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Exam 23: Performance Evaluation for Decentralized Operations

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Question 71

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

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

E) A) and C)
F) None of the above

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Question 72

Multiple Choice

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An activity base is used to charge service department expenses. Match each of the following activity bases with the appropriate department a-h) . -Number of payroll checks

A) Purchasing
B) Payroll accounting
C) Human resources
D) Maintenance
E) Information systems
F) Marketing
G) President's Office
H) Transportation

I) B) and C)
J) B) and D)

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Question 73

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

Match each of the following phrases as describing a) an advantage, b) a disadvantage, or c) neither of decentralization. -Internal price wars

If divisional income from operations is $75,000, invested assets are $737,500, and the minimum rate of return on invested assets is 6%, the residual income is $36,750.

Using the data below for the Ace Guitar Company, determine the divisional income from operations for the A and B regions. Allocate service department expenses proportional to the sales of each region. Round percentage of sales allocation to one decimal place.

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: -The net income for Train Corporation is

The Magnolia Company's Division A has income from operations of $80,000 and assets of $400,000. The minimum acceptable rate of return on assets is 12%. What is the residual income for the division?

Separation of businesses into more manageable operating units is termed decentralization.

Which of the following is a measure of a manager's performance working in a profit center?

Sales commission expense for a department store is an example of a direct expense.

Which of the following is a measure of a manager's performance working in an investment center?

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

The Creative Division of the Barry Company reported the following results for December: Invested assets $1,200,000 Profit margin 25% Return on investment 30% Based on this information, what were sales?

The sales, income from operations, and invested assets for each division of Grosbeak Company are as follows: a) Using the DuPont formula, determine the profit margin, investment turnover, and rate of return on investment for each division. Round profit margin percentage to two decimal places, investment turnover to four decimal places, and rate of return on investment to one decimal place. b) Which division is the most profitable per dollar invested?

The ratio of sales to investment is termed the rate of return on investment.

Match each of the following phrases as describing a) an advantage, b) a disadvantage, or c) neither of decentralization. -Separate office staff

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: -The income from operations for the Locomotive Division is

What is the rate of return on investment for Division A?