Exam 9: Evaluating Decentralized Operations

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 rate of return on investment for Division D?

Purchase requisitions for Purchasing and the number of payroll checks for Payroll Accounting are examples of activity bases.

The minimum acceptable divisional income from operations is set by top management by establishing a minimum rate of return considered acceptable for invested assets.

Which of the following is not one of the common types of responsibility centers?

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 profit margin?

Which is the best example of a decentralized operation?

Materials used by the Layton Company's Division 1 are currently purchased from an outside supplier at $58 per unit. Division 2 is able to supply Division 1 with 22,000 units at a variable cost of $46 per unit. The two divisions have recently negotiated a transfer price of $50 per unit for the 20,000 units. (a)  By how much will each division's income increase as a result of this transfer? (b) What is the total increase in income for Layton?

The transfer price approach that uses a variety of cost concepts is the

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

The sales, income from operations, and invested assets for each division of Wren Company are as follows: Management has established a minimum rate of return for invested assets of 8%. (a) Determine the residual income for each division. (b) Based on residual income, which of the divisions is the most profitable?

The International Boot Company has income from operations of $80,000, invested assets of $500,000, and sales of $1,525,000. What is the profit margin?

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

A decentralized business organization is one in which all major planning and operating decisions are made by top management.

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

The balanced scorecard measures

It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.

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

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

Under the cost price approach, the transfer price is the price at which the product or service transferred could be sold to outside buyers.

ABC Corporation has three service departments with the following costs and activity base: How much service department cost would be allocated to the Super Division?