Exam 14: Management Control in Decentralized Organizations

Good, Inc.'s records reveal the following: The variable cost of Division B will be incurred whether it buys from Division A or from an outside supplier. -If Division A is working at full capacity, the lowest price it would be willing to accept from Division B would be

The following information pertains to Baltic Company: -If invested capital is defined as stockholders' equity, the residual income at an imputed interest rate of 15 percent is

The following information is available for the Peppercorn Company: -An improvement in either capital turnover or income percentage of revenue , without changing the other, will also improve the

The Duncan Company provided the following information: The operating income before amortization during each of the three years the machine was in use was $300,000. Compute: a. the rate of return on the average investment for each of the three years using the net book value. b. the rate of return on the average investment for each of the three years using the gross book value.

Inman Company has two fabric divisions, Cotton and Wool. The following information is available: Compute the following for each division: a. ROI. b. income percentage of revenue. c. capital turnover. d. residual income.

Crickmore Industries has two divisions, the D division and the J division. Information about a component that the D division produces is as follows: The D division can produce up to 8,000 components per year. The J division needs 500 units of the component for a product it manufactures. a. Determine the minimum transfer price that the D division would accept. b. Determine the maximum transfer price that the manager of the J division would pay. c. How would your answers to requirements [A] and [B] above, change if the D division did not have excess capacity?

Income divided by revenue.

The following data are available for the three divisions of Pomeroy Company: Required: Provide the missing data.

The following information pertains to Wolfe Company -If invested capital is defined as total assets, the capital turnover is

A measure of income or profit divided by the investment required to obtain that income or profit.

Good, Inc.'s records reveal the following: The variable cost of Division B will be incurred whether it buys from Division A or from an outside supplier. -The highest price that Division B would want to pay Division A for the components would be

The following information pertains to Wolfe Company -If invested capital is defined as total assets, and the imputed interest rate is 8 percent, the residual income is

The following information is available for the Peppercorn Company: -What is the capital turnover?

The asset section of the January 1, 20X7 balance sheet of Murphy Company includes a machine, which was acquired on January 1, 20X1. The machine's original cost was $1,000,000, and the estimated life was determined to be 10 years. The estimated residual value was zero, and the straight-line method of depreciation was chosen. -If operating income AFTER amortization is $160,000, the rate of return on average net book value for 19X1 is

Those formal and informal performance-based rewards that enhance managerial effort toward organizational goals.

The Produce and Can Divisions are part of the same company. Currently the Can Division buys a part from Produce for $24. The Produce Division wants to increase the price of the part it sells to Can by $6 to $30. The manager of Can has stated that it cannot afford to go that high, as it will decrease the division's profit to near zero. Can Division can buy the part from an outside supplier for $28. The cost data for the Produce Division is as follows: Required: a. If Produce ceases to produce the parts for Can, it will be able to avoid one-third of the fixed manufacturing overhead. The Produce Division has excess capacity but no alternative uses for its facilities. From the standpoint of the company as a whole, should Can continue to buy from Produce or start to buy from the outside supplier? b. What should the transfer price for the part be?

Explain how the linking of rewards to responsibility centre results affects incentives and risk.

The amount charged by one segment of an organization for a product or service that it supplies to another segment of the same organization.

The following information pertains to Wolfe Company -The original cost of an asset less any accumulated depreciated is referred to as

The following information is available for the Peppercorn Company: -What is the income percentage of revenue?