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Exam 23: Evaluating Decentralized Operations

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Question 51

Multiple Choice

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Heart Company has two divisions.Division A is interested in purchasing 10,000 units from Division B.Capacity is available for Division B to produce these units.The per-unit market price is $30 per unit,with a variable cost of $25.The manager of Division A has offered to purchase the units at $22 per unit.In an effort to make this transfer price beneficial for the company as a whole,what is the range of prices that should be used during negotiations between the two divisions?

A) $22 to $30
B) $22 to $25
C) over $30
D) $25 to $30

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

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Question 52

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

A) True
B) False

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Question 53

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The gross profit for the Rails Division is

The net income for Train Corporation is

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

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

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.

How much will Square Yard Products total income from operations increase?

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

The manager of the furniture department of a leading retailer does not control the salaries of departmental personnel.

What is Clydesdale Company's residual income?

The formula for the rate of return on investment is

The balanced scorecard measures

Blaser Corporation had $275,000 in invested assets,sales of $330,000,income from operations amounting to $33,000 and a desired minimum rate of return of 7.5%.The rate of return on investment for Blaser Corporation is

Which of the following expressions is termed the profit margin factor as used in determining the rate of return on investment?

How much service department cost will be allocated to the Micro Division?

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.

The profit margin for Central Division is 20% and the investment turnover is 2.8.What is the rate of return on investment for Central Division?

Separation of businesses into more manageable operating units is termed decentralization.

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?