Question 1

Indicate whether each of the following statements about return on investment is

Accepted Answer

Return on investment for a division is c

Question 2

The research and development department of Apple Computers would likely be organized as:

Accepted Answer

A)  A profit center. 
B)  A cost center. 
C)  A revenue center. 
D)  An investment center. 
A)  A profit center. 
B)  A cost center. 
C)  A revenue center. 
D)  An investment center.

Question 3

Indicate whether each of the following statements about responsibility centers is

Accepted Answer

A responsibility center controls identif

Question 4

The preferred method for establishing transfer prices for transactions between divisions of the same firm is to base the transfer price on some form of competitive market price.

Accepted Answer

A) True 
 B)False

Question 5

Indicate whether each of the following statements is

Accepted Answer

Margin is calculated by dividing operati

Question 6

Which of the following statements regarding cost centers is incorrect?

Accepted Answer

A)  Cost centers are units within a business that incur expense,but do not have responsibility for generating revenue. 
B)  Cost centers tend to be found at upper levels on a company's organization chart. 
C)  A manager of a cost center has less responsibility than a manager in an investment center. 
D)  Cost center managers are evaluated on their ability to control costs and keep within budget. 
A)  Cost centers are units within a business that incur expense,but do not have responsibility for generating revenue. 
B)  Cost centers tend to be found at upper levels on a company's organization chart. 
C)  A manager of a cost center has less responsibility than a manager in an investment center. 
D)  Cost center managers are evaluated on their ability to control costs and keep within budget.

Question 7

Retail Sales and Wholesale Sales are the only divisions of Terra Company.The following information was gathered for the two divisions for the current year: $\begin{array}{|l|lr|lr|}
\hline & {\text { Retail Division }} & &{\text { Wholesale Division }} \
\hline \text { Operating income } & \$ & 2,500,000 & \$ & 6,000,000 \
\hline \text { Operating assets } & \$ & 16,000,000 & \$ & 36,000,000 \
\hline
\end{array}$ The company has $1,200,000 in operating assets that are not assigned to either of the divisions and $500,000 in corporate expenses that are not reflected in the information above.Based on this information,what is the ROI for the company as a whole?

Accepted Answer

A)  17.7% 
B)  16.9% 
C)  15.0% 
D)  The answer cannot be determined using the information provided. 
A)  17.7% 
B)  16.9% 
C)  15.0% 
D)  The answer cannot be determined using the information provided.

Question 8

Joseph Company has an investment in assets of $450,000,operating income that is 10% of sales,and an ROI of 18%.From this information the amount of operating income would be:

Accepted Answer

A)  $81,000. 
B)  $45,000. 
C)  $2,500,000. 
D)  Impossible to determine from the information given. 
A)  $81,000. 
B)  $45,000. 
C)  $2,500,000. 
D)  Impossible to determine from the information given.

Question 9

Joanne Graves is manager of a production department of Fordham Company.Her department makes one product;the following information for her department was accumulated for the current year: $\begin{array}{l}
\begin{array}{|l|}
\hline\
\hline  \text {Number of units } \
\hline  \text {Direct materials cost } \
\hline  \text {Direct labor cost } \
\hline  \text {Variable manufacturing overhead } \
\hline  \text {Fixed manufacturing overhead} \
\hline  \text { Total } \
\hline
\end{array}
\begin{array}{c|}
\hline \text { Static Budget }\
\hline 100,000 \
\hline \$  400,000 \
\hline  200,000 \
\hline  100,000 \
\hline  \underline {145,000} \
\hline \$  845,000 \
\hline
\end{array}
\begin{array}{c|}
\hline \text { Actual Results }\
\hline \$ 94,000 \
\hline 380,000 \
\hline 185,000 \
\hline 94,000 \
\hline \underline {148,000} \
 \hline \$ 807,000 \
\hline

\end{array}
\end{array}$ Required:
1)Prepare a flexible budget for the department's actual level of activity.
2)Use the flexible budget to evaluate the performance of Ms.Graves' department.
3)Why does the budget not include sales revenue and net income?

