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 
A)  cost price approach 
B)  negotiated price approach 
C)  revenue price approach 
D)  market price approach

Question 2

Two divisions of Oregano Company (Divisions TX and OY) have the same profit margins. Division TX's investment turnover is larger than that of Division OY
(1)2 to 1.0). Income from operations for Division TX is $55,000, and income from operations for Division OY is $43,000. Division TX has a higher return on investment than Division OY by

Accepted Answer

A)  using income from operations as a performance measure 
B)  comparing the profit margins 
C)  applying a negotiated price measure 
D)  using its assets more efficiently in generating sales 
A)  using income from operations as a performance measure 
B)  comparing the profit margins 
C)  applying a negotiated price measure 
D)  using its assets more efficiently in generating sales

Question 3

The excess of divisional income from operations over a minimum acceptable amount of divisional income from operations is

Accepted Answer

A)  profit margin 
B)  residual income 
C)  return on investment 
D)  gross profit 
A)  profit margin 
B)  residual income 
C)  return on investment 
D)  gross profit

Question 4

The major advantage of the return on investment over income from operations as a divisional performance measure is that divisional investment is directly considered and thus comparability of divisions is facilitated.

Accepted Answer

A) True 
 B)False

Question 5

Responsibility accounting reports that are given to lower-level managers are usually very detailed; in turn, higher-level managers will be given a summary report.

Accepted Answer

A) True 
 B)False

Question 6

Using the data from Terrace Industries, determine the divisional income from operations for Districts 1 and 2.​   Allocate service department expenses proportionally to the sales of each district.

Accepted Answer

The answer of Using the data from Terrace Industries, determine...

Question 7

Use this information for ABC Corporation to answer the questions that follow.
​
ABC Corporation has three service departments with the following costs and activity base:
​
   ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information is as follows:
​
  
-What will the income of the Super Division be after all service department allocations?

Accepted Answer

A)  $300,000 
B)  $325,000 
C)  $550,000 
D)  $200,000 
A)  $300,000 
B)  $325,000 
C)  $550,000 
D)  $200,000

Question 8

The formula for the return on investment is

Accepted Answer

A)  Invested Assets/Income from Operations 
B)  Sales/Invested Assets 
C)  Income from Operations/Sales 
D)  Income from Operations/Invested Assets 
A)  Invested Assets/Income from Operations 
B)  Sales/Invested Assets 
C)  Income from Operations/Sales 
D)  Income from Operations/Invested Assets

Question 9

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

Accepted Answer

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

Question 10

In a cost center, the manager has responsibility and authority for making decisions that affect

Accepted Answer

A)  revenues 
B)  investments in assets 
C)  both costs and revenues 
D)  costs 
A)  revenues 
B)  investments in assets 
C)  both costs and revenues 
D)  costs

Question 11

Materials used by Best Bread Company in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit. However, the same materials are available from Division B. Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit.
(a)If a transfer price of $25 per unit is established and 60,000 units of material are transferred, with no reductions in Division B's current sales, how much would Best Bread Company's total income from operations increase?
(b)Assuming a transfer price of $25 per unit is established and 60,000 units of material are transferred, with no reductions in Division B's current sales, how much would the income from operations of Division A increase?
(c)Assuming a transfer price of $25 per unit is established and 60,000 units of material are transferred, with no reductions in Division B's current sales, how much would the income from operations of Division B increase?
(d)If the negotiated price approach is used, what would be the range of acceptable transfer prices?​

Accepted Answer

(a)$600,000Increase in Division A's Inco

Question 12

In return on investment analysis, the investment turnover component focuses on efficiency in the use of assets and indicates the rate at which sales are being generated for each dollar of invested assets.

Accepted Answer

A) True 
 B)False

Question 13

Match each of the following phrases as describing (a) an advantage, (b) a disadvantage, or (c) neither of decentralization.
-Internal price wars

Accepted Answer

A) Advantage of decentralization 
B) Disadvantage of decentralization 
C) Neither an advantage nor a disadvantage 
A) Advantage of decentralization 
B) Disadvantage of decentralization 
C) Neither an advantage nor a disadvantage

Question 14

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

Question 15

The negotiated price approach allows the managers of decentralized units to agree on the transfer price.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following formulas is the investment turnover factor as used in determining the return on investment?

Accepted Answer

A)  Invested Assets/Sales 
B)  Income from Operations/Invested Assets 
C)  Income from Operations/Sales 
D)  Sales/Invested Assets 
A)  Invested Assets/Sales 
B)  Income from Operations/Invested Assets 
C)  Income from Operations/Sales 
D)  Sales/Invested Assets

Question 17

The balanced scorecard is a set of financial and nonfinancial measures that reflect the performance of the business.

Accepted Answer

A) True 
 B)False

Question 18

The profit center income statement should include only controllable revenues and expenses.

Accepted Answer

A) True 
 B)False

Question 19

Sales commission expense for a department store is an example of a direct expense.

Accepted Answer

A) True 
 B)False

Question 20

How much will Square Yard Products Inc.'s total income from operations increase?

Accepted Answer

A)  $32,000 
B)  $112,000 
C)  $80,000 
D)  $150,000 
A)  $32,000 
B)  $112,000 
C)  $80,000 
D)  $150,000

Exam 23: 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 excess of divisional income from operations over a minimum acceptable amount of divisional income from operations is

The major advantage of the return on investment over income from operations as a divisional performance measure is that divisional investment is directly considered and thus comparability of divisions is facilitated.

Responsibility accounting reports that are given to lower-level managers are usually very detailed; in turn, higher-level managers will be given a summary report.

Using the data from Terrace Industries, determine the divisional income from operations for Districts 1 and 2.​ Allocate service department expenses proportionally to the sales of each district.

The formula for the return on investment is

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

In a cost center, the manager has responsibility and authority for making decisions that affect

In return on investment analysis, the investment turnover component focuses on efficiency in the use of assets and indicates the rate at which sales are being generated for each dollar of invested assets.

Match each of the following phrases as describing (a) an advantage, (b) a disadvantage, or (c) neither of decentralization. -Internal price wars

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.

The negotiated price approach allows the managers of decentralized units to agree on the transfer price.

Which of the following formulas is the investment turnover factor as used in determining the return on investment?

The balanced scorecard is a set of financial and nonfinancial measures that reflect the performance of the business.

The profit center income statement should include only controllable revenues and expenses.

Sales commission expense for a department store is an example of a direct expense.

How much will Square Yard Products Inc.'s total income from operations increase?

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Cost-Volume-Profit Analysis

Evaluating Variances From Standard Costs

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Filters

Using the data from Terrace Industries, determine the divisional income from operations for Districts 1 and 2. Allocate service department expenses proportionally to the sales of each district.