Question 1

Operating expenses incurred for the entire business as a unit that are not subject to the control of individual department managers are called indirect expenses.

Accepted Answer

A) True 
 B)False  True

Question 2

How much service department cost would be allocated to the Macro Division?

Accepted Answer

A)   $405,000
B)   $175,000
C)   $130,000
D)   $305,000 A

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

The excess of divisional income from operations over a minimum acceptable income from operations is termed the residual income.

Accepted Answer

A) True 
 B)False

Question 5

The profit margin for Division C is 6% and the investment turnover is 1.2.What is the rate of return on investment for Division B?

Accepted Answer

A)   20%
B)   6.7%
C)   7.3%
D)   7.2%

Question 6

Which of the following is not a measure that management can use in evaluating and controlling investment center performance?

Accepted Answer

A)   rate of return on investment
B)   negotiated price
C)   residual income
D)   income from operations

Question 7

The term used to describe expenses that are incurred by a specific department is

Accepted Answer

A)   indirect expenses
B)   margin expenses
C)   departmental expenses
D)   direct expenses

Question 8

The gross profit for the Locomotive Division is

Accepted Answer

A)   $57,960
B)   $14,790
C)   $27,240
D)   $47,280

Question 9

For higher levels of management,responsibility accounting reports

Accepted Answer

A)   are more detailed than for lower levels of management
B)   are more summarized than for lower levels of management
C)   contain about the same level of detail as reports for lower levels of management
D)   are rarely provided or reviewed

Question 10

If income from operations for a division is $6,000,invested assets are $25,000,and sales are $30,000,the investment turnover is 1.2.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)   $0
B)   $75,000
C)   $12,500
D)   $50,000

Question 12

Income from operations for Division H is $220,000,and income from operations before service department charges is $975,000.As a result,

Accepted Answer

A)   total operating expenses are $565,000
B)   total manufacturing expenses are $565,000
C)   direct materials,direct labor,and factory overhead total $565,000
D)   total service department charges are $755,000

Question 13

Some organizations use internal service departments to provide like services to several divisions or departments within an organization.Which of the following would probably not lend itself as a service department?

Accepted Answer

A)   inventory control
B)   payroll accounting
C)   information systems
D)   human resources

Question 14

Responsibility accounting reports for profit centers will include

Accepted Answer

A)   costs only
B)   revenues only
C)   expenses and fixed assets
D)   revenues,expenses,net income or loss from operations

Question 15

The ratio of income from operations to sales is termed the profit margin component of the rate of return on investment.

Accepted Answer

A) True 
 B)False

Question 16

What is the rate of return on investment for Division D?

Accepted Answer

A)   153.3%
B)   114.7%
C)   87.2%
D)   233%

Question 17

Service department charges are similar to the expenses of a profit center that purchased services from a source outside the company.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following expenses incurred by the sporting goods department of a department store is a direct expense?

Accepted Answer

A)   depreciation expense-office equipment
B)   insurance on inventory of sporting goods
C)   uncollectible accounts expense
D)   office salaries

Question 19

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are

Accepted Answer

A)   miscellaneous administrative expenses
B)   direct operating expenses
C)   indirect expenses
D)   fixed expenses

Question 20

Investment turnover (as used in determining the rate of return on investment)focuses on the rate of profit earned on each sales dollar.

Accepted Answer

A) True 
 B)False

Exam 23: Evaluating Decentralized Operations

Operating expenses incurred for the entire business as a unit that are not subject to the control of individual department managers are called indirect expenses.

How much service department cost would be allocated to the Macro Division?

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

The excess of divisional income from operations over a minimum acceptable income from operations is termed the residual income.

The profit margin for Division C is 6% and the investment turnover is 1.2.What is the rate of return on investment for Division B?

Which of the following is not a measure that management can use in evaluating and controlling investment center performance?

The term used to describe expenses that are incurred by a specific department is

The gross profit for the Locomotive Division is

For higher levels of management,responsibility accounting reports

If income from operations for a division is $6,000,invested assets are $25,000,and sales are $30,000,the investment turnover is 1.2.

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

Income from operations for Division H is $220,000,and income from operations before service department charges is $975,000.As a result,

Some organizations use internal service departments to provide like services to several divisions or departments within an organization.Which of the following would probably not lend itself as a service department?

Responsibility accounting reports for profit centers will include

The ratio of income from operations to sales is termed the profit margin component of the rate of return on investment.

What is the rate of return on investment for Division D?

Service department charges are similar to the expenses of a profit center that purchased services from a source outside the company.

Which of the following expenses incurred by the sporting goods department of a department store is a direct expense?

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are

Investment turnover (as used in determining the rate of return on investment)focuses on the rate of profit earned on each sales dollar.