Question 1

In designing accounting control systems, top managers must consider the system's impact on behaviour desired by the organization.

Accepted Answer

A) True 
 B)False

Question 2

Profit centres can exist only in a decentralized organization.

Accepted Answer

A) True 
 B)False

Question 3

The following information is available for the Colwell Company:   Compute:
a. capital turnover.
b. net income.
c. income percentage of revenue.

Accepted Answer

a. $5,000,000/$2,000,000 = 2.5

Question 4

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 BEFORE amortization is $280,000, the rate of return on gross book value for 20X7 is

Accepted Answer

A)  18 percent. 
B)  28 percent. 
C)  45 percent. 
D)  70 percent. 
A)  18 percent. 
B)  28 percent. 
C)  45 percent. 
D)  70 percent.

Question 5

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 best transfer price from the viewpoint of the company as a whole would be

Accepted Answer

A)  $12. 
B)  $18. 
C)  $30. 
D)  $24. 
A)  $12. 
B)  $18. 
C)  $30. 
D)  $24.

Question 6

The following information is available for the Peppercorn Company:
  
-What is the net income?

Accepted Answer

A)  $375,000 
B)  $625,000 
C)  $62,500 
D)  $200,000 
A)  $375,000 
B)  $625,000 
C)  $62,500 
D)  $200,000

Question 7

Any action taken in conflict with organizational goals.

Accepted Answer

Dysfunctio

Question 8

Stirton Industries is a decentralized company that evaluates its divisions based on ROI.
Division R has the capacity to make 10,000 units of a product. Division R's variable costs are $60 per unit.
Division J can use the product as a component in one of its products. Division J would incur $40 of variable costs to convert the component into its own product, which sells for $200.
The following requirements are independent of each other.
a. Division R can sell all that it produces for $120 each. Division J needs 1,000 units. What is the correct transfer price?
b. Division R can sell 8,000 units at $150 each. Any excess capacity will be unused unless the units are purchased by the J division, which could use up to 1,000 units. Determine the floor and ceiling of the bargaining range.

Accepted Answer

a.
The transfer price would be the marke

Question 9

The following information pertains to Wolfe Company
  
-Which of the following is NOT a possible definition of invested capital?

Accepted Answer

A)  Total assets. 
B)  Total assets less current liabilities. 
C)  Total assets less long-term liabilities. 
D)  Total assets less total liabilities. 
A)  Total assets. 
B)  Total assets less current liabilities. 
C)  Total assets less long-term liabilities. 
D)  Total assets less total liabilities.

Question 10

A theory used to describe the formal choices of performance measures and rewards.

Accepted Answer

The answer of A theory used to describe the formal...

Question 11

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 NOT at full capacity, the lowest price at which it would be willing to sell to Division B would be

Accepted Answer

A)  $24. 
B)  $18. 
C)  $12. 
D)  $38. 
A)  $24. 
B)  $18. 
C)  $12. 
D)  $38.

Question 12

If there is a competitive market for the product or service being transferred internally, using the cost-based price as a transfer price will generally lead to the desired goal congruence and managerial effort.

Accepted Answer

A) True 
 B)False

Question 13

The Ink and Paper Divisions are part of the same company. Currently the Paper Division buys a part ingredient from Ink for $192. The Ink Division wants to increase the price of the part it sells to Paper by $48 to $240. The manager of Paper has stated that it cannot afford to go that high, as it will decrease the division's profit to near zero. Paper can buy the part from an outside supplier for $224. The cost data for the Ink Division is as follows:
   If Ink ceases to produce the parts for Paper, it will be able to avoid one-third of the fixed manufacturing overhead. The Ink Division has excess capacity but no alternative uses for its facilities.
-From the standpoint of the company as a whole, should Paper continue to buy from Ink or start to buy from the outside supplier?

