Question 1

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

Accepted Answer

A)  Payroll Accounting Department 
B)  Manufacturing Department 
C)  Information Systems Department 
D)  Purchasing Department 
A)  Payroll Accounting Department 
B)  Manufacturing Department 
C)  Information Systems Department 
D)  Purchasing Department

Question 2

Division G of Elephant Preservation Inc. has sales of $895,000, cost of goods sold of $475,000, operating expenses of $79,500, and invested assets of $750,000. 
Calculate: 
(a) The rate of return on investment for Division G. 
(b) The profit margin for Division G. 
(c) The investment turnover for Division G.

Accepted Answer

1. Rate of return: 
($895,000

Question 3

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 4

Assume that divisional income from operations amounts to $215,000 and top management has established 15% as the minimum rate of return on divisional assets totaling $1,000,000. The residual income for the division is

Accepted Answer

A)  $65,000 
B)  $215,000 
C)  $635,000 
D)  $150,000 
A)  $65,000 
B)  $215,000 
C)  $635,000 
D)  $150,000

Question 5

If income from operations for a division is $5,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

Division D of Saunders Company has sales of $350,000, cost of goods sold of $120,000, operating expenses of $58,000, and invested assets of $150,000.
What is the profit margin for Division D?

Accepted Answer

A)  42.9% 
B)  83.4% 
C)  49.1% 
D)  65.7% 
A)  42.9% 
B)  83.4% 
C)  49.1% 
D)  65.7%

Question 8

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 9

The major advantage of the rate of 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 10

Which of the following is a measure of a manager's performance working in an investment center?

Accepted Answer

A)  rate of return on investment 
B)  residual income 
C)  divisional income statements 
D)  all of these 
A)  rate of return on investment 
B)  residual income 
C)  divisional income statements 
D)  all of these

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 
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

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 investment turnover for Mason is

Accepted Answer

A)  1.08 
B)  0.93 
C)  6.57 
D)  7.07 
A)  1.08 
B)  0.93 
C)  6.57 
D)  7.07

Question 14

Piano Company's costs were over budget by $47,000. The Piano Company is divided into 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 15

The profit margin component of rate of return on investment analysis focuses on profitability by indicating the rate of profit earned on each sales dollar.

Accepted Answer

A) True 
 B)False

Question 16

All of the following are advantages of decentralization except

Accepted Answer

A)  Managers make better decisions when closer to the operations of the company. 
B)  Expertise in all areas of the business is difficult; decentralization makes it better to delegate certain responsibilities. 
C)  Each decentralized operation purchases its own assets and pays for operating costs. 
D)  Decentralized managers can respond quickly to customer needs. 
A)  Managers make better decisions when closer to the operations of the company. 
B)  Expertise in all areas of the business is difficult; decentralization makes it better to delegate certain responsibilities. 
C)  Each decentralized operation purchases its own assets and pays for operating costs. 
D)  Decentralized managers can respond quickly to customer needs.

Question 17

The sales, income from operations, invested assets, and residual income for each division of Marcus Company are as follows:   
Determine the minimum rate of return for invested assets.

Accepted Answer

Division X: 
$645,000 - ($4,10

Question 18

Most manufacturing plants are considered cost centers because they have control over

Accepted Answer

A)  sales and costs 
B)  fixed assets and costs 
C)  costs only 
D)  fixed assets and sales 
A)  sales and costs 
B)  fixed assets and costs 
C)  costs only 
D)  fixed assets and sales

Question 19

Which of the following expressions is termed the profit margin factor as used in determining the rate of return on investment?

Accepted Answer

A)  Sales/Income from operations 
B)  Income from operations/Sales 
C)  Invested assets/Sales 
D)  Sales/Invested assets 
A)  Sales/Income from operations 
B)  Income from operations/Sales 
C)  Invested assets/Sales 
D)  Sales/Invested assets

Question 20

In a profit center, the department manager has responsibility for and the authority to make decisions that affect

Accepted Answer

A)  not only costs and revenues, but also assets invested in the center 
B)  the assets invested in the center, but not costs and revenues 
C)  both costs and revenues for the department or division 
D)  costs and assets invested in the center, but not revenues 
A)  not only costs and revenues, but also assets invested in the center 
B)  the assets invested in the center, but not costs and revenues 
C)  both costs and revenues for the department or division 
D)  costs and assets invested in the center, but not revenues

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

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

Assume that divisional income from operations amounts to $215,000 and top management has established 15% as the minimum rate of return on divisional assets totaling $1,000,000. The residual income for the division is

If income from operations for a division is $5,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

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

Division D of Saunders Company has sales of $350,000, cost of goods sold of $120,000, operating expenses of $58,000, and invested assets of $150,000. What is the profit margin for Division D?

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

The major advantage of the rate of 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.

Which of the following is a measure of a manager's performance working in an investment center?

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

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 investment turnover for Mason is

Piano Company's costs were over budget by $47,000. The Piano Company is divided into 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 profit margin component of rate of return on investment analysis focuses on profitability by indicating the rate of profit earned on each sales dollar.

All of the following are advantages of decentralization except

The sales, income from operations, invested assets, and residual income for each division of Marcus Company are as follows: Determine the minimum rate of return for invested assets.

Most manufacturing plants are considered cost centers because they have control over

Which of the following expressions is termed the profit margin factor as used in determining the rate of return on investment?

In a profit center, the department manager has responsibility for and the authority to make decisions that affect

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

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Exam 9: Evaluating Decentralized Operations

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

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

Assume that divisional income from operations amounts to $215,000 and top management has established 15% as the minimum rate of return on divisional assets totaling $1,000,000. The residual income for the division is

If income from operations for a division is $5,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

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

Division D of Saunders Company has sales of $350,000, cost of goods sold of $120,000, operating expenses of $58,000, and invested assets of $150,000. What is the profit margin for Division D?

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

The major advantage of the rate of 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.

Which of the following is a measure of a manager's performance working in an investment center?

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

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 investment turnover for Mason is

Piano Company's costs were over budget by $47,000. The Piano Company is divided into 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 profit margin component of rate of return on investment analysis focuses on profitability by indicating the rate of profit earned on each sales dollar.

All of the following are advantages of decentralization except

The sales, income from operations, invested assets, and residual income for each division of Marcus Company are as follows: Determine the minimum rate of return for invested assets.

Most manufacturing plants are considered cost centers because they have control over

Which of the following expressions is termed the profit margin factor as used in determining the rate of return on investment?

In a profit center, the department manager has responsibility for and the authority to make decisions that affect

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