs for Division X are as follows: Direct materials $ 4 per unit Direct labor 2 per unit Variable overhead 5 per unit Fixed overhead 3 per unit Total $14 per unit What is the transfer price for Division X based on standard variable cost plus a markup of 25 percent?

Economic value added is calculated by which of the following formulas?

One disadvantage of ROI in evaluating performance is that it encourages managers to slack off.

The Engine Division provides engines for the Final Assembly Division of a company. The standard unit costs for the Engine Division are as follows: What is the transfer price based on variable product costs plus a fixed fee of $210?

If the margin of 0.3 stayed the same and the turnover ratio of 5.0 increased by 10 percent, the ROI would

Panther Company had the following historical accounting data per unit: The units are normally transferred internally from Division A to Division B. The units also may be sold externally for $210 per unit. The minimum profit level accepted by the company is a markup of 30 percent. There were no beginning or ending inventories. If variable manufacturing costs without a fixed fee are used as the transfer price, Division A's transfer price would be

The right to buy a certain number of shares of a company's stock at a particular price is(are) called:

Lowellson Company had sales of $200,000, net income of $10,000, and an asset base of $300,000. Its margin is

Comparison of an international division's ROI can potentially be misleading because of

Which of the following departments would NOT be classified as a profit center?