Accepted Answer

1),2)   The total difference between act

Question 10

Prentiss Company is decentralized with three divisions.While all three division managers have responsibility for costs,only the Division Three manager has responsibility for generating revenues.Select the correct statement from the following.

Accepted Answer

A)  Prentiss Company is not large enough to benefit from preparing responsibility reports. 
B)  Responsibility reports should be prepared for Division Three only. 
C)  Responsibility reports should be prepared for all three divisions. 
D)  Responsibility reports should be prepared for Divisions One and Two only. 
A)  Prentiss Company is not large enough to benefit from preparing responsibility reports. 
B)  Responsibility reports should be prepared for Division Three only. 
C)  Responsibility reports should be prepared for all three divisions. 
D)  Responsibility reports should be prepared for Divisions One and Two only.

Question 11

Packrall Company makes computer chips.Curtis is manager of the company's maintenance department.Because his maintenance technicians are so well trained in maintaining expensive and sensitive circuit board stamping equipment,Curtis has been authorized to contract to perform maintenance for outside customers.In this company,the maintenance department is likely organized as:

Accepted Answer

A)  A profit center. 
B)  A revenue center. 
C)  A cost center. 
D)  An investment center. 
A)  A profit center. 
B)  A revenue center. 
C)  A cost center. 
D)  An investment center.

Question 12

The Electronics Division of Anton Company reports the following results for the current year: $\begin{array}{|l|lr|}
\hline \text { Revenues } & \$ & 800,000 \
\hline \text { Operating expenses } & \$ & 720,000 \
\hline \text { Operating income } & \$ & 144,000 \
\hline \text { Operating assets } & \$ & 1,200,000 \
\hline
\end{array}$ Anton Company has set a target return on investment (ROI)of 11% for the Electronics Division.The Electronic Division's turnover (asset utilization)is:

Accepted Answer

A)  0.1125. 
B)  0.12. 
C)  0.667. 
D)  0.18. 
A)  0.1125. 
B)  0.12. 
C)  0.667. 
D)  0.18.

Question 13

Terra Company has two divisions,the Retail Division and the Wholesale Division.The following information was gathered for the two divisions for the current year: $\begin{array}{|l|lr|lr|}
\hline & {\text { Retail Division }} & &{\text { Wholesale Division }} \
\hline \text { Operating income } & \$ & 2,500,000 & \$ & 6,000,000 \
\hline \text { Operating assets } & \$ & 16,000,000 & \$ & 36,000,000 \
\hline
\end{array}$ Terra Company has set a target return on investment (ROI)of 15% for both divisions.Based on ROI,which division appears to have performed better?

Accepted Answer

A)  Retail division. 
B)  Wholesale division. 
C)  Both divisions have the same results. 
D)  The answer cannot be determined using the information provided. 
A)  Retail division. 
B)  Wholesale division. 
C)  Both divisions have the same results. 
D)  The answer cannot be determined using the information provided.

Question 14

An investment opportunity with a residual income that equals or exceeds the company's required rate of return should be accepted.

Accepted Answer

A) True 
 B)False

Question 15

The cellular phone division of Stegall Company had budgeted sales of $950,000 and actual sales of $900,000.Budgeted expenses were $600,000 while actual expenses were $550,000.Based on this information,the responsibility report for the manager of this profit center would show:

Accepted Answer

A)  A favorable revenue variance. 
B)  A favorable cost variance. 
C)  Both a favorable revenue variance and a favorable cost variance. 
D)  None of these. 
A)  A favorable revenue variance. 
B)  A favorable cost variance. 
C)  Both a favorable revenue variance and a favorable cost variance. 
D)  None of these.

Question 16

Which of the following is not a characteristic of an effective responsibility accounting system?