Accepted Answer

A)  Buy from Ink Division, because the company's profit would be $29.60 per unit larger. 
B)  Buy from Ink Division, because the company's profit would be $16.00 per unit larger. 
C)  Buy from an outside supplier. 
D)  None of the above. 
A)  Buy from Ink Division, because the company's profit would be $29.60 per unit larger. 
B)  Buy from Ink Division, because the company's profit would be $16.00 per unit larger. 
C)  Buy from an outside supplier. 
D)  None of the above.

Question 14

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

Accepted Answer

A)  10.000 percent 
B)  3.125 percent 
C)  1.000 percent 
D)  None of the above. 
A)  10.000 percent 
B)  3.125 percent 
C)  1.000 percent 
D)  None of the above.

Question 15

The delegation of freedom to make decisions.

Accepted Answer

The answer of The delegation of freedom to make decisions....

Question 16

The following information pertains to Wolfe Company
  
-If invested capital is defined as total assets minus current liabilities, the residual income at an imputed interest rate of 9 percent is

Accepted Answer

A)  $65,600. 
B)  $80,000. 
C)  $18,000. 
D)  $14,400. 
A)  $65,600. 
B)  $80,000. 
C)  $18,000. 
D)  $14,400.

Question 17

Buchmiller Company's records reveal the following:
     The variable costs of Division Y will be incurred whether it buys from Division X or from an outside supplier.
-If Division X wants to transfer the parts to Division Y for $54, the manager of Division Y would

Accepted Answer

A)  not want to buy from Division X, as the same product could be purchased at the market price of $50. 
B)  buy from Division X, as this would be in the best interest of the company as a whole. 
C)  buy the part from Division X as long as Division X could supply a large enough quantity to make it profitable to Division Y. 
D)  probably ask Division X's manager to split the difference between the $54 and the market price of $50 to arrive at a transfer price of $52. 
A)  not want to buy from Division X, as the same product could be purchased at the market price of $50. 
B)  buy from Division X, as this would be in the best interest of the company as a whole. 
C)  buy the part from Division X as long as Division X could supply a large enough quantity to make it profitable to Division Y. 
D)  probably ask Division X's manager to split the difference between the $54 and the market price of $50 to arrive at a transfer price of $52.

Question 18

Assuming a company uses a cost-based pricing system for transfer pricing, which of the following is not a possible definition of cost?

Accepted Answer

A)  Variable cost 
B)  Full cost 
C)  Actual cost 
D)  Fixed cost 
A)  Variable cost 
B)  Full cost 
C)  Actual cost 
D)  Fixed cost

Question 19

The Pen and Pencil Divisions are part of the same company. Currently the Pencil Division buys a part ingredient from Pen for $96. The Pen Division wants to increase the price of the part it sells to Pencil by $24 to $120. The manager of Pencil has stated that it cannot afford to go that high, as it will decrease the division's profit to near zero. Pencil can buy the part from an outside supplier for $112. The cost data for the Pen Division is as follows:
   If Pen ceases to produce the parts for Pencil, it will be able to avoid one-third of the fixed manufacturing overhead. The Pen Division has excess capacity but no alternative uses for its facilities.
-What is the minimum transfer price that should be charged?

Accepted Answer

A)  $120.00 
B)  $112.00 
C)  $97.20 
D)  $94.00 
A)  $120.00 
B)  $112.00 
C)  $97.20 
D)  $94.00

Question 20

Use the following information of the Toro division of Hondo Corporation to answer the next question(s):
   Total divisional assets are $800,000. The firm's minimum required rate of return is 10%.
-Decentralization is most successful when

Accepted Answer

A)  segment autonomy does not exist. 
B)  established in nonprofit organizations. 
C)  there is frequent transferring of products between segments. 
D)  an organization's segments are relatively independent of one another. 
A)  segment autonomy does not exist. 
B)  established in nonprofit organizations. 
C)  there is frequent transferring of products between segments. 
D)  an organization's segments are relatively independent of one another.

