Question 1

Nonfinancial measures can highlight falling sales and profits in an organization,but only financial measures can identify why this is occurring.

Accepted Answer

A) True 
 B)False

Question 2

A cost center is a business segment:

Accepted Answer

A) that usually evaluates employee performance by comparing the center's actual costs with target or standard costs for the amount and type of work done. 
B) in which interperiod cost comparisons can be misleading if the output level and production mix are constant. 
C) that usually includes individual stores within a department-store chain. 
D) that should be evaluated solely on its ability to control and reduce costs. 
A) that usually evaluates employee performance by comparing the center's actual costs with target or standard costs for the amount and type of work done. 
B) in which interperiod cost comparisons can be misleading if the output level and production mix are constant. 
C) that usually includes individual stores within a department-store chain. 
D) that should be evaluated solely on its ability to control and reduce costs.

Question 3

The management accountant for the Martino Organics has prepared the following segmented income statement for the most current year.
  
-Assume an advertising campaign could increase revenues for any of the products by $15,000.To maximize corporate profits,the ________ department should receive the advertising dollars.Assume the cost of the advertising campaign is less than the revenues it generates.

Accepted Answer

A) Sundries 
B) FIsh & Meat 
C) Produce 
D) From the information given,the correct product line cannot be determined. 
A) Sundries 
B) FIsh & Meat 
C) Produce 
D) From the information given,the correct product line cannot be determined.

Question 4

Why are transfer prices used? What is a market-based transfer price?

Accepted Answer

Transfer prices are used internally to v

Question 5

A local unit is evaluated as a profit center but the corporate office controls many facets of the operation.If local-unit performance is poor,it may reflect:

Accepted Answer

A) poor corporate decisions. 
B) poor local decisions. 
C) conditions that no one can control. 
D) All of the above are correct. 
A) poor corporate decisions. 
B) poor local decisions. 
C) conditions that no one can control. 
D) All of the above are correct.

Question 6

A support department,such as human resources,should be evaluated as a cost center.

Accepted Answer

A) True 
 B)False

Question 7

Describe a cost center.What are some of the problems faced by cost centers?

Accepted Answer

Cost centers are responsibility centers

Question 8

Economic value added:

Accepted Answer

A) encourages segment managers to accept only new capital projects with a return on investment (ROI)that exceed the current ROI. 
B) of $100,000 indicates the segment earned $100,000 for the company. 
C) of $20,000 indicates the segment's actual earnings (adjusted for biasing effects of accounting conservatism)exceeded the company's cost of capital by $20,000. 
D) is considered an inferior method of evaluating investment center performance. 
A) encourages segment managers to accept only new capital projects with a return on investment (ROI)that exceed the current ROI. 
B) of $100,000 indicates the segment earned $100,000 for the company. 
C) of $20,000 indicates the segment's actual earnings (adjusted for biasing effects of accounting conservatism)exceeded the company's cost of capital by $20,000. 
D) is considered an inferior method of evaluating investment center performance.

Question 9

For each of the following,identify whether it BEST relates to (M)arket-based,(C)ost-based,(N)egotiated,(A)dministered,or (All)types of transfer pricing.
 a.Bargaining between selling and buying units (M / C / N / A / All)
b.Objective and provides the proper economic incentives (M / C / N / A / All)
 c.145% of full costs (M / C / N / A / All)
d.Avoids confrontation and generally used when a transaction occurs frequently (M / C / N / A / All)
e.Internal product transfers are required (M / C / N / A / All)
 f.Prices listed in a trade journal (M / C / N / A / All)
 g.Prices do not reflect pure economic considerations nor accountability considerations (M / C / N / A / All)
 h.Goal is to motivate decision makers to act in the organization's best interest (M / C / N / A / All)
 i.Provide no incentive to the supplying division (M / C / N / A / All)
 j.Reflects support of the controllability principle (M / C / N / A / All)

Accepted Answer

a.N
b.M
c.C
d.A
e.M,

Question 10

Return on investment (ROI)can be increased by:

Accepted Answer

A) increasing sales. 
B) decreasing operating assets. 
C) decreasing operating income. 
D) decreasing asset turnover. 
A) increasing sales. 
B) decreasing operating assets. 
C) decreasing operating income. 
D) decreasing asset turnover.

Question 11

Assume an organization's cost of capital is 10% and Division X has operating income of $3 million and uses $20 million of capital.The economic value added for Division X is:

Accepted Answer

A) $200,000. 
B) $300,000. 
C) $1,000,000. 
D) $1,700,000. 
A) $200,000. 
B) $300,000. 
C) $1,000,000. 
D) $1,700,000.

Question 12

A revenue center is like an independent business.

Accepted Answer

A) True 
 B)False

Question 13

If external markets exist,then market-based transfer prices are the most appropriate.

Accepted Answer

A) True 
 B)False

Question 14

The MOST likely result of a negotiated transfer price is that it:

Accepted Answer

A) takes away the ultimate responsibility of the resulting transfer price from the two parties. 
B) may reflect the relative negotiating skills of the two parties. 
C) generally results in transferring more than the optimum number of units. 
D) reflects purely economic considerations. 
A) takes away the ultimate responsibility of the resulting transfer price from the two parties. 
B) may reflect the relative negotiating skills of the two parties. 
C) generally results in transferring more than the optimum number of units. 
D) reflects purely economic considerations.

Question 15

When an organization moves to decentralized decision making,control moves from results control to task control.

