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Exam 14: Performance Evaluation for Decentralized Operations

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Question 21

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How much would Division C's income from operations increase?

A) $0
B) $180,000
C) $60,000
D) $120,000

E) C) and D)
F) A) and B)

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Question 22

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The costs of services charged to a profit center on the basis of its use of those services Are called

A) operating expenses.
B) noncontrollable charges.
C) service department charges.
D) activity charges.

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

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Question 23

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Materials used by Ford Company in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit.However,the same materials are available from Division B.Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit.

A responsibility center in which the authority over and responsibility for costs and revenues is vested in the department manager is termed an investment center.

Depreciation expense on store equipment for a department store is a direct expense.

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.

The rates at which services are charged to each division are called service department charge rates.

Operating expenses incurred for the entire business as a unit that are NOT subject to the control of individual department managers are called indirect expenses.

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.

The balanced scorecard measures

The budget for Department 5 of Plant M for the current month ending March 31 is as follows: During March,the costs incurred in Department 5 of Plant M were materials,$204,000;factory wages,$285,000;supervisory salaries,$63,600;depreciation of plant and equipment,$35,000;power and light,$21,360;insurance and property taxes,$14,400;maintenance,$9,456.

If income from operations for a division is $120,000,sales are $975,000,and invested assets are $750,000,the investment turnover is 6.3.

Transfer prices may be used when decentralized units are organized as cost,profit,or investment centers.

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

The profit margin for Division K is 9% and the investment turnover is 1.20.What is the rate of return on investment for Division K?

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

If Division Q's income from operations was $60,000 on invested assets of $400,000,the rate of return on investment is 15%.

Which of the following expenses incurred by the sporting goods department of a department store is a direct expense?

The profit center income statement should include ONLY controllable revenues and expenses.

The process of measuring and reporting operating data by areas of responsibility is termed responsibility accounting.