In designing accounting control systems, top managers must consider the system's impact on behaviour desired by the organization.

Profit centres can exist only in a decentralized organization.

The following information is available for the Colwell Company: Compute: a. capital turnover. b. net income. c. income percentage of revenue.

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 best transfer price from the viewpoint of the company as a whole would be

The following information is available for the Peppercorn Company: -What is the net income?

Any action taken in conflict with organizational goals.

The following information pertains to Wolfe Company -Which of the following is NOT a possible definition of invested capital?

A theory used to describe the formal choices of performance measures and rewards.

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 NOT at full capacity, the lowest price at which it would be willing to sell to Division B would be

If there is a competitive market for the product or service being transferred internally, using the cost-based price as a transfer price will generally lead to the desired goal congruence and managerial effort.

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

The delegation of freedom to make decisions.

The following information pertains to Wolfe Company -If invested capital is defined as total assets minus current liabilities, the residual income at an imputed interest rate of 9 percent is

Buchmiller Company's records reveal the following: The variable costs of Division Y will be incurred whether it buys from Division X or from an outside supplier. -If Division X wants to transfer the parts to Division Y for $54, the manager of Division Y would

Assuming a company uses a cost-based pricing system for transfer pricing, which of the following is not a possible definition of cost?

Use the following information of the Toro division of Hondo Corporation to answer the next question(s): Total divisional assets are $800,000. The firm's minimum required rate of return is 10%. -Decentralization is most successful when

Management Accounting and Management Decisions

Cost Behaviour and Cost-Volume Relationships

Measurement of Cost Behaviour

Cost Management Systems

Cost Allocation and Activity-Based Costing Systems

Job-Costing Systems

Process-Costing Systems

Relevant Information and Decision Making: Marketing Decisions

Relevant Information and Decision Making: Production Decisions

Capital Budgeting Decisions

The Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems, the Balanced Scorecard, and Responsibility Accounting

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Exam 14: Management Control in Decentralized Organizations

In designing accounting control systems, top managers must consider the system's impact on behaviour desired by the organization.

Profit centres can exist only in a decentralized organization.

The following information is available for the Colwell Company: Compute: a. capital turnover. b. net income. c. income percentage of revenue.

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 best transfer price from the viewpoint of the company as a whole would be

The following information is available for the Peppercorn Company: -What is the net income?

Any action taken in conflict with organizational goals.

The following information pertains to Wolfe Company -Which of the following is NOT a possible definition of invested capital?

A theory used to describe the formal choices of performance measures and rewards.

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 NOT at full capacity, the lowest price at which it would be willing to sell to Division B would be

If there is a competitive market for the product or service being transferred internally, using the cost-based price as a transfer price will generally lead to the desired goal congruence and managerial effort.

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

The delegation of freedom to make decisions.

The following information pertains to Wolfe Company -If invested capital is defined as total assets minus current liabilities, the residual income at an imputed interest rate of 9 percent is

Buchmiller Company's records reveal the following: The variable costs of Division Y will be incurred whether it buys from Division X or from an outside supplier. -If Division X wants to transfer the parts to Division Y for $54, the manager of Division Y would

Assuming a company uses a cost-based pricing system for transfer pricing, which of the following is not a possible definition of cost?

Use the following information of the Toro division of Hondo Corporation to answer the next question(s): Total divisional assets are $800,000. The firm's minimum required rate of return is 10%. -Decentralization is most successful when

Management Accounting and Management Decisions

Cost Behaviour and Cost-Volume Relationships

Measurement of Cost Behaviour

Cost Management Systems

Cost Allocation and Activity-Based Costing Systems

Job-Costing Systems

Process-Costing Systems

Relevant Information and Decision Making: Marketing Decisions

Relevant Information and Decision Making: Production Decisions

Capital Budgeting Decisions

The Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems, the Balanced Scorecard, and Responsibility Accounting

Filters