Question 1

Transfer prices can be based on:

Accepted Answer

A) variable cost. 
B) full cost. 
C) an external market price. 
D) a negotiated settlement between the buying and selling divisions. 
E) all of thesE. 
A) variable cost. 
B) full cost. 
C) an external market price. 
D) a negotiated settlement between the buying and selling divisions. 
E) all of thesE.

Question 2

Sullivan Enterprises had a sales margin of 5%,sales of $4,000,000,and invested capital of $5,000,000.The company's ROI was:

Accepted Answer

A) 4.00%. 
B) 6.25%. 
C) 16.00%. 
D) 25.00%. 
E) some other figurE. 
A) 4.00%. 
B) 6.25%. 
C) 16.00%. 
D) 25.00%. 
E) some other figurE.

Question 3

Consider the following statements about goal congruence:
I.Goal congruence is obtained when managers of subunits throughout an organization strive to achieve the goals set by top management.
II.Managers are often more concerned about the performance of their own subunits rather than the performance of the entire organization.
III.Achieving goal congruence in most organizations is relatively straightforward and easy to accomplish.
Which of the above statements is (are)true?

Accepted Answer

A) I only. 
B) II only. 
C) I and II. 
D) II and III. 
E) I,II,and III. 
A) I only. 
B) II only. 
C) I and II. 
D) II and III. 
E) I,II,and III.

Question 4

Economic value added uses a firm's weighted-average cost of capital.

Accepted Answer

A) True 
 B)False

Question 5

Although the general rule for transfer prices is the outlay cost plus opportunity cost,many companies instead use negotiated prices to price their goods and services.When are negotiated transfer prices used? Are such prices consistent or inconsistent with responsibility accounting? Explain.

Accepted Answer

Negotiated transfer prices can be used w

Question 6

Capital turnover shows:

Accepted Answer

A) the income generated by each dollar of capital investment. 
B) the sales dollars generated by each dollar of capital investment. 
C) the contribution margin generated by each dollar of capital investment. 
D) the capital investment generated by each sales dollar. 
E) the capital investment generated by each dollar of incomE. 
A) the income generated by each dollar of capital investment. 
B) the sales dollars generated by each dollar of capital investment. 
C) the contribution margin generated by each dollar of capital investment. 
D) the capital investment generated by each sales dollar. 
E) the capital investment generated by each dollar of incomE.

Question 7

For the period just ended,United Corporation's Delta Division reported profit of $31.9 million and invested capital of $220 million.Assuming an imputed interest rate of 12%,which of the following choices correctly denotes Delta's return on investment (ROI)and residual income?

Accepted Answer

A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E 
A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E

Question 8

The maximum amount the Cologne Division would be willing to pay for each bottle transferred would be:

Accepted Answer

A) $2.00. 
B) $2.10. 
C) $2.60. 
D) $2.90. 
E) $3.00. 
A) $2.00. 
B) $2.10. 
C) $2.60. 
D) $2.90. 
E) $3.00.

Question 9

The external market price transfer-pricing method can lead to dysfunctional decision-making behavior by managers.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following elements is not used in the calculation of economic value added for an investment center?

Accepted Answer

A) An investment center's after-tax operating income. 
B) An investment center's total assets. 
C) An investment center's return on investment. 
D) An investment center's current liabilities. 
E) A company's weighted-average cost of capital. 
A) An investment center's after-tax operating income. 
B) An investment center's total assets. 
C) An investment center's return on investment. 
D) An investment center's current liabilities. 
E) A company's weighted-average cost of capital.

Question 11

The amounts charged for goods and services exchanged between two divisions are known as:

Accepted Answer

A) opportunity costs. 
B) transfer prices. 
C) standard variable costs. 
D) residual prices. 
E) target prices. 
A) opportunity costs. 
B) transfer prices. 
C) standard variable costs. 
D) residual prices. 
E) target prices.

Question 12

Vision,Inc.reported a return on investment of 12%,a capital turnover of 5,and income of $180,000.On the basis of this information,the company's invested capital was:

Accepted Answer

A) $300,000. 
B) $900,000. 
C) $1,500,000. 
D) $7,500,000. 
E) some other amount. 
A) $300,000. 
B) $900,000. 
C) $1,500,000. 
D) $7,500,000. 
E) some other amount.

Question 13

Assume the Bottle Division has no excess capacity and could sell everything it produced externally.Using the general rule,the transfer price from the Bottle Division to the Cologne Division would be:

Accepted Answer

A) $2.00. 
B) $2.10. 
C) $2.60. 
D) $2.90. 
E) $3.00. 
A) $2.00. 
B) $2.10. 
C) $2.60. 
D) $2.90. 
E) $3.00.

