Question 1

The following data are taken from the management accounting reports of Dulcimer Co.:  If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that

Accepted Answer

A)   Division A's manager is given the bonus
B)   Division B's manager is given the bonus
C)   Division C's manager is given the bonus
D)   Divisions B and C's managers divide the bonusE) C) and D)
F) B) and D)

Question 2

The ratio of sales to invested assets is termed the investment turnover component of the rate of return on investment.

Accepted Answer

A) True 
 B)False

Question 3

In evaluating the profit center manager, the income from operations should be compared

Accepted Answer

A)   across profit centers
B)   to historical performance or budget
C)   to the competitor's net income
D)   to the total company earnings per shareE) A) and B)
F) A) and C)

Question 4

Several items are missing from the following table of rate of return on investment and residual income. Determine the missing items, identifying each item by the appropriate letter (a-l).  Round percentage values to one decimal point

Accepted Answer

(a) $800,000 ($128,000/16%)
(b) $138,00...

Question 5

Determining the transfer price as the price at which the product or service transferred could be sold to outside buyers is known as the

Accepted Answer

A)   cost price approach
B)   negotiated price approach
C)   revenue price approach
D)   market price approachE) B) and C)
F) A) and C)

Question 6

The underlying principle of allocating direct operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.

Accepted Answer

A) True 
 B)False

Question 7

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%.
What is Clydesdale Company's rate of return on investment?

Accepted Answer

A)   56%
B)   20%
C)   45%
D)   25%E) A) and B)
F) B) and C)

Question 8

Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5 per unit. However, the same materials are available from Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6's current sales.
How much will Square Yard Products total income from operations increase?

Accepted Answer

A)   $32,000
B)   $112,000
C)   $80,000
D)   $150,000E) A) and D)
F) A) and C)

Question 9

The amount of detail presented in a budget performance report for a cost center depends upon the level of management to which the report is directed.

Accepted Answer

A) True 
 B)False

Question 10

Division A of Chacha Company has sales of $140,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000. What is the investment turnover for Division A?

Accepted Answer

A)   0.93
B)   9.3
C)   1.07
D)   10.7E) All of the above
F) None of the above

Question 11

ABC Corporation has three service departments with the following costs and activity base:   What is the service department charge rate for Graphics Production?

Accepted Answer

A)   $2.00
B)   $10.00
C)   $6.66
D)   $0.50E) A) and C)
F) B) and D)

Question 12

ABC Corporation has three service departments with the following costs and activity base:   What is the service department charge rate for the Accounting Department?

Accepted Answer

A)   $714
B)   $250
C)   $625
D)   $0.004E) A) and D)
F) None of the above

Question 13

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 14

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

Accepted Answer

A)   operating expenses are $1,025,000
B)   total service department charges are $1,025,000
C)   noncontrollable charges are $1,025,000
D)   direct manufacturing charges are $1,025,000E) A) and D)
F) A) and B)

Question 15

Ralston Company has income from operations of $75,000, invested assets of $360,000, and sales of $790,000. 
Use the DuPont formula to calculate the rate of return on investment, and show (a) the profit margin, (b) the investment turnover, and (c) rate of return on investment. Round the profit margin percentage to two decimal places and the investment turnover to three decimal places.

Accepted Answer

(a) Profit margin = $75,000/$7...

Question 16

Two divisions of Oregano Company (Divisions TX and OY)  have the same profit margins. Division TX's investment turnover is larger than that of Division OY (1.2 to 1.0) . Income from operations for Division TX is $55,000, and income from operations for Division OY is $43,000. Division TX has a higher return on investment than Division OY by

Accepted Answer

A)   using income from operations as a performance measure
B)   comparing the profit margins
C)   applying a negotiated price measure
D)   using its assets more efficiently in generating salesE) A) and B)
F) All of the above

Question 17

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.E) C) and D)
F) B) and D)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 assetsE) A) and B)
F) A) and C)

Question 20

Responsibility accounting reports for profit centers will include

Accepted Answer

A)   costs only
B)   revenues only
C)   expenses and fixed assets
D)   revenues, expenses, net income or loss from operationsE) A) and B)
F) A) and C)

Exam 9: Evaluating Decentralized Operations

Several items are missing from the following table of rate of return on investment and residual income. Determine the missing items, identifying each item by the appropriate letter (a-l). Round percentage values to one decimal point

Correct Answer
verified
(a) $800,000 ($128,000/16%)
(b) $138,00...
View Answer

ABC Corporation has three service departments with the following costs and activity base: What is the service department charge rate for the Accounting Department?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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(a) Profit margin = $75,000/$7...
View Answer

The ratio of sales to invested assets is termed the investment turnover component of the rate of return on investment.

Correct Answer
verified

Which of the following is a disadvantage of decentralization?

Correct Answer
verified

The investment turnover is the ratio of

Correct Answer
verified

The following data are taken from the management accounting reports of Dulcimer Co.: If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that

Correct Answer
verified

Determining the transfer price as the price at which the product or service transferred could be sold to outside buyers is known as the

Correct Answer
verified

The underlying principle of allocating direct operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.

Correct Answer
verified

Correct Answer
verified

ABC Corporation has three service departments with the following costs and activity base: What is the service department charge rate for Graphics Production?

Correct Answer
verified

In evaluating the profit center manager, the income from operations should be compared

Correct Answer
verified

The amount of detail presented in a budget performance report for a cost center depends upon the level of management to which the report is directed.

Correct Answer
verified

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's rate of return on investment?

Correct Answer
verified

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%.

Correct Answer
verified

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

Correct Answer
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Responsibility accounting reports for profit centers will include

Correct Answer
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Division A of Chacha Company has sales of $140,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000. What is the investment turnover for Division A?

Correct Answer
verified

Exam 9: Evaluating Decentralized Operations

Several items are missing from the following table of rate of return on investment and residual income. Determine the missing items, identifying each item by the appropriate letter (a-l). Round percentage values to one decimal point

Correct Answerverified(a) $800,000 ($128,000/16%) (b) $138,00...View AnswerShow Answer

ABC Corporation has three service departments with the following costs and activity base: What is the service department charge rate for the Accounting Department?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answerverified(a) Profit margin = $75,000/$7...View AnswerShow Answer

The ratio of sales to invested assets is termed the investment turnover component of the rate of return on investment.

Correct AnswerverifiedShow Answer

Which of the following is a disadvantage of decentralization?

Correct AnswerverifiedShow Answer

The investment turnover is the ratio of

Correct AnswerverifiedShow Answer

The following data are taken from the management accounting reports of Dulcimer Co.: If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that

Correct AnswerverifiedShow Answer

Determining the transfer price as the price at which the product or service transferred could be sold to outside buyers is known as the

Correct AnswerverifiedShow Answer

The underlying principle of allocating direct operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

ABC Corporation has three service departments with the following costs and activity base: What is the service department charge rate for Graphics Production?

Correct AnswerverifiedShow Answer

In evaluating the profit center manager, the income from operations should be compared

Correct AnswerverifiedShow Answer

The amount of detail presented in a budget performance report for a cost center depends upon the level of management to which the report is directed.

Correct AnswerverifiedShow Answer

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's rate of return on investment?

Correct AnswerverifiedShow Answer

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%.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Responsibility accounting reports for profit centers will include

Correct AnswerverifiedShow Answer

Division A of Chacha Company has sales of $140,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000. What is the investment turnover for Division A?

Correct AnswerverifiedShow Answer

Correct Answer
verified
(a) $800,000 ($128,000/16%)
(b) $138,00...
View Answer

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(a) Profit margin = $75,000/$7...
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