Question 1

When responsibility centers are treated as profit centers:

Accepted Answer

A) the segment manager has responsibility for pricing and product selection, but not for purchasing and promotion. 
B) the corporate office makes most of the operating and pricing decisions. 
C) the information technology group of a manufacturing firm would typically be treated as a profit center. 
D) there are usually problems associated with assigning jointly earned revenues. 
A) the segment manager has responsibility for pricing and product selection, but not for purchasing and promotion. 
B) the corporate office makes most of the operating and pricing decisions. 
C) the information technology group of a manufacturing firm would typically be treated as a profit center. 
D) there are usually problems associated with assigning jointly earned revenues.

Question 2

Return on sales,the efficiency component of return on investment (ROI),is:

Accepted Answer

A) 20%. 
B) 80%. 
C) 25%. 
D) 125%. 
A) 20%. 
B) 80%. 
C) 25%. 
D) 125%.

Question 3

Is segment margin an appropriate measure of financial performance for segment management? Why?
Yes,it is an appropriate measure because all of the revenues and costs used to compute segment margin are directly traceable to the segment and are essentially under the control of the segment manager.Segment income is also a valuable measure of performance because it considers all costs that could be avoided without the segment.

Accepted Answer

Yes, it is an appropriate measure becaus

Question 4

A fully-owned subsidiary of a multinational firm reports return on investment four times a year.This is an example of:

Accepted Answer

A) a revenue center. 
B) a cost center. 
C) an investment center. 
D) a profit center. 
A) a revenue center. 
B) a cost center. 
C) an investment center. 
D) a profit center.

Question 5

Segment margin includes:

Accepted Answer

A) all costs traceable to the segment. 
B) the segment's share of allocated corporate costs. 
C) the segment's share of allocated unavoidable costs. 
D) All of the above are correct. 
A) all costs traceable to the segment. 
B) the segment's share of allocated corporate costs. 
C) the segment's share of allocated unavoidable costs. 
D) All of the above are correct.

Question 6

The financial measure,economic value added,evaluates income relative to the level of investment required.

Accepted Answer

A) True 
 B)False

Question 7

If a product line was eliminated,forecasted annual corporate profits in the short run would decrease by the amount of that product line's contribution margin.

Accepted Answer

A) True 
 B)False

Question 8

Performance measures for financial control include all of the following EXCEPT:

Accepted Answer

A) reduced cycle times. 
B) ROI ( return on investment)and economic value added. 
C) profit. 
D) cost. 
A) reduced cycle times. 
B) ROI ( return on investment)and economic value added. 
C) profit. 
D) cost.

Question 9

All of the following are true of responsibility centers EXCEPT that they:

Accepted Answer

A) operate like a small business. 
B) promote the interests of the larger organization. 
C) coordinate activities with other responsibility centers. 
D) are best used in a centralized organization. 
A) operate like a small business. 
B) promote the interests of the larger organization. 
C) coordinate activities with other responsibility centers. 
D) are best used in a centralized organization.

Question 10

What is financial control and how does it relate to nonfinancial measures?

Accepted Answer

Financial control involves the use of fi

Question 11

All of the following are true of a revenue center EXCEPT that it:

Accepted Answer

A) controls service quality and units sold. 
B) controls the acquisition cost of the product or service sold. 
C) may control price, product mix, and promotional activities. 
D) may incur sales and marketing costs. 
A) controls service quality and units sold. 
B) controls the acquisition cost of the product or service sold. 
C) may control price, product mix, and promotional activities. 
D) may incur sales and marketing costs.

Question 12

Organizations use nonfinancial control to provide a summary measure of how well their systems of operations control are working.

Accepted Answer

A) True 
 B)False

Question 13

To discover where to make improvements in productivity,managers might do all of the following EXCEPT:

Accepted Answer

A) calculate the ratio of output over input. 
B) compare return on sales to a competitor's return on sales. 
C) use trend analysis. 
D) compare the asset turnover ratio for this accounting period to an industry norm. 
A) calculate the ratio of output over input. 
B) compare return on sales to a competitor's return on sales. 
C) use trend analysis. 
D) compare the asset turnover ratio for this accounting period to an industry norm.

Question 14

The Crandon Mill has two divisions.The Cutting Division prepares timber at its sawmills.The Assembly Division prepares the cut lumber into finished wood for the furniture industry.During the year,the Cutting Division prepared 60,000 cords of wood at a cost of $660,000.All the lumber was transferred to the Assembly Division where additional operating costs of $6 per cord were incurred.The 600,000 boardfeet of finished wood were sold for $2,500,000.
Required:
a.Determine the operating income for each division if the transfer price from Cutting to Assembly is at cost,$11 a cord.
b.Determine the operating income for each division if the transfer price is $9 per cord.
c.Since the Cutting Division sells all of its wood internally to the Assembly Division,does the manager care what price is selected? Why? Should the Cutting Division be a cost center or a profit center under the circumstances?

