Question 1

Determining the transfer price as the price at which the product or service transferred could be sold to outside buyers is known as the:

Accepted Answer

A)  Cost price approach 
B)  Negotiated price approach 
C)  Revenue price approach 
D)  Market price approach

Question 2

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31:  The net income for Train Corporation is:

Accepted Answer

A)  $83,180 
B)  $35,940 
C)  $48,390 
D)  $60,840

Question 3

The primary disadvantage of decentralized operations is that decisions made by one manager may affect other managers in such a way that the profitability of the entire company may suffer.

Accepted Answer

A) True 
 B)False

Question 4

The profit margin is the:

Accepted Answer

A)  ratio of income from operations to sales 
B)  ratio of income from operations to invested assets 
C)  ratio of assets to liabilities 
D)  ratio of sales to invested assets

Question 5

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

Accepted Answer

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

Question 6

If income from operations for a division is $30,000, sales are $263,750, and invested assets are $187,500, the investment turnover is 1.3.

Accepted Answer

A) True 
 B)False

Question 7

The Western Division of Bestboot Company has a rate of return on investment of 15% and an investment turnover of 1.2. What is the profit margin?

Accepted Answer

A)  10% 
B)  12.5% 
C)  9% 
D)  6%

Question 8

The balanced scorecard measures

Accepted Answer

A)  only financial information 
B)  only nonfinancial information 
C)  both financial and nonfinancial information 
D)  external and internal information

Question 9

The ratio of sales to investment is termed the rate of return on investment.

Accepted Answer

A) True 
 B)False

Question 10

The costs of services charged to a profit center on the basis of its use of those services are called:

Accepted Answer

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

Question 11

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 12

To calculate income from operations, total service department charges are:

Accepted Answer

A)  added to income from operations before service department charges 
B)  subtracted from operating expenses 
C)  subtracted from income from operations before service department charges 
D)  subtracted from gross profit margin

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

Division A of Mocha Company has sales of $155,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000. What is the rate of return on investment for Division A?

Accepted Answer

A)  19.3% 
B)  48.0% 
C)  18.7% 
D)  5.47%

Question 15

Piano Company's costs were over budget by $47,000. The Piano Company is divided in two regions. The first region's costs were over budget by $5,000. Determine the amount that the second region's cost was over or under budget.

Accepted Answer

The answer of Piano Company's costs were over budget by...

Question 16

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31:  The gross profit for the Rails Division is:

Accepted Answer

A)  $60,800 
B)  $33,600 
C)  $8,700 
D)  $21,150

Question 17

Xang Company's costs were over budget by $46,000. The Xang Company is divided in two regions. The first region's costs were over budget by $7,000.
Required:
Determine the amount that the second region's cost was over or under budget.

Accepted Answer

The answer of Xang Company's costs were over budget by...

Question 18

Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The profit margin for Mason is:

Accepted Answer

A)  7.1% 
B)  20% 
C)  15.2% 
D)  14.1%

Question 19

The plant managers in a cost center can be held responsible for major differences between budgeted and actual costs in their plants.

Accepted Answer

A) True 
 B)False

Question 20

If income from operations for a division is $120,000, sales are $975,000, and invested assets are $750,000, the investment turnover is 1.3.

Accepted Answer

A) True 
 B)False

Exam 23: Performance Evaluation for Decentralized Operations

Determining the transfer price as the price at which the product or service transferred could be sold to outside buyers is known as the:

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: The net income for Train Corporation is:

The primary disadvantage of decentralized operations is that decisions made by one manager may affect other managers in such a way that the profitability of the entire company may suffer.

The profit margin is the:

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

If income from operations for a division is $30,000, sales are $263,750, and invested assets are $187,500, the investment turnover is 1.3.

The Western Division of Bestboot Company has a rate of return on investment of 15% and an investment turnover of 1.2. What is the profit margin?

The balanced scorecard measures

The ratio of sales to investment is termed the rate of return on investment.

The costs of services charged to a profit center on the basis of its use of those services are called:

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

To calculate income from operations, total service department charges are:

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?

Division A of Mocha Company has sales of $155,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000. What is the rate of return on investment for Division A?

Piano Company's costs were over budget by $47,000. The Piano Company is divided in two regions. The first region's costs were over budget by $5,000. Determine the amount that the second region's cost was over or under budget.

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: The gross profit for the Rails Division is:

Xang Company's costs were over budget by $46,000. The Xang Company is divided in two regions. The first region's costs were over budget by $7,000. Required: Determine the amount that the second region's cost was over or under budget.

Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The profit margin for Mason is:

The plant managers in a cost center can be held responsible for major differences between budgeted and actual costs in their plants.

If income from operations for a division is $120,000, sales are $975,000, and invested assets are $750,000, the investment turnover is 1.3.