Accepted Answer

A)  Reports that show the areas that need corrective action 
B)  Reports that show revenue and/or expense items under a manager's control 
C)  Reports that show budgeted and actual amounts of controllable revenue and expense items 
D)  Reports that set goals for long-term strategic performance 
A)  Reports that show the areas that need corrective action 
B)  Reports that show revenue and/or expense items under a manager's control 
C)  Reports that show budgeted and actual amounts of controllable revenue and expense items 
D)  Reports that set goals for long-term strategic performance

Question 17

Thanks to his firm's decentralization and use of responsibility accounting,Matt has more time to review a proposed new joint venture with one of the firm's business partners.What advantage of decentralization does this illustrate?

Accepted Answer

A)  Encourages upper level management to concentrate on strategic decisions 
B)  Trains lower level managers to accept higher responsibilities 
C)  Improves performance evaluation 
D)  Motivates managers to improve productivity 
A)  Encourages upper level management to concentrate on strategic decisions 
B)  Trains lower level managers to accept higher responsibilities 
C)  Improves performance evaluation 
D)  Motivates managers to improve productivity

Question 18

The preferred method for setting transfer prices generally is some form of:

Accepted Answer

A)  Price based on negotiation. 
B)  Price based on industry cost averages. 
C)  Price based on historical costs. 
D)  Price based on market forces. 
A)  Price based on negotiation. 
B)  Price based on industry cost averages. 
C)  Price based on historical costs. 
D)  Price based on market forces.

Indicate whether each of the following statements about return on investment is

The research and development department of Apple Computers would likely be organized as:

Indicate whether each of the following statements about responsibility centers is

The preferred method for establishing transfer prices for transactions between divisions of the same firm is to base the transfer price on some form of competitive market price.

Indicate whether each of the following statements is

Which of the following statements regarding cost centers is incorrect?

Joseph Company has an investment in assets of $450,000,operating income that is 10% of sales,and an ROI of 18%.From this information the amount of operating income would be:

Prentiss Company is decentralized with three divisions.While all three division managers have responsibility for costs,only the Division Three manager has responsibility for generating revenues.Select the correct statement from the following.

An investment opportunity with a residual income that equals or exceeds the company's required rate of return should be accepted.

The cellular phone division of Stegall Company had budgeted sales of $950,000 and actual sales of $900,000.Budgeted expenses were $600,000 while actual expenses were $550,000.Based on this information,the responsibility report for the manager of this profit center would show:

Which of the following is not a characteristic of an effective responsibility accounting system?

Thanks to his firm's decentralization and use of responsibility accounting,Matt has more time to review a proposed new joint venture with one of the firm's business partners.What advantage of decentralization does this illustrate?

The preferred method for setting transfer prices generally is some form of:

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 9: Responsibility Accounting

Indicate whether each of the following statements about return on investment is

The research and development department of Apple Computers would likely be organized as:

Indicate whether each of the following statements about responsibility centers is

The preferred method for establishing transfer prices for transactions between divisions of the same firm is to base the transfer price on some form of competitive market price.

Indicate whether each of the following statements is

Which of the following statements regarding cost centers is incorrect?

Joseph Company has an investment in assets of $450,000,operating income that is 10% of sales,and an ROI of 18%.From this information the amount of operating income would be:

Prentiss Company is decentralized with three divisions.While all three division managers have responsibility for costs,only the Division Three manager has responsibility for generating revenues.Select the correct statement from the following.

An investment opportunity with a residual income that equals or exceeds the company's required rate of return should be accepted.

The cellular phone division of Stegall Company had budgeted sales of $950,000 and actual sales of $900,000.Budgeted expenses were $600,000 while actual expenses were $550,000.Based on this information,the responsibility report for the manager of this profit center would show:

Which of the following is not a characteristic of an effective responsibility accounting system?

Thanks to his firm's decentralization and use of responsibility accounting,Matt has more time to review a proposed new joint venture with one of the firm's business partners.What advantage of decentralization does this illustrate?

The preferred method for setting transfer prices generally is some form of:

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters