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Exam 23: Decentralized Operations

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Question 61

Multiple Choice

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All of the following are advantages of decentralization except

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

E) None of the above
F) All of the above

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Question 62

True/False

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

A) True
B) False

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Question 63

Multiple Choice

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Which of the following is not a measure that management can use in evaluating and controlling investment center performance?

The approach that requires the transfer price to be less than the market price but greater than the supplying division's variable costs per unit is called the

The primary disadvantage of decentralized operations is that decisions made by one manager may affect other managers in such a way that the profitability of the entire company may suffer.

Use this information for ABC Corporation to answer the questions that follow. ​ ABC Corporation has three service departments with the following costs and activity base: ​ ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information is as follows: ​ -What will the income of the Macro Division be after all service department allocations?

Purchase requisitions for Purchasing and the number of payroll checks for Payroll Accounting are examples of activity bases.

To calculate income from operations, total service department charges are

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%.

Use this information for ABC Corporation to answer the questions that follow. ​ ABC Corporation has three service departments with the following costs and activity base: ​ ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information is as follows: ​ -Marshall Corporation had $220,000 in invested assets, sales of $242,000, income from operations of $66,000, and a desired minimum return of 3%. The return on investment for Marshall is

Service department charges are similar to the expenses of a profit center that purchased services from a source outside the company.

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the investment turnover is 5.

What is the profit margin?

The ratio of income from operations to sales, which is also a factor in the DuPont formula for determining the return on investment, is called

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

Income from operations of the Pierce Automobile Division is $2,225,000. If income from operations before service department charges is $3,250,000,

Income from operations for Division L is $250,000, total service department charges are $400,000, and operating expenses are $2,750,000. What are the revenues for Division L?

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

The profit margin component of return on investment analysis focuses on profitability by indicating the rate of profit earned on each sales dollar.

A manager is responsible for costs only in a (n)