Accepted Answer

a.
 @#IMG-DLM& 
* 60,000 cords × $11 = $660,000
b.

Question 15

Bedtime Bedding Company manufactures pillows.The Cover Division makes covers and the Assembly Division makes the finished pillows.The covers can be sold separately for $5.00. The pillows sell for $6.00.The information related to manufacturing for the most recent year is as follows:
   
Required:
a. Compute the operating income for each division and the company as a whole.Use market value as the transfer price.
b. Are all managers happy with this concept? Explain.

Accepted Answer

a.
 @#IMG-DLM& b. The Assembly manager is probably

Question 16

For the segment manager to be properly evaluated,common costs should NOT be allocated to the various segments,even if an arbitrary allocation is required.

Accepted Answer

A) True 
 B)False

Question 17

The management accountant for the Martino Organics has prepared the following segmented income statement for the most current year.
  
-If the Fish & Meat department had been discontinued,the short-term effect on corporate profits would be a decrease of:

Accepted Answer

A) $55,000. 
B) $34,000. 
C) $31,000. 
D) $24,000. 
A) $55,000. 
B) $34,000. 
C) $31,000. 
D) $24,000.

Question 18

The management accountant for the Martino Organics has prepared the following segmented income statement for the most current year.
  
-Assume that the Sundries department has been discontinued and long-term capacity of the company has had time to adjust.The projected long-term effect of this action on annual corporate profits would be a decrease of:

Accepted Answer

A) $40,000. 
B) $32,000. 
C) $29,000. 
D) $22,000. 
A) $40,000. 
B) $32,000. 
C) $29,000. 
D) $22,000.

Question 19

Measuring performance based on cost per unit will motivate performance that includes keeping ________ under control.

Accepted Answer

A) only costs 
B) costs and on-time delivery 
C) costs and the amount of defects 
D) only quality 
A) only costs 
B) costs and on-time delivery 
C) costs and the amount of defects 
D) only quality

Question 20

Properly chosen nonfinancial measures anticipate and explain financial results.

Accepted Answer

A) True 
 B)False

When responsibility centers are treated as profit centers:

Return on sales,the efficiency component of return on investment (ROI),is:

A fully-owned subsidiary of a multinational firm reports return on investment four times a year.This is an example of:

Segment margin includes:

The financial measure,economic value added,evaluates income relative to the level of investment required.

If a product line was eliminated,forecasted annual corporate profits in the short run would decrease by the amount of that product line's contribution margin.

Performance measures for financial control include all of the following EXCEPT:

All of the following are true of responsibility centers EXCEPT that they:

What is financial control and how does it relate to nonfinancial measures?

All of the following are true of a revenue center EXCEPT that it:

Organizations use nonfinancial control to provide a summary measure of how well their systems of operations control are working.

To discover where to make improvements in productivity,managers might do all of the following EXCEPT:

For the segment manager to be properly evaluated,common costs should NOT be allocated to the various segments,even if an arbitrary allocation is required.

The management accountant for the Martino Organics has prepared the following segmented income statement for the most current year. -If the Fish & Meat department had been discontinued,the short-term effect on corporate profits would be a decrease of:

Measuring performance based on cost per unit will motivate performance that includes keeping ________ under control.

Properly chosen nonfinancial measures anticipate and explain financial results.

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

When responsibility centers are treated as profit centers:

Return on sales,the efficiency component of return on investment (ROI),is:

A fully-owned subsidiary of a multinational firm reports return on investment four times a year.This is an example of:

Segment margin includes:

The financial measure,economic value added,evaluates income relative to the level of investment required.

If a product line was eliminated,forecasted annual corporate profits in the short run would decrease by the amount of that product line's contribution margin.

Performance measures for financial control include all of the following EXCEPT:

All of the following are true of responsibility centers EXCEPT that they:

What is financial control and how does it relate to nonfinancial measures?

All of the following are true of a revenue center EXCEPT that it:

Organizations use nonfinancial control to provide a summary measure of how well their systems of operations control are working.

To discover where to make improvements in productivity,managers might do all of the following EXCEPT:

For the segment manager to be properly evaluated,common costs should NOT be allocated to the various segments,even if an arbitrary allocation is required.

The management accountant for the Martino Organics has prepared the following segmented income statement for the most current year. -If the Fish & Meat department had been discontinued,the short-term effect on corporate profits would be a decrease of:

Measuring performance based on cost per unit will motivate performance that includes keeping ________ under control.

Properly chosen nonfinancial measures anticipate and explain financial results.

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