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Exam 14: Performance Evaluation for Decentralized Operations

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Question 61

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

A) costs.
B) revenues.
C) assets.
D) costs,revenues,and assets.

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

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Question 62

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Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be

A) centralized.
B) consolidated.
C) diversified.
D) decentralized.

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

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Question 63

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If income from operations for a division is $6,000,invested assets are $25,000,and sales are $30,000,the investment turnover is 5.0.

The profit center income statement should include ONLY revenues and expenses that are controlled by the manager.

Under the cost price approach,the transfer price is the price at which the product or service transferred could be sold to outside buyers.

Blancher Corporation had $495,000 in invested assets,sales of $660,000,income from operations amounting to $99,000,and a desired minimum rate of return of 15%.The rate of return on investment for Stevenson is

By use of the rate of return on investment as a divisional performance measure,divisional managers will always be motivated to invest in proposals that will increase the overall rate of return for the company.

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 profit margin is 24%.

Blancher Corporation had $495,000 in invested assets,sales of $660,000,income from operations amounting to $99,000,and a desired minimum rate of return of 15%.The profit margin for Stevenson is

The major advantage of residual income as a performance measure is that it gives consideration to not only a minimum rate of return on investment but also the total magnitude of income from operations earned by each division.

Responsibility accounting reports for a profit center typically show

Which of the following is NOT a disadvantage of decentralized operation?

In rate of return on investment analysis,the investment turnover component focuses on efficiency in the use of assets and indicates the rate at which sales are being generated for each dollar of invested assets.

Property tax expense for a department store's store equipment is an example of a direct expense.

To calculate income from operations,total service department charges are

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

The rate of return on investment may be computed by dividing investment turnover by the profit margin.

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

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