Exam 10: Responsibility Accounting,performance Evaluation,and Transfer Pricing

Chemical Company has two divisions,the Mixing Division and Bottling Division.The Mixing Division sells chemicals to the Bottling Division. Standard costs for the Mixing Division are as follows: Direct materials \ 3.00 per litre Direct labour 2.40 per litre The Bottling Division uses the following predetermined overhead rate: Variable overhead \ 3.60 per litre Fixed overhead 2.40 per litre Total \ 6.00 per litre What is the transfer price for the chemicals per litre based on standard variable cost?

Provide the missing data for the following divisions. $\begin{array}{lrrr}&\text { Alpha } & \text { Beta } & \text { Gamma } \\&\text { Division } & \text { Division } & \text { Division } \\\text { Sales } & \$ 300,000 & \$(\mathrm{~d}) & \$ 800,000 \\\text { Income } & \$ 22,500 & 100,000 & \$(\mathrm{~g}) \\\text { Asset base } & \$(\mathrm{a}) & \$(\mathrm{e}) & \$ 200,000 \\\text { Return on investment } & 10 \% & 20 \% & (\mathrm{~h}) \\\text { Operating income margin } & (\mathrm{b}) & 0.10 & 0.12 \\\text { Operating asset turnover } & (\mathrm{c}) & (\mathrm{f}) & 4.0\end{array}$

Which of the following managerial rewards is a long-term reward?

Pautner Company had the following historical accounting data per unit: Direct materials \6 0 Direct labour 30 Variable overhead 15 Fixed overhead 24 Variable selling expenses 45 Fixed selling expenses 9 The units are normally transferred internally from Division A to Division B.The units also may be sold externally for $210 per unit.The minimum profit level accepted by the company is a markup of 30 percent.There was no beginning or ending inventories. If the negotiated price is used,what should be Division A's transfer price?

Which of the following changes would increase return on investment (ROI)?

Division A produces a component and wants to sell it to Division B.What does the transfer price represent for each division?

If the operating asset turnover increased by 50 percent and the margin increased by 50 percent,by how much would the ROI increase?

What managerial rewards encourage a short-term orientation?

Beta Division had the following information: Asset base in Beta Division \ 400,000 Net income in Beta Division \ 50,000 Weighted average cost of capital 12\% Target RoI 15\% Margin for Beta Division 20\% If the asset base is decreased by $100,000,with no other changes,what will be the return on investment of Beta Division?

What is the term for a type of fringe benefit received over and above one's salary?

What problems do owners face in encouraging goal congruence of managers? What is a stock option? How can stock options encourage goal congruence?

What is a manager of a cost centre responsible for?

What is the definition of the term responsibility accounting?

Correll Company has two divisions,A and B.Information for each division is as follows: Net earnings for division \ 40,000 \ 260,000 Asset base for division \ 100,000 \ 1,200,000 Target rate of return 15\% 18\% Margin 10\% 20\% Weighted average cost of capital 12\% 12\% What is the residual income for A?

Colora Furniture had the following historical accounting data, per hundred board metres, concerning one of its products: $\text { Finished shelving: }$ Direct materials \3 0 Direct labour 16 Variable overhead 10 Fixed overhead 12 Vaniable selling expenses 8 Fixed selling expenses 4 The shelving is normally transferred internally from the Cutting Division to the Finishing Division.It also may be sold externally for $110 per hundred board metres.The minimum profit level accepted by the company is a markup of 20 percent. -Refer to the figure.If the variable manufacturing cost transfer price method is used without a fixed fee,what will be Colora Furniture's transfer price?

Compare and discuss the advantages and disadvantages of the following performance measures: ROI,EVA,and Residual Income.

In the Ambros Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: Division A: Case 1 Case 2 Capacity in units 100,000 100,000 Number of units sold externally 100,000 60,000 Market selling price \ 90 \ 75 Variable costs per unit 73 58 Fixed costs per unit based on capacity 10 10 Division B: Number of units needed for production 40,000 40,000 Purchase price per unit from external supplier \8 6 \7 4 -Refer to the figure.The company uses the opportunity cost approach to transfer pricing.What is the minimum transfer price in Case 2?

The following information pertains to the three divisions of Marlow Company: Sales ? ? 1,250,000 Net operating income \ 36,000 \ 25,000 \ 75,000 Average operating assets 300,000 ? ? Return on investment ? 20\% 15\% Margin 0.10 0.05 ? Turnover 1.5 ? ? Target ROI 15\% 12\% 10\% -Refer to the figure.What are the average operating assets for Division Y?

What is not controlled by a manager of a profit centre?

How are information,responsibility,and accountability related?