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Exam 23: Performance Evaluation for Decentralized Operations

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Question 101

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Income from operations of the Pierce Automobile Division is $2,225,000. If income from operations before service department charges is $3,250,000,

A) operating expenses are $1,025,000
B) total service department charges are $1,025,000
C) noncontrollable charges are $1,025,000
D) direct manufacturing charges are $1,025,000

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

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Question 102

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Assume that divisional income from operations amounts to $215,000 and top management has established 15% as the minimum rate of return on divisional assets totaling $1,000,000. The residual income for the division is

A) $65,000
B) $215,000
C) $635,000
D) $150,000

E) All of the above
F) A) and D)

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Question 103

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The residual income for Chicks is

The Central Division of the Nebraska Company has a rate of return on investment of 28% and a profit margin of 14%. What is the investment turnover?

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 Rails Division is

A centralized business organization is one in which all major planning and operating decisions are made by top management.

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.

The best measure of managerial efficiency in the use of investments in assets is

The materials used by the Holly Company's Division A are currently purchased from an outside supplier. Division B is able to supply Division A with 20,000 units at a variable cost of $42 per unit. The normal price that Division B normally sells its units is $53 per unit. What is the range of transfer prices within which the two division managers should negotiate?

The following financial information was summarized from the accounting records of Buddy Corporation for the current year ended December 31: ​ Calculate: a) The gross profit for the Dalmatian Division. b) The income from operations from the Dalmatian Division. c) The gross profit for the Beagle Division. d) The income from operations from the Beagle Division. e) The net income for the Buddy Corporation.

Responsibility accounting reports for profit centers are normally in the form of income statements.

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.

Some organizations use internal service departments to provide like services to several divisions or departments within an organization. Which of the following would probably not lend itself as a service department?

A manager is responsible for costs only in an)

Xang Company's costs were over budget by $46,000. The Xang Company is divided in two regions. The first region's costs were over budget by $7,000. Determine the amount that the second region's cost was over or under budget.

Division G of Elephant Preservation Inc. has sales of $895,000, cost of goods sold of $475,000, operating expenses of $79,500, and invested assets of $750,000. Calculate: a) The rate of return on investment for Division G. b) The profit margin for Division G. c) The investment turnover for Division G.

The ratio of sales to invested assets, which is also a factor in the DuPont formula for determing the rate of return on investment, is called

The plant managers in a cost center can be held responsible for major differences between budgeted and actual costs in their plants.

For higher levels of management, responsibility accounting reports

The investment turnover for Chicks is