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Exam 24: Evaluating Decentralized Operations

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Question 21

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Paduka Industries has several divisions. The Eastern Division has $350,000 of invested assets, operating income of $200,000, and residual income of $151,000. Determine the minimum acceptable return on investment.

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$200,000 -...

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Question 22

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ABC Corporation has three support departments with the following costs and cost drivers: ABC has three operating divisions, Micro, Macro, and Super. Their revenue, cost, and activity information are as follows: ​ -The support department allocation rate for the Accounting Department is

A) $714
B) $250
C) $625
D) $0.004

E) A) and D)
F) All of the above

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Question 23

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If operating income for a division is $6,000, invested assets are $25,000, and sales are $30,000, the investment turnover is 1.2.

Piano Company's costs were over budget by $47,000. Piano Company is divided into two regions. The first region's costs were over budget by $5,000. Determine the amount that the second region's cost was over or under budget.

Match each of the following phrases as describing (a) an advantage, (b) a disadvantage, or (c) neither of decentralization. -Internal price wars A)Advantage of decentralization B)Disadvantage of decentralization C)Neither an advantage nor a disadvantage

A responsibility center in which the department manager has responsibility for and authority over costs, revenues, and assets invested in the department is termed a cost center.

Which of the following would not be considered an internal centralized support department?

Materials used by Jefferson Company in producing Division C's product are currently purchased from outside suppliers at a cost of $10.00 per unit. However, the same materials are available from Division A. Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $8.50 per unit. A transfer price of $9.50 per unit is negotiated and 25,000 units of material are transferred, with no reduction in Division A's current sales.​ -Division A's operating income will increase by

Bottlebrush Company has operating income of $60,000, invested assets of $345,000, and sales of $786,000. Use the DuPont formula to compute the return on investment, and show (a) the profit margin, (b) the investment turnover, and (c) the return on investment. Round the profit margin percentage and the return on investment to two decimal places and the investment turnover to three decimal places.

The ratio of operating income to sales, which is also a factor in the DuPont formula for determining the return on investment (ROI) , is called

All of the following are advantages of decentralization except

Some organizations use internal support departments to provide like services to several divisions or departments within an organization. Which of the following would probably not lend itself as a support department?

A cost driver is used to allocate support department expenses. Match each of the following cost drivers with the appropriate department (a-h). -Number of miles A)Purchasing B)Payroll Accounting C)Human Resources D)Maintenance E)Information Systems F)Marketing G)President's Office H)Transportation

The ratio of operating income to sales is termed the profit margin component of the return on investment.

Which of the following is not one of the common types of responsibility centers?

The Human Resources Department in a department store is an example of a support department.

The three common types of responsibility centers are referred to as cost centers, profit centers, and investment centers.

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. The return on investment (ROI) is

The profit margin for Division C is 6%, and the investment turnover is 1.2. The return on investment for Division B is

Xang Company's costs were over budget by $46,000. Xang Company is divided into two regions. The first region's costs were over budget by $7,000.Determine the amount that the second region's cost was over or under budget.