Question 1

The underlying principle of allocating direct operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.

Accepted Answer

A) True 
 B)False

Question 2

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 3

What is Clydesdale Company's residual income?

Accepted Answer

A)  $252,000
B)  $900,000
C)  $1,400,000
D)  $760,000E) None of the above
F) A) and B)

Question 4

Materials used by the Layton Company's Division 1 are currently purchased from outside supplier at $58 per unit.Division 2 is able to supply Division 1 with 22,000 units at a variable cost of $46 per unit.The two divisions have recently negotiated a transfer price of $50 per unit for the 20,000 units.
a By how much will each division's income increase as a result of this transfer?
b What is the total increase in income for Layton?

Accepted Answer

The answer of Materials used by the Layton Company's Division...

Question 5

The profit margin for Mason is

Accepted Answer

A)  7.1%
B)  20%
C)  15.2%
D)  14.1%E) All of the above
F) None of the above

Question 6

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

Accepted Answer

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 $1,025,000E) A) and D)
F) A) and C)

Question 7

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?

Accepted Answer

A)  inventory control
B)  payroll accounting
C)  information systems
D)  human resourcesE) A) and B)
F) All of the above

Question 8

How much service department cost would be allocated to the Super Division?

Accepted Answer

A)  $350,000
B)  $100,000
C)  $125,000
D)  $550,000E) A) and D)
F) A) and C)

Question 9

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

Accepted Answer

A)  $0
B)  $75,000
C)  $25,000
D)  $50,000E) A) and B)
F) A) and C)

Question 10

What will the income of the Macro Division be after all service department allocations?

Accepted Answer

A)  $780,000
B)  $375,000
C)  $575,000
D)  $435,000E) A) and B)
F) None of the above

Question 11

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

Question 12

Match each definition that follows with the term a-e it defines.
-Income from operations minus minimum acceptable income from operations

Accepted Answer

A)  Controllable revenues
B)  Profit margin
C)  Investment turnover
D)  Rate of return on investments
E)  Residual incomeF) C) and D)
G) C) and E)

Question 13

Two divisions of Oregano Company Divisions TX and OY have the same profit margins.Division TX's investment turnover is larger than that of Division OY 1.2 to 1.0.Income from operations for Division TX is $55,000, and income from operations for Division OY is $43,000.Division TX has a higher return on investment than Division OY by

Accepted Answer

A)  using income from operations as a performance measure
B)  comparing the profit margins
C)  applying a negotiated price measure
D)  using its assets more efficiently in generating salesE) All of the above
F) B) and C)

Question 14

Which of the following is a disadvantage of decentralization?

Accepted Answer

A)  Decisions made by one manager may negatively affect the profitability of the entire company.
B)  Decentralization helps retain quality managers.
C)  Managers closest to the operations make decisions.
D)  Managers are able to acquire expertise in their areas of responsibility.E) A) and B)
F) B) and C)

Question 15

Match each definition that follows with the term a-e it defines.
-Ratio of sales to invested assets

Accepted Answer

A)  Controllable revenues
B)  Profit margin
C)  Investment turnover
D)  Rate of return on investments
E)  Residual incomeF) B) and E)
G) A) and D)

Question 16

The balanced scorecard measures four areas of financial and nonfinancial performance of a business.Identify one of the following that is not included as a performance measurement.

Accepted Answer

A)  internal process
B)  financial
C)  innovation and learning
D)  employeesE) None of the above
F) B) and D)

Question 17

Match each of the following phrases as describing a an advantage, b a disadvantage, or c neither of decentralization.
-Operational issues are made by managers closest to the operations

Accepted Answer

A)  Advantage of decentralization
B)  Disadvantage of decentralization
C)  Neither an advantage or disadvantageD) A) and B)
E) A) and C)

Question 18

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) All of the above
F) B) and C)

Exam 8: Performance Evaluation for Decentralized Operations

The profit margin for Mason is

Correct Answer
verified

The underlying principle of allocating direct operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.

Correct Answer
verified

Match each definition that follows with the term a-e it defines. -Ratio of sales to invested assets

Correct Answer
verified

Which of the following is a disadvantage of decentralization?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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Match each definition that follows with the term a-e it defines. -Income from operations minus minimum acceptable income from operations

Correct Answer
verified

Match each of the following phrases as describing a an advantage, b a disadvantage, or c neither of decentralization. -Operational issues are made by managers closest to the operations

Correct Answer
verified

What is Clydesdale Company's residual income?

Correct Answer
verified

The balanced scorecard measures four areas of financial and nonfinancial performance of a business.Identify one of the following that is not included as a performance measurement.

Correct Answer
verified

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?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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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 Answer
verified

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

Correct Answer
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What will the income of the Macro Division be after all service department allocations?

Correct Answer
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How much service department cost would be allocated to the Super Division?

Correct Answer
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Exam 8: Performance Evaluation for Decentralized Operations

The profit margin for Mason is

Correct AnswerverifiedShow Answer

The underlying principle of allocating direct operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.

Correct AnswerverifiedShow Answer

Match each definition that follows with the term a-e it defines. -Ratio of sales to invested assets

Correct AnswerverifiedShow Answer

Which of the following is a disadvantage of decentralization?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match each definition that follows with the term a-e it defines. -Income from operations minus minimum acceptable income from operations

Correct AnswerverifiedShow Answer

Match each of the following phrases as describing a an advantage, b a disadvantage, or c neither of decentralization. -Operational issues are made by managers closest to the operations

Correct AnswerverifiedShow Answer

What is Clydesdale Company's residual income?

Correct AnswerverifiedShow Answer

The balanced scorecard measures four areas of financial and nonfinancial performance of a business.Identify one of the following that is not included as a performance measurement.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

What will the income of the Macro Division be after all service department allocations?

Correct AnswerverifiedShow Answer

How much service department cost would be allocated to the Super Division?

Correct AnswerverifiedShow Answer

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