Question 1

EVA encourages the right kind of behavior from divisions because of its emphasis on

Accepted Answer

A) after-tax net income. 
B) total capital employed. 
C) true cost of capital. 
D) before-tax operating income. 
A) after-tax net income. 
B) total capital employed. 
C) true cost of capital. 
D) before-tax operating income. C

Question 2

Transfer prices are the prices charged

Accepted Answer

A) for distributing goods from one warehouse to another. 
B) for the goods produced by one division to another division that needs those goods. 
C) when delivering goods to the customer. 
D) when transferring goods to international divisions. 
A) for distributing goods from one warehouse to another. 
B) for the goods produced by one division to another division that needs those goods. 
C) when delivering goods to the customer. 
D) when transferring goods to international divisions. B

Question 3

Marlow Company
The following information pertains to the three divisions of Marlow Company:
 
Refer to Marlow Company.What is the profit margin percentage for Division Z?

Accepted Answer

A) 1.5% 
B) 100.0% 
C) 15.0% 
D) 6.0% 
A) 1.5% 
B) 100.0% 
C) 15.0% 
D) 6.0% D

Question 4

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

Accepted Answer

The return on investment measure is a ra

Question 5

What is a disadvantage of top management intervention in setting transfer prices between divisions?

Accepted Answer

A) Top management may become swamped with pricing disputes. 
B) Division managers will lose the flexibility and other advantages of autonomous decision making. 
C) The approach reduces the benefits of decentralization. 
D) All of the answers are correct. 
A) Top management may become swamped with pricing disputes. 
B) Division managers will lose the flexibility and other advantages of autonomous decision making. 
C) The approach reduces the benefits of decentralization. 
D) All of the answers are correct.

Question 6

When measuring a division's operating costs,direct noncontrollable operating costs include

Accepted Answer

A) labor used in the division's production. 
B) salary of the division manager (controlled by top management). 
C) costs of providing centralized services,such as data processing and employee training. 
D) company president's salary. 
A) labor used in the division's production. 
B) salary of the division manager (controlled by top management). 
C) costs of providing centralized services,such as data processing and employee training. 
D) company president's salary.

Question 7

If the profit margin percentage of 30% stayed the same and the investment turnover ratio of 5.0 increased by 10%,what would happen to ROI?

Accepted Answer

A) increase by 10% 
B) decrease by 10% 
C) increase by 15% 
D) remain the same 
A) increase by 10% 
B) decrease by 10% 
C) increase by 15% 
D) remain the same

Question 8

Marlow Company
The following information pertains to the three divisions of Marlow Company:
 
Refer to Marlow Company.What is the division investment for Division Z?

Accepted Answer

A) $75,000 
B) $500,000 
C) $1,250,000 
D) $187,500 
A) $75,000 
B) $500,000 
C) $1,250,000 
D) $187,500

Question 9

Which of the following is an advantage(s)of using market prices in a competitive market?

Accepted Answer

A) Both buying and selling divisions can buy and sell as many units as they want at market price. 
B) Managers of both buying and selling divisions are indifferent between trading with each other or with outsiders. 
C) From the company's perspective,this arrangement is fine as long as the selling division is operating at capacity. 
D) All of the answers are correct. 
A) Both buying and selling divisions can buy and sell as many units as they want at market price. 
B) Managers of both buying and selling divisions are indifferent between trading with each other or with outsiders. 
C) From the company's perspective,this arrangement is fine as long as the selling division is operating at capacity. 
D) All of the answers are correct.

Question 10

What are the issues in measuring the investment base for calculating return on investment?

Accepted Answer

Two issues arise when measurin

Question 11

Framing Division
The Framing Division had the following data:
 
Refer to the Framing Division.What is the return on investment for Year 2009?

Accepted Answer

A) 10%. 
B) 16%. 
C) 20%. 
D) 24%. 
A) 10%. 
B) 16%. 
C) 20%. 
D) 24%.

Question 12

When measuring a division's operating costs,thecost of the company president's salary is

Accepted Answer

A) direct,controllable. 
B) indirect,controllable. 
C) direct,noncontrollable. 
D) indirect,noncontrollable. 
A) direct,controllable. 
B) indirect,controllable. 
C) direct,noncontrollable. 
D) indirect,noncontrollable.

Question 13

EVA encourages the right kind of behavior from divisions because of its emphasis on

Accepted Answer

A) after-tax net income. 
B) total capital employed. 
C) true cost of capital. 
D) before-tax operating income. 
A) after-tax net income. 
B) total capital employed. 
C) true cost of capital. 
D) before-tax operating income.

Question 14

What is the purpose of the return on investment (ROI)calculation and what are its shortcomings?

Accepted Answer

The return on investment (ROI)has two co

Question 15

Provide the missing data in the following situations:

Accepted Answer

The answer of Provide the missing data in the following...

Question 16

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:
 
The Bottling Division uses the following predetermined overhead rate:
 
What is the transfer price for the chemicals per gallon based on standard variable cost?

