Question 1

Which of the following is a disadvantage of decentralization?

Accepted Answer

A)  Decisions made by one manager may negatively affect the profitability of the entire company. 
B)  Decentralization helps retain quality managers. 
C)  Managers closest to the operations make decisions. 
D)  Managers are able to acquire expertise in their areas of responsibility. 
A)  Decisions made by one manager may negatively affect the profitability of the entire company. 
B)  Decentralization helps retain quality managers. 
C)  Managers closest to the operations make decisions. 
D)  Managers are able to acquire expertise in their areas of responsibility.

Question 2

Depreciation expense on store equipment for a department store is an indirect expense.

Accepted Answer

A) True 
 B)False

Question 3

How much will Jefferson's total income from operations increase?

Accepted Answer

A)  $37,500 
B)  $100,000 
C)  $62,500 
D)  $150,000 
A)  $37,500 
B)  $100,000 
C)  $62,500 
D)  $150,000

Question 4

If income from operations for a division is $6,000,invested assets are $25,000,and sales are $30,000,the profit margin is 20%.

Accepted Answer

A) True 
 B)False

Question 5

Transfer prices may be used when decentralized units are organized as cost,profit,or investment centers.

Accepted Answer

A) True 
 B)False

Question 6

The excess of divisional income from operations over a minimum acceptable amount of divisional income from operations is

Accepted Answer

A)  profit margin 
B)  residual income 
C)  rate of return on investment 
D)  gross profit 
A)  profit margin 
B)  residual income 
C)  rate of return on investment 
D)  gross profit

Question 7

The rate of return on investment may be computed by multiplying investment turnover by the profit margin.

Accepted Answer

A) True 
 B)False

Question 8

The investment turnover is the ratio of

Accepted Answer

A)  income from operations to sales 
B)  income from operations to invested assets 
C)  assets to liabilities 
D)  sales to invested assets 
A)  income from operations to sales 
B)  income from operations to invested assets 
C)  assets to liabilities 
D)  sales to invested assets

Question 9

If income from operations for a division is $5,000,invested assets are $25,000,and sales are $30,000,the profit margin is 20%.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not a disadvantage of decentralized operation?

Accepted Answer

A)  competition among managers 
B)  duplication of operations 
C)  price cutting by departments that are competing in the same product market 
D)  top management freed from everyday tasks to do strategic planning 
A)  competition among managers 
B)  duplication of operations 
C)  price cutting by departments that are competing in the same product market 
D)  top management freed from everyday tasks to do strategic planning

Question 11

The ratio of sales to invested assets,which is also a factor in the DuPont formula for determing the rate of return on investment,is called

Accepted Answer

A)  profit margin 
B)  indirect margin 
C)  investment turnover 
D)  cost ratio 
A)  profit margin 
B)  indirect margin 
C)  investment turnover 
D)  cost ratio

Question 12

The DuPont formula uses financial information to measure the performance of a business.

Accepted Answer

A) True 
 B)False

Question 13

Developing and retaining quality managers are advantages of decentralization.

Accepted Answer

A) True 
 B)False

Question 14

All of the following are advantages of decentralization except

Accepted Answer

A)  Managers make better decisions when closer to the operations of the company. 
B)  Expertise in all areas of the business is difficult; decentralization makes it better to delegate certain responsibilities. 
C)  Each decentralized operation purchases its own assets and pays for operating costs. 
D)  Decentralized managers can respond quickly to customer needs. 
A)  Managers make better decisions when closer to the operations of the company. 
B)  Expertise in all areas of the business is difficult; decentralization makes it better to delegate certain responsibilities. 
C)  Each decentralized operation purchases its own assets and pays for operating costs. 
D)  Decentralized managers can respond quickly to customer needs.

Question 15

A centralized business organization is one in which all major planning and operating decisions are made by top management.

Accepted Answer

A) True 
 B)False

Question 16

Tom's Tool Factory is an investment center and is responsible for all of its net income and the use of its assets.This year,the invested assets totaled $475,000,and net income was $275,000.What is the rate of return on assets?

Accepted Answer

A)  57.9% 
B)  172.3% 
C)  5.0% 
D)  115.0% 
A)  57.9% 
B)  172.3% 
C)  5.0% 
D)  115.0%

Question 17

The residual income for Mason is

Accepted Answer

A)  $0 
B)  $84,150 
C)  $(6,000) 
D)  $1,500 
A)  $0 
B)  $84,150 
C)  $(6,000) 
D)  $1,500

Question 18

Which is the best example of a decentralized operation?

Accepted Answer

A)  one owner who prepares plans and makes decisions for the entire company 
B)  each unit is responsible for their own operations and decision making 
C)  in a major company,operating decisions are made by top management 
D)  none of these,all are examples of a centralized operation 
A)  one owner who prepares plans and makes decisions for the entire company 
B)  each unit is responsible for their own operations and decision making 
C)  in a major company,operating decisions are made by top management 
D)  none of these,all are examples of a centralized operation

Question 19

The objective of transfer pricing is to encourage each division manager to transfer goods and services between divisions if overall company income can be increased by doing so.

Accepted Answer

A) True 
 B)False

Question 20

The Southern Division of Knucklehead Company has a rate of return on investment of 15% and an investment turnover of 1.2.What is the profit margin?

Accepted Answer

A)  1.5% 
B)  12.5% 
C)  0.67% 
D)  6.67% 
A)  1.5% 
B)  12.5% 
C)  0.67% 
D)  6.67%

Exam 23: Evaluating Decentralized Operations

Which of the following is a disadvantage of decentralization?

Depreciation expense on store equipment for a department store is an indirect expense.

How much will Jefferson's total income from operations increase?

If income from operations for a division is $6,000,invested assets are $25,000,and sales are $30,000,the profit margin is 20%.

Transfer prices may be used when decentralized units are organized as cost,profit,or investment centers.

The excess of divisional income from operations over a minimum acceptable amount of divisional income from operations is

The rate of return on investment may be computed by multiplying investment turnover by the profit margin.

The investment turnover is the ratio of

If income from operations for a division is $5,000,invested assets are $25,000,and sales are $30,000,the profit margin is 20%.

Which of the following is not a disadvantage of decentralized operation?

The ratio of sales to invested assets,which is also a factor in the DuPont formula for determing the rate of return on investment,is called

The DuPont formula uses financial information to measure the performance of a business.

Developing and retaining quality managers are advantages of decentralization.

All of the following are advantages of decentralization except

A centralized business organization is one in which all major planning and operating decisions are made by top management.

Tom's Tool Factory is an investment center and is responsible for all of its net income and the use of its assets.This year,the invested assets totaled $475,000,and net income was $275,000.What is the rate of return on assets?

The residual income for Mason is

Which is the best example of a decentralized operation?

The objective of transfer pricing is to encourage each division manager to transfer goods and services between divisions if overall company income can be increased by doing so.

The Southern Division of Knucklehead Company has a rate of return on investment of 15% and an investment turnover of 1.2.What is the profit margin?

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Liabilities: Current,installment Notes,and Contingencies

Liabilities: Bonds Payable

Corporations: Organization, stock Transactions, and Dividends

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity-Based Costing

Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Evaluating Variances From Standard Costs

Differential Analysis and Product Pricing

Capital Investment Analysis

Lean Manufacturing and Activity Analysis

Filters