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

Responsibility accounting is a system that measures the results of each responsibility center and compares those results with some expected or budgeted outcome.

Firms encourage goal congruence by constructing management early retirement programs.

The price charged for goods produced in one division to another division within the company is called the __________ price.

The Engine Division provides engines for the Truck Division of a company. The standard unit costs for the Engine Division are as follows: What is the transfer price based on full cost plus a markup of 30 percent?

Responsibility accounting is a system that does NOT consider

Multiple measures of performance are beneficial if they

What problems do owners face in encouraging goal congruence of managers? What is a stock option? How can stock options encourage goal congruence?

It is important for the multinational firm to separate the evaluation of a division manager from the division.

The Chasis Division provides frames for the Tractor Division of a company. The standard unit costs for the Chasis Division are as follows: What is the transfer price based on full cost plus a markup of 20 percent?

Which of the following changes would increase return on investment (ROI)?

If the Southern Division of American Products Company had a turnover ratio of 4.2 and a margin of 0.10, the return on investment would be

Cornwall Company has two divisions, A and B. Information for each division is as follows: What is the operating asset turnover for A?

Omega Division had the following information: Asset base in Omega Division $500,000 Net income in Omega Division $60,000 Weighted average cost of capital 12% Target ROI 15% Margin for Omega Division 20% What is the return on investment of Omega Division?

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 minimum transfer price in Case 1?

The transfer price is revenue to the selling division and cost to the buying division.

The Jet Engine Division provides engines for the Jet Plane Division of a company. The standard unit costs for the Jet Engine Division are as follows: The engine department has excess capacity. What is the best transfer price to avoid transfer price problems?

The delegation of decision-making authority to successively lower management levels is called __________ .

Sporadic Company has the following data for 2016: a. Margin ratio b. Turnover ratio c. ROI d. Residual income e. EVA

If the turnover increased by 30 percent and the margin decreased by 30 percent, the ROI would

How do the differences between centralization and decentralization affect decision making? Why would a Company decentralize its operations?