Accepted Answer

A) $3.00 
B) $5.40 
C) $9.00 
D) $11.40 
A) $3.00 
B) $5.40 
C) $9.00 
D) $11.40

Question 17

When establishing transfer prices,the objective is to maximize the company's profit by

Accepted Answer

A) transferring at the differential outlay cost to the selling division (typically variable costs). 
B) transferring at the opportunity cost to the company of making the internal transfers ($0 if the seller has idle capacity or selling price minus variable costs if the seller is operating at capacity). 
C) transferring at the differential outlay cost to the selling division plus the opportunity cost to the company of making the internal transfers. 
D) None of the answers is correct. 
A) transferring at the differential outlay cost to the selling division (typically variable costs). 
B) transferring at the opportunity cost to the company of making the internal transfers ($0 if the seller has idle capacity or selling price minus variable costs if the seller is operating at capacity). 
C) transferring at the differential outlay cost to the selling division plus the opportunity cost to the company of making the internal transfers. 
D) None of the answers is correct.

Question 18

Identify types of costs to be considered in measuring divisional operating costs.

Accepted Answer

In measuring divisional operating costs,

Question 19

Engine Division
The Engine Division provides engines for the Tractor Division of a company.The standard unit costs for Engine Division are as follows:
 
Refer to the Engine Department.The division has excess capacity.What is the best transfer price to avoid transfer price problems?

Accepted Answer

A) $1,350 
B) $300 
C) $900 
D) $2,100 
A) $1,350 
B) $300 
C) $900 
D) $2,100

Question 20

Because tax rates are different in different countries,companies have incentives to set transfer prices that will

Accepted Answer

A) increase revenues in low-tax countries. 
B) decrease costs in high-tax countries. 
C) decrease revenues in low-tax countries. 
D) None of the answers is correct. 
A) increase revenues in low-tax countries. 
B) decrease costs in high-tax countries. 
C) decrease revenues in low-tax countries. 
D) None of the answers is correct.

EVA encourages the right kind of behavior from divisions because of its emphasis on

Transfer prices are the prices charged

Marlow Company The following information pertains to the three divisions of Marlow Company: Refer to Marlow Company.What is the profit margin percentage for Division Z?

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

What is a disadvantage of top management intervention in setting transfer prices between divisions?

When measuring a division's operating costs,direct noncontrollable operating costs include

If the profit margin percentage of 30% stayed the same and the investment turnover ratio of 5.0 increased by 10%,what would happen to ROI?

Marlow Company The following information pertains to the three divisions of Marlow Company: Refer to Marlow Company.What is the division investment for Division Z?

Which of the following is an advantage(s)of using market prices in a competitive market?

What are the issues in measuring the investment base for calculating return on investment?

Framing Division The Framing Division had the following data: Refer to the Framing Division.What is the return on investment for Year 2009?

When measuring a division's operating costs,thecost of the company president's salary is

EVA encourages the right kind of behavior from divisions because of its emphasis on

What is the purpose of the return on investment (ROI)calculation and what are its shortcomings?

Provide the missing data in the following situations:

When establishing transfer prices,the objective is to maximize the company's profit by

Identify types of costs to be considered in measuring divisional operating costs.

Engine Division The Engine Division provides engines for the Tractor Division of a company.The standard unit costs for Engine Division are as follows: Refer to the Engine Department.The division has excess capacity.What is the best transfer price to avoid transfer price problems?

Because tax rates are different in different countries,companies have incentives to set transfer prices that will

Fundamental Concepts

Measuring Product Costs

Activity-Based Management

Strategic Management of Costs,quality,and Time

Cost Drivers and Cost Behavior

Financial Modeling for Short-Term Decision Making

Differential Cost Analysis for Operating Decisions

Capital Expenditure Decisions

Profit Planning and Budgeting

Profit and Cost Center Performance Evaluation

Incentive Issues

Allocating Costs to Responsibility Centers

Filters

Exam 11: Investment Center Performance Evaluation

EVA encourages the right kind of behavior from divisions because of its emphasis on

Transfer prices are the prices charged

Marlow Company The following information pertains to the three divisions of Marlow Company: Refer to Marlow Company.What is the profit margin percentage for Division Z?

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

What is a disadvantage of top management intervention in setting transfer prices between divisions?

When measuring a division's operating costs,direct noncontrollable operating costs include

If the profit margin percentage of 30% stayed the same and the investment turnover ratio of 5.0 increased by 10%,what would happen to ROI?

Marlow Company The following information pertains to the three divisions of Marlow Company: Refer to Marlow Company.What is the division investment for Division Z?

Which of the following is an advantage(s)of using market prices in a competitive market?

What are the issues in measuring the investment base for calculating return on investment?

Framing Division The Framing Division had the following data: Refer to the Framing Division.What is the return on investment for Year 2009?

When measuring a division's operating costs,thecost of the company president's salary is

EVA encourages the right kind of behavior from divisions because of its emphasis on

What is the purpose of the return on investment (ROI)calculation and what are its shortcomings?

Provide the missing data in the following situations:

When establishing transfer prices,the objective is to maximize the company's profit by

Identify types of costs to be considered in measuring divisional operating costs.

Engine Division The Engine Division provides engines for the Tractor Division of a company.The standard unit costs for Engine Division are as follows: Refer to the Engine Department.The division has excess capacity.What is the best transfer price to avoid transfer price problems?

Because tax rates are different in different countries,companies have incentives to set transfer prices that will

Fundamental Concepts

Measuring Product Costs

Activity-Based Management

Strategic Management of Costs,quality,and Time

Cost Drivers and Cost Behavior

Financial Modeling for Short-Term Decision Making

Differential Cost Analysis for Operating Decisions

Capital Expenditure Decisions

Profit Planning and Budgeting

Profit and Cost Center Performance Evaluation

Incentive Issues

Allocating Costs to Responsibility Centers

Filters