Question 1

Budget performance reports prepared for the vice-president of production would generally contain less detail than the reports prepared for the various plant managers.

Accepted Answer

A) True 
 B)False

Question 2

Division T reported income from operations of $900,000 and total service department charges of $575,000.Therefore:

Accepted Answer

A) net income was $325,000. 
B) the gross profit margin was $325,000. 
C) income from operations before service department charges was $1,475,000. 
D) consolidated net income was $325,000.

Question 3

Under the negotiated price approach,the transfer price is the price at which the product or service transferred could be sold to outside buyers.

Accepted Answer

A) True 
 B)False

Question 4

Separation of businesses into more manageable operating units is termed centralization.

Accepted Answer

A) True 
 B)False

Question 5

The gross profit for the Southern Division is:

Accepted Answer

A) $150,000. 
B) $295,000. 
C) $235,000. 
D) $120,000.

Question 6

The profit margin for Division J is 12% and the investment turnover is 1.40.What is the rate of return on investment for Division J?

Accepted Answer

A) 16.8% 
B) 8.6% 
C) 12.0% 
D) 9.6%

Question 7

If divisional income from operations is $100,000,invested assets are $850,000,and the minimum rate of return on invested assets is 8%,the residual income would be $32,000.

Accepted Answer

A) True 
 B)False

Question 8

Businesses that are separated into two or more manageable units and in which managers have authority and responsibility for operations are said to be:

Accepted Answer

A) centralized. 
B) consolidated. 
C) diversified. 
D) decentralized.

Question 9

The costs of services charged to a profit center based on the usage of the service are called:

Accepted Answer

A) operating expenses. 
B) noncontrollable charges. 
C) service department charges. 
D) activity charges.

Question 10

Which of the following would not be considered as an internal centralized service department?

Accepted Answer

A) Payroll accounting department 
B) Manufacturing department 
C) Information systems department 
D) Purchasing department

Question 11

The budget for Department 5 of Plant M for the current month ending March 31 is as follows:

Accepted Answer

The answer of The budget for Department 5 of Plant...

Question 12

Responsibility accounting reports for profit centers are normally in the form of balance sheets.

Accepted Answer

A) True 
 B)False

Question 13

How much would Division C's income from operations increase?

Accepted Answer

A) $0 
B) $180,000 
C) $60,000 
D) $120,000

Question 14

A responsibility center in which the department manager has responsibility for and authority over costs in the department is termed a cost center.

Accepted Answer

A) True 
 B)False

Question 15

The sales,income from operations,and invested assets for each division of Salem Company are as follows:

Accepted Answer

The answer of The sales,income from operations,and invested assets for...

Question 16

How much would Boone's total income from operations increase?

Accepted Answer

A) $180,000 
B) $240,000 
C) $120,000 
D) $300,000

Question 17

The underlying principle of allocating operating expenses to departments is to assign each department an amount of expense proportional to the revenues of that department.

Accepted Answer

A) True 
 B)False

Exam 14: Performance Evaluation for Decentralized Operations

Budget performance reports prepared for the vice-president of production would generally contain less detail than the reports prepared for the various plant managers.

Division T reported income from operations of $900,000 and total service department charges of $575,000.Therefore:

Under the negotiated price approach,the transfer price is the price at which the product or service transferred could be sold to outside buyers.

Separation of businesses into more manageable operating units is termed centralization.

The gross profit for the Southern Division is:

The profit margin for Division J is 12% and the investment turnover is 1.40.What is the rate of return on investment for Division J?

If divisional income from operations is $100,000,invested assets are $850,000,and the minimum rate of return on invested assets is 8%,the residual income would be $32,000.

Businesses that are separated into two or more manageable units and in which managers have authority and responsibility for operations are said to be:

The costs of services charged to a profit center based on the usage of the service are called:

Which of the following would not be considered as an internal centralized service department?

The budget for Department 5 of Plant M for the current month ending March 31 is as follows:

Responsibility accounting reports for profit centers are normally in the form of balance sheets.

How much would Division C's income from operations increase?

A responsibility center in which the department manager has responsibility for and authority over costs in the department is termed a cost center.

The sales,income from operations,and invested assets for each division of Salem Company are as follows:

How much would Boone's total income from operations increase?

The underlying principle of allocating operating expenses to departments is to assign each department an amount of expense proportional to the revenues of that department.