Question 1

The Everest Company has income from operations of $80,000, invested assets of $500,000, and sales of $1,050,000. What is the investment turnover?

Accepted Answer

A)   1.8
B)   2.1
C)   .48
D)   13.13E) None of the above
F) A) and B)

Question 2

Which of the following would not be considered an internal centralized service department?

Accepted Answer

A)   Payroll accounting department
B)   Manufacturing department
C)   Information systems department
D)   Purchasing departmentE) A) and B)
F) All of the above

Question 3

The Creative Division of the Barry Company reported the following results for December 2012:
  Required: Based on this information, what were the sales?

Accepted Answer

$1,200,000...

Question 4

In an investment center, the manager has the responsibility and the authority to make decisions that affect not only costs and revenues, but also the plant assets invested in the center.

Accepted Answer

A) True 
 B)False

Question 5

Three measures of investment center performance are income from operations, rate of return on investment, and residual income.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)   costs
B)   revenues
C)   assets
D)   costs, revenues, and assetsE) A) and C)
F) B) and C)

Question 7

The major shortcoming of income from operations as an investment center performance measure is that it ignores the amount of revenues earned by the center.

Accepted Answer

A) True 
 B)False

Question 8

Responsibility accounting reports for profit centers will include

Accepted Answer

A)   costs.
B)   revenues.
C)   expenses and fixed assets.
D)   revenues, expenses, net income or loss from operations.E) A) and C)
F) B) and C)

Question 9

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum rate of return of 15%. The residual income for Chicks is:

Accepted Answer

A)   $165,000
B)   $302,500
C)   $137,500
D)   $191,500E) B) and D)
F) A) and B)

Question 10

The balanced scorecard is a set of financial and nonfinancial measures that reflect the performance of the business.

Accepted Answer

A) True 
 B)False

Question 11

Developing and retaining quality managers is an advantage of decentralization.

Accepted Answer

A) True 
 B)False

Question 12

The following is a measure of a manager's performance working in a profit center.

Accepted Answer

A)   balance sheet
B)   rate of return and residual income measures
C)   budget performance report
D)   divisional income statementsE) C) and D)
F) B) and C)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The investment turnover 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) A) and B)
F) A) and C)

Question 15

One of the advantages of decentralization is that delegating authority to managers closest to the operation always results in better decisions.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

The Eastern Division of Kentucky Company has a rate of return on investment of 28% and a profit margin of 20%. What is the investment turnover?

Accepted Answer

A)   3.6
B)   1.4
C)   5.0
D)   .7E) A) and D)
F) All of the above

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

The Magnolia Company 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?

Accepted Answer

The answer of The Magnolia Company Division A has income...

Question 20

The minimum amount of desired divisional income from operations is set by top management by establishing a minimum rate of return considered acceptable for invested assets.

Accepted Answer

A) True 
 B)False

Exam 23: Performance Evaluation for Decentralized Operations

Developing and retaining quality managers is an advantage of decentralization.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Everest Company has income from operations of $80,000, invested assets of $500,000, and sales of $1,050,000. What is the investment turnover?

Correct AnswerverifiedShow Answer

The Creative Division of the Barry Company reported the following results for December 2012: Required: Based on this information, what were the sales?

Correct Answerverified$1,200,000...View AnswerShow Answer

In an investment center, the manager has the responsibility and the authority to make decisions that affect not only costs and revenues, but also the plant assets invested in the center.

Correct AnswerverifiedShow Answer

Responsibility accounting reports for profit centers will include

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The major shortcoming of income from operations as an investment center performance measure is that it ignores the amount of revenues earned by the center.

Correct AnswerverifiedShow Answer

The balanced scorecard is a set of financial and nonfinancial measures that reflect the performance of the business.

Correct AnswerverifiedShow Answer

One of the advantages of decentralization is that delegating authority to managers closest to the operation always results in better decisions.

Correct AnswerverifiedShow Answer

The minimum amount of desired divisional income from operations is set by top management by establishing a minimum rate of return considered acceptable for invested assets.

Correct AnswerverifiedShow Answer

Three measures of investment center performance are income from operations, rate of return on investment, and residual income.

Correct AnswerverifiedShow Answer

The Eastern Division of Kentucky Company has a rate of return on investment of 28% and a profit margin of 20%. What is the investment turnover?

Correct AnswerverifiedShow Answer

The investment turnover is the:

Correct AnswerverifiedShow Answer

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum rate of return of 15%. The residual income for Chicks is:

Correct AnswerverifiedShow Answer

Which of the following would not be considered an internal centralized service department?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Magnolia Company 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?

Correct AnswerverifiedShow Answer

The following is a measure of a manager's performance working in a profit center.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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$1,200,000...
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