Question 14

BFF Corporation uses an imputed interest rate of 13% in the calculation of residual income.Division X,which is part of BFF,had invested capital of $1,200,000 and an ROI of 16%.On the basis of this information,X's residual income was:

Accepted Answer

A) $24,960. 
B) $36,000. 
C) $156,000. 
D) $192,000. 
E) some other amount. 
A) $24,960. 
B) $36,000. 
C) $156,000. 
D) $192,000. 
E) some other amount.

Question 15

The Pro Division of Custom Industries is in need of a particular service.The service can be obtained from another division of Custom at "cost," with cost defined as the summation of variable cost ($9)and fixed cost ($3).Alternatively,Pro can secure the service from a source external to Custom for $10.Which of the following statements is true?

Accepted Answer

A) Pro should compare $10 vs.$3 in deciding where to acquire the service. 
B) Pro should compare $10 vs.$9 in deciding where to acquire the service. 
C) Pro should compare $10 vs.$12 in deciding where to acquire the service. 
D) From Custom's perspective,the proper decision is reached by comparing $10 vs.$9. 
E) Both "C" and "D" are truE. 
A) Pro should compare $10 vs.$3 in deciding where to acquire the service. 
B) Pro should compare $10 vs.$9 in deciding where to acquire the service. 
C) Pro should compare $10 vs.$12 in deciding where to acquire the service. 
D) From Custom's perspective,the proper decision is reached by comparing $10 vs.$9. 
E) Both "C" and "D" are truE.

Question 16

The ROI calculation will indicate:

Accepted Answer

A) the percentage of each sales dollar that is invested in assets. 
B) the sales dollars generated from each dollar of income. 
C) how effectively a company used its invested capital. 
D) the invested capital generated from each dollar of income. 
E) the overall quality of a company's earnings. 
A) the percentage of each sales dollar that is invested in assets. 
B) the sales dollars generated from each dollar of income. 
C) how effectively a company used its invested capital. 
D) the invested capital generated from each dollar of income. 
E) the overall quality of a company's earnings.

Question 17

Division A transfers a profitable subassembly to Division B,where it is assembled into a final product.A is located in a European country that has a high tax rate;B is located in an Asian country that has a low tax rate.Ideally,(1)what type of before-tax income should each division report from the transfer and (2)what type of transfer price should Division A set for the subassembly?

Accepted Answer

A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E 
A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E

Question 18

The Fitzhugh Division of General Enterprises has a negative residual income of $540,000.Fitzhugh's management is contemplating an investment opportunity that will reduce this negative amount to $400,000.The investment:

Accepted Answer

A) should be pursued because it is attractive from both the divisional and corporate perspectives. 
B) should be pursued because it is attractive from the divisional perspective although not from the corporate perspective. 
C) should be pursued because it is attractive from the corporate perspective although not from the divisional perspective. 
D) should not be pursued because it is unattractive from both the divisional and corporate perspectives. 
E) should not be pursued because it is unattractive from the divisional perspective although it is attractive from the corporate perspectivE. 
A) should be pursued because it is attractive from both the divisional and corporate perspectives. 
B) should be pursued because it is attractive from the divisional perspective although not from the corporate perspective. 
C) should be pursued because it is attractive from the corporate perspective although not from the divisional perspective. 
D) should not be pursued because it is unattractive from both the divisional and corporate perspectives. 
E) should not be pursued because it is unattractive from the divisional perspective although it is attractive from the corporate perspectivE.

Question 19

Sonoma Corporation is a multi-divisional company whose managers have been delegated full profit responsibility and complete autonomy to accept or reject transfers from other divisions.Division X produces 2,000 units of a subassembly that has a ready market.One of these subassemblies is currently used by Division Y for each final product manufactured,the latter of which is sold to outsiders for $1,600.Y's sales during the current period amounted to 2,000 completed units.Division X charges Division Y the $1,100 market price for the subassembly;Division Y has additional variable costs of $600 per unit.Variable costs for Division X is $850 per unit.
The manager of Division Y feels that X should transfer the subassembly at a lower price because Y is currently unable to make a profit.
Required:
A.
   
A.Calculate the contribution margins (total dollars and per unit)of Divisions X and Y,as well as the company as a whole,if transfers are made at market price.
B.
   
Division X should transfer all 2,000 units to Division Y to produce an additional $100,000 ($300,000 - $200,000)of contribution margin. 
B.Assume that conditions have changed and X can sell only 1,000 units in the market at $900 per unit.From the company's perspective,should X transfer all 2,000 units to Y or sell 1,000 in the market and transfer the remainder? Note: Y's sales would decrease to 1,000 units if the latter alternative is pursueD.

