Question 1

Which of the following is a disadvantage of decentralization?

Accepted Answer

A)  Decisions made by one manager may negatively affect the profitability of the entire company. 
B)  Decentralization helps retain quality managers. 
C)  Managers closest to the operations make decisions. 
D)  Managers are able to acquire expertise in their areas of responsibility. 
A)  Decisions made by one manager may negatively affect the profitability of the entire company. 
B)  Decentralization helps retain quality managers. 
C)  Managers closest to the operations make decisions. 
D)  Managers are able to acquire expertise in their areas of responsibility.

Question 2

Income from operations of the Pierce Automobile Division is $2,225,000. If income from operations before service department charges is $3,250,000,

Accepted Answer

A)  operating expenses are $1,025,000 
B)  total service department charges are $1,025,000 
C)  noncontrollable charges are $1,025,000 
D)  direct manufacturing charges are $1,025,000 
A)  operating expenses are $1,025,000 
B)  total service department charges are $1,025,000 
C)  noncontrollable charges are $1,025,000 
D)  direct manufacturing charges are $1,025,000

Question 3

The investment turnover is the ratio of

Accepted Answer

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

Question 4

A manager in a cost center also has responsibility and authority over the revenues.

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

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 7

Division A of Chacha Company has sales of $140,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000. What is the investment turnover for Division A?

Accepted Answer

A)  0.93 
B)  9.3 
C)  1.07 
D)  10.7 
A)  0.93 
B)  9.3 
C)  1.07 
D)  10.7

Question 8

ABC Corporation has three service departments with the following costs and activity base:     What is the service department charge rate for the Accounting Department?

Accepted Answer

A)  $714 
B)  $250 
C)  $625 
D)  $0.004 
A)  $714 
B)  $250 
C)  $625 
D)  $0.004

Question 9

In evaluating the profit center manager, the income from operations should be compared

Accepted Answer

A)  across profit centers 
B)  to historical performance or budget 
C)  to the competitor's net income 
D)  to the total company earnings per share 
A)  across profit centers 
B)  to historical performance or budget 
C)  to the competitor's net income 
D)  to the total company earnings per share

Question 10

The following data are taken from the management accounting reports of Dulcimer Co.:   If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that

Accepted Answer

A)  Division A's manager is given the bonus 
B)  Division B's manager is given the bonus 
C)  Division C's manager is given the bonus 
D)  Divisions B and C's managers divide the bonus 
A)  Division A's manager is given the bonus 
B)  Division B's manager is given the bonus 
C)  Division C's manager is given the bonus 
D)  Divisions B and C's managers divide the bonus

Question 11

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%.
What is Clydesdale Company's rate of return on investment?

Accepted Answer

A)  56% 
B)  20% 
C)  45% 
D)  25% 
A)  56% 
B)  20% 
C)  45% 
D)  25%

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 14

ABC Corporation has three service departments with the following costs and activity base:     What is the service department charge rate for Graphics Production?

Accepted Answer

A)  $2.00 
B)  $10.00 
C)  $6.66 
D)  $0.50 
A)  $2.00 
B)  $10.00 
C)  $6.66 
D)  $0.50

Question 15

Ralston Company has income from operations of $75,000, invested assets of $360,000, and sales of $790,000. 
Use the DuPont formula to calculate the rate of return on investment, and show (a) the profit margin, (b) the investment turnover, and (c) rate of return on investment. Round the profit margin percentage to two decimal places and the investment turnover to three decimal places.

Accepted Answer

(a) Profit margin = $75,000/$7

Question 16

Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5 per unit. However, the same materials are available from Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6's current sales.
How much will Square Yard Products 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

Question 17

The amount of detail presented in a budget performance report for a cost center depends upon the level of management to which the report is directed.

Accepted Answer

A) True 
 B)False

Question 18

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

Accepted Answer

A) True 
 B)False

Question 19

Several items are missing from the following table of rate of return on investment and residual income. Determine the missing items, identifying each item by the appropriate letter (a-l).  Round percentage values to one decimal point

Accepted Answer

(a) $800,000 ($128,000/16%) 
(b) $138,00

Question 20

The ratio of sales to invested assets is termed the investment turnover component of the rate of return on investment.

Accepted Answer

A) True 
 B)False

Which of the following is a disadvantage of decentralization?

Income from operations of the Pierce Automobile Division is $2,225,000. If income from operations before service department charges is $3,250,000,

The investment turnover is the ratio of

A manager in a cost center also has responsibility and authority over the revenues.

Responsibility accounting reports for profit centers will include

Division A of Chacha Company has sales of $140,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000. What is the investment turnover for Division A?

ABC Corporation has three service departments with the following costs and activity base: What is the service department charge rate for the Accounting Department?

In evaluating the profit center manager, the income from operations should be compared

The following data are taken from the management accounting reports of Dulcimer Co.: If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's rate of return on investment?

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

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

ABC Corporation has three service departments with the following costs and activity base: What is the service department charge rate for Graphics Production?

The amount of detail presented in a budget performance report for a cost center depends upon the level of management to which the report is directed.

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

Several items are missing from the following table of rate of return on investment and residual income. Determine the missing items, identifying each item by the appropriate letter (a-l). Round percentage values to one decimal point

The ratio of sales to invested assets is termed the investment turnover component of the rate of return on investment.

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity Based Costing

Cost Volume Profit Analysis

Variable Costing for Management Analysis

Budgeting

Evaluating Variances From Standard Costs

Differential Analysis and Product Pricing

Capital Investment Analysis

Lean Manufacturing and Activity Analysis

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 9: Evaluating Decentralized Operations

Which of the following is a disadvantage of decentralization?

Income from operations of the Pierce Automobile Division is $2,225,000. If income from operations before service department charges is $3,250,000,

The investment turnover is the ratio of

A manager in a cost center also has responsibility and authority over the revenues.

Responsibility accounting reports for profit centers will include

Division A of Chacha Company has sales of $140,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000. What is the investment turnover for Division A?

ABC Corporation has three service departments with the following costs and activity base: What is the service department charge rate for the Accounting Department?

In evaluating the profit center manager, the income from operations should be compared

The following data are taken from the management accounting reports of Dulcimer Co.: If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's rate of return on investment?

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

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

ABC Corporation has three service departments with the following costs and activity base: What is the service department charge rate for Graphics Production?

The amount of detail presented in a budget performance report for a cost center depends upon the level of management to which the report is directed.

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

Several items are missing from the following table of rate of return on investment and residual income. Determine the missing items, identifying each item by the appropriate letter (a-l). Round percentage values to one decimal point

The ratio of sales to invested assets is termed the investment turnover component of the rate of return on investment.

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity Based Costing

Cost Volume Profit Analysis

Variable Costing for Management Analysis

Budgeting

Evaluating Variances From Standard Costs

Differential Analysis and Product Pricing

Capital Investment Analysis

Lean Manufacturing and Activity Analysis

Statement of Cash Flows

Financial Statement Analysis

Filters