Question 1

Decentralization stimulates competition among the divisions of a firm.

Accepted Answer

A) True 
 B)False

Question 2

Gunnison Furniture had the following historical accounting data, per hundred board feet, concerning one of its products:   The shelving is normally transferred internally from the Cutting Division to the Finishing Division. It also may be
Sold externally for $110 per hundred board feet. The minimum profit level accepted by the company is a markup of 20 percent.
If the variable manufacturing cost transfer price method is used without a fixed fee, Gunnison Furniture's transfer price will be

Accepted Answer

A)  $56 
B)  $84 
C)  $64 
D)  $68 
A)  $56 
B)  $84 
C)  $64 
D)  $68

Question 3

Both revenue center and profit center managers are responsible for achieving

Accepted Answer

A)  budgeted revenues. 
B)  budgeted net income. 
C)  budgeted costs. 
D)  budgeted contribution margin. 
A)  budgeted revenues. 
B)  budgeted net income. 
C)  budgeted costs. 
D)  budgeted contribution margin.

Question 4

The Uniforms Division of Baseball Company has just revised its actual cost data for 2016. Uniforms Division transfers goods to the Sport Division. Sport Division can buy the same goods in the open market for $122 each. Uniforms's new cost data are as follows:
   Current production is 200,000 units, and the Uniforms Division has a capacity of 300,000 units.
Required: 
a. What is the lowest price the Uniforms Division should charge for the internal transfers of its goods?
b. What is the highest price the Sport Division should pay for the units?
c. Give the primary reason why the Uniforms Division should reduce its price.

Accepted Answer

a. Lowest price would be total variable

Question 5

The emphasis on short-run results at the expense of the long run is

Accepted Answer

A)  efficient behavior. 
B)  effective behavior. 
C)  optimal behavior. 
D)  myopic behavior. 
A)  efficient behavior. 
B)  effective behavior. 
C)  optimal behavior. 
D)  myopic behavior.

Question 6

Which of the following changes would NOT change return on investment (ROI)?

Accepted Answer

A)  Decrease sales and expenses by the same percentage. 
B)  Increase total assets. 
C)  Increase sales dollars by the same amount as total assets. 
D)  Decrease sales and expenses by the same dollar amount. 
A)  Decrease sales and expenses by the same percentage. 
B)  Increase total assets. 
C)  Increase sales dollars by the same amount as total assets. 
D)  Decrease sales and expenses by the same dollar amount.

Question 7

The minimum transfer price is the absolute maximum price that can be accepted.

Accepted Answer

A) True 
 B)False

Question 8

Negotiated prices are transfer prices

Accepted Answer

A)  determined between a division and corporate headquarters. 
B)  negotiated with external customers. 
C)  used when supplying and buying divisions independently agree on a price. 
D)  agreed to by division management and employees. 
A)  determined between a division and corporate headquarters. 
B)  negotiated with external customers. 
C)  used when supplying and buying divisions independently agree on a price. 
D)  agreed to by division management and employees.

Question 9

The delegation of decision-making authority to successively lower management levels in an organization is called:

Accepted Answer

A)  Centralization 
B)  Decentralization 
C)  Optimization 
D)  An unfavorable overhead variance 
A)  Centralization 
B)  Decentralization 
C)  Optimization 
D)  An unfavorable overhead variance

Question 10

If the operating asset turnover ratio increased by 40 percent and the margin increased by 30 percent, the divisional ROI

Accepted Answer

A)  would decrease by 70 percent. 
B)  would increase by 82 percent. 
C)  would increase by 30 percent. 
D)  cannot be determined. 
A)  would decrease by 70 percent. 
B)  would increase by 82 percent. 
C)  would increase by 30 percent. 
D)  cannot be determined.

Question 11

If a company has sales of $2,500,000, net income of $250,000, and an asset base of $1,250,000, its return on investment is

Accepted Answer

A)  20%. 
B)  10%. 
C)  500%. 
D)  200%. 
A)  20%. 
B)  10%. 
C)  500%. 
D)  200%.

Question 12

When the major functions of a company are controlled by top management, it is called .

Accepted Answer

The answer of When the major functions of a company...

Question 13

Benjamin Manufacturing Company has two divisions, X and Y. Division X prepares the steel for processing. Division Y processes the steel into the final product. No inventories exist in either division at the beginning or end of 2016. During the year, Division X prepared 80,000 lbs. of steel at a cost of $800,000. All the steel was transferred to Division Y where additional operating costs of $5 per lb. were incurred. The final product was sold for $3,000,000.
Required:
a. Determine the gross profit for each division and for the company as a whole if the transfer price is $8 per lb.
b. Determine the gross profit for each division and for the company as a whole if the transfer price is $12 per lb.