Accepted Answer

A. @#IMG-DLM& 
B. @#IMG-DLM& Division X should tra

Question 20

All of the following actions are likely to increase ROI except:

Accepted Answer

A) an increase in sales revenues. 
B) a decrease in operating expenses. 
C) a decrease in a company's invested capital. 
D) a decrease in the number of units solD. 
E) an improvement in manufacturing efficiency. 
A) an increase in sales revenues. 
B) a decrease in operating expenses. 
C) a decrease in a company's invested capital. 
D) a decrease in the number of units solD. 
E) an improvement in manufacturing efficiency.

Transfer prices can be based on:

Sullivan Enterprises had a sales margin of 5%,sales of $4,000,000,and invested capital of $5,000,000.The company's ROI was:

Economic value added uses a firm's weighted-average cost of capital.

Although the general rule for transfer prices is the outlay cost plus opportunity cost,many companies instead use negotiated prices to price their goods and services.When are negotiated transfer prices used? Are such prices consistent or inconsistent with responsibility accounting? Explain.

Capital turnover shows:

For the period just ended,United Corporation's Delta Division reported profit of $31.9 million and invested capital of $220 million.Assuming an imputed interest rate of 12%,which of the following choices correctly denotes Delta's return on investment (ROI)and residual income?

The maximum amount the Cologne Division would be willing to pay for each bottle transferred would be:

The external market price transfer-pricing method can lead to dysfunctional decision-making behavior by managers.

Which of the following elements is not used in the calculation of economic value added for an investment center?

The amounts charged for goods and services exchanged between two divisions are known as:

Vision,Inc.reported a return on investment of 12%,a capital turnover of 5,and income of $180,000.On the basis of this information,the company's invested capital was:

Assume the Bottle Division has no excess capacity and could sell everything it produced externally.Using the general rule,the transfer price from the Bottle Division to the Cologne Division would be:

BFF Corporation uses an imputed interest rate of 13% in the calculation of residual income.Division X,which is part of BFF,had invested capital of $1,200,000 and an ROI of 16%.On the basis of this information,X's residual income was:

The ROI calculation will indicate:

The Fitzhugh Division of General Enterprises has a negative residual income of $540,000.Fitzhugh's management is contemplating an investment opportunity that will reduce this negative amount to $400,000.The investment:

All of the following actions are likely to increase ROI except:

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts and Accounting for Mass Customization Operations

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis,cost Behavior,and Cost Estimation

Appendix I: The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Cost-Volume-Profit Analysis

Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Standard Costing,Operational Performance Measures,and the Balanced Scorecard

Flexible Budgeting and the Management of Overhead and Support Activity Costs

Responsibility Accounting, Quality Control, and Environmental Cost Management

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

compound Interest and the Concept of Present Value

Inventory Management

Filters

Exam 13: Investment Centers and Transfer Pricing

Transfer prices can be based on:

Sullivan Enterprises had a sales margin of 5%,sales of $4,000,000,and invested capital of $5,000,000.The company's ROI was:

Economic value added uses a firm's weighted-average cost of capital.

Although the general rule for transfer prices is the outlay cost plus opportunity cost,many companies instead use negotiated prices to price their goods and services.When are negotiated transfer prices used? Are such prices consistent or inconsistent with responsibility accounting? Explain.

Capital turnover shows:

For the period just ended,United Corporation's Delta Division reported profit of $31.9 million and invested capital of $220 million.Assuming an imputed interest rate of 12%,which of the following choices correctly denotes Delta's return on investment (ROI)and residual income?

The maximum amount the Cologne Division would be willing to pay for each bottle transferred would be:

The external market price transfer-pricing method can lead to dysfunctional decision-making behavior by managers.

Which of the following elements is not used in the calculation of economic value added for an investment center?

The amounts charged for goods and services exchanged between two divisions are known as:

Vision,Inc.reported a return on investment of 12%,a capital turnover of 5,and income of $180,000.On the basis of this information,the company's invested capital was:

Assume the Bottle Division has no excess capacity and could sell everything it produced externally.Using the general rule,the transfer price from the Bottle Division to the Cologne Division would be:

BFF Corporation uses an imputed interest rate of 13% in the calculation of residual income.Division X,which is part of BFF,had invested capital of $1,200,000 and an ROI of 16%.On the basis of this information,X's residual income was:

The ROI calculation will indicate:

The Fitzhugh Division of General Enterprises has a negative residual income of $540,000.Fitzhugh's management is contemplating an investment opportunity that will reduce this negative amount to $400,000.The investment:

All of the following actions are likely to increase ROI except:

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts and Accounting for Mass Customization Operations

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis,cost Behavior,and Cost Estimation

Appendix I: The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Cost-Volume-Profit Analysis

Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Standard Costing,Operational Performance Measures,and the Balanced Scorecard

Flexible Budgeting and the Management of Overhead and Support Activity Costs

Responsibility Accounting, Quality Control, and Environmental Cost Management

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

compound Interest and the Concept of Present Value

Inventory Management

Filters