Question 1

A manager in a cost center also has responsibility and authority over the revenues.

Accepted Answer

A) True 
 B)False

Question 2

Investment centers differ from profit centers in that they

Accepted Answer

A)  are responsible for net income only 
B)  are able to invest in assets 
C)  have less responsibilities than cost centers and profit centers 
D)  are only responsible for revenues 
A)  are responsible for net income only 
B)  are able to invest in assets 
C)  have less responsibilities than cost centers and profit centers 
D)  are only responsible for revenues

Question 3

The manager of a profit center does not make decisions concerning the fixed assets invested in the center.

Accepted Answer

A) True 
 B)False

Question 4

A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called a(n)

Accepted Answer

A)  profit center 
B)  investment center 
C)  volume center 
D)  cost center 
A)  profit center 
B)  investment center 
C)  volume center 
D)  cost center

Question 5

In an investment center,the manager has the responsibility for and the authority to make decisions that affect

Accepted Answer

A)  the assets invested in the center,but not costs and revenues 
B)  costs and assets invested in the center,but not revenues 
C)  both costs and revenues for the department or division 
D)  costs,revenues,and assets invested in the center 
A)  the assets invested in the center,but not costs and revenues 
B)  costs and assets invested in the center,but not revenues 
C)  both costs and revenues for the department or division 
D)  costs,revenues,and assets invested in the center

Question 6

Which of the following expenses incurred by a department store is an indirect expense?

Accepted Answer

A)  insurance on merchandise inventory 
B)  sales salaries 
C)  depreciation on store equipment 
D)  salary of vice president of finance 
A)  insurance on merchandise inventory 
B)  sales salaries 
C)  depreciation on store equipment 
D)  salary of vice president of finance

Question 7

Which of the following is not​ a commonly used approach to setting transfer prices?

Accepted Answer

A)  market price approach 
B)  revenue price approach 
C)  negotiated price approach 
D)  cost price approach 
A)  market price approach 
B)  revenue price approach 
C)  negotiated price approach 
D)  cost price approach

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The cost price approach for transfer pricing is most often used between responsibility centers organized as cost centers that are not concerned with the revenue.

Accepted Answer

A) True 
 B)False

Question 10

The process of measuring and reporting operating data by responsibility centers is termed responsibility accounting.

Accepted Answer

A) True 
 B)False

Question 11

Division A reported income from operations of $975,000 and total service department charges of $675,000.As a result,

Accepted Answer

A)  net income was $300,000 
B)  the gross profit margin was $300,000 
C)  income from operations before service department charges was $1,650,000 
D)  consolidated net income was $300,000 
A)  net income was $300,000 
B)  the gross profit margin was $300,000 
C)  income from operations before service department charges was $1,650,000 
D)  consolidated net income was $300,000

Question 12

If the profit margin for a division is 8% and the investment turnover is 1.20,the rate of return on investment is 9.6%.

Accepted Answer

A) True 
 B)False

Question 13

What is the service department charge rate for Graphics Production?

Accepted Answer

A)  $2.00 
B)  $10.00 
C)  $6.66 
D)  $0.50 
A)  $2.00 
B)  $10.00 
C)  $6.66 
D)  $0.50

Question 14

It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.

Accepted Answer

A) True 
 B)False

Question 15

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are termed direct operating expenses.

Accepted Answer

A) True 
 B)False

Question 16

The profit margin is the

Accepted Answer

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

Question 17

Which transfer price approach is used when the transfer price is set at the amount sold to outside buyers?

Accepted Answer

A)  market price 
B)  cost price 
C)  negotiated price 
D)  variable price 
A)  market price 
B)  cost price 
C)  negotiated price 
D)  variable price

Question 18

What is the investment turnover for Division A?

Accepted Answer

A)  0.93 
B)  9.3 
C)  1.07 
D)  10.7 
A)  0.93 
B)  9.3 
C)  1.07 
D)  10.7

Question 19

The negotiated price approach allows the managers of decentralized units to agree on the transfer price.

Accepted Answer

A) True 
 B)False

Question 20

How much will Division 6's income from operations increase?

Accepted Answer

A)  $8,000 
B)  $15,000 
C)  $80,000 
D)  $150,000 
A)  $8,000 
B)  $15,000 
C)  $80,000 
D)  $150,000

Exam 23: Evaluating Decentralized Operations

A manager in a cost center also has responsibility and authority over the revenues.

Investment centers differ from profit centers in that they

The manager of a profit center does not make decisions concerning the fixed assets invested in the center.

A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called a(n)

In an investment center,the manager has the responsibility for and the authority to make decisions that affect

Which of the following expenses incurred by a department store is an indirect expense?

Which of the following is not​ a commonly used approach to setting transfer prices?

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

The cost price approach for transfer pricing is most often used between responsibility centers organized as cost centers that are not concerned with the revenue.

The process of measuring and reporting operating data by responsibility centers is termed responsibility accounting.

Division A reported income from operations of $975,000 and total service department charges of $675,000.As a result,

If the profit margin for a division is 8% and the investment turnover is 1.20,the rate of return on investment is 9.6%.

What is the service department charge rate for Graphics Production?

It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are termed direct operating expenses.

The profit margin is the

Which transfer price approach is used when the transfer price is set at the amount sold to outside buyers?

What is the investment turnover for Division A?

The negotiated price approach allows the managers of decentralized units to agree on the transfer price.

How much will Division 6's income from operations increase?

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

Which of the following is not a commonly used approach to setting transfer prices?