Question 1

What is the investment turnover for Division A?

Accepted Answer

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

Question 2

Investment centers differ from profit centers in that they

Accepted Answer

A)   are responsible for net income only
B)   are able to invest in assets
C)   have less responsibilities than cost centers and profit centers
D)   are only responsible for revenuesE) B) and C)
F) None of the above

Question 3

It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.

Accepted Answer

A) True 
 B)False

Question 4

How much will Division 6's income from operations increase?

Accepted Answer

A)   $8,000
B)   $15,000
C)   $80,000
D)   $150,000E) A) and B)
F) All of the above

Question 5

The manager of a profit center does not make decisions concerning the fixed assets invested in the center.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)   market price
B)   cost price
C)   negotiated price
D)   variable priceE) A) and B)
F) A) and D)

Question 7

What is the service department charge rate for Graphics Production?

Accepted Answer

A)   $2.00
B)   $10.00
C)   $6.66
D)   $0.50E) None of the above
F) B) and C)

Question 8

Division A reported income from operations of $975,000 and total service department charges of $675,000.As a result,

Accepted Answer

A)   net income was $300,000
B)   the gross profit margin was $300,000
C)   income from operations before service department charges was $1,650,000
D)   consolidated net income was $300,000E) A) and C)
F) B) and C)

Question 9

Which of the following expenses incurred by a department store is an indirect expense?

Accepted Answer

A)   insurance on merchandise inventory
B)   sales salaries
C)   depreciation on store equipment
D)   salary of vice president of financeE) B) and C)
F) None of the above

Question 10

Which of the following is not​ a commonly used approach to setting transfer prices?

Accepted Answer

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

Question 11

The profit margin is the

Accepted Answer

A)   ratio of income from operations to sales
B)   ratio of income from operations to invested assets
C)   ratio of assets to liabilities
D)   ratio of sales to invested assetsE) B) and D)
F) B) and C)

Question 12

The DuPont formula uses financial and nonfinancial information to measure the performance of a business.

Accepted Answer

A) True 
 B)False

Question 13

If the profit margin for a division is 8% and the investment turnover is 1.20,the rate of return on investment is 9.6%.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

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 centerE) A) and B)
F) A) and C)

Question 15

The cost price approach for transfer pricing is most often used between responsibility centers organized as cost centers that are not concerned with the revenue.

Accepted Answer

A) True 
 B)False

Question 16

The negotiated price approach allows the managers of decentralized units to agree on the transfer price.

Accepted Answer

A) True 
 B)False

Question 17

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are termed direct operating expenses.

Accepted Answer

A) True 
 B)False

Question 18

A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called a(n)

Accepted Answer

A)   profit center
B)   investment center
C)   volume center
D)   cost centerE) None of the above
F) C) and D)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 23: Evaluating Decentralized Operations

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

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Division A reported income from operations of $975,000 and total service department charges of $675,000.As a result,

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

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The negotiated price approach allows the managers of decentralized units to agree on the transfer price.

Correct AnswerverifiedShow Answer

If the profit margin for a division is 8% and the investment turnover is 1.20,the rate of return on investment is 9.6%.

Correct AnswerverifiedShow Answer

It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.

Correct AnswerverifiedShow Answer

What is the investment turnover for Division A?

Correct AnswerverifiedShow Answer

A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called a(n)

Correct AnswerverifiedShow Answer

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are termed direct operating expenses.

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How much will Division 6's income from operations increase?

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

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What is the service department charge rate for Graphics Production?

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The cost price approach for transfer pricing is most often used between responsibility centers organized as cost centers that are not concerned with the revenue.

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Which of the following expenses incurred by a department store is an indirect expense?

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

Correct AnswerverifiedShow Answer

The DuPont formula uses financial and nonfinancial information to measure the performance of a business.

Correct AnswerverifiedShow Answer

The profit margin is the

Correct AnswerverifiedShow Answer

Investment centers differ from profit centers in that they

Correct AnswerverifiedShow Answer

Which of the following is not​ a commonly used approach to setting transfer prices?

Correct AnswerverifiedShow Answer

The manager of a profit center does not make decisions concerning the fixed assets invested in the center.

Correct AnswerverifiedShow Answer

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Which of the following is not a commonly used approach to setting transfer prices?

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