Accepted Answer

The answer of Benjamin Manufacturing Company has two divisions, X...

Question 14

Transfer pricing exists when one division of a company produces a product that can be used in the production by a different division.

Accepted Answer

A) True 
 B)False

Question 15

The following information pertains to the three divisions of Merrymount Company:   What is the margin for Division Z?

Accepted Answer

A)  1.5% 
B)  100.0% 
C)  6.0% 
D)  15.0% 
A)  1.5% 
B)  100.0% 
C)  6.0% 
D)  15.0%

Question 16

Return on investment can be divided into two separate components

Accepted Answer

A)  margin and profit. 
B)  margin and turnover. 
C)  value and turnover. 
D)  liquidity and margin. 
A)  margin and profit. 
B)  margin and turnover. 
C)  value and turnover. 
D)  liquidity and margin.

Question 17

The manager of an investment center is responsible for

Accepted Answer

A)  decisions regarding costs. 
B)  decisions regarding revenues. 
C)  decisions to invest in assets. 
D)  all of these. 
A)  decisions regarding costs. 
B)  decisions regarding revenues. 
C)  decisions to invest in assets. 
D)  all of these.

Question 18

The Women's Wear of Bigelow Department Store had a net income of $560,000, a net asset base of $4,000,000, and a required rate of return of 12 percent. Sales for the period totaled $3,000,000. The residual income for the period is

Accepted Answer

A)  $480,000. 
B)  $80,000. 
C)  $120,000. 
D)  $360,000. 
A)  $480,000. 
B)  $80,000. 
C)  $120,000. 
D)  $360,000.

Question 19

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. The part can be purchased externally for $7 each. Transportation costs amount to $1 and the commission of $.50 will not need to be paid. What is the transfer price using the comparable uncontrolled price method?

Accepted Answer

A)  $8.50 
B)  $8 
C)  $7 
D)  $7.50 
A)  $8.50 
B)  $8 
C)  $7 
D)  $7.50

Question 20

When top management controls the major functions of an organization it is called:

Accepted Answer

A)  Centralization 
B)  Decentralization 
C)  Optimization 
D)  An unfavorable overhead variance 
A)  Centralization 
B)  Decentralization 
C)  Optimization 
D)  An unfavorable overhead variance

Decentralization stimulates competition among the divisions of a firm.

Both revenue center and profit center managers are responsible for achieving

The emphasis on short-run results at the expense of the long run is

Which of the following changes would NOT change return on investment (ROI)?

The minimum transfer price is the absolute maximum price that can be accepted.

Negotiated prices are transfer prices

The delegation of decision-making authority to successively lower management levels in an organization is called:

If the operating asset turnover ratio increased by 40 percent and the margin increased by 30 percent, the divisional ROI

If a company has sales of $2,500,000, net income of $250,000, and an asset base of $1,250,000, its return on investment is

When the major functions of a company are controlled by top management, it is called .

Transfer pricing exists when one division of a company produces a product that can be used in the production by a different division.

The following information pertains to the three divisions of Merrymount Company: What is the margin for Division Z?

Return on investment can be divided into two separate components

The manager of an investment center is responsible for

The Women's Wear of Bigelow Department Store had a net income of $560,000, a net asset base of $4,000,000, and a required rate of return of 12 percent. Sales for the period totaled $3,000,000. The residual income for the period is

When top management controls the major functions of an organization it is called:

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

Decentralization stimulates competition among the divisions of a firm.

Both revenue center and profit center managers are responsible for achieving

The emphasis on short-run results at the expense of the long run is

Which of the following changes would NOT change return on investment (ROI)?

The minimum transfer price is the absolute maximum price that can be accepted.

Negotiated prices are transfer prices

The delegation of decision-making authority to successively lower management levels in an organization is called:

If the operating asset turnover ratio increased by 40 percent and the margin increased by 30 percent, the divisional ROI

If a company has sales of $2,500,000, net income of $250,000, and an asset base of $1,250,000, its return on investment is

When the major functions of a company are controlled by top management, it is called .

Transfer pricing exists when one division of a company produces a product that can be used in the production by a different division.

The following information pertains to the three divisions of Merrymount Company: What is the margin for Division Z?

Return on investment can be divided into two separate components

The manager of an investment center is responsible for

The Women's Wear of Bigelow Department Store had a net income of $560,000, a net asset base of $4,000,000, and a required rate of return of 12 percent. Sales for the period totaled $3,000,000. The residual income for the period is

When top management controls the major functions of an organization it is called:

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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