Accepted Answer

A) True 
 B)False

Question 16

A division reports a 24.5% ROI,a 9.6% return on sales,and a 2.55 asset turnover ratio.How can the manager of this division determine whether these results are favorable or not?

Accepted Answer

Meaning is added when ratios are compare

Question 17

Calculate and compare the difference in overall corporate net income between Scenario A and Scenario B if the Assembly Division sells 100,000 pairs of shoes for $120 per pair to customers. Scenario A: Negotiated transfer price of $30 per pair of soles
Scenario B: Market-based transfer price

Accepted Answer

A) $1,000,000 more net income under Scenario A 
B) $1,000,000 of net income using Scenario B 
C) $200,000 of net income using Scenario A 
D) None of the above is correct. 
A) $1,000,000 more net income under Scenario A 
B) $1,000,000 of net income using Scenario B 
C) $200,000 of net income using Scenario A 
D) None of the above is correct.

Question 18

All of the following would likely be classified as cost centers except:

Accepted Answer

A) maintenance department at local grocery store. 
B) your university's computer center. 
C) surgical department of hospital. 
D) All of the above are cost centers. 
A) maintenance department at local grocery store. 
B) your university's computer center. 
C) surgical department of hospital. 
D) All of the above are cost centers.

Question 19

Measure of financial control highlight:

Accepted Answer

A) falling profits. 
B) poor quality. 
C) high prices. 
D) unsatisfactory service. 
A) falling profits. 
B) poor quality. 
C) high prices. 
D) unsatisfactory service.

Question 20

In a decentralized organization:

Accepted Answer

A) local-division managers have less control over their business segments. 
B) there are few deviations from the standardized way of doing things. 
C) front-line employees are not trained to respond to changes in the business environment. 
D) decisions are made by the managers most familiar with the problems and opportunities. 
A) local-division managers have less control over their business segments. 
B) there are few deviations from the standardized way of doing things. 
C) front-line employees are not trained to respond to changes in the business environment. 
D) decisions are made by the managers most familiar with the problems and opportunities.

Nonfinancial measures can highlight falling sales and profits in an organization,but only financial measures can identify why this is occurring.

A cost center is a business segment:

Why are transfer prices used? What is a market-based transfer price?

A local unit is evaluated as a profit center but the corporate office controls many facets of the operation.If local-unit performance is poor,it may reflect:

A support department,such as human resources,should be evaluated as a cost center.

Describe a cost center.What are some of the problems faced by cost centers?

Economic value added:

Return on investment (ROI)can be increased by:

Assume an organization's cost of capital is 10% and Division X has operating income of $3 million and uses $20 million of capital.The economic value added for Division X is:

A revenue center is like an independent business.

If external markets exist,then market-based transfer prices are the most appropriate.

The MOST likely result of a negotiated transfer price is that it:

When an organization moves to decentralized decision making,control moves from results control to task control.

A division reports a 24.5% ROI,a 9.6% return on sales,and a 2.55 asset turnover ratio.How can the manager of this division determine whether these results are favorable or not?

Calculate and compare the difference in overall corporate net income between Scenario A and Scenario B if the Assembly Division sells 100,000 pairs of shoes for $120 per pair to customers. Scenario A: Negotiated transfer price of $30 per pair of soles Scenario B: Market-based transfer price

All of the following would likely be classified as cost centers except:

Measure of financial control highlight:

In a decentralized organization:

How Management Accounting Information Supports Decision Making

The Balanced Scorecard and Strategy Map

Using Costs in Decision Making

Accumulating and Assigning Costs to Products

Activity-Based Cost Systems

Measuring and Managing Customer Relationships

Measuring and Managing Process Performance

Measuring and Managing Life-Cycle Costs

Behavioral and Organizational Issues in Management Accounting and Control Systems

Using Budgets for Planning and Coordination

Filters

Exam 11: Financial Control

Nonfinancial measures can highlight falling sales and profits in an organization,but only financial measures can identify why this is occurring.

A cost center is a business segment:

Why are transfer prices used? What is a market-based transfer price?

A local unit is evaluated as a profit center but the corporate office controls many facets of the operation.If local-unit performance is poor,it may reflect:

A support department,such as human resources,should be evaluated as a cost center.

Describe a cost center.What are some of the problems faced by cost centers?

Economic value added:

Return on investment (ROI)can be increased by:

Assume an organization's cost of capital is 10% and Division X has operating income of $3 million and uses $20 million of capital.The economic value added for Division X is:

A revenue center is like an independent business.

If external markets exist,then market-based transfer prices are the most appropriate.

The MOST likely result of a negotiated transfer price is that it:

When an organization moves to decentralized decision making,control moves from results control to task control.

A division reports a 24.5% ROI,a 9.6% return on sales,and a 2.55 asset turnover ratio.How can the manager of this division determine whether these results are favorable or not?

Calculate and compare the difference in overall corporate net income between Scenario A and Scenario B if the Assembly Division sells 100,000 pairs of shoes for $120 per pair to customers. Scenario A: Negotiated transfer price of $30 per pair of soles Scenario B: Market-based transfer price

All of the following would likely be classified as cost centers except:

Measure of financial control highlight:

In a decentralized organization:

How Management Accounting Information Supports Decision Making

The Balanced Scorecard and Strategy Map

Using Costs in Decision Making

Accumulating and Assigning Costs to Products

Activity-Based Cost Systems

Measuring and Managing Customer Relationships

Measuring and Managing Process Performance

Measuring and Managing Life-Cycle Costs

Behavioral and Organizational Issues in Management Accounting and Control Systems

Using Budgets for Planning and